Filed electronically with the Securities and Exchange Commission on
March 1, 2000
File No. 333-9069
File No. 811-7731
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_/
Pre-Effective Amendment No. /_/
Post-Effective Amendment No. 6 /X/
And/or -
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /_/
Amendment No. 7 /X/
-
KEMPER ASIAN GROWTH FUND
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 781-1121
Philip J. Collora, Vice President and Secretary
Kemper Asian Growth Fund
222 South Riverside Plaza
Chicago, Illinois 60606
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/_/ Immediately upon filing pursuant to paragraph (b)
/_/ 60 days after filing pursuant to paragraph (a) (1)
/_/ 75 days after filing pursuant to paragraph (a) (2)
/X/ On March 1, 2000 pursuant to paragraph (b)
/_/ On __________________ pursuant to paragraph (a) (1)
/_/ On __________________ pursuant to paragraph (a) (2) of Rule 485.
If Appropriate, check the following box:
/_/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD(SM)
March 1, 2000
Prospectus
K E M P E R G L O B A L / I N T E R N A T I O N A L F U N D S
Kemper Asian Growth Fund
Kemper Emerging Markets Growth Fund
Kemper Global Blue Chip Fund
Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper Latin America Fund
Kemper New Europe Fund
As with all mutual funds, the Securities and
Exchange Commission (SEC) does not approve
or disapprove these shares or determine
whether the information in this prospectus
is truthful or complete. It is a criminal
offense for anyone to inform you otherwise.
[LOGO] KEMPER FUNDS
<PAGE>
HOW THE INVESTING IN
FUNDS WORK THE FUNDS
2 Kemper Asian Growth 32 Kemper International 75 Choosing A Share
Fund Fund Class
8 Kemper Emerging 38 Kemper Latin America 81 How To Buy Shares
Markets Growth Fund Fund
82 How To Exchange
14 Kemper Global Blue 44 Kemper New Europe Or Sell Shares
Chip Fund Fund
83 Policies You Should
20 Kemper Global 51 Other Policies and Know About
Discovery Fund Risks
91 Understanding
26 Kemper Global Income 53 Financial Highlights Distributions And
Fund Taxes
<PAGE>
How The Funds Work
These funds invest significantly in foreign securities. Seven of the funds focus
on stocks, one mainly on bonds. Each fund is dedicated to a particular region of
the world or a particular investment theme, and follows its own investment goal.
Remember that mutual funds are investments, not bank deposits. They're not
guaranteed or insured by the FDIC or any other government agency. Their share
prices will go up and down, so be aware that you could lose money.
<PAGE>
TICKER SYMBOLS CLASS: A) KANAX B) KANBX C) KANCX
Kemper
Asian Growth Fund
FUND GOAL The fund seeks long-term capital growth.
2 | Kemper Asian Growth Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 85% of total assets in common stocks and other Asian
equities (equities that are issued by companies organized under the laws of an
Asian country or traded mainly on Asian markets and do more than half of their
business in Asia). The fund generally focuses on emerging Asian markets, such as
China, Indonesia, Korea and Thailand.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with identifiable
market niches and sound balance sheets, among other factors.
Growth orientation. The managers generally look for companies that seem to offer
the potential for sustainable above-average growth of revenue or earnings
relative to each stock's own market.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, with an eye toward identifying countries,
industries and companies that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given country or industry.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks or preferred stocks. The fund may invest up
to 15% of total assets in debt securities of any issuer or credit quality,
including junk bonds (i.e., grade BB and below) or in non-Asian equities.
3 | Kemper Asian Growth Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how Asian stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When Asian stock prices fall, you should
expect the value of your investment to fall as well. The fact that the fund
concentrates on a single geographical region could affect fund performance. For
example, Asian companies could be hurt by such factors as regional economic
downturns (some Asian economies are currently in recession), currency
devaluations, the inability of governments or banking systems to bring about
reforms or trade barriers on exports.
Emerging markets, a category that includes most Asian countries, tend to be more
volatile than developed markets, for reasons ranging from political and economic
uncertainties to poor regulation and liquidity to a higher risk that essential
information may be incomplete or wrong.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies. In addition, changing
currency rates could add to the fund's investment losses or reduce its
investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may make sense for investors interested in diversifying a growth
portfolio with exposure to emerging countries in Asia.
4 | Kemper Asian Growth Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1997 -34.60
1998 -19.02
1999 71.97
Best quarter: 40.35%, Q2 '99 Worst quarter: -33.05%, Q2 '98
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
- --------------------------------------------------------------------------------
Since 12/31/98 Since 10/21/96
1 Year Life of Class
- ------------------------------------------------------------------------------
Class A 62.14% -2.85%
- ------------------------------------------------------------------------------
Class B 68.21 -2.50
- ------------------------------------------------------------------------------
Class C 69.16 -2.18
- ------------------------------------------------------------------------------
Index 49.83 -0.57*
- ------------------------------------------------------------------------------
Index: The Morgan Stanley Capital International All Country Asia Free Ex-Japan
Index is a capitalized weighted index that is representative of the equity
securities for the following countries: Hong Kong, Indonesia, Korea (at 20%),
Malaysia, Philippines free, Singapore free and Thailand.
* Index comparison begins 10/31/96.
In the chart, total returns from 1997 through 1999 would have been lower if
operating expenses hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 1999 would have been lower if operating expenses
hadn't been reduced.
5 | Kemper Asian Growth Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.85% 0.85% 0.85%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 3.19 3.35 4.26
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 4.04 4.95 5.86
- ------------------------------------------------------------------------------
Expense Reimbursement 1.84 2.17 3.06
- ------------------------------------------------------------------------------
Net Annual Operating Expenses*** 2.20 2.78 2.80
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
*** By contract, total operating expenses are capped at 2.20%, 2.78% and
2.80% for Class A, Class B and Class C shares, respectively, through
02/28/2001.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $785 $1,576 $2,381 $4,464
- ------------------------------------------------------------------------------
Class B shares 681 1,594 2,507 4,502
- ------------------------------------------------------------------------------
Class C shares 383 1,471 2,638 5,469
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $785 $1,576 $2,381 $4,464
- ------------------------------------------------------------------------------
Class B shares 281 1,294 2,307 4,502
- ------------------------------------------------------------------------------
Class C shares 283 1,471 2,638 5,469
- ------------------------------------------------------------------------------
6 | Kemper Asian Growth Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00%* of average daily net assets.
* Reflecting the effect of expense limitations and/or fee waivers then in
effect.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Tien Yu Sieh Theresa Gusman
Lead Portfolio Manager o Began investment career
o Began investment career in 1983
in 1990 o Joined the advisor in
o Joined the advisor in 1996 1992
o Joined the fund team o Joined the fund team
in 1999 in 1998
Elizabeth J. Allan
o Began investment career
in 1982
o Joined the advisor in 1987
o Joined the fund team
in 1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
7 | Kemper Asian Growth Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KEMAX B) KEMBX C) KEMCX
Kemper
Emerging Markets
Growth Fund
FUND GOAL The fund seeks long-term capital growth.
8 | Kemper Emerging Markets Growth Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 65% of total assets in common stocks and other
equities from emerging market countries, which are located in Latin America,
Asia, Africa, the Middle East and Eastern Europe.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies that have
exceptional business prospects (due to factors that may range from market
dominance to innovative products or services).
Growth orientation. The managers generally look for companies that seem to offer
the potential for sustainable above-average growth of revenue or earnings
relative to each stock's own market.
Top-down analysis. The managers look for significant social, economic,
industrial and demographic changes, with an eye toward identifying countries,
industries and companies that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given country or industry.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks or preferred stocks. The fund may invest up
to 35% of total assets in developed foreign and U.S. equities, and may invest up
to 35% of total assets in emerging market and U.S. debt securities, including
junk bonds (i.e., grade BB and below). Compared to investment-grade bonds, junk
bonds may pay higher yields and have higher volatility and risk of default.
9 | Kemper Emerging Markets Growth Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how emerging market stocks perform
- -- something that depends on a large number of factors, including economic,
political and demographic trends. When emerging market stock prices fall, you
should expect the value of your investment to fall as well. If the fund
emphasizes a given market, such as Latin America, factors affecting that market
will affect performance. Emerging markets tend to be more volatile than
developed markets, for reasons ranging from political and economic uncertainties
to poor regulation and liquidity to a higher risk that essential information may
be incomplete or wrong.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies. The fact that the fund
is not diversified and may invest in relatively few companies increases fund
risk, because any factors affecting a given company could affect performance. In
addition, changing currency rates could add to the fund's investment losses or
reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may make sense for investors interested in adding exposure to
countries located in emerging markets.
10 | Kemper Emerging Markets Growth Fund
<PAGE>
Performance
The bar chart shows the total return for the fund's Class A shares, which may
give some idea of risk. The chart doesn't reflect sales loads; if it did,
returns would be lower. The table shows how the fund's returns over different
periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1999 49.26
Best quarter: 30.89%, Q4 '99 Worst quarter: -7.31%, Q3 '99
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
- --------------------------------------------------------------------------------
Since 12/31/98 Since 1/9/98
1 Year Life of Class
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A 40.60% 9.77%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B 45.01 10.70
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C 48.01 12.21
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Index 66.65 18.81*
- ------------------------------------------------------------------------------
Index: IFCI Emerging Markets Investable Index, a U.S. dollar-denominated index
comprised of stocks of countries classified as either low- or middle-income
economies by the World Bank regardless of their particular stage of development.
* Index comparison begins 1/31/98.
In the chart, total returns for 1999 would have been lower if operating expenses
hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 1999 would have been lower if operating expenses
hadn't been reduced.
11 | Kemper Emerging Markets Growth Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 5.75% None None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Management Fee 1.25% 1.25% 1.25%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Other Expenses** 13.14 13.36 13.63
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 14.39 15.36 15.63
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expense Reimbursement 12.11 12.18 12.48
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net Annual Operating Expenses*** 2.28 3.18 3.15
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
*** By contract, total operating expenses are capped at 2.28%, 3.18% and
3.15% for Class A, Class B and Class C shares, respectively, through
2/28/2001.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A $793 $3,324 $5,401 $9,111
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B 721 3,433 5,593 9,156
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C 418 3,172 5,452 9,340
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A $793 $3,324 $5,401 $9,111
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B 321 3,133 5,393 9,156
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C 318 3,172 5,452 9,340
- ------------------------------------------------------------------------------
12 | Kemper Emerging Markets Growth Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00%* of average daily net assets.
* Reflecting the effect of expense limitations and/or fee waivers then in
effect.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Joyce E. Cornell Theresa Gusman
Lead Portfolio Manager o Began investment career
o Began investment career in 1983
in 1987 o Joined the advisor in
o Joined the advisor in 1991 1992
o Joined the fund team o Joined the fund team
in 1998 in 1998
Andre J. DeSimone Tara C. Kenney
o Began investment career o Began investment career
in 1981 in 1984
o Joined the advisor in 1997 o Joined the advisor in
o Joined the fund team 1995
in 1998 o Joined the fund team
in 1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
13 | Kemper Emerging Markets Growth Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KGLAX B) KGLBX C) KGLCX
Kemper
Global Blue Chip Fund
FUND GOAL The fund seeks long-term capital growth.
14 | Kemper Global Blue Chip Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 65% of total assets in common stocks and other
equities of "blue chip" companies throughout the world. These are large, well
known companies that typically have an established earnings and dividends
history, easy access to credit, solid positions in their industries and strong
management. Although the fund may invest in any country, it primarily focuses on
countries with developed economies (including the U.S.).
In choosing stocks, the portfolio managers look for those blue-chip companies
that appear likely to benefit from global economic trends or have promising new
technologies or products.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, when its fundamental factors have changed or when adjusting its
exposure to a given country or industry.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks or preferred stocks. While the fund invests
mainly in developed countries, it may invest up to 15% of total assets in
emerging market debt or equity securities of emerging markets (of which, 5% of
net assets may be junk bonds, i.e., grade BB and below).
15 | Kemper Global Blue Chip Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how U.S. and foreign stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When U.S. and foreign stock prices
fall, especially prices of large company stocks, you should expect the value of
your investment to fall as well. Foreign stocks tend to be more volatile than
their U.S. counterparts, for reasons ranging from political and economic
uncertainties to a higher risk that essential information may be incomplete or
wrong.
Large company stocks at times may not perform as well as stocks of smaller or
mid-size companies. Because a stock represents ownership in its issuer, stock
prices can be hurt by poor management, shrinking product demand and other
business risks. These may affect single companies as well as groups of
companies. In addition, changing currency rates could add to the fund's
investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
If you are interested in large-cap stocks and want to look beyond U.S. markets,
this fund could be suitable for you.
16 | Kemper Global Blue Chip Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1998 13.79
1999 28.23
Best quarter: 18.78%, Q4 '99 Worst quarter: -8.00%, Q3 '98
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
- --------------------------------------------------------------------------------
Since 12/31/98 Since 12/31/97
1 Year Life of Class
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A 20.85% 17.25%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B 24.02 18.34
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C 27.07 19.73
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Index 25.34 25.07
- ------------------------------------------------------------------------------
Index: The MSCI (Morgan Stanley Capital International) World Index measures
performance of a range of developed country general stock markets, including the
United States, Canada, Europe, Australia, New Zealand and the Far East.
In the chart, total returns from 1998 through 1999 would have been lower if
operating expenses hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 1999 would have been lower if operating expenses
hadn't been reduced.
17 | Kemper Global Blue Chip Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 5.75% None None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Management Fee 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Other Expenses** 3.44 3.84 4.14
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 4.44 5.59 5.89
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expense Reimbursement 2.64 2.91 3.24
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net Annual Operating Expenses*** 1.80 2.68 2.65
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies about
transactions") may be subject to a contingent deferred sales charge of 1.00% if
redeemed within one year of purchase and 0.50% if redeemed during the second
year following purchase.
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
regulatory fees.
*** By contract, total operating expenses are capped at 1.80%, 2.68% and 2.65%
for Class A, Class B and Class C shares, respectively, through 2/28/2001.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $747 $1,616 $2,495 $4,735
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 671 1,708 2,732 4,874
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 368 1,464 2,638 5,483
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $747 $1,616 $2,495 $4,735
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 271 1,408 2,532 4,874
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 268 1,464 2,638 5,483
- ------------------------------------------------------------------------------
18 | Kemper Global Blue Chip Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00%* of average daily net assets.
* Reflecting the effect of expense limitations and/or fee waivers then in
effect.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Diego Espinosa William E. Holzer
Lead Portfolio Manager o Began investment career
o Began investment career in 1970
in 1991 o Joined the advisor in
o Joined the advisor in 1996 1980
o Joined the fund team in o Joined the fund team in
1998 1998
Nicholas Bratt
o Began investment career
in 1974
o Joined the advisor in 1976
o Joined the fund team in
1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
19 | Kemper Global Blue Chip Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KGDAX B) KGDBX C) KGDCX
Kemper
Global Discovery Fund*
FUND GOAL The fund seeks above-average long-term capital appreciation.
* Kemper Global Discovery Fund is properly known as Global Discovery
Fund.
20 | Kemper Global Discovery Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 65% of total assets in common stocks and other
equities of small companies throughout the world (companies with market values
similar to the smallest 20% of the Salomon Brothers Broad Market Index). The
fund generally focuses on countries with developed economies (including the
U.S.). As of December 31, 1999, companies in which the fund invests typically
have a market capitalization of between $75 million and $5.7 billion.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for companies that appear to have
effective management, strong competitive positioning, vigorous research and
development efforts and sound balance sheets.
Growth orientation. The managers generally look for companies that have
above-average potential for sustainable growth of revenue or earnings compared
to large companies, and whose market value appears reasonable in light of their
business prospects.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, seeking to identify stocks that may benefit
from them.
The managers may favor different securities at different times, while still
maintaining variety in terms of the countries and industries represented.
The fund will normally sell a stock when the managers believe its price is
unlikely to go much higher, its fundamentals have deteriorated, other
investments offer better opportunities or in the course of adjusting its
emphasis on a given country.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks or preferred stocks. The fund may invest up
to 35% of total assets in common stocks and other equities of large companies or
in debt securities (of which, 5% of net assets may be junk bonds, i.e. grade BB
and below).
21 | Kemper Global Discovery Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt the fund's performance, cause you to
lose money or make the fund perform less well than other investments.
The most important factor with this fund is how U.S. and foreign stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When U.S. and foreign stock prices
fall, you should expect the value of your investment to fall as well. Foreign
stocks tend to be more volatile than their U.S. counterparts, for reasons
ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. These risks tend to be greater
in emerging markets.
Compared to large company stocks, small and mid-size stocks tend to be more
volatile, in part because these companies tend to be less established and the
valuation of their stocks often depends on future expectations. Because a stock
represents ownership in its issuer, stock prices can be hurt by poor management,
shrinking product demand and other business risks. These may affect single
companies as well as groups of companies. In addition, changing currency rates
could add to the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may interest long-term investors who want to diversify a large-cap or
domestic portfolio of investments.
22 | Kemper Global Discovery Fund
<PAGE>
Performance
The bar chart shows the total return for the fund's Class A shares, which may
give some idea of risk. The chart doesn't reflect sales loads; if it did,
returns would be lower. The table shows how the fund's returns over different
periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1999 64.15
Best quarter: 41.23%, Q4 '99 Worst quarter: -5.43%, Q3 '99
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
- --------------------------------------------------------------------------------
Since 12/31/98 Since 4/16/98
1 Year Life of Class
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A 54.68% 23.94%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B 59.70 28.00
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C 62.83 29.53
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Index 22.36 8.10*
- ------------------------------------------------------------------------------
Index: Salomon Brothers World Equity Extended Market Index, an unmanaged small
capitalization stock universe of 22 countries.
* Index comparison begins 4/30/98.
In the chart, total returns for 1999 would have been lower if operating expenses
hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 1999 would have been lower if operating expenses
hadn't been reduced.
23 | Kemper Global Discovery Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 5.75% None None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Management Fee 1.10% 1.10% 1.10%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Other Expenses** 1.20 1.63 1.19
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 2.30 3.48 3.04
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expense Reimbursement 0.29 0.65 0.24
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net Annual Operating Expenses*** 2.01 2.83 2.80
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
*** By contract, total operating expenses are capped at 2.01%, 2.83% and
2.80% for Class A, Class B and Class C shares, respectively, through
2/28/2001.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $767 $1,226 $1,710 $3,038
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 686 1,308 1,952 3,202
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 383 917 1,575 3,338
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $767 $1,226 $1,710 $3,038
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 286 1,008 1,752 3,202
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 283 917 1,575 3,338
- ------------------------------------------------------------------------------
24 | Kemper Global Discovery Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.88% of average daily net assets.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Gerald J. Moran Steven T. Stokes
Lead Portfolio Manager o Began investment career
o Began investment career in 1986
in 1968 o Joined the advisor in
o Joined the advisor in 1968 1996
o Joined the fund team o Joined the fund team
in 1991 in 1999
Sewall Hodges
o Began investment career
in 1978
o Joined the advisor in 1995
o Joined the fund team
in 1996
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
25 | Kemper Global Discovery Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KGIAX B) KGIBX C) KGICX
Kemper
Global Income Fund
FUND GOAL The fund seeks to provide high current income consistent with
prudent total return asset management.
26 | Kemper Global Income Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 65% of total assets in foreign and U.S.
investment-grade bonds and other income-producing securities. While the fund may
invest in securities issued by any issuer and in any currency, it generally
focuses on issuers in developed markets, such as Australia, Canada, Japan, New
Zealand, the U.S. and Western Europe, and on securities of other countries that
are denominated in the currencies of these countries or the euro.
In making their buy and sell decisions, the portfolio managers typically
consider a number of factors, including economic outlooks, interest rate
movements, inflation trends, security characteristics and changes in supply and
demand within global bond markets. In choosing individual bonds, the managers
use independent analysis to look for bonds that have attractive yields and good
credit. The managers may favor securities from different countries and issuers
at different times, while still maintaining variety in terms of countries and
issuers represented.
Although the managers may adjust the fund's duration (a measure of sensitivity
to interest rate movements), they generally intend to keep it between 4.0 and
6.0 years.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
This fund normally invests at least 65% of total assets in investment-grade
bonds, which are those in the top four credit grades (i.e., as low as BBB/Baa).
The fund may invest up to 35% of net assets in foreign or domestic debt
securities of any credit quality, including junk bonds (i.e., grade BB and
below). Compared to investment-grade bonds, junk bonds may pay higher yields and
have higher volatility and risk of default.
27 | Kemper Global Income Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
For this fund, the main factor is global interest rates. A rise in interest
rates generally means a fall in bond prices -- and, in turn, a fall in the value
of your investment. (As a general rule, a 1% rise in interest rates means a 1%
fall in value for every year of duration.)
Foreign markets tend to be more volatile than U.S. markets, for reasons ranging
from political and economic uncertainties to poor regulation to a higher risk
that essential information may be incomplete or wrong.
Another major factor is currency exchange rates. When the dollar value of a
foreign currency falls, so does the value of any investments the fund owns that
are denominated in that currency. This is separate from market risk, and may add
to market losses or reduce market gains.
The fact that the fund is not diversified and may invest in securities of
relatively few issuers increases its risk, because any factors affecting a given
company could affect performance. Similarly, if the fund emphasizes a given
market, such as Canada, or a given industry, factors affecting that market or
industry will affect performance.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, issuers, industries or other matters
o a bond could fall in credit quality or go into default; this risk is
greater for junk bonds
o some types of bonds could be paid off earlier than expected, which
would hurt the fund's performance
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may make sense for investors seeking a less aggressive approach to
international income investing.
28 | Kemper Global Income Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1990 22.66
1991 11.13
1992 -1.90
1993 10.23
1994 -1.47
1995 19.89
1996 5.87
1997 1.80
1998 10.48
1999 -6.38
Best quarter: 11.23%, Q1 '95 Worst quarter: -4.32%, Q1 '92
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
- --------------------------------------------------------------------------------
Since Since Since 5/31/94 Since
12/31/98 12/31/94 Life of Class 12/31/89
1 Year 5 Years B/C 10 Years
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A -10.58% 5.01% -- 6.36%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B -9.66 5.07 4.88% --
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C -7.06 5.30 5.08 --
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Index -4.27 6.42 6.30 8.03
- ------------------------------------------------------------------------------
Index: Salomon Brothers World Government Bond Index, an unmanaged index on a
U.S. dollar total return basis, with all dividends reinvested, and includes
government bonds from 14 countries. The minimum maturity is one year.
The table includes the effects of maximum sales loads.
29 | Kemper Global Income Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 4.50% None None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Management Fee 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Other Expenses** 0.96 0.89 0.86
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.71 2.39 2.36
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $616 $965 $1,336 $2,379
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 642 1,045 1,475 2,403
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 339 736 1,260 2,696
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $616 $965 $1,336 $2,379
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 242 745 1,275 2,403
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 239 736 1,260 2,696
- ------------------------------------------------------------------------------
30 | Kemper Global Income Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.75% of average daily net assets.
Scudder Investments (U.K.) Limited, 1 South Place, London, U.K., an affiliate of
Scudder Kemper Investments, Inc., is the sub-advisor for Kemper Global Income
Fund. Scudder Investments (U.K.) Limited has served as sub-advisor for mutual
funds since December, 1996 and investment advisor for certain institutional
accounts since August, 1998.
Scudder Investments (U.K.) Limited renders investment advisory and management
services with regard to the portion of the fund's portfolio as allocated to
Scudder Investments (U.K.) Limited by Scudder Kemper Investments, Inc. from
time-to-time for management, including services related to foreign securities,
foreign currency transactions and related investments.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Jan C. Faller Jeremy L. Ragus
Co-Lead Portfolio Manager o Began investment career
o Began investment career in 1977
in 1988 o Joined the advisor
o Joined the advisor in 1999 in 1990
o Joined the fund team in 1999 o Joined the fund team
in 1999
Robert Stirling
Co-Lead Portfolio Manager
o Began investment career
in 1984
o Joined the sub-advisor
in 1995
o Joined the fund team in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who
work together to develop the fund's investment strategies.
31 | Kemper Global Income Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KITAX B) KINBX C) KITCX
Kemper
International Fund
FUND GOAL The fund seeks total return through a combination of capital
growth and income.
32 | Kemper International Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 80% of total assets in foreign securities (securities
issued by foreign-based issuers). The fund invests at least 65% of total assets
in common stocks of established foreign companies with the potential for capital
growth, income or both. The fund may invest more than 25% of total assets in any
given developed country that the manager believes poses no unique investment
risk.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies that have sound
financial strength, good business prospects and strong competitive positioning
and above-average earnings growth, among other factors.
Top-down analysis. The managers consider the economic outlooks for various
countries and geographical areas, favoring those they believe have sound
economic conditions and open markets.
Analysis of global themes. The managers look for significant changes in the
business environment, with an eye toward identifying industries that may benefit
from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, its underlying investment theme has matured or the reasons for
originally investing no longer apply.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks or preferred stocks. The fund may invest up
to 35% of net assets in foreign or domestic debt securities of any credit
quality, including junk bonds (i.e., grade BB and below). Compared to
investment-grade bonds, junk bonds may pay higher yields and have higher
volatility and risk of default.
33 | Kemper International Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how foreign stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When foreign stock prices fall, you should
expect the value of your investment to fall as well.
Foreign stocks may at times be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies. In addition, changing
currency rates could add to the fund's investment losses or reduce its
investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o bond investments could be hurt by rising interest rates or declines in
credit quality
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Investors who are looking for a broadly diversified international fund may want
to consider this fund.
34 | Kemper International Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1990 -7.50
1991 9.13
1992 -4.79
1993 35.65
1994 -4.00
1995 12.96
1996 17.05
1997 9.00
1998 7.88
1999 41.30
Best quarter: 29.96%, Q4 '99 Worst quarter: -17.89%, Q3 '98
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as 12/31/1999
- --------------------------------------------------------------------------------
Since Since 5/31/94 Since
Since 12/31/98 12/31/94 Life of Class 12/31/89
1 Year 5 Years B/C 10 Years
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A 33.20% 15.68% -- 9.99%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B 37.34 15.90 13.62% --
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C 40.42 16.03 13.73 --
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Index 27.30 13.15 11.81 7.33
- ------------------------------------------------------------------------------
Index: MSCI EAFE Index (Morgan Stanley Capital International Europe,
Austral-Asia, Far East Index), a generally accepted benchmark for performance of
major overseas markets.
The table includes the effects of maximum sales loads. In the table and the
chart, total returns for 1990 would have been lower if operating expenses hadn't
been reduced.
35 | Kemper International Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 5.75% None None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Management Fee 0.74% 0.74% 0.74%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Other Expenses** 0.88 0.97 0.86
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.62 2.46 2.35
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a contingent deferred sales charge of
1.00% if redeemed within one year of purchase and 0.50% if redeemed during
the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $730 $1,057 $1,406 $2,386
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 649 1,067 1,511 2,399
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 338 733 1,255 2,686
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $730 $1,057 $1,406 $2,386
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 249 767 1,311 2,399
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 238 733 1,255 2,686
- ------------------------------------------------------------------------------
36 | Kemper International Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.74% of average daily net assets.
Scudder Investments (U.K.) Limited, 1 South Place, London, U.K., an affiliate of
Scudder Kemper Investments, Inc., is the sub-advisor for Kemper International
Fund. Scudder Investments (U.K.) Limited has served as sub-advisor for mutual
funds since December, 1996 and investment advisor for certain institutional
accounts since August, 1998.
Scudder Investments (U.K.) Limited renders investment advisory and management
services with regard to the portion of the fund's portfolio as allocated to
Scudder Investments (U.K.) Limited by Scudder Kemper Investments, Inc. from
time-to-time for management, including services related to foreign securities,
foreign currency transactions and related investments.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Irene Cheng Marc Slendebroek
Lead Portfolio Manager o Began investment career
o Began investment career in 1990
in 1985 o Joined the sub-advisor
o Joined the advisor in 1993 in 1994
o Joined the fund team o Joined the fund team
in 1999 in 1998
Nicholas Bratt Carol L. Franklin
o Began investment career o Began investment career
in 1974 in 1975
o Joined the advisor in 1976 o Joined the advisor
o Joined the fund team in 1981
in 2000 o Joined the fund team
in 2000
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
37 | Kemper International Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KLAAX B) KLABX C) KLACX
Kemper
Latin America Fund
FUND GOAL The fund seeks long-term capital appreciation.
38 | Kemper Latin America Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 65% of total assets in Latin American common stocks
and other equities that are issued by companies organized under the laws of a
Latin American country or traded on Latin American markets and do more than half
of their business in Latin America. The fund generally focuses on Argentina,
Brazil, Chile, Colombia, Mexico and Peru.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with competitive
business positions, good technologies, and sound balance sheets, among other
factors. The managers also consider the quality of management, the impact of
government regulations and trade initiatives and the cost of labor and raw
materials.
Growth orientation. The managers generally look for companies that seem to offer
the potential for sustainable above-average growth of revenue or earnings
relative to each stock's own market.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, with an eye toward identifying countries,
industries and companies that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given country or industry.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks or preferred stocks. The fund may invest up
to 35% of total assets in non-Latin American (including U.S.) debt and equity
securities, including junk bonds (i.e., grade BB and below). Compared to
investment-grade bonds, junk bonds may pay higher yields and have higher
volatility and risk of default.
39 | Kemper Latin America Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how Latin American stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When Latin American stock prices
fall, you should expect the value of your investment to fall as well. The fact
that the fund concentrates on a single geographical region could affect fund
performance. For example, Latin American companies could be hurt by such factors
as regional economic downturns, currency devaluations, runaway inflation, shifts
in government policy or fluctuations in commodity prices. Similarly, the fact
that the fund is not diversified and may invest in relatively few companies
increases its risk, because any factors affecting a given company could affect
performance.
Emerging markets, including Latin American countries, tend to be more volatile
than developed markets, for reasons ranging from political and economic
uncertainties to poor regulation and liquidity to a higher risk that essential
information may be incomplete or wrong. Stock prices can be hurt by poor
management, shrinking product demand and other business risks. These may affect
single companies as well as groups of companies. In addition, changing currency
rates could add to the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o bond investments could be hurt by rising interest rates or declines in
credit quality
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may interest investors who believe in the long-term growth potential
of Latin American stocks and can accept above-average risks.
40 | Kemper Latin America Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1998 -24.32
1999 50.98
Best quarter: 34.56%, Q4 '99 Worst quarter: -19.35%, Q3 '98
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
- --------------------------------------------------------------------------------
Since 12/31/98 Since 12/31/97
1 Year Life of Class
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A 42.39% 3.77%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B 46.65 4.55
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C 49.86 5.97
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Index 61.85 2.13
- ------------------------------------------------------------------------------
Index: IFC Latin America Investable Return Index, a U.S. dollar-denominated
index comprised of Latin America's stock markets without reference to the
stock's availability to overseas investors.
In the chart, total returns from 1998 through 1999 would have been lower if
operating expenses hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 1999 would have been lower if operating expenses
hadn't been reduced.
41 | Kemper Latin America Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 5.75% None None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Management Fee 1.25% 1.25% 1.25%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Other Expenses** 17.92 17.85 18.69
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 19.17 19.85 20.69
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expense Reimbursement 16.98 16.78 17.65
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Net Annual Operating Expenses*** 2.19 3.07 3.04
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
*** By contract, total operating expenses are capped at 2.19%, 3.07% and
3.04% for Class A, Class B and Class C shares, respectively, through
2/28/2001.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $784 $3,992 $6,355 $9,886
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 710 4,078 6,493 9,900
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 407 3,890 6,437 10,031
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A shares $784 $3,992 $6,355 $9,886
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class B shares 310 3,778 6,293 9,900
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class C shares 307 3,890 6,437 10,031
- ------------------------------------------------------------------------------
42 | Kemper Latin America Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00%* of average daily net assets.
* Reflecting the effect of expense limitations and/or fee waivers then in
effect.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Tara C. Kenney Paul H. Rogers
Lead Portfolio Manager o Began investment career
o Began investment career in 1985
in 1984 o Joined the advisor in
o Joined the advisor in 1995 1994
o Joined the fund team o Joined the fund team
in 1997 in 1997
Edmund B. Games, Jr.
o Began investment career
in 1960
o Joined the advisor in 1960
o Joined the fund team
in 1997
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
43 | Kemper Latin America Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KNEAX B) KNEBX C) KNECX
Kemper
New Europe Fund
FUND GOAL The fund seeks long-term capital appreciation.
44 | Kemper New Europe Fund
<PAGE>
The Fund's Main Strategy
The fund invests at least 65% of total assets in European common stocks and
other equities (equities that are traded mainly on European markets or are
issued by companies that are based in Europe or do more than half of their
business there). The fund generally focuses on common stocks of companies in the
more established markets of Western and Southern Europe such as Finland,
Germany, France, Italy, Spain and Portugal.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with new or
dominant products or technologies, among other factors.
Growth orientation. The managers look for stocks that seem to offer the
potential for sustainable above-average growth of revenues or earnings relative
to each stock's own market and whose market prices are reasonable in light of
their potential growth.
Top-down analysis. The managers consider the outlook for economic, political,
industrial and demographic trends and how they may affect various countries,
sectors and industries.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when it has reached a target price, the
managers believe other investments offer better opportunities or when adjusting
its exposure to a given country or industry.
[ICON]--------------------------------------------------------------------------
OTHER INVESTMENTS
While most of the fund's equities are common stocks, some may be other types of
equities, such as convertible stocks or preferred stocks. The fund may invest up
to 20% of total assets in European debt securities of any credit quality,
including junk bonds (i.e., grade BB and below). Compared to investment-grade
bonds, junk bonds may pay higher yields and have higher volatility and risk of
default.
45 | Kemper New Europe Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how European stock markets perform
- -- something that depends on a large number of factors, including economic,
political and demographic trends. When European stock prices fall, you should
expect the value of your investment to fall as well.
The fact that the fund focuses on a single geographical region could affect fund
performance. For example, European companies could be hurt by such factors as
regional economic downturns or difficulties with the European Economic and
Monetary Union (EMU). Eastern European companies can be very sensitive to
political and economic developments. The fact that the fund is not diversified
and may invest in relatively few companies increases its risk, because any
factors affecting a given company could affect performance.
European stocks may at times be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies. In addition, changing currency rates could add to
the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o bond investments could be hurt by rising interest rates or declines in
credit quality
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may appeal to investors who seek long-term growth and want to gain
exposure to Europe's established markets.
46 | Kemper New Europe Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class M shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
The performance of Class M shares shown in the bar chart and performance table
reflects performance from when the fund was a closed-end fund (through
09/03/99). Because the fund had no daily sales and redemptions, its performance
as a closed-end fund may have been higher than if it had operated as an open-end
fund.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class M Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 3.06
1992 -9.59
1993 25.62
1994 -0.27
1995 18.97
1996 34.38
1997 20.03
1998 34.39
1999 51.83
Best quarter: 37.93%, Q4 '99 Worst quarter: -16.81%, Q3 '98
- --------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
- --------------------------------------------------------------------------------
Since
Since 12/31/98 Since 12/31/94 2/16/90 Life
1 Year 5 Years of Class
- ------------------------------------------------------------------------------
Class M 51.83% 31.39% 15.93%
- ------------------------------------------------------------------------------
Index 16.23 22.54 15.05*
- ------------------------------------------------------------------------------
Index: The Morgan Stanley Capital International Europe Equity Index, an
unmanaged index that is generally representative of the equity securities of the
European markets.
* Index comparison begins 02/28/90.
Class A, B and C shares do not have a full calendar year of operations and their
performance is not shown above. The performance of Class M shares does not
reflect any sales charges. The performance of the other classes is subject to
sales charges and would be lower.
47 | Kemper New Europe Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed 5.75% None None None
On Purchases (as % of offering price)
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None* 4.00% 1.00% None
(as % of redemption proceeds)
- ------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, None None None 2.00%**
if applicable)
- ------------------------------------------------------------------------------
Exchange Fee None None None 2.00%**
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.75% 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75 None
- ------------------------------------------------------------------------------
Other Expenses*** 1.05 1.20 1.20 0.70
- ------------------------------------------------------------------------------
Total Annual Operating Expenses**** 1.80 2.70 2.70 1.45
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** A 2% redemption fee, which is retained by the fund, is imposed upon
redemptions or exchanges of shares held less than one year, with
limited exceptions (see "Policies You Should Know About -- Redemption
Fee).
*** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
**** The fund was reorganized from a closed-end fund to an open-end fund on
September 3, 1999. The fees and expenses of open-end funds are, in many
cases, different than those of closed-end funds. Accordingly, the
expense ratios shown above are estimated for the fund's current fiscal
year ending October 31, 2001, based on the fund's current fee schedule
and expenses incurred by the fund during its most recent fiscal year
adjusted for any open-end related expenses. By contract, total
operating expenses are capped at 1.80%, 2.70% and 2.70% for Class A,
Class B and Class C shares, respectively, through 2/28/2001.
48 | Kemper New Europe Fund
<PAGE>
Based on the figures on the previous page (including one year of capped expenses
in each period except for Class M shares), this example is designed to help you
compare the expenses of each share class to those of other funds. The example
assumes operating expenses remain the same and that you invested $10,000, earned
5% annual returns and reinvested all dividends and distributions. This is only
an example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $747 $1,109 $1,494 $2,569
- ------------------------------------------------------------------------------
Class B shares 673 1,138 1,630 2,615
- ------------------------------------------------------------------------------
Class C shares 373 838 1,430 3,032
- ------------------------------------------------------------------------------
Class M shares 345 649 976 1,900
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $747 $1,109 $1,494 $2,569
- ------------------------------------------------------------------------------
Class B shares 273 838 1,430 2,615
- ------------------------------------------------------------------------------
Class C shares 273 838 1,430 3,032
- ------------------------------------------------------------------------------
Class M shares 345 649 976 1,900
- ------------------------------------------------------------------------------
49 | Kemper New Europe Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.96% of average daily net assets.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Carol L. Franklin Joan R. Gregory
Lead Portfolio Manager o Began investment career
o Began investment career in 1989
in 1975 o Joined the advisor in
o Joined the advisor in 1981 1992
o Joined the fund team o Joined the fund team
in 1990 in 1992
Nicholas Bratt Marc Slendebroek
o Began investment career o Began investment career
in 1974 in 1990
o Joined the advisor in 1976 o Joined the advisor in
o Joined the fund team 1994
in 1999 o Joined the fund team
in 1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
50 | Kemper New Europe Fund
<PAGE>
Other Policies And Risks
While the previous pages describe the main points of each fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, each fund's Board could
change that fund's investment goal without seeking shareholder
approval.
o As a temporary defensive measure, any of these funds could shift up to
100% of assets into investments such as money market securities. This
could prevent losses, but would mean that the fund would not be
pursuing its goal.
o Scudder Kemper establishes a security's credit quality when it buys the
security, using independent ratings or, for unrated securities, its own
credit determination. When ratings don't agree, a fund may use the
higher rating. If a security's credit quality falls, the advisor will
determine whether selling it would be in the shareholders' best
interests.
o The funds may trade securities more actively than many funds, which
could mean higher expenses (thus lowering return) and higher taxable
distributions.
o Although the managers are permitted to use various types of derivatives
(contracts whose value is based on, for example, indices, currencies or
securities), the managers don't intend to use them as principal
investments, and might not use them at all. With derivatives there is a
risk that they could produce disproportionate losses.
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This prospectus doesn't tell you about every policy or risk of investing in a
fund. For more information, request a copy of the Statement of Additional
Information (see back cover).
51 | Other Policies And Risks
<PAGE>
Euro conversion
Funds that invest in foreign securities could be affected by accounting
differences, changes in tax treatment or other issues related to the conversion
of certain European currencies into the euro, which is already underway. The
investment advisor is working to address euro-related issues as they occur and
has been notified that other key service providers are taking similar steps.
Still, there's some risk that this problem could materially affect a fund's
operation (including its ability to calculate net asset value and to handle
purchases and redemptions), its investments or securities markets in general.
51 | Other Policies And Risks
<PAGE>
Financial Highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by Ernst & Young LLP (except Kemper Global Discovery Fund, which has been
audited by Pricewaterhouse-Coopers LLP), whose reports, along with each fund's
financial statements, are included in that fund's annual report (see
"Shareholder reports" on the back cover).
Kemper Asian Growth Fund
Class A
- ------------------------------------------------------------------------------
Years ended November 30, 1999 1998 1997 1996(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $5.41 $6.65 $10.04 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (.01)(b) .11 .08 --
- ------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 2.65 (1.27) (3.47) .54
- ------------------------------------------------------------------------------
Total from investment operations 2.64 (1.16) (3.39) .54
- ------------------------------------------------------------------------------
Less distributions from net investment
income -- (.08) -- --
- ------------------------------------------------------------------------------
Net asset value, end of period $8.05 $5.41 $6.65 $10.04
- ------------------------------------------------------------------------------
Total return (%) (d) 48.80(c) (17.66)(c) (33.76)(c) 5.68**
- ------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- ------------------------------------------------------------------------------
Net assets at end of period ($
thousands) 12,685 4,047 3,549 827
- ------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 3.35 2.65 2.62 1.46*
- ------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.76 1.80 1.60 1.46*
- ------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) (.17) 2.05 .97 .74*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 80 131 155 74*
- ------------------------------------------------------------------------------
(a) For the period from October 21, 1996 (commencement of operations) to
November 30, 1996.
(b) Based on monthly average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been reduced.
(d) Total return does not reflect the effect of sales charges.
* Annualized
** Not annualized
53 | Financial Highlights
<PAGE>
Class B
- ------------------------------------------------------------------------------
Years ended November 30, 1999 1998 1997 1996(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $5.34 $6.58 $10.03 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (.02)(b) .06 -- --
- ------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 2.59 (1.28) (3.45) .53
- ------------------------------------------------------------------------------
Total from investment operations 2.57 (1.22) (3.45) .53
- ------------------------------------------------------------------------------
Less distributions from net investment
income -- (.02) -- --
- ------------------------------------------------------------------------------
Net asset value, end of period $7.91 $5.34 $6.58 $10.03
- ------------------------------------------------------------------------------
Total return (%) (d) 48.13(c) (18.65)(c)(34.40)(c)5.58**
- ------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- ------------------------------------------------------------------------------
Net assets at end of period ($
thousands) 8,674 3,035 2,545 941
- ------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 4.25 4.29 3.51 2.34*
- ------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.91 2.78 2.57 2.34*
- ------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) (.32) 1.07 -- (.14)*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 80 131 155 74*
- ------------------------------------------------------------------------------
(a) For the period from October 21, 1996 (commencement of operations) to
November 30, 1996.
(b) Based on monthly average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been reduced.
(d) Total return does not reflect the effect of sales charges.
* Annualized
** Not annualized
54 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended November 30, 1999 1998 1997 1996(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $5.35 $6.60 $10.03 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (.08)(b) .05 -- --
- ------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 2.56 (1.28) (3.43) .53
- ------------------------------------------------------------------------------
Total from investment operations 2.48 (1.23) (3.43) .53
- ------------------------------------------------------------------------------
Less distributions from net investment
income -- (.02) -- --
- ------------------------------------------------------------------------------
Net asset value, end of period $7.83 $5.35 $6.60 $10.03
- ------------------------------------------------------------------------------
Total return (%) (d) 46.36(c) (18.72)(c)(34.20)(c)5.58**
- ------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- ------------------------------------------------------------------------------
Net assets at end of period ($
thousands) 1,182 334 304 180
- ------------------------------------------------------------------------------
Ratio of expenses, before expense
reductions (%) 5.17 4.56 3.55 2.34*
- ------------------------------------------------------------------------------
Ratio of expenses, after expense
reductions (%) 2.81 2.71 2.54 2.34*
- ------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) (1.22) 1.14 .03 (.14)*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 80 131 155 74*
- ------------------------------------------------------------------------------
(a) For the period from October 21, 1996 (commencement of operations) to
November 30, 1996.
(b) Based on monthly average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been
reduced.
(d) Total return does not reflect the effect of sales charges.
* Annualized
** Not annualized
55 | Financial Highlights
<PAGE>
Kemper Emerging Markets Growth Fund
Class A
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $7.80 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (.02)(a) .03
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.71 (1.73)
- ------------------------------------------------------------------------------
Total from investment operations 1.69 (1.70)
- ------------------------------------------------------------------------------
Net asset value, end of period $9.49 $7.80
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 21.67 (17.89)
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense reductions (%) 10.23 22.38
- ------------------------------------------------------------------------------
Expenses, net (%) 2.19 2.28
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (.22) .40
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $7.74 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment loss (.09)(a) (.01)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.68 (1.75)
- ------------------------------------------------------------------------------
Total from investment operations 1.59 (1.76)
- ------------------------------------------------------------------------------
Net asset value, end of period $9.33 $7.74
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 20.54 (18.53)
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense reductions (%) 11.25 24.06
- ------------------------------------------------------------------------------
Expenses, net (%) 3.06 3.18
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (.93) (.50)
- ------------------------------------------------------------------------------
(a) Per share data was determined based on average shares outstanding.
(b) For the period from January 9, 1998 (commencement of operations) to October
31, 1998.
56 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $7.76 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (.10)(a) .03
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.69 (1.71)
- ------------------------------------------------------------------------------
Total from investment operations 1.59 (1.74)
- ------------------------------------------------------------------------------
Net asset value, end of period $9.35 $7.76
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 20.49 (18.32)
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense reductions (%) 11.55 24.03
- ------------------------------------------------------------------------------
Expenses, net (%) 3.03 3.15
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (1.13) (.47)
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net assets at end of period $3,493,300 1,771,222
- ------------------------------------------------------------------------------
Portfolio turnover rate (annualized) (%) 78 69
- ------------------------------------------------------------------------------
(a) Per share data was determined based on average shares outstanding.
(b) For the period from January 9, 1998 (commencement of operations) to October
31, 1998.
Note: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. has agreed to temporarily waive its management fee and
absorb certain operating expenses of the fund.
57 | Financial Highlights
<PAGE>
Kemper Global Blue Chip Fund
Class A
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $10.21 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .03(a) .05
- ------------------------------------------------------------------------------
Net realized and unrealized gain 1.64 .66
- ------------------------------------------------------------------------------
Total from investment operations 1.67 .71
- ------------------------------------------------------------------------------
Net asset value, end of period $11.88 $10.21
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 16.26 7.47
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses before expense reductions (%) 3.35 6.06
- ------------------------------------------------------------------------------
Expenses, net (%) 1.80 1.80
- ------------------------------------------------------------------------------
Net investment income (loss) (%) .24 .92
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $10.13 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (.07)(a) --
- ------------------------------------------------------------------------------
Net realized and unrealized gain 1.61 .63
- ------------------------------------------------------------------------------
Total from investment operations 1.54 .63
- ------------------------------------------------------------------------------
Net asset value, end of period $11.67 $10.13
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 15.10 6.63
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses before expense reductions (%) 4.54 7.69
- ------------------------------------------------------------------------------
Expenses, net (%) 2.68 2.68
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (.64) .04
- ------------------------------------------------------------------------------
(a) Per share data was determined based on monthly average shares outstanding
during the period.
(b) For the period ended December 31, 1997 (commencement of operations) to
October 31, 1998.
58 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $10.14 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (.07) --
- ------------------------------------------------------------------------------
Net realized and unrealized gain 1.62 .64
- ------------------------------------------------------------------------------
Total from investment operations 1.55 .64
- ------------------------------------------------------------------------------
Net asset value, end of period $11.69 $10.14
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 15.19 6.74
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses before expense reductions (%) 4.85 7.66
- ------------------------------------------------------------------------------
Expenses, net (%) 2.65 2.65
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (.61) .07
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net assets at end of period $22,977,660 9,539,623
- ------------------------------------------------------------------------------
Portfolio turnover rate (annualized) (%) 68 84
- ------------------------------------------------------------------------------
(a) Per share data was determined based on monthly average shares outstanding
during the period.
(b) For the period ended December 31, 1997 (commencement of operations) to
October 31, 1998.
Note: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. has agreed to temporarily waive its management fee and
absorb certain operating expenses of the fund. The Ratios to Average Net Assets
are computed without this expense waiver or absorption.
59 | Financial Highlights
<PAGE>
Kemper Global Discovery Fund
Class A
- ------------------------------------------------------------------------------
Years ended October 31, 1999 1998(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $19.78 $23.98
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (b) (.24) (.09)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 8.51 (4.11)
- ------------------------------------------------------------------------------
Total from investment operations 8.27 (4.20)
- ------------------------------------------------------------------------------
Net asset value, end of period $28.05 $19.78
- ------------------------------------------------------------------------------
Total return (%) (c)(d) 41.61 (17.51)**
- ------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------
Net assets, end of period ($ millions) 55 11
- ------------------------------------------------------------------------------
Ratio of operating expenses to average daily net assets
(%) 2.01 1.95*
- ------------------------------------------------------------------------------
Ratio of operating expenses, before expense reductions,
to average daily net assets (%) 2.26 2.20*
- ------------------------------------------------------------------------------
Ratio of net investment income to average daily
net assets (%) (.98) (1.00)*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 64 41
- ------------------------------------------------------------------------------
(a) For the period April 16, 1998 (commencement of sales of Class A shares) to
October 31, 1998.
(b) Based on monthly average shares outstanding during the period.
(c) Total return does not reflect the effect of any sales charges.
(d) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
60 | Financial Highlights
<PAGE>
Class B
- ------------------------------------------------------------------------------
Years ended October 31, 1999 1998(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $19.70 $23.98
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (b) (.43) (.18)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 8.42 (4.10)
- ------------------------------------------------------------------------------
Total from investment operations 7.99 (4.28)
- ------------------------------------------------------------------------------
Net asset value, end of period $27.69 $19.70
- ------------------------------------------------------------------------------
Total return (%) (c)(d) 40.43 (17.85)**
- ------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------
Net assets, end of period ($ millions) 27 6
- ------------------------------------------------------------------------------
Ratio of operating expenses to average daily net assets
(%) 2.83 2.83*
- ------------------------------------------------------------------------------
Ratio of operating expenses, before expense reductions,
to average daily net assets (%) 3.44 3.13*
- ------------------------------------------------------------------------------
Ratio of net investment income to average daily
net assets (%) (1.81) (1.87)*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 64 41
- ------------------------------------------------------------------------------
(a) For the period April 16, 1998 (commencement of sales of Class B shares) to
October 31, 1998.
(b) Based on monthly average shares outstanding during the period.
(c) Total return does not reflect the effect of any sales charges.
(d) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
61 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended October 31, 1999 1998(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $19.70 $23.98
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (b) (.43) (.17)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 8.44 (4.11)
- ------------------------------------------------------------------------------
Total from investment operations 8.01 (4.28)
- ------------------------------------------------------------------------------
Net asset value, end of period $27.71 $19.70
- ------------------------------------------------------------------------------
Total return (%) (c)(d) 40.41 (17.85)**
- ------------------------------------------------------------------------------
Ratios and Supplemental Data
- ------------------------------------------------------------------------------
Net assets, end of period ($ millions) 8 2
- ------------------------------------------------------------------------------
Ratio of operating expenses to average daily net assets
(%) 2.80 2.80*
- ------------------------------------------------------------------------------
Ratio of operating expenses, before expense reductions,
to average daily net assets (%) 3.00 3.23*
- ------------------------------------------------------------------------------
Ratio of net investment income to average daily
net assets (%) (1.79) (1.88)*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 64 41
- ------------------------------------------------------------------------------
(a) For the period April 16, 1998 (commencement of sales of Class C shares) to
October 31, 1998.
(b) Based on monthly average shares outstanding during the period.
(c) Total return does not reflect the effect of any sales charges.
(d) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
62 | Financial Highlights
<PAGE>
Kemper Global Income Fund
Class A
- ------------------------------------------------------------------------------
Years ended December 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of period $8.94 $8.58 $8.97 $9.05 $8.55
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .32(a) .37(a) .48(a) .52(a) .61
- ------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions (.88) .50 (.33) (.02) 1.05
- ------------------------------------------------------------------------------
Total from investment
operations (.56) .87 .15 .50 1.66
- ------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------
Net investment income (.13) (.40) (.47) (.58) (1.16)
- ------------------------------------------------------------------------------
Tax return of capital (.27) (.11) (.07) -- --
- ------------------------------------------------------------------------------
Total distributions (.40) (.51) (.54) (.58) (1.16)
- ------------------------------------------------------------------------------
Net asset value, end of period $7.98 $8.94 $8.58 $8.97 $9.05
- ------------------------------------------------------------------------------
Total return (%) (b) (6.38) 10.48 1.80 5.87 19.89
- ------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period
($ in thousands) 49,407 69,913 72,145 86,240 102,988
- ------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 1.68 1.58 1.32 1.48 1.34
- ------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 1.67 1.58 1.32 1.48 1.34
- ------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) 3.80 4.31 5.56 5.77 6.43
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 165 313 283 276 220
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charges.
63 | Financial Highlights
<PAGE>
Class B
- ------------------------------------------------------------------------------
Years ended December 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of period $8.96 $8.60 $9.00 $9.09 $8.56
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .26(a) .31(a) .41(a) .46(a) .56
- ------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions (.88) .49 (.33) (.02) 1.05
- ------------------------------------------------------------------------------
Total from investment
operations (.62) .80 .08 .44 1.61
- ------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------
Net investment income (.11) (.34) (.42) (.53) (1.08)
- ------------------------------------------------------------------------------
Tax return of capital (.23) (.10) (.06) -- --
- ------------------------------------------------------------------------------
Total distributions (.34) (.44) (.48) (.53) (1.08)
- ------------------------------------------------------------------------------
Net asset value, end of period $8.00 $8.96 $8.60 $9.00 $9.09
- ------------------------------------------------------------------------------
Total return (%) (b) (6.98) 9.56 1.03 5.11 19.21
- ------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period
($ in thousands) 6,955 12,536 25,735 44,678 49,692
- ------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 2.37 2.32 2.18 2.14 1.98
- ------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 2.36 2.32 2.18 2.14 1.98
- ------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) 3.11 3.57 4.70 5.11 5.79
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 165 313 283 276 220
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charges.
64 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended December 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of period $8.99 $8.62 $9.02 $9.09 $8.56
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .27(a) .32(a) .42(a) .48(a) .57
- ------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions (.90) .49 (.33) (.02) 1.05
- ------------------------------------------------------------------------------
Total from investment
operations (.63) .81 .09 .46 1.62
- ------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------
Net investment income (.11) (.34) (.43) (.53) (1.09)
- ------------------------------------------------------------------------------
Tax return of capital (.24) (.10) (.06) -- --
- ------------------------------------------------------------------------------
Total distributions (.35) (.44) (.49) (.53) (1.09)
- ------------------------------------------------------------------------------
Net asset value, end of period $8.01 $8.99 $8.62 $9.02 $9.09
- ------------------------------------------------------------------------------
Total return (%) (b) (7.06) 9.72 1.09 5.31 19.26
- ------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period
($ in thousands) 1,340 2,346 1,149 821 253
- ------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 2.32 2.13 2.11 2.06 2.06
- ------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 2.31 2.13 2.11 2.06 2.06
- ------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) 3.16 3.76 4.77 5.19 5.71
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 165 313 283 276 220
- ------------------------------------------------------------------------------
Notes:
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charges.
65 | Financial Highlights
<PAGE>
Kemper International Fund
Class A
- -------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
Net asset value, beginning of year $12.10 $12.68 $11.96 $10.59 $11.13
- -------------------------------------------------------------------------------
Income from investment operations:
- -------------------------------------------------------------------------------
Net investment income (loss) (.01) .04 -- .04 .07
- -------------------------------------------------------------------------------
Net realized and unrealized gain 2.57 .01 1.52 1.50 .05
- -------------------------------------------------------------------------------
Total from investment operations 2.56 .05 1.52 1.54 .12
- -------------------------------------------------------------------------------
Less dividends:
- -------------------------------------------------------------------------------
Distribution from net
investment income -- (.08) (.12) (.12) --
- -------------------------------------------------------------------------------
Distribution from net
realized gain (1.81) (.55) (.68) (.05) (.66)
- -------------------------------------------------------------------------------
Total dividends (1.81) (.63) (.80) (.17) (.66)
- -------------------------------------------------------------------------------
Net asset value, end of year $12.85 $12.10 $12.68 $11.96 $10.59
- -------------------------------------------------------------------------------
Total return (%) 23.47(a) .45 13.49 14.70 1.69
- -------------------------------------------------------------------------------
Ratios to average net assets
- -------------------------------------------------------------------------------
Expenses, before expense reductions
(%) 1.59 1.64 1.57 1.64 1.57
- -------------------------------------------------------------------------------
Expenses, net (%) 1.59 1.64 1.57 1.64 1.57
- -------------------------------------------------------------------------------
Net investment income (loss) (%) (.12) .36 .16 .34 .83
- -------------------------------------------------------------------------------
66 | Financial Highlights
<PAGE>
Class B
- -------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
Net asset value, beginning of year $11.90 $12.50 $11.81 $10.46 $11.09
- -------------------------------------------------------------------------------
Income from investment operations:
- -------------------------------------------------------------------------------
Net investment income (loss) (.11) (.08) (.12) (.06) (.02)
- -------------------------------------------------------------------------------
Net realized and unrealized gain 2.52 .03 1.51 1.47 .05
- -------------------------------------------------------------------------------
Total from investment operations 2.41 (.05) 1.39 1.41 .03
- -------------------------------------------------------------------------------
Less dividends:
- -------------------------------------------------------------------------------
Distribution from net
investment income -- -- (.02) (.01) --
- -------------------------------------------------------------------------------
Distribution from net
realized gain (1.81) (.55) (.68) (.05) (.66)
- -------------------------------------------------------------------------------
Total dividends (1.81) (.55) (.70) (.06) (.66)
- -------------------------------------------------------------------------------
Net asset value, end of period $12.50 $11.90 $12.50 $11.81 $10.46
- -------------------------------------------------------------------------------
Total return (%) 22.50(a) (.37) 12.32 13.59 .84
- -------------------------------------------------------------------------------
Ratios to average net assets
- -------------------------------------------------------------------------------
Expenses, before expense
reductions (%) 2.44 2.62 2.57 2.53 2.50
- -------------------------------------------------------------------------------
Expenses, net (%) 2.43 2.62 2.57 2.53 2.50
- -------------------------------------------------------------------------------
Net investment income (loss) (%) (.96) (.62) (.84) (.55) (.10)
- ------------------------------------------------------------------------------
(a) If the Advisor had not reimbursed the fund, the total return for the
year ended October 31, 1999 would have been lower.
67 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of period $11.91 $12.51 $11.81 $10.46 $11.09
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (.10) (.08) (.09) (.06) (.02)
- ------------------------------------------------------------------------------
Net realized and unrealized gain 2.51 .03 1.49 1.47 .05
- ------------------------------------------------------------------------------
Total from investment operations 2.41 (.05) 1.40 1.41 .03
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income -- -- (.02) (.01) --
- ------------------------------------------------------------------------------
Distribution from net
realized gain (1.81) (.55) (.68) (.05) (.66)
- ------------------------------------------------------------------------------
Total dividends (1.81) (.55) (.70) (.06) (.66)
- ------------------------------------------------------------------------------
Net asset value, end of period $12.51 $11.91 $12.51 $11.81 $10.46
- ------------------------------------------------------------------------------
Total return (%) 22.49(a) (.37) 12.45 13.59 .84
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense
reductions (%) 2.33 2.55 2.49 2.50 2.50
- ------------------------------------------------------------------------------
Expenses, net (%) 2.32 2.55 2.49 2.50 2.50
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (.85) (.55) (.76) (.52) (.10)
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $658,211 604,684 588,069 472,243 364,708
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 140 105 76 104 114
- ------------------------------------------------------------------------------
(a) If the Advisor had not reimbursed the fund, the total return for the year
ended October 31, 1999 would have been lower.
Note: Total return does not reflect the effect of any sales charges. Per share
data were determined based on average shares outstanding for the years ended
1995, 1996 and 1998, respectively.
68 | Financial Highlights
<PAGE>
Kemper Latin America Fund
Class A
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $7.31 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .07 .06
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .80 (2.25)
- ------------------------------------------------------------------------------
Total from investment operations .87 (2.19)
- ------------------------------------------------------------------------------
Distribution from net investment income (.06) --
- ------------------------------------------------------------------------------
Net asset value, end of period $8.12 $7.31
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 12.01 (23.05)
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses, before expense reductions (%) 9.16 12.75
- ------------------------------------------------------------------------------
Expenses, net (%) 2.19 2.21
- ------------------------------------------------------------------------------
Net investment income (%) .87 1.38
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $7.26 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (.01) .04
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .81 (2.28)
- ------------------------------------------------------------------------------
Total from investment operations .80 (2.24)
- ------------------------------------------------------------------------------
Net asset value, end of period $8.06 $7.26
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 11.02 (23.58)
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses, before expense reductions (%) 9.93 14.38
- ------------------------------------------------------------------------------
Expenses, net (%) 3.06 3.09
- ------------------------------------------------------------------------------
Net investment income (%) (.13) .50
- ------------------------------------------------------------------------------
(a) Per share data was determined based on monthly average shares outstanding
during the period.
(b) For the period from December 31, 1997 (commencement of operations) to
October 31, 1998.
69 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $7.26 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income -- .04
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .80 (2.28)
- ------------------------------------------------------------------------------
Total from investment operations .80 (2.24)
- ------------------------------------------------------------------------------
Net asset value, end of period $8.06 $7.26
- ------------------------------------------------------------------------------
Total return (not annualized) (%) 11.02 (23.58)
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses, before expense reductions (%) 10.73 14.34
- ------------------------------------------------------------------------------
Expenses, net (%) 3.04 3.06
- ------------------------------------------------------------------------------
Net investment income (%) (.02) .53
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended October 31, 1999(a) 1998(b)
- ------------------------------------------------------------------------------
Net assets at end of period $2,462,031 1,460,498
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 76 55
- ------------------------------------------------------------------------------
(a) Per share data was determined based on monthly average shares outstanding
during the period.
(b) For the period from December 31, 1997 (commencement of operations) to
October 31, 1998.
Note: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. has agreed to temporarily waive its management fee and
absorb certain operating expenses of the fund.
70 | Financial Highlights
<PAGE>
Kemper New Europe Fund
Class A
- ------------------------------------------------------------------------------
1999(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $14.27
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (b) (.03)
- ------------------------------------------------------------------------------
Net realized and unrealized gain .63
- ------------------------------------------------------------------------------
Total from investment operations .60
- ------------------------------------------------------------------------------
Net asset value, end of period $14.87
- ------------------------------------------------------------------------------
Total return (not annualized) (%) (c) 4.20
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses (%) 1.63
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (1.21)
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
1999(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $13.91
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (b) (.05)
- ------------------------------------------------------------------------------
Net realized and unrealized gain .63
- ------------------------------------------------------------------------------
Total from investment operations .58
- ------------------------------------------------------------------------------
Net asset value, end of period $14.49
- ------------------------------------------------------------------------------
Total return (not annualized) (%) (c) 4.17
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses (%) 2.36
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (1.95)
- ------------------------------------------------------------------------------
(a) For the period September 3, 1999 (commencement of Class) to October 31,
1999.
(b) Based on monthly average shares outstanding during the period.
(c) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested.
71 | Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
1999(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $14.02
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (b) (.04)
- ------------------------------------------------------------------------------
Net realized and unrealized gain .64
- ------------------------------------------------------------------------------
Total from investment operations .60
- ------------------------------------------------------------------------------
Net asset value, end of period $14.62
- ------------------------------------------------------------------------------
Total return (not annualized) (%) (c) 4.28
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses (%) 2.40
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (1.99)
- ------------------------------------------------------------------------------
(a) For the period September 3, 1999 (commencement of Class) to October 31,
1999.
(b) Based on monthly average shares outstanding during the period.
(c) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested.
Note: Total return does not reflect the effect of any sales charges. Prior to
September 3, 1999, the fund operated as a closed-end investment company. On
September 3, 1999, the fund became an open-end investment company and offered
three additional classes of shares.
72 | Financial Highlights
<PAGE>
Class M
- ------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of period $22.23 $19.96 $16.60 $13.24 $11.61
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (a) (.00)(c) (.00) (.01) .05 .05
- ------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions 4.62 4.47 3.43 3.36 1.58
- ------------------------------------------------------------------------------
Total from investment operations 4.62 4.47 3.42 3.41 1.63
- ------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------
Net investment income (.03) (.09) (.06) (.05) --
- ------------------------------------------------------------------------------
Net realized gains on
investment transactions (6.36) (2.11) -- -- --
- ------------------------------------------------------------------------------
Total distributions (6.39) (2.20) (.06) (.05) --
- ------------------------------------------------------------------------------
Redemption fees .13 -- -- -- --
- ------------------------------------------------------------------------------
Net asset value, end of period $20.59 $22.23 $19.96 $16.60 $13.24
- ------------------------------------------------------------------------------
Total return (%)
- ------------------------------------------------------------------------------
Per share net asset value (%)
(b)(d) 27.95 27.70 20.66 25.92 14.04
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.68(e) 1.41 1.49 1.51 1.62
- ------------------------------------------------------------------------------
Net investment income (loss) (%) (.00) (.01) (.03) .31 .39
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of period ($
millions) $295 359 320 266 213
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 57.8 41.4 44.7 35.3 32.4
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested.
(c) Net investment income per share includes non-recurring dividend income
amounting to $.08 per share.
(d) The performance of Class M shares reflects performance of the fund in
closed-end form. The fund's performance may have been lower if it had
operated as an open-end fund during these periods.
(e) Includes reorganization expense ratio of .20%.
Note: Total return does not reflect the effect of any sales charges.
73 | Financial Highlights
<PAGE>
Investing In The Funds
The following pages tell you about many of the services, choices and benefits of
being a Kemper Funds shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.
You can find out more about the topics covered here by speaking with your
financial representative or a representative of your workplace retirement plan
or other investment provider.
<PAGE>
Choosing A Share Class
In this prospectus, there are three share classes for each fund. Each class has
its own fees and expenses, offering you a choice of cost structures.
For Kemper New Europe Fund, Class M shares represent the initial shares of the
fund and are no longer offered. Class M shares are not subject to a contingent
deferred sales charge or a Rule 12b-1 distribution fee. Class M shares are
subject to a 2% fee on all redemptions (including redemptions in kind) and
exchanges. Class M shares will automatically convert to Class A shares on
September 3, 2000.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
- ------------------------------------------------------------------------------
Classes and features Points to help you compare
- ------------------------------------------------------------------------------
Class A
o Sales charges of up to 5.75%, o Some investors may be able to
charged when you buy shares reduce or eliminate their sales
charges; see page 84
o In most cases, no charges when you
sell shares o Total annual expenses are lower
than those for Class B or Class C
o No distribution fee
- ------------------------------------------------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate
falls to zero after six years
o Deferred sales charge of up to
4.00%, charged when you sell shares o Shares automatically convert to
you bought within the last six years Class A six years after purchase,
which means lower annual expenses
o 0.75% distribution fee going forward
- ------------------------------------------------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is
lower, but your shares never convert
o Deferred sales charge of 1.00%, to Class A, so annual expenses
charged when you sell shares you remain higher
bought within the last year
o 0.75% distribution fee
- ------------------------------------------------------------------------------
75 | Choosing A Share Class
<PAGE>
Class A shares
Class A shares have a sales charge that varies with the amount you invest:
All funds except Kemper Global Income Fund
Sales charge Sales charge
as a % of as a % of your
Your investment offering price net investment
- ---------------------------------------------------------
Up to $50,000 5.75% 6.10%
- ---------------------------------------------------------
$50,000-$99,999 4.50 4.71
- ---------------------------------------------------------
$100,000-$249,999 3.50 3.63
- ---------------------------------------------------------
$250,000-$499,999 2.60 2.67
- ---------------------------------------------------------
$500,000-$999,999 2.00 2.04
- ---------------------------------------------------------
$1 million or more See page 85
- ---------------------------------------------------------
Kemper Global Income Fund
Sales charge Sales charge
as a % of as a % of your
Your investment offering price net investment
- ---------------------------------------------------------
Up to $100,000 4.50% 4.71%
- ---------------------------------------------------------
$100,000-$249,999 3.50 3.63
- ---------------------------------------------------------
$250,000-$499,999 2.60 2.67
- ---------------------------------------------------------
$500,000-$999,999 2.00 2.04
- ---------------------------------------------------------
$1 million or more See page 85
- ---------------------------------------------------------
The offering price includes the sales charge.
76 | Choosing A Share Class
<PAGE>
You may be able to lower your Class A sales charges if:
o you plan to invest at least $50,000 ($100,000 for Kemper Global Income
Fund) over the next 24 months ("letter of intent")
o the amount of Kemper shares you already own (including shares in
certain other Kemper funds) plus the amount you're investing now is at
least $50,000 ($100,000 for Kemper Global Income Fund) ("cumulative
discount")
o you are investing a total of $50,000 ($100,000 for Kemper Global Income
Fund) or more in several Kemper funds at once ("combined purchases")
The point of these three features is to let you count investments made at other
times for purposes of calculating your present sales charge. Any time you can
use the privileges to "move" your investment into a lower sales charge category
in the table above, it's generally beneficial for you to do so. You can take
advantage of these methods by filling in the appropriate sections of your
application or by speaking with your financial representative.
77 | Choosing A Share Class
<PAGE>
You may be able to buy Class A shares without sales charges when you are:
o reinvesting dividends or distributions
o investing through certain workplace retirement plans
o participating in an investment advisory program under which you pay a
fee to an investment advisor or other firm for portfolio management
services
There are a number of additional provisions that apply in order to be eligible
for a sales charge waiver. The fund may waive the sales charges for investors in
other situations as well. Your financial representative or Kemper can answer
your questions and help you determine if you are eligible.
If you're investing $1 million or more, either as a lump sum or through one of
the sales charge reduction features described on the previous page, you may be
eligible to buy Class A shares without sales charges. However, you may be
charged a contingent deferred sales charge (CDSC) of 1.00% on any shares you
sell within the first year of owning them, and a similar charge of 0.50% on
shares you sell within the second year of owning them. This CDSC is waived under
certain circumstances (see "Policies You Should Know About"). Your financial
representative or Kemper can answer your questions and help you determine if
you're eligible.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class A shares may make sense for long-term investors, especially those who are
eligible for reduced or eliminated sales charges.
78 | Choosing A Share Class
<PAGE>
Class B shares
With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% is deducted
from fund assets each year. This means the annual expenses for Class B shares
are somewhat higher (and their performance correspondingly lower) compared to
Class A shares, which don't have a 12b-1 fee. After six years, Class B shares
automatically convert to Class A, which has the net effect of lowering the
annual expenses from the seventh year on.
Class B shares have a contingent deferred sales charge (CDSC). This charge
declines over the years you own shares, and disappears completely after six
years of ownership. But for any shares you sell within those six years, you may
be charged as follows:
Year after you bought shares CDSC on shares you sell
- -----------------------------------------------------------
First year 4.00%
- -----------------------------------------------------------
Second or third year 3.00
- -----------------------------------------------------------
Fourth or fifth year 2.00
- -----------------------------------------------------------
Sixth year 1.00
- -----------------------------------------------------------
Seventh year and later None
(automatic conversion to
Class A)
- -----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class B shares are designed for long-term investors who prefer to see all of
their investment go to work right away, and can accept somewhat higher annual
expenses.
79 | Choosing A Share Class
<PAGE>
Class C shares
Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan under which a distribution fee of 0.75% is deducted from fund assets
each year. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a contingent deferred sales charge (CDSC), but only on
shares you sell within one year of buying them:
Year after you bought shares CDSC on shares you sell
- ----------------------------------------------------------
First year 1.00%
- ----------------------------------------------------------
Second year and later None
- ----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class C shares may appeal to investors who plan to sell shares within six years
of buying them, or who aren't certain of their investment time horizon.
80 | Choosing A Share Class
<PAGE>
How to Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
- ------------------------------------------------------------------------------
First investment Additional investments
- ------------------------------------------------------------------------------
$1,000 or more for regular accounts $100 or more for regular accounts
$250 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic
Investment Plan
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative using o Contact your representative using
the method that's most convenient for the method that's most convenient
you for you
- ------------------------------------------------------------------------------
By mail or express mail (see below)
o Fill out and sign an application o Send a check and a Kemper
investment slip to us at the
o Send it to us at the appropriate appropriate address below
address, along with an investment
check o If you don't have an investment
slip, simply include a letter with
your name, account number, the full
name of the fund and the share class
and your investment instructions
- ------------------------------------------------------------------------------
By wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By phone
- -- o Call (800) 621-1048 for
instructions
- ------------------------------------------------------------------------------
With an automatic investment plan
- -- o To set up regular investments,
call (800) 621-1048
- ------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9415
Express, registered or certified mail:
Kemper Service Company, 811 Main Street, Kansas City, MO 64105-2005
Fax number: (800) 818-7526 (for exchanging and selling only)
81 | How to Buy Shares
<PAGE>
How to Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
- ------------------------------------------------------------------------------
Exchanging into another fund Selling shares
- ------------------------------------------------------------------------------
$1,000 or more to open a new account Some transactions, including most
for over $50,000, can only be
$100 or more for exchanges between ordered in writing with a signature
existing accounts guarantee; if you're in doubt, see
page 92
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by
method that's most convenient the method that's most convenient
for you for you
- ------------------------------------------------------------------------------
By phone or wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By mail, express mail or fax
(see previous page)
Write a letter that includes:
Write a letter that includes:
o the fund, class and account
o the fund, class and account number number from which you want to sell
you're exchanging out of shares
o the dollar amount or number of o the dollar amount or number of
shares you want to exchange shares you want to sell
o the name and class of the fund you o your name(s), signature(s) and
want to exchange into address, as they appear on your
account
o your name(s), signature(s) and
address, as they appear on your account o a daytime telephone number
o a daytime telephone number
- ------------------------------------------------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from a o To set up regular cash payments
Kemper fund account, call from a Kemper fund account, call
(800) 621-1048 (800) 621-1048
- ------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
82 | How to Exchange or Sell Shares
<PAGE>
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you
received from them. As a general rule, you should follow the information in
those materials wherever it contradicts the information given here. Please note
that an investment provider may charge its own fees.
Policies about transactions
The funds are open for business each day the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange (typically 3 p.m. Central time, but sometimes
earlier, as in the case of scheduled half-day trading or unscheduled suspensions
of trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
83 | Policies You Should Know About
<PAGE>
EXPRESS-Transfer lets you set up a link between a Kemper account and a bank
account. Once this link is in place, you can move money between the two with a
phone call. You'll need to make sure your bank has Automated Clearing House
(ACH) services. Transactions take two to three days to be completed, and there
is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the account
application; to add it to an existing account, call (800) 621-1048.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that, with respect to certain pre-authorized privileges,
as long as we take reasonable steps to ensure that an order appears genuine, we
are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are normally completed within 24 hours. The funds can only
send or accept wires of $1,000 or more.
Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www.kemper.com to get up-to-date information, review balances or
even place orders for exchanges.
84 | Policies You Should Know About
<PAGE>
When you want to sell more than $50,000 worth of shares, or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a contingent deferred sales charge (CDSC), we
calculate the CDSC as a percentage of what you paid for the shares or what you
are selling them for -- whichever results in the lowest charge to you. In
processing orders to sell shares, we turn to the shares with the lowest CDSC
first. Exchanges from one Kemper fund into another don't affect CDSCs: for each
investment you make, the date you first bought Kemper shares is the date we use
to calculate a CDSC on that particular investment.
There are certain cases in which you may be exempt from a CDSC. These include:
o the death or disability of an account owner (including a joint owner)
o withdrawals made through a systematic withdrawal plan
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns
of excess contributions from retirement plans
o For Class A shares purchased through the Large Order NAV Purchase
Privilege, redemption of shares whose dealer of record at the time of
the investment notifies Kemper Distributors that the dealer is waiving
the applicable commission.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.
85 | Policies You Should Know About
<PAGE>
In each of these cases, there are a number of additional provisions that apply
in order to be eligible for a CDSC waiver. Your financial representative or
Kemper can answer your questions and help you determine if you are eligible.
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take advantage of the "reinstatement feature." With
this feature, you can put your money back into the same class of a Kemper fund
at its current NAV and for purposes of sales charges it will be treated as if it
had never left Kemper. You'll also be reimbursed (in the form of fund shares)
for any CDSC you paid when you sold your shares. Future CDSC calculations will
be based on your original investment date, rather than your reinstatement date.
There is also an option that lets investors who sold Class B shares buy Class A
shares with no sales charge, although they won't be reimbursed for any CDSC they
paid. You can only use the reinstatement feature once for any given group of
shares. To take advantage of this feature, contact Kemper or your financial
representative.
Money from shares you sell is normally sent out within one business day of when
your order is processed, although it could be delayed for up to seven days.
There are also two circumstances when it could be longer: when you are selling
shares you bought recently by check and that check hasn't cleared yet (maximum
delay: 10 days) or when unusual circumstances prompt the SEC to allow further
delays. Certain expedited redemption processes may also be delayed when you are
selling recently purchased shares.
86 | Policies You Should Know About
<PAGE>
Redemption Fee (Class M shares)
Upon the redemption or exchange of Class M shares of the fund (including
redemptions in kind) until September 3, 2000, a fee of 2% of the current net
asset value of the shares will be assessed and retained by the fund for the
benefit of the remaining shareholders. This fee is intended to discourage short
term trading in a vehicle intended for long term investment, to avoid
transaction and other expenses caused by early redemptions and to facilitate
portfolio management. The fee is not a deferred sales charge and is not a
commission paid to the investment manager or its subsidiaries. The fund reserves
the right to modify the terms of or terminate this fee at any time.
The fee applies to all redemptions from the fund and exchanges to other Kemper
Funds by Class M shareholders. The fee is applied to the shares being redeemed
or exchanged in the order in which they were purchased.
87 | Policies You Should Know About
<PAGE>
How the funds calculate share price
For each fund in this prospectus, the price at which you buy shares is as
follows:
Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")
Class B, Class C and Class M shares -- net asset value per share, or NAV
To calculate NAV, each share class of each fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
-------------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
For each fund and share class in this prospectus, the price at which you sell
shares is also the NAV, although for Class B and Class C investors a contingent
deferred sales charge may be taken out of the proceeds (see "Choosing A Share
Class").
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
Because each fund invests in securities that are traded primarily in foreign
markets, the value of its holdings could change at a time when you aren't able
to buy or sell fund shares. This is because some foreign markets are open on
days when the fund doesn't price its shares.
88 | Policies You Should Know About
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if we have
been notified by the IRS that you are subject to backup withholding, or
if you fail to provide us with a correct taxpayer ID number or
certification that you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been
opened, we may give you 30 days' notice to provide the correct number
o charge you $9 each calendar quarter if your account balance is below
$1,000 for the entire quarter; this policy doesn't apply to most
retirement accounts or if you have an automatic investment plan
o pay you for shares you sell by "redeeming in kind," that is, by giving
you marketable securities (which typically will involve brokerage costs
for you to liquidate) rather than cash; with respect to Kemper Asian
Growth Fund, Global Discovery Fund, Kemper Global Income Fund and
Kemper New Europe Fund, the funds generally won't make a redemption in
kind unless your requests over a 90-day period total more than $250,000
or 1%, whichever is less, of a portfolio's net assets; the other funds
may make similar arrangements
89 | Policies You Should Know About
<PAGE>
o prior to September 3, 2000, all redemptions of Kemper New Europe Fund
Class M shares that total more than $500,000 over a 90-day period will
be paid in kind; in addition to paying the usual 2% redemption fee,
shareholders that are subject to redemption in kind may bear additional
expenses greater than 1% of the value of the shares redeemed, and must
submit their redemption request in writing using a form available from
Kemper Service Company
o change, add or withdraw various services, fees and account policies
(for example, we may change or terminate the exchange privilege at any
time)
90 | Policies You Should Know About
<PAGE>
Understanding Distributions And Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The funds intend to pay dividends and distributions to their shareholders in
November or December, and if necessary may do so at other times as well.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Because each shareholder's tax situation is unique, ask your tax professional
about the tax consequences of your investments, including any state and local
tax consequences.
91 | Understanding Distributions And Taxes
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:
Generally taxed at ordinary income rates
- -------------------------------------------------------
o short-term capital gains from selling fund shares
- -------------------------------------------------------
o income dividends you receive from a fund
- -------------------------------------------------------
o short-term capital gains distributions received from a
fund
- -------------------------------------------------------
Generally taxed at capital gains rates
- -------------------------------------------------------
o long-term capital gains from selling fund shares
- -------------------------------------------------------
o long-term capital gains distributions received from a
fund
- -------------------------------------------------------
You may be able to claim a tax credit or deduction for your share of any foreign
taxes your fund pays.
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
If you invest right before the fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.
Corporations may be able to take a dividends- received deduction for a portion
of income dividends they receive.
92 | Understanding Distributions And Taxes
<PAGE>
Notes
<PAGE>
To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call (800) 621-1048.
Statements of Additional Information (SAIs) -- These tell you more about each
fund's features and policies, including additional risk information. The SAIs
are incorporated by reference into this document (meaning that they are legally
part of this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC or request them electronically at [email protected].
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
www.sec.gov
Tel (202) 942-8090
Kemper Funds
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
Tel (800) 621-1048
SEC File Numbers
Kemper Asian Growth Fund 811-7731
Kemper Emerging Markets Growth Fund 811-08395
Kemper Global Blue Chip Fund 811-08395
Global Discovery Fund 811-4670
Kemper Global Income Fund 811-5829
Kemper International Fund 811-3136
Kemper Latin America Fund 811-08395
Kemper New Europe Fund 811-5969
Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com E-mail
[email protected] Tel (800) 621-1048
[LOGO] KEMPER FUNDS
Long-term investing in short-term world(SM)
<PAGE>
Kemper Global and International Funds
Kemper Asian Growth Fund
Kemper Global Income Fund
Kemper International Fund
SUPPLEMENT TO PROSPECTUS
DATED MARCH 1, 2000
CLASS I SHARES
- --------------------------------------------------------------------------------
The above funds currently offer four classes of shares 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
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of Scudder
Kemper Investments, Inc. ("Scudder Kemper") and its affiliates and rollover
accounts from those plans; (2) the following investment advisory clients of
Scudder Kemper and its investment advisory affiliates that invest at least $1
million in a fund: unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and self-directed retirement
plans); unaffiliated banks and insurance companies purchasing for their own
accounts; and endowment funds of unaffiliated non-profit organizations; (3)
investment-only accounts for large qualified plans, with a least $50 million in
total plan assets or at least 1000 participants; (4) trust and fiduciary
accounts of trust companies and bank trust departments providing fee based
advisory services that invest at least $1 million in a fund on behalf of each
trust; (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a fund; and (6) investment
companies managed by Scudder Kemper that invest primarily in other investment
companies. Class I shares currently are available for purchase only from Kemper
Distributors, Inc. ("KDI"), principal underwriter for the funds, and, in the
case of category 4 above, selected dealers authorized by KDI. Share certificates
are not available for Class I shares.
<PAGE>
The following information supplements the indicated sections of the prospectus.
Past performance
The charts and tables contained in the accompanying prospectus provide some
indication of the risks of investing in the funds by illustrating how the funds
have performed from year to year, and comparing this information to a broad
measure of market performance. Of course, past performance is not necessarily an
indication of future performance. Additional performance and financial
information for Kemper International Fund which currently has Class I shares
outstanding is set forth below. No Class I shares are outstanding for the other
funds.
Average Annual Total Returns -- Class I shares
For periods ended Inception
December 31, 1999 One year Life of class of class
---------------------------------------------------------------------------
Kemper International Fund 42.12% 18.83% 7/3/95
---------------------------------------------------------------------------
MSCI EAFE Index 27.30% 14.02%* --
---------------------------------------------------------------------------
Index: MSCI EAFE Index (Morgan Stanley Capital International Europe,
Austral-Asia, Far East Index), a generally accepted benchmark for performance of
major overseas markets.
* Index comparison begins 6/30/95.
Fee and expense information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the funds.
Shareholder Fees, paid directly from your investment
Maximum sales Maximum
charge (load) deferred sales
imposed on charge (load)
purchases (as % (as % of
of offering redemption
price) proceeds)
- ----------------------------------------------------------------------------
Kemper Asian Growth Fund None None
- ----------------------------------------------------------------------------
Kemper Global Income Fund None None
- ----------------------------------------------------------------------------
Kemper International Fund None None
- ----------------------------------------------------------------------------
2
<PAGE>
Annual Operating Expenses; deducted from fund assets
Total Annual
Fund
Management Distribution Other Operating
Fee (12b-1) Fee Expenses* Expenses*
---------------------------------------------------------------------------
Kemper Asian
Growth Fund 0.85% None 2.46% 3.31%
---------------------------------------------------------------------------
Kemper
International
Fund 0.74% None 0.30% 1.04%
---------------------------------------------------------------------------
Kemper Global
Income Fund 0.75% None 0.56% 1.31%
---------------------------------------------------------------------------
* Estimated for Kemper Asian Growth Fund and Kemper Global Income Fund since
no Class I shares were issued as of their most recent fiscal year ends.
"Other Expenses" are restated for Kemper International Fund to reflect
changes in certain administrative and
regulatory fees.
Example
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
Fees and expenses if you sold shares after:
1 year 3 years 5 years 10 years
---------------------------------------------------------------------------
Kemper Asian Growth Fund $334 $1,018 -- --
---------------------------------------------------------------------------
Kemper International Fund $106 $331 $574 $1,271
---------------------------------------------------------------------------
Kemper Global Income Fund $133 $415 -- --
---------------------------------------------------------------------------
3
<PAGE>
Financial Highlights
Kemper International Fund -- I shares
July 3
to
October
Year ended October 31, 31,
CLASS I 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning
of period $12.16 12.72 11.99 10.61 10.09
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment income
(loss) .05 .11 .07 .10 .04
- ----------------------------------------------------------------------------
Net realized and
unrealized gain 2.61 .03 1.53 1.48 .48
- ----------------------------------------------------------------------------
Total from investment
operations 2.66 .14 1.60 1.58 .52
- ----------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income -- .15 .19 .15 --
- ----------------------------------------------------------------------------
Distribution from net
realized gain 1.81 .55 .68 .05 --
- ----------------------------------------------------------------------------
Total dividends 1.81 .70 .87 .20 --
- ----------------------------------------------------------------------------
Net asset value, end
of period $13.01 12.16 12.72 11.99 10.61
- ----------------------------------------------------------------------------
Total return 24.25%(a) 1.18 14.19 15.19 5.15
- ----------------------------------------------------------------------------
Ratios to average net assets
- ----------------------------------------------------------------------------
Expenses, before expense
reductions 1.03% 1.00 1.04 1.10 .85
- ----------------------------------------------------------------------------
Expenses, net 1.02% 1.00 1.04 1.10 .85
- ----------------------------------------------------------------------------
Net investment income (loss) .45% 1.00 .69 .88 1.32
- ----------------------------------------------------------------------------
Year ended October 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Supplemental data for all classes
Net assets at end of year
(in thousands) $658,211 604,684 588,069 472,243 364,708
- ----------------------------------------------------------------------------
Portfolio turnover rate 140% 105 76 104 114
- ----------------------------------------------------------------------------
Notes: Per share data were determined based on average
shares outstanding for the years ended 1996 and 1998,
respectively.
(a) If the Advisor had not reimbursed the fund, the total return for the year
ended October 31, 1999 would have been lower.
4
<PAGE>
Special Features
Shareholders of a fund's Class I shares may exchange their shares for (i) shares
of Zurich Money Funds -- Zurich Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper 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 Zurich
Money Funds -- Zurich Money Market Fund who have purchased shares because they
are participants in tax-exempt retirement plans of Scudder Kemper 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 "How to Exchange or Sell Shares."
5
<PAGE>
March 1, 2000
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
March 1, 2000
KEMPER ASIAN GROWTH FUND (the "Asian Fund")
KEMPER GLOBAL INCOME FUND (the "Global Fund")
KEMPER INTERNATIONAL FUND (the "International
Fund") 222 South Riverside Plaza, Chicago,
Illinois 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the combined
Statement of Additional Information for the Asian, Global and International
Funds (the "Funds"). It should be read in conjunction with the combined
prospectus of the Funds dated March 1, 2000. The prospectus may be obtained
without charge from the Funds and is also available along with other related
materials on the SEC's Internet web site (http://www.sec.gov).
--------------------
TABLE OF CONTENTS
Page
----
Investment Restrictions......................................... 2
Investment Policies and Techniques.............................. 5
Dividends and Taxes............................................. 20
Performance..................................................... 26
Investment Manager and Underwriter.............................. 33
Portfolio Transactions.......................................... 40
Purchase, Repurchase and Redemption of Shares................... 41
Officers and Trustees........................................... 55
Shareholder Rights.............................................. 60
Appendix--Ratings of Investments................................ 62
The financial statements appearing in each Fund's Annual Report to Shareholders
are incorporated herein by reference. The Report for the Fund for which this
Statement of Additional Information is requested accompanies this document, and
may be obtained without charge by calling 1-800-621-1048.
Scudder Kemper Investments, Inc. (the "Adviser") serves as each Fund's
investment manager..
<PAGE>
INVESTMENT RESTRICTIONS
- -----------------------
Each Fund has adopted certain fundamental investment restrictions which cannot
be changed without approval of a "majority" of its outstanding voting shares. As
defined in the Investment Company Act of 1940, this means the lesser of (1) 67%
of the Fund's shares present at a meeting where more than 50% of the outstanding
shares are present in person or by proxy; or (2) more than 50% of the Fund's
outstanding shares.
The Asian Growth and International Funds are classified as diversified open-end
management investment companies. The Global Income Fund is a non-diversified
open-end investment management company.
Each Fund, with the exception of the International Fund, may not, as a
- --------------------------------------------------------------------------------
fundamental policy:
- -------------------
1. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
2. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
3. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
4. Purchase physical commodities or contracts relating to physical
commodities.
5. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
6. Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
7. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. Each Fund has
also adopted the following non-fundamental restrictions, which may be changed by
the Board of Trustees without shareholder approval.
The Asian Fund may not, as a non-fundamental policy:
- ----------------------------------------------------
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. Purchase more than 10% of any class of voting securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as the
Fund.
iv. Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings. (The collateral
arrangements with respect to options and financial futures transactions and
any margin payments in connection therewith are not deemed to be pledges or
other encumbrances.)
2
<PAGE>
v. Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
options and financial futures transactions.
vi. Purchase options, unless the aggregate premiums paid on all such options
held by the Fund at any time do not exceed 20%of its total assets; or sell
put options, if as a result, the aggregate value of the obligations
underlying such put options would exceed 50% of its total assets;
vii. Enter into futures contracts or purchase options thereon unless immediately
after the purchase, the value of the aggregate initial margin with respect
to such futures contracts entered into on behalf of the Fund and the
premiums paid for such options on futures contracts does not exceed 5% of
the fair market value of the Fund's total assets; provided that in the case
of an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in computing the 5% limit.
The Global Fund may not, as a non-fundamental policy:
- -----------------------------------------------------
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. Purchase more than 10% of any class of voting securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as the
Fund.
iv. Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings. (The collateral
arrangements with respect to options, financial futures and delayed
delivery transactions and any margin payments in connection therewith are
not deemed to be pledges or other encumbrances.)
v. Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may
make margin deposits in connection with options and financial futures
transactions.
vi. Make short sales of securities or other assets or maintain a short position
for the account of the Fund unless at all times when a short position is
open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are
convertible into or exchangeable for securities or other assets of the same
issue as, and equal in amount to, the securities or other assets sold short
and unless not more than 10% of the Fund's total assets is held as
collateral for such sales at any one time.
vii. Purchase options, unless the aggregate premiums paid on all such options
held by the Fund at any time do not exceed 20%of its total assets; or sell
put options, if as a result, the aggregate value of the obligations
underlying such put options would exceed 50% of its total assets;
viii.Enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial margin
with respect to such futures contracts entered into on behalf of the Fund
and the premiums paid for such options on futures contracts does not exceed
5% of the fair market value of the Fund's total assets; provided that in
the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing the 5% limit.
The International Fund may not, as a fundamental policy:
- --------------------------------------------------------
3
<PAGE>
1. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities. All debt securities and all preferred stocks
are each considered as one class.
2. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
3. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
4. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
5. Purchase physical commodities or contracts relating to physical
commodities.
6. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
7. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
8. Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
International Fund did not borrow money as permitted by investment restriction
number 3 in the latest fiscal year and it has no present intention of borrowing
during the current year. The International Fund has adopted the following
non-fundamental restrictions, which may be changed by the Board of Trustees
without shareholder approval.
The International Fund may not, as a non-fundamental policy:
- ------------------------------------------------------------
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities. All debt securities and all preferred stocks
are each considered as one class.
iv. Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
v. Pledge the Fund's securities or receivables or transfer or assign or
otherwise encumber them in an amount exceeding the amount of the borrowing
secured thereby.
vi. Purchase options, unless the aggregate premiums paid on all such options
held by the Fund at any time do not exceed 20%of its total assets; or sell
put options, if as a result, the aggregate value of the obligations
underlying such put options would exceed 50% of its total assets;
vii. Enter into futures contracts or purchase options thereon unless immediately
after the purchase, the value of the aggregate initial margin with respect
to such futures contracts entered into on behalf of the
4
<PAGE>
Fund and the premiums paid for such options on futures contracts does not
exceed 5% of the fair market value of the Fund's total assets; provided
that in the case of an option that is in-the-money at the time of purchase,
the in-the-money amount may be excluded in computing the 5% limit.
5
<PAGE>
6
<PAGE>
7
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following information sets forth each Fund's investment objective and
policies. Each Fund's returns and net asset value will fluctuate and there is no
assurance that a Fund will achieve its objective.
ASIAN FUND. The objective of the Asian Fund is long-term capital growth. The
Fund seeks to achieve its objective by investing in a diversified portfolio
consisting primarily of equity securities of Asian companies ("Asian Equity
Securities"). Asian Equity Securities include common stocks, preferred stocks,
securities convertible into or exchangeable for common or preferred stocks,
equity investments in partnerships, joint ventures and other forms of
non-corporate investment and warrants, options and rights exercisable for equity
securities that are issued by Asian companies as defined below.
The Fund considers an issuer of securities to be an Asian company if: (i) it is
organized under the laws of an Asian country and has a principal office in an
Asian country; (ii) it derives 50% or more of its total revenues from business
in Asia; or (iii) its equity securities are traded principally on a stock
exchange in Asia. Under normal circumstances, the Fund will invest at least 85%
of its total assets in Asian Equity Securities and will invest at least 65% of
its total assets in Asian Equity Securities of issuers meeting at least one of
the first two criteria described in the preceding sentence. For purposes of the
foregoing policies, the Fund also considers Asian Equity Securities to include:
(i) shares of closed-end management investment companies, the assets of which
are invested primarily in Asian Equity Securities and (ii) depository receipts
(such as American Depository Receipts) where the underlying or deposited
securities are Asian Equity Securities.
Currently, the Fund invests principally in developing or "emerging" countries
(see "Special Risk Factors -- Emerging Markets" below). Some examples of
emerging countries in which the Fund may invest without limit include China,
Indonesia, Korea, Malaysia, Philippines, Thailand and Taiwan. The Fund may, in
the discretion of the Fund's investment manager, invest without limit in
developed Asian countries such as Hong Kong, Japan and Singapore; however, the
Fund will only invest in Japan when economic conditions warrant and then only in
limited amounts.
In pursuing its objective, the Fund invests primarily in Asian Equity Securities
believed to have potential for capital growth. However, there is no requirement
that the Fund invest exclusively in Asian Equity Securities. Subject to limits
described above, the Fund may invest in any other type of security including,
but not limited to, equity securities of non-Asian companies, bonds, notes and
other debt securities of domestic or foreign companies (including Asian-currency
instruments and securities) and obligations of domestic or foreign governments
and their political subdivisions. Currently, the Fund does not intend to invest
more than 5% of its net assets in debt securities (except for temporary
defensive investments described below).
The Fund makes investments in various Asian countries. Under normal
circumstances, business activities in not less than four different Asian
countries will be represented in the Fund's portfolio. The Fund may, from time
to time, have 40% or more of its assets invested in any major Asian industrial
or developed country which, in the view of the Fund's investment manager, poses
no unique investment risk. Investments may include securities issued by
enterprises that have undergone or are currently undergoing privatization.
In determining the appropriate distribution of investments among various Asian
countries and geographic regions, the Fund's investment manager ordinarily
considers such factors as prospects for relative economic growth among Asian
countries; expected levels of inflation; relative price levels of the various
capital markets; government policies influencing business conditions; the
outlook for currency relationships and the range of individual investment
opportunities available to investors in Asian companies.
8
<PAGE>
When the investment manager deems it appropriate to invest for temporary
defensive purposes, such as during periods of adverse market conditions, up to
100% of the Fund's assets may be invested in cash (including foreign currency)
or cash equivalent short-term obligations, either rated as high quality or
considered to be of comparable quality in the opinion of the investment manager,
including, but not limited to, certificates of deposit, commercial paper,
short-term notes, obligations issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities, and repurchase agreements secured thereby.
In particular, for temporary defensive purposes the Fund's assets may be
invested without limitation in U.S. Dollar-denominated obligations to reduce the
risks inherent in non-U.S. Dollar-denominated assets.
Generally, the Fund will not trade in securities for short-term profits but,
when circumstances warrant, securities may be sold without regard to the length
of time held.
The Fund may purchase or sell put options and enter into futures contracts or
purchase options. The Fund may also utilize various other investment strategies
through the use of derivative contracts. See "Strategic Transactions and
Derivatives."
GLOBAL FUND. The objective of the Global Fund is to provide high current income
consistent with prudent total return asset management. In seeking to achieve its
objective, the Fund will invest primarily in investment grade foreign and
domestic fixed income securities. In managing the Fund's portfolio to provide a
high level of current income, the investment manager will also be seeking to
protect net asset value and to provide investors with a total return, which is
measured by changes in net asset value as well as income earned. In so managing
the Fund's portfolio in an effort to reduce volatility and increase returns, the
investment manager may, as is discussed more fully below, adjust the Fund's
portfolio across various global markets, maturity ranges, quality ratings and
issuers based upon its view of interest rates and other market conditions
prevailing throughout the world.
As a global fund, the Fund may invest in securities issued by any issuer and in
any currency and may hold foreign currency. Under normal market conditions, as a
non-fundamental policy, at least 65% of the Fund's assets will be invested in
the securities of issuers located in at least three countries, one of which may
be the United States. Securities of issuers within a given country may be
denominated in the currency of another country, or in multinational currency
units such as the European Currency Unit ("ECU"). Since the Fund invests in
foreign securities, the net asset value of the Fund will be affected by
fluctuations in currency exchange rates. See "Special Risk Factors" below.
The Fund may seek to capitalize on investment opportunities presented throughout
the world and in international financial markets influenced by the increasing
interdependence of economic cycles and currency exchange rates. Currently, more
than 50% of the value of the world's debt securities is represented by
securities denominated in currencies other than the U.S. Dollar. Over the past
ten years, debt securities offered by certain foreign governments provided
higher investment returns than U.S. Government debt securities. Such returns
reflect interest rates prevailing in those countries and the effect of gains and
losses in the denominated currencies, which have had a substantial impact on
investment in foreign fixed income securities. The relative performance of
various countries' fixed income markets historically has reflected wide
variations relating to the unique characteristics of each country's economy.
Year-to-year fluctuations in certain markets have been significant, and negative
returns have been experienced in various markets from time to time. The
investment manager believes that investment in a global portfolio can provide
investors with more opportunities for attractive returns than investment in a
portfolio comprised exclusively of U.S. debt securities. Also, the flexibility
to invest in fixed income markets around the world can reduce risk since, as
noted above, different world markets have often performed, at a given time, in
radically different ways.
The Fund will allocate its assets among securities of various issuers,
geographic regions, and currency denominations in a manner that is consistent
with its objective based upon relative interest rates among currencies, the
outlook for changes in these interest rates, and anticipated changes in
worldwide exchange rates. In considering these factors, a country's economic and
political state, including such factors as inflation rate, growth prospects,
global trade patterns and government policies, will be evaluated.
9
<PAGE>
It is currently anticipated that the Fund's assets will be invested principally
within Australia, Canada, Japan, New Zealand, the United States and Western
Europe, and in securities denominated in the currencies of these countries or
denominated in multinational currency units such as the ECU. The Fund may also
acquire securities and currency in less developed countries and in developing
countries.
The Fund may invest in debt securities of supranational entities denominated in
any currency. A supranational entity is an entity designated or supported by the
national governments of two or more countries to promote economic reconstruction
or development. Examples of supranational entities include, among others, the
World Bank, the European Investment Bank and the Asian Development Bank. The
Fund may, in addition, invest in debt securities denominated in the ECU of an
issuer in any country (including supranational issuers). The Fund is further
authorized to invest in "semi-governmental securities," which are debt
securities issued by entities owned by either a national, state or equivalent
government or are obligations of such a government jurisdiction that are not
backed by its full faith and credit and general taxing powers.
The Fund is authorized to invest in the securities of any foreign or domestic
issuer. Investments by the Fund in fixed income securities may include
obligations issued or guaranteed by United States or foreign governments
(including foreign states, provinces and municipalities) or their agencies and
instrumentalities; obligations issued or guaranteed by supranational entities;
debt obligations of foreign and domestic corporations, banks and other business
organizations; and other foreign and domestic debt securities such as
convertible securities and preferred stocks, cash and cash equivalents and
repurchase agreements. Under normal market conditions, the Fund, as a
non-fundamental policy, will invest at least 65%, and may invest up to 100%, of
its total assets in fixed income securities. Some of the Fund's fixed income
securities may be convertible into common stock or be traded together with
warrants for the purchase of common stock, and the Fund may convert such
securities into equities and hold them as equity upon conversion. Investments
may include securities issued by enterprises that have undergone or are
currently undergoing privatization.
The securities in which the Fund may invest will be "investment grade"
securities. Investment grade securities are those rated at the time of purchase
within the four highest grades assigned by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P") or IBCA Limited (including
its affiliate IBCA, Inc.) ("IBCA"); or that are unrated but are of comparable
quality in the opinion of the investment manager. Most foreign fixed income
securities are unrated. The characteristics of the securities in the Fund's
portfolio, such as the maturity and the type of issuer, will affect yields and
yield differentials, which vary over time. The actual yield realized by the
investor is subject, among other things, to the Fund's expenses and the
investor's transaction costs.
When the investment manager deems it appropriate to invest for temporary
defensive purposes, such as during periods of adverse market conditions, or when
relative yields in other securities are not deemed attractive, part or all of
the Fund's assets may be invested in cash (including foreign currency) or cash
equivalent short-term obligations, either rated as high quality or considered to
be of comparable quality in the opinion of the investment manager, including,
but not limited to, certificates of deposit, commercial paper, short-term notes,
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities, and repurchase agreements secured thereby. In particular,
for defensive purposes a larger portion of the Fund's assets may be invested in
U.S. Dollar-denominated obligations to reduce the risks inherent in non-U.S.
Dollar-denominated assets.
The Fund will not normally engage in the trading of securities for the purpose
of realizing short-term profits, but it will adjust its portfolio as considered
advisable in view of prevailing or anticipated market conditions and the Fund's
investment objective. Accordingly, the Fund may sell portfolio securities in
anticipation of a rise in interest rates and purchase securities for inclusion
in its portfolio in anticipation of a decline in interest rates.
The Fund may purchase or sell put options and enter into futures contracts or
purchase options. The Fund may also utilize various other investment strategies
through the use of derivative contracts. See "Strategic Transactions and
Derivatives."
INTERNATIONAL FUND. The International Fund seeks a total return, a combination
of capital growth and income, principally through an internationally diversified
portfolio of equity securities. Investments may be made for capital growth or
for income or any combination thereof for the purpose of achieving a high
overall return. There
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is no limitation on the percentage or amount of the Fund's assets that may be
invested in growth or income, and therefore at any particular time the
investment emphasis may be placed solely or primarily on growth of capital or on
income. While the Fund invests principally in equity securities of non-U.S.
issuers, it may also invest in convertible and debt securities and foreign
currencies. The Fund invests primarily in non-U.S. issuers, and under normal
circumstances more than 80% of the Fund's total assets will be invested in
non-U.S. issuers. In determining whether the Fund will be invested for capital
growth or income, the investment manager analyzes the international equity and
fixed income markets and seeks to assess the degree of risk and level of return
that can be expected from each market. See "Special Risk Factors."
In pursuing its objective, the Fund invests primarily in common stocks of
established non-U.S. companies believed to have potential for capital growth,
income or both. However, there is no requirement that the Fund invest
exclusively in common stocks or other equity securities. The Fund may invest in
any other type of security including, but not limited to, convertible securities
(including warrants), preferred stocks, bonds, notes and other debt securities
of companies (including Euro-currency instruments and securities) or obligations
of domestic or foreign governments and their political subdivisions. When the
investment manager believes that the total return potential in debt securities
equals or exceeds the potential return on equity securities, the Fund may
substantially increase its holdings in such debt securities. The Fund may
establish and maintain reserves for defensive purposes or to enable it to take
advantage of buying opportunities. The Fund's reserves may be invested in
domestic as well as foreign short-term money market instruments including, but
not limited to, government obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term corporate debt
securities and repurchase agreements.
The Fund makes investments in various countries. Under normal circumstances,
business activities in not less than three different foreign countries will be
represented in the Fund's portfolio. The Fund may, from time to time, have more
than 25% of its assets invested in any major industrial or developed country
which in the view of the investment manager poses no unique investment risk. The
Fund may purchase securities of companies, wherever organized, that have their
principal activities and interests outside the United States. Investments may
include securities issued by enterprises that have undergone or are currently
undergoing privatization. Under exceptional economic or market conditions
abroad, the Fund may, for defensive purposes, invest all or a major portion of
its assets in U.S. Government obligations or securities of companies
incorporated in and having their principal activities in the United States. The
Fund may also invest its reserves in domestic short-term money-market
instruments as described above.
In determining the appropriate distribution of investments among various
countries and geographic regions, the investment manager ordinarily considers
such factors as prospects for relative economic growth among foreign countries;
expected levels of inflation; relative price levels of the various capital
markets; government policies influencing business conditions; the outlook for
currency relationships and the range of individual investment opportunities
available to the international investor.
Generally, the Fund will not trade in securities for short-term profits but,
when circumstances warrant, securities may be sold without regard to the length
of time held.
The Fund may purchase or sell put options and enter into futures contracts or
purchase options. The Fund may also utilize various other investment strategies
through the use of derivative contracts. See "Strategic Transactions and
Derivatives."
SPECIAL RISK FACTORS. There are risks inherent in investing in any security,
including shares of each Fund. The investment manager attempts to reduce risk
through fundamental research; however, there is no guarantee that such efforts
will be successful and each Fund's returns and net asset value will fluctuate
over time. There are special risks associated with each Fund's investments that
are discussed below.
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be
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repatriated based upon the exchange rate at the time of disbursement or payment,
and restrictions on capital flows may be imposed. Losses and other expenses may
be incurred in converting between various currencies in connection with
purchases and sales of foreign securities.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
Because the Asian Fund concentrates its investments in Asian companies, the
performance of the Asian Fund is closely tied to economic and political
conditions within Asia. The current economies and political structures of many
of the countries the Asian Fund may invest in do not compare favorably with the
United States or other mature economies in terms of wealth and stability. As a
result, such investments will be subject to more risk and erratic and abrupt
price movements; particularly in the emerging Asian countries. Concentration of
the Asian Fund's investments in Asian companies presents greater risk than
investment in a more diversified portfolio of foreign securities.
EMERGING MARKETS. While the Global and International Funds' investments in
foreign securities will principally be in developed countries, a Fund may, and
in the case of the Asian Fund will principally, invest in countries considered
by the Fund's investment manager to be developing or "emerging" markets. While
no specific limits apply, it is currently anticipated that less than 25% of the
total assets for each of the Global and International Funds will be invested in
such countries. Developing or emerging markets involve exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. A developing country or
emerging market country can be considered to be a country that is in the initial
stages of its industrialization cycle. Currently, emerging markets generally
include every country in the world other than the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
countries. Currently, investing in many emerging markets may not be desirable or
feasible because of the lack of adequate custody arrangements for a Fund's
assets, overly burdensome repatriation and similar restrictions, the lack of
organized and liquid securities markets, unacceptable political risks or other
reasons. As opportunities to invest in securities in emerging markets develop, a
Fund may expand and further broaden the group of emerging markets in which it
invests. In the past, markets of developing countries have been more volatile
than the markets of developed countries; however, such markets often have
provided higher rates of return to investors. The investment manager believes
that these characteristics can be expected to continue in the future.
Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.
Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets.
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There also may be a lower level of monitoring and regulation of developing
markets and the activities of investors in such markets, and enforcement of
existing regulations has been extremely limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of a Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to a Fund due to subsequent declines in value of the
portfolio security or, if a Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Certain emerging
markets may lack clearing facilities equivalent to those in developed countries.
Accordingly, settlements can pose additional risks in such markets and
ultimately can expose a Fund to the risk of losses resulting from a Fund's
inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for a Fund's portfolio securities in such
markets may not be readily available. A Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of its Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of a Fund. Emerging markets may require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
FIXED INCOME. Since most foreign fixed income securities are not rated, a Fund
will invest in foreign fixed income securities based upon the investment
manager's analysis without relying on published ratings. Since such investments
will be based upon the investment manager's analysis rather than upon published
ratings, achievement of a Fund's goals may depend more upon the abilities of the
investment manager than would otherwise be the case.
The value of the fixed income securities held by a Fund, and thus the net asset
value of the Fund's shares, generally will fluctuate with (a) changes in the
perceived creditworthiness of the issuers of those securities, (b) movements in
interest rates, and (c) changes in the relative values of the currencies in
which a Fund's investments in fixed income securities are denominated with
respect to the U.S. Dollar. The extent of the fluctuation will depend on various
factors, such as the average maturity of a Fund's investments in foreign fixed
income securities, and the extent to which a Fund hedges its interest rate,
credit and currency exchange rate risks. Many of the foreign fixed income
obligations in which a Fund will invest will have long maturities. A longer
average maturity generally is associated with a higher level of volatility in
the market value of such securities in response to changes in market conditions.
Investments in sovereign debt, including Brady Bonds, involve special risks.
Brady Bonds are debt securities issued under a plan implemented to allow debtor
nations to restructure their outstanding commercial bank indebtedness. Foreign
governmental issuers of debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or pay
interest when due. In the event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Political conditions, especially a sovereign entity's
willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and a Fund may be unable to
collect all or any part of its investment in a particular issue.
Foreign investment in certain sovereign debt is restricted or controlled to
varying degrees, including requiring governmental approval for the repatriation
of income, capital or proceed of sales by foreign investors. These
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restrictions or controls may at times limit or preclude foreign investment in
certain sovereign debt or increase the costs and expenses of a Fund. A
significant portion of the sovereign debt in which a Fund may invest is issued
as part of debt restructuring and such debt is to be considered speculative.
There is a history of defaults with respect to commercial bank loans by public
and private entities issuing Brady Bonds. All or a portion of the interest
payments and/or principal repayment with respect to Brady Bonds may be
uncollateralized.
PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. A Fund's investments in the
securities of privatized enterprises include privately negotiated investments in
a government- or state-owned or controlled company or enterprise that has not
yet conducted an initial equity offering, investments in the initial offering of
equity securities of a state enterprise or former state enterprise and
investments in the securities of a state enterprise following its initial equity
offering.
In certain jurisdictions, the ability of foreign entities, such as a Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
In the case of the enterprises in which a Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization or management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as the enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which a Fund may invest
enjoy the protection of and receive preferential treatment from the respective
sovereigns that own or control them. After making an initial equity offering
these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
DEPOSITORY RECEIPTS. Each Fund may invest in securities of foreign issuers in
the form of American Depository Receipts ("ADRs"). For many foreign securities,
there are U.S. Dollar denominated ADRs, which are bought and sold in the United
States and are issued by domestic banks. ADRs represent the right to receive
securities of foreign issuers deposited in the domestic bank or a correspondent
bank. ADRs do not eliminate all the risk inherent in investing in the securities
of foreign issuers, such as changes in foreign currency exchange rates. However,
by investing in ADRs rather than directly in foreign issuers' stock, a Fund
avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs. The Funds may also
invest in securities of foreign issuers in the form of Global Depository
Receipts ("GDRs"), and European Depository Receipts ("EDRs") for the Europe,
Global and International Funds, which are receipts evidencing an arrangement
with a bank, similar to that for ADRs, and are designed for use in other foreign
securities markets. EDRs and GDRs are not necessarily denominated in the
currency of the underlying security.
ADDITIONAL INVESTMENT INFORMATION. The Funds will have increased opportunities
to adjust their portfolios across various markets and may experience a high
portfolio turnover rate (over 100%), which involves correspondingly greater
brokerage commissions or other transaction costs. Higher portfolio turnover may
result in the realization of greater net short-term capital gains. See
"Dividends and Taxes" below.
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The Global Fund has registered as a "non-diversified" investment company so that
it will be able to invest more than 5% of its assets in the obligations of an
issuer, subject to the diversification requirements of Subchapter M of the
Internal Revenue Code applicable to the Fund. This allows the Global Fund, as to
50% of its assets, to invest more than 5% of its assets, but not more than 25%,
in the fixed income securities of an individual foreign government or corporate
issuer. Currently, the Fund does not intend to invest more than 5% of its assets
in any individual corporate issuer. Since the Fund may invest a relatively high
percentage of its assets in the obligations of a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company.
As noted above, the Global Fund may invest in securities that are rated within
the four highest grades by S&P, Moody's or IBCA or, if unrated, are of
comparable quality as determined by the investment manager. Securities rated
within the four highest grades are generally considered to be "investment
grade." Like higher rated securities, securities rated in the fourth grade are
considered to have adequate capacity to pay principal and interest, although
they may have fewer protective provisions than higher rated securities and thus
may be adversely affected by severe economic circumstances and are considered to
have speculative characteristics. The characteristics of the rating categories
are described in the "Appendix -- Ratings of Investments."
Since interest rates vary with changes in economic, market, political and other
conditions, there can be no assurance that past interest rates are indicative of
future rates. The values of fixed income securities in a Fund's portfolio will
fluctuate depending upon market factors and inversely with current interest rate
levels.
The Global Fund may take full advantage of the entire range of maturities of
fixed income securities and may adjust the average maturity of its portfolio
from time to time, depending upon its assessment of relative yields on
securities of different maturities and its expectations of future changes in
interest rates. Thus, the average maturity of the Fund's portfolio may be
relatively short (under five years, for example) at some times and relatively
long (over 10 years, for example) at other times. Generally, since shorter term
debt securities tend to be more stable than longer term debt securities, the
portfolio's average maturity will be shorter when interest rates are expected to
rise and longer when interest rates are expected to fall. Since in most foreign
markets debt securities generally are issued with maturities of ten years or
less, it is currently anticipated that the average maturity of the Fund's
portfolio will normally be in the intermediate range (three to ten years).
A Fund will not purchase illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 15% of the
Fund's net assets valued at the time of the transaction would be invested in
such securities. If the Fund holds a material percentage of its assets in
illiquid securities, there may be a question concerning the ability of the Fund
to make payment within seven days of the date its shares are tendered for
redemption. SEC guidelines provide that the usual limit on aggregate holdings by
an open-end investment company of illiquid assets is 15% of its net assets. See
"Investment Policies and Techniques -- Over-the-Counter Options" for a
description of the extent to which over- the-counter traded options are in
effect considered as illiquid for purposes of each Fund's limit on illiquid
securities. A Fund may invest in securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. This rule permits otherwise restricted
securities to be sold to certain institutional buyers, such as the Funds. Such
securities may be illiquid and subject to a Fund's limitation on illiquid
securities. A "Rule 144A" security may be treated as liquid, however, if so
determined pursuant to procedures adopted by the Board of Trustees. Investing in
Rule 144A securities could have the effect of increasing the level of
illiquidity in the Fund to the extent that qualified institutional buyers become
uninterested for a time in purchasing Rule 144A securities.
Each Fund has adopted certain fundamental investment restrictions, which are
presented above and that, together with any policies of the Fund specifically
designated in this statement of additional information as fundamental, cannot be
changed without approval by holders of a majority of its outstanding voting
shares. As defined in the Investment Company Act of 1940 ("1940 Act"), this
means the lesser of the vote of (a) 67% of the shares of the Fund present at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy; or (b) more than 50% of the outstanding shares of the Fund. Policies
of a Fund that are neither designated as fundamental nor incorporated into any
of the fundamental investment restrictions referred to above may be changed by
the Board of Trustees of the applicable Fund without shareholder approval.
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STRATEGIC TRANSACTIONS AND DERIVATIVES. Each Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of fixed-income securities in each Fund's portfolio, or to
enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, each Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for each Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect each Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in each Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of each Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of each Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Each Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
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financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to each Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation each Fund can realize on its
investments or cause each Fund to hold a security it might otherwise sell. The
use of currency transactions can result in each Fund incurring losses as a
result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency. The use of options and futures transactions entails certain other
risks. In particular, the variable degree of correlation between price movements
of futures contracts and price movements in the related portfolio position of
each Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of each Fund's position. In addition, futures
and options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
each Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, each Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving each Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. Each Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect each Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. Each Fund is authorized to purchase and sell exchange listed options
and over-the-counter options ("OTC options"). Exchange listed options are issued
by a regulated intermediary such as the Options Clearing Corporation ("OCC"),
which guarantees the performance of the obligations of the parties to such
options. The discussion below uses the OCC as an example, but is also applicable
to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
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Each Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. Each
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting each Fund to require the Counterparty
to sell the option back to each Fund at a formula price within seven days. Each
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with each Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, each Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. Each Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from
Standard & Poor's ("S&P") or P-1 from Moody's Investors Service ("Moody's") or
an equivalent rating from any nationally recognized statistical rating
organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit quality by the Adviser. The staff of the
SEC currently takes the position that OTC options purchased by each Fund, and
portfolio securities "covering" the amount of each Fund's obligation pursuant to
an OTC option sold by it (the cost of the sell-back plus the in-the-money
amount, if any) are illiquid, and are subject to each Fund's limitation on
investing no more than 10% of its assets in illiquid securities.
If each Fund sells a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio or will increase each Fund's income. The sale of put options can also
provide income.
Each Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by each Fund must be "covered" (i.e., each Fund must
own the securities or futures contract subject to the call) or must meet the
asset segregation requirements described below as long as the call is
outstanding. Even though each Fund will receive the option premium to help
protect it against loss, a call sold by each Fund exposes each Fund during the
term of the option to possible loss of opportunity to realize appreciation in
the market price of the underlying security or instrument and may require each
Fund to hold a security or instrument which it might otherwise have sold.
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Each Fund may purchase and sell put options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, foreign
sovereign debt, corporate debt securities, equity securities (including
convertible securities) and Eurodollar instruments (whether or not it holds the
above securities in its portfolio), and on securities indices, currencies and
futures contracts other than futures on individual corporate debt and individual
equity securities. Each Fund will not sell put options if, as a result, more
than 50% of each Fund's assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to
futures and options thereon. In selling put options, there is a risk that each
Fund may be required to buy the underlying security at a disadvantageous price
above the market price.
General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by each Fund, as seller, to deliver to the
buyer the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
Each Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires each Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of each Fund.
If each Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.
Each Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of each Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. Each Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
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Currency Transactions. Each Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. Each Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or are determined to be of
equivalent credit quality by the Adviser.
Each Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of each Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
Each Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which each Fund has or in which each Fund
expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, each Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which each
Fund's portfolio is exposed is difficult to hedge or to hedge against the
dollar. Proxy hedging entails entering into a commitment or option to sell a
currency whose changes in value are generally considered to be correlated to a
currency or currencies in which some or all of each Fund's portfolio securities
are or are expected to be denominated, in exchange for U.S. dollars. The amount
of the commitment or option would not exceed the value of each Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
each Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to each
Fund if the currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that each Fund is engaging in proxy hedging. If each
Fund enters into a currency hedging transaction, each Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to each Fund if it is unable to deliver or receive currency or funds
in settlement of obligations and could also cause hedges it has entered into to
be rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which
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may not always be available. Currency exchange rates may fluctuate based on
factors extrinsic to that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of each Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. Each Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities each Fund anticipates purchasing at a later
date. Each Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream each
Fund may be obligated to pay. Interest rate swaps involve the exchange by each
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
Each Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with each Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and each Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. Each Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, each Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. Each Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. Each Fund might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are
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subject to the risk of governmental actions affecting trading in, or the prices
of, foreign securities, currencies and other instruments. The value of such
positions also could be adversely affected by: (i) other complex foreign
political, legal and economic factors, (ii) lesser availability than in the U.S.
of data on which to make trading decisions, (iii) delays in each Fund's ability
to act upon economic events occurring in foreign markets during non-business
hours in the U.S., (iv) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the U.S., and (v) lower
trading volume and liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that each Fund segregate liquid high
grade assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by each Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid high grade securities at
least equal to the current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. For example, a call option written by each Fund will require each Fund to
hold the securities subject to the call (or securities convertible into the
needed securities without additional consideration) or to segregate liquid
high-grade securities sufficient to purchase and deliver the securities if the
call is exercised. A call option sold by each Fund on an index will require each
Fund to own portfolio securities which correlate with the index or to segregate
liquid high grade assets equal to the excess of the index value over the
exercise price on a current basis. A put option written by each Fund requires
each Fund to segregate liquid, high grade assets equal to the exercise price.
Except when each Fund enters into a forward contract for the purchase
or sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates each Fund to buy or sell
currency will generally require each Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to each Fund's obligations
or to segregate liquid high grade assets equal to the amount of each Fund's
obligation.
OTC options entered into by each Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when
each Fund sells these instruments it will only segregate an amount of assets
equal to its accrued net obligations, as there is no requirement for payment or
delivery of amounts in excess of the net amount. These amounts will equal 100%
of the exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by each Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when each Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, each Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by each Fund other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement and each Fund will segregate an
amount of assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical delivery or cash
settlement will be treated the same as other options settling with physical
delivery.
In the case of a futures contract or an option thereon, each Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, each Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps, floors and collars
require segregation of assets with a value equal to each Fund's net obligation,
if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. Each Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, each Fund
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could purchase a put option if the strike price of that option is the same or
higher than the strike price of a put option sold by each Fund. Moreover,
instead of segregating assets if each Fund held a futures or forward contract,
it could purchase a put option on the same futures or forward contract with a
strike price as high or higher than the price of the contract held. Other
Strategic Transactions may also be offset in combinations. If the offsetting
transaction terminates at the time of or after the primary transaction no
segregation is required, but if it terminates prior to such time, assets equal
to any remaining obligation would need to be segregated.
Each Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. (See "TAXES.")
INVESTMENT COMPANY SECURITIES. Each Fund except for Kemper Global Income Fund
may acquire securities of other investment companies to the extent consistent
with its investment objective and subject to the limitations of the 1940 Act.
Each Fund will indirectly bear its proportionate share of any management fees
and other expenses paid by such other investment companies.
For example, a Fund may invest in a variety of investment companies which seek
to track the composition and performance of specific indexes or a specific
portion of an index. These index-based investments hold substantially all of
their assets in securities representing their specific index. Accordingly, the
main risk of investing in index-based investments is the same as investing in a
portfolio of equity securities comprising the index. The market prices of
index-based investments will fluctuate in accordance with both changes in the
market value of their underlying portfolio securities and due to supply and
demand for the instruments on the exchanges on which they are traded (which may
result in their trading at a discount or premium to their NAVs). Index-based
investments may not replicate exactly the performance of their specified index
because of transaction costs and because of the temporary unavailability of
certain component securities of the index.
Examples of index-based investments include:
SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary Receipts," are
based on the S&P 500 Composite Stock Price Index. They are issued by the SPDR
Trust, a unit investment trust that holds shares of substantially all the
companies in the S&P 500 in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.
MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They are
issued by the MidCap SPDR Trust, a unit investment trust that holds a portfolio
of securities consisting of substantially all of the common stocks in the S&P
MidCap 400 Index in substantially the same weighting and seeks to closely track
the price performance and dividend yield of the Index.
Select Sector SPDRs(R): Select Sector SPDRs are based on a particular sector or
group of industries that are represented by a specified Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end management investment company with nine
portfolios that each seeks to closely track the price performance and dividend
yield of a particular Select Sector Index.
DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM). They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.
Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are
issued by the Nasdaq-100 Trust, a unit investment trust that holds a portfolio
consisting of substantially all of the securities, in substantially the same
weighting, as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.
WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are based on 17
country-specific Morgan Stanley Capital International Indexes. They are issued
by the WEBs Index Fund, Inc., an open-end management investment company that
seeks to generally correspond to the price and yield performance of a specific
Morgan Stanley Capital International Index.
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REGULATORY RESTRICTIONS. To the extent required to comply with applicable
regulation, when purchasing a futures contract, writing a put option or entering
into a delayed delivery purchase or a forward foreign currency exchange
purchase, a Fund will maintain eligible securities in a segregated account. A
Fund will use cover in connection with selling a futures contract.
A Fund will not engage in transactions in financial futures contracts or options
thereon for speculation, but only to attempt to hedge against changes in market
conditions affecting the values of securities or other assets which the Fund
holds or intends to purchase.
REPURCHASE AGREEMENTS. A Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. Each Fund currently does not intend to invest more
than 5% of its net assets in repurchase agreements during the current year.
SHORT SALES AGAINST-THE-BOX. The Asian and Global Funds may make short sales
against-the-box for the purpose of, but not limited to, deferring realization of
loss when deemed advantageous for federal income tax purposes. A short sale
"against-the-box" is a short sale in which the Fund owns at least an equal
amount of the securities sold short or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and at least equal in amount to, the securities or other
assets sold short. The Fund may engage in such short sales only to the extent
that not more than 10% of the Fund's total assets (determined at the time of the
short sale) is held as collateral for such sales. The Fund currently does not
intend, however, to engage in such short sales to the extent that more than 5%
of its net assets will be held as collateral therefor during the current year.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Asian and Global Funds may lend its portfolio securities
(principally to broker-dealers) without limit where such loans are callable at
any time and are continuously secured by segregated collateral (cash or other
liquid securities) equal to no less than the market value, determined daily, of
the securities loaned. A Fund will receive amounts equal to dividends or
interest on the securities loaned. It also will earn income for having made the
loan. Any cash collateral pursuant to these loans will be invested in short-term
money market instruments. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. However, the loans would be made only to
firms deemed by the Fund's investment manager to be of good standing, and when
the Fund's investment manager believes the potential earnings justify the
attendant risk. Management will limit such lending to not more than one-third of
the value of a Fund's total assets.
DIVIDENDS AND TAXES
DIVIDENDS. The Global Fund normally distributes monthly dividends of net
investment income, the Asian and International Funds normally distribute annual
dividends of net investment income and each Fund distributes any net realized
short-term and long-term capital gains at least annually.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
A Fund may at any time vary the foregoing dividend practice and, therefore,
reserves the right from time to time either to distribute or to retain for
reinvestment such of its net investment income and its net short-term and
long-term capital gains as the Board of Trustees of the Fund determines
appropriate under then current circumstances. In particular, and without
limiting the foregoing, a Fund may make additional distributions of net
investment income or
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capital gain net income in order to satisfy the minimum distribution
requirements contained in the Internal Revenue Code (the "Code").
Income dividends and capital gain dividends, if any, of a Fund will be credited
to shareholder accounts in full and fractional Fund shares of the same class at
net asset value except that, upon written request to the Shareholder Service
Agent, a shareholder may select one of the following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset value;
or
(2) To receive income and capital gain dividends in cash.
Any dividends of a Fund that are reinvested normally will be reinvested in Fund
shares of the same class. However, upon written request to the Shareholder
Service Agent, a shareholder may elect to have dividends of a Fund invested
without sales charge in shares of the same class of another Kemper Fund at the
net asset value of such class of such other fund. See "Special Features -- Class
A Shares -- Combined Purchases" for a list of such other Kemper Funds. To use
this privilege of investing dividends of a Fund in shares of another Kemper
Fund, shareholders must maintain a minimum account value of $1,000 in the Fund
distributing the dividends. The Funds reinvest dividend checks (and future
dividends) in shares of that same class of the Fund and class if checks are
returned as undeliverable. Dividends and other distributions in the aggregate
amount of $10 or less are automatically reinvested in shares of the same Fund
unless the shareholder requests that such policy not be applied to the
shareholder's account.
TAXES. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, will not be liable
for federal income taxes to the extent its earnings are distributed. Such
qualification does not involve governmental supervision or management of
investment practices or policy.
If for any taxable year a Fund does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of a Fund's
earnings and profits, and would be eligible for the dividends-received deduction
in the case of corporate shareholders.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% of its
investment company taxable income (including net short-term capital gain) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code. Dividends derived from net investment income
and net short-term capital gains are taxable to shareholders as ordinary income.
Long-term capital gain dividends received by individual shareholders are taxed
at a maximum rate of 20%.
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A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of a Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 in the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. The Funds intend to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax. If any net realized long-term
capital gains in excess of net realized short-term capital losses are retained
by a Fund for reinvestment, requiring federal income taxes to be paid thereon by
a Fund, the Fund intends to elect to treat such capital gains as having been
distributed to shareholders. As a result, each shareholder will report such
capital gains as long-term capital gains, will be able to claim a relative share
of federal income taxes paid by the Fund on such gains as a credit against
personal federal income tax liability, and will be entitled to increase the
adjusted tax basis on Fund shares by the difference between a pro rata share of
such gains owned and the individual tax credit.
It is anticipated that only a small portion, if any, of the ordinary income
dividends from the Funds will be eligible for the dividends received deduction
available to corporate shareholders. The aggregate amount eligible for the
dividends received deduction may not exceed the aggregate qualifying dividends
received by a Fund for the fiscal year.
A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of a Fund or any other Kemper Mutual Fund listed herein
under "Special Features--Class A Shares--Combined Purchases" (other than shares
of Kemper Cash Reserves Fund not acquired by exchange from another Kemper Mutual
Fund) may reinvest the amount redeemed at net asset value at the time of the
reinvestment in shares of the Fund or in shares of the other Kemper Mutual Funds
within six months of the redemption as described herein under "Redemption or
Repurchase of Shares--Reinvestment Privilege." If redeemed shares were held less
than 91 days, then the lesser of (a) the sales charge waived on the reinvested
shares, or (b) the sales charge incurred on the redeemed shares, is included in
the basis of the reinvested shares and is not included in the basis of the
redeemed shares. If a shareholder realizes a loss on the redemption or exchange
of a Fund's shares and reinvests in shares of the same Fund within 30 days
before or after the redemption or exchange, the transactions may be subject to
the wash sale rules resulting in a postponement of the recognition of such loss
for federal income tax purposes. An exchange of a Fund's shares for shares of
another fund is treated as a redemption and reinvestment for federal income tax
purposes upon which gain or loss may be recognized.
A Fund may invest in shares of certain foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). If
a Fund receives a so-called "excess distribution" with respect to PFIC stock,
the Fund itself may be subject to a tax on a portion of the excess distribution.
Certain distributions from a PFIC as well as gains from the sale of the PFIC
shares are treated as "excess distributions." In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The Fund will be subject to
tax on the portion, if any, of an excess distribution that is
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allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Excess
distributions allocated to the current taxable year are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
A Fund may make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U.S. federal income taxation.
At the end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign company's stock exceeds the Fund's adjusted basis in these shares; any
mark to market losses and any loss from an actual disposition of shares would be
deductible as ordinary loss to the extent of any net mark to market gains
included in income in prior years. The effect of the election would be to treat
excess distributions and gain on dispositions as ordinary income which is not
subject to a fund level tax when distributed to shareholders as a dividend.
Alternatively, a Fund may elect to include as income and gain its share of the
ordinary earnings and net capital gain of certain foreign investment companies
in lieu of being taxed in the manner described above.
Equity options (including covered call options on portfolio stock) and
over-the-counter options on debt securities written or purchased by a Fund will
be subject to tax under Section 1234 of the Code. In general, no loss is
recognized by a Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a lapse or sale
of the option, on the Fund's holding period for the option, and in the case of
an exercise of a put option, on the Fund's holding period for the underlying
stock. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock or substantially identical stock in the Fund's portfolio. If a
Fund writes a put or call option, no gain is recognized upon its receipt of a
premium. If the option lapses or is closed out, any gain or loss is treated as a
short-term capital gain or loss. If a call option is exercised, any resulting
gain or loss is a short-term or long-term capital gain or loss depending on the
holding period of the underlying stock. The exercise of a put option written by
a Fund is not a taxable transaction for the Fund.
Many futures contracts and certain foreign currency forward contracts entered
into by a Fund and all listed non-equity options written or purchased by a Fund
(including options on futures contracts and options on broad-based stock
indices) will be governed by Section 1256 of the Code. Absent a tax election to
the contrary, gain or loss attributable to the lapse, exercise or closing out of
any such position generally will be treated as 60% long-term and 40% short-term
capital gain or loss, and on the last trading day of the Fund's fiscal year, all
outstanding Section 1256 positions will be marked to market (i.e. treated as if
such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term. Under
Section 988 of the Code, discussed below, foreign currency gain or loss from
foreign currency-related forward contracts and similar financial instruments
entered into or acquired by a Fund will be treated as ordinary income. Under
certain circumstances, entry into a futures contract to sell a security may
constitute a short sale for federal income tax purposes, causing an adjustment
in the holding period of the underlying security or a substantially identical
security in the Fund's portfolio.
Positions of a Fund which consist of at least one stock and at least one other
position with respect to a related security which substantially diminishes a
Fund's risk of loss with respect to such stock could be treated as a "straddle"
which is governed by Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in the holding periods of stock or securities
and conversion of short-term capital losses into long-term capital losses. An
exception to these straddle rules exists for certain "qualified covered call
options" on stock written by the Fund.
Positions of a Fund which consist of at least one position not governed by
Section 1256 and at least one futures or forward contract or non-equity option
governed by Section 1256 which substantially diminishes a Fund's risk of loss
with respect to such other position will be treated as a "mixed straddle."
Although mixed straddles are subject to the straddle rules of Section 1092 of
the Code, certain tax elections exist for them which reduce or eliminate the
operation of these rules. The Fund intends to monitor its transactions in
options and futures and may make certain tax elections in connection with these
investments.
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Notwithstanding any of the foregoing, recent tax law changes may require a Fund
to recognize gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if a Fund enters into a short sale, offsetting
notional principal contract, futures or forward contract transaction with
respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.
Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, and on disposition of certain options, futures contracts and
forward contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income.
Distributions of investment company taxable income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
The Funds will be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-
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exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of a Fund may be subject to state and local taxes on distributions
received from a Fund and on redemptions of the Fund's shares. Each distribution
is accompanied by a brief explanation of the form and character of the
distribution. In January of each year the Fund issues to each shareholder a
statement of the federal income tax status of all distributions.
Each Fund is organized as a Massachusetts business trust and is not liable for
any income or franchise tax in the Commonwealth of Massachusetts, provided that
it qualifies as a regulated investment company for federal income tax purposes.
An individual may make a deductible IRA contribution for any taxable year only
if (i) the individual is not an active participant in an employer's retirement
plan, or (ii) the individual has an adjusted gross income below a certain level
($52,000 for married individuals filing a joint return, with a phase-out of the
deduction for adjusted gross income between $52,000 and $62,000; $32,000 for a
single individual, with a phase-out for adjusted gross income between $32,000
and $42,000). An individual is not considered an active participant in an
employer's retirement plan if the individual's spouse is an active participant
in such a plan. However, in the case of a joint return, the amount of the
deductible contribution by the individual who is not an active participant (but
whose spouse is) is phased out for adjusted gross income between $150,000 and
$160,000. However, an individual not permitted to make a deductible contribution
to an IRA for any such taxable year may nonetheless make nondeductible
contributions up to $2,000 to an IRA (up to $2,000 per individual for married
couples if only one spouse has earned income) for that year. There are special
rules for determining how withdrawals are to be taxed if an IRA contains both
deductible and nondeductible amounts. In general, a proportionate amount of each
withdrawal will be deemed to be made from nondeductible contributions; amounts
treated as a return of nondeductible contributions will not be taxable. Also,
annual contributions may be made to a spousal IRA even if the spouse has
earnings in a given year if the spouse elects to be treated as having no
earnings (for IRA contribution purposes) for the year.
Distributions by a Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Each Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over". The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
(IRAs) or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax Advisors regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends and periodic
investment and redemption programs. Information for income tax purposes,
including, when appropriate, information regarding any foreign taxes and
credits, will be provided after the end of the calendar year. Shareholders are
encouraged to retain copies of their account confirmation statements or year-end
statements for tax reporting
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purposes. However, those who have incomplete records may obtain historical
account transaction information at a reasonable fee.
When more than one shareholder resides at the same address, certain reports and
communications to be delivered to such shareholders may be combined in the same
mailing package, and certain duplicate reports and communications may be
eliminated. Similarly, account statements to be sent to such shareholders may be
combined in the same mailing package or consolidated into a single statement.
However, a shareholder may request that the foregoing policies not be applied to
the shareholder's account.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on amounts constituting ordinary income received
by him or her, where such amounts are treated as income from U.S. sources under
the Code.
Dividend and interest income received by a Fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Shareholders should consult their tax advisors about the application of the
provisions of tax law described in this Statement of Additional Information in
light of their particular tax situations.
NET ASSET VALUE
The net asset value per share of a Fund is the value of one share and is
determined separately for each class by dividing the value of a Fund's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will generally be lower than that of the Class A shares of a Fund
because of the higher expenses borne by the Class B and Class C shares. The net
asset value of shares of a Fund is computed as of the close of regular trading
(the "value time") on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
Portfolio securities for which market quotations are readily available are
generally valued at market value as of the value time in the manner described
below. All other securities may be valued at fair value as determined in good
faith by or under the direction of the Board.
With respect to the Funds with securities listed primarily on foreign exchanges,
such securities may trade on days when the Fund's net asset value is not
computed; and therefore, the net asset value of a Fund may be significantly
affected on days when the investor has no access to the Fund.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Stock Market Inc.
("Nasdaq") is valued at its most recent sale price. Lacking any sales, the
security is valued at the most recent bid quotation. The value of an equity
security not quoted on Nasdaq, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities are valued at prices supplied by a pricing agent(s) which
reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board believes approximates market value. If it is not possible to value a
particular debt security pursuant to these valuation methods, the value of such
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security is the most recent bid quotation supplied by a bona fide marketmaker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment manager of the particular fund may calculate the price
of that debt security, subject to limitations established by the Board.
An exchange-traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such exchange.
Lacking any sales, the options contract is valued at the Calculated Mean.
Lacking any Calculated Mean, the options contract is valued at the most recent
bid quotation in the case of a purchased options contract, or the most recent
asked quotation in the case of a written options contract. An options contract
on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate on the
valuation date.
If a security is traded on more than one exchange, or upon one or more exchanges
and in the over-the-counter market, quotations are taken from the market in
which the security is traded most extensively.
If, in the opinion of the Valuation Committee of the Board of Trustees, the
value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which, in the discretion of the Valuation Committee, most fairly
reflects market value of the property on the valuation date.
Following the valuations of securities or other portfolios assets in terms of
the currency in which the market quotation used is expressed ("Local Currency"),
the value of these portfolio assets in terms of U.S. dollars is calculated by
converting the Local Currency into U.S. dollars at the prevailing currency
exchange rate on the valuation date.
PERFORMANCE
A Fund may advertise several types of performance information for a class of
shares, including "yield" and "average annual total return" and "total return."
Performance information will be computed separately for each class. Each of
these figures is based upon historical results and is not representative of the
future performance of any class of a Fund. A Fund with fees or expenses being
waived or absorbed by Scudder Kemper may also advertise performance information
before and after the effect of the fee waiver or expense absorption.
A Fund's historical performance or return for a class of shares may be shown in
the form of "average annual total return" and "total return" figures, and for
the Global Fund may be shown in the form of "yield" figures. These various
measures of performance are described below. Performance information will be
computed separately for each class.
Yield is a measure of the net investment income per share earned over a specific
one month or 30-day period expressed as a percentage of the maximum offering
price of the Global Fund's shares (which is net asset value for Class B and
Class C shares) at the end of the period. Average annual total return and total
return measure both the net investment income generated by, and the effect of
any realized or unrealized appreciation or depreciation of, the underlying
investments in the Fund's portfolio.
The Global Fund's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. The Fund's Class
A, Class B and Class C shares' yields based upon the one-month period ended
December 31, 1998 were 2.09%, 1.25%, and 2.50%, respectively. The Fund's yield
is computed by dividing the net investment income per share earned during the
specified one month or 30-day period by the maximum offering price per share
(which is net asset value for Class B and Class C shares) on the last day of the
period, according to the following formula:
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YIELD = 2[(a - b + 1)^6 - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period (which is net asset value for Class B and Class C
shares).
In computing the foregoing yield, the Global Fund follows certain standardized
accounting practices specified by Securities and Exchange Commission rules.
These practices are not necessarily consistent with those that the Fund uses to
prepare its annual and interim financial statements in conformity with generally
accepted accounting principles.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value in the case of Class B or Class C shares may or may not include the effect
of the applicable contingent deferred sales charge that may be imposed at the
end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total return figures
may also be calculated without deducting the maximum sales charge.
Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for the Fund's "Financial Highlights" table in the Fund's
financial statements and prospectus. Total return performance for a specific
period is calculated by first taking a hypothetical investment ("initial
investment") in the Fund's shares on the first day of the period, either
adjusting or not adjusting to deduct the maximum sales charge (in the case of
Class A shares), and computing the "ending value" of that investment at the end
of the period. The total return percentage is then determined by subtracting the
initial investment from the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The ending value
in the case of Class B and Class C shares may or may not include the effect of
the applicable contingent deferred sales charge that may be imposed at the end
of the period. The calculation assumes that all income and capital gains
dividends paid by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B shares would be
reduced if such charge were included.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one-, five- and ten-year periods ending on a recent calendar quarter
(or if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
A Fund's performance figures are based upon historical results and are not
representative of future performance. The Global Fund's Class A shares are sold
at net asset value plus a maximum sales charge of 4.5% of the offering price
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and the Asian and International Funds' Class A shares are sold at net asset
value plus a maximum sales charge of 5.75% of the offering price. Class B and
Class C shares are sold at net asset value. Redemption of Class B shares may be
subject to a contingent deferred sales charge that is 4% in the first year
following the purchase, declines by a specified percentage each year thereafter
and becomes zero after six years. Redemption of Class C shares may be subject to
a 1% contingent deferred sales charge in the first year following purchase.
Average annual total return figures do, and total return figures may, include
the effect of the contingent deferred sales charge for the Class B shares and
Class C shares that may be imposed at the end of the period in question.
Performance figures for the Class B shares and Class C shares not including the
effect of the applicable contingent deferred sales charge would be reduced if it
were included. Returns and net asset value will fluctuate. Factors affecting
each Fund's performance include general market conditions, operating expenses
and investment management. Any additional fees charged by a dealer or other
financial services firm would reduce returns described in this section. Shares
of each Fund are redeemable at the then current net asset value, which may be
more or less than original cost.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged bond indexes including, but not limited to, the Salomon
Brothers High Grade Corporate Bond Index, the Lehman Brothers Adjustable Rate
Index, the Lehman Brothers Aggregate Bond Index, the Lehman Brothers Government/
Corporate Bond Index, the Salomon Brothers Long-Term High Yield Index, the
Salomon Brothers 30 Year GNMA Index and the Merrill Lynch Market Weighted Index
and may also be compared to the performance of other mutual funds or mutual fund
indexes with similar objectives and policies as reported by independent mutual
fund reporting services such as Lipper Analytical Services, Inc. ("Lipper").
Lipper performance calculations are based upon changes in net asset value with
all dividends reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit and other bank products, money market
funds and U.S. Treasury obligations. Bank product performance may be based upon,
among other things, the BANK RATE MONITOR National Index(TM) or various
certificate of deposit indexes. Money market fund performance may be based upon,
among other things, the IBC/Donoghue's Money Fund Report(R) or Money Market
Insight(R), reporting services on money market funds. Performance of U.S.
Treasury obligations may be based upon, among other things, various U.S.
Treasury bill indexes. Certain of these alternative investments may offer fixed
rates of return and guaranteed principal and may be insured. Economic indicators
may include, without limitation, indicators of market rate trends and cost of
funds, such as Federal Home Loan Bank Board 11th District Cost of Funds Index
("COFI").
A Fund may depict the historical performance of the securities in which the Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. A Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.
Each Fund's returns and net asset value will fluctuate and shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above. Additional
information about each Fund's performance also appears in its Annual Report to
Shareholders, which is available without charge from the applicable Fund.
The figures below show performance information for various periods.
The net asset value and returns of the Funds will fluctuate. No adjustment has
been made for taxes payable on dividends. The periods indicated were ones of
fluctuating securities prices and interest rates.
ASIAN FUND--NOVEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL Fund Fund Fund
TOTAL RETURN TABLE Class A Class B Class C
------------------
39
<PAGE>
Shares Shares Shares
------ ------ ------
<S> <C> <C> <C>
Life of Class(+) -6.62% -6.26% -5.94%
Three Year -8.55% -8.16% -7.84%
One Year 40.24% 45.13% 46.36%
(+) Since October 21, 1996 for all classes.
GLOBAL FUND--DECEMBER 31,
1999
Fund Fund Fund
AVERAGE ANNUAL Class A Class B Class C
TOTAL RETURN TABLE Shares Shares Shares
------------------ ------ ------ ------
Life of Class(+) 6.70% 4.88% 5.08%
Ten Years 6.36% N/A N/A
FiveYears 5.01% 5.07% 5.30%
One Year -10.58% -9.66% -7.06%
(+) Since October 1, 1989 for Class A shares. Since May 31,
1994 for Class B and Class C shares.
INTERNATIONAL FUND--OCTOBER 31, 1999
Fund Fund Fund
AVERAGE ANNUAL Class A Class B Class C
TOTAL RETURN TABLE Shares Shares Shares
------------------ ------ ------ ------
Life of Class(+) 12.11% 9.50% 9.65%
Ten Years 8.70% N/A N/A
Five Years 9.12% 9.31% 9.47%
One Year 16.35% 19.50% 22.49%
(+) Since May 21, 1981 for Class A shares. Since May 31,
1994 for Class B and Class C shares.
</TABLE>
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75% for the Asian, and International Funds and 4.5% for
the Global Fund. The Initial Investment for Class B and Class C shares was
not adjusted. Amounts were adjusted for Class B shares for the contingent
deferred sales charge that may be imposed at the end of the period based
upon the schedule for shares sold currently, see "Redemption or Repurchase
of Shares" herein. No adjustments were made to Class C shares.
Investors may want to compare a Fund's performance to that of certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of the deposit prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution. The
shares of the Fund are not insured and net asset value as well as yield will
fluctuate. Shares of a Fund are redeemable at net asset value which may be more
or less than original cost. Redemption of Class B and Class C shares may be
subject to a contingent deferred sales charge. The bonds in the Global Fund's
portfolio are generally of longer term than most certificates of deposit and may
reflect longer term market interest rate fluctuations.
40
<PAGE>
Investors may also want to compare a Fund's performance to that of U.S. Treasury
bills, notes or bonds. Rates of Treasury obligations are fixed at the time of
issuance and payment of principal and interest is backed by the full faith and
credit of the U.S. Treasury. The market value of such instruments will generally
fluctuate inversely with interest rates prior to maturity and will equal par
value at maturity. Shares of a Fund are redeemable at net asset value, which may
be more or less than original cost. The Funds' returns will also fluctuate.
In order to appreciate more fully the opportunities for income throughout the
world and the potential advantages of investing in the Global Fund, investors
may want to compare the historical performance of various bond markets around
the world. Such performance, of course, would not necessarily be representative
of future actual or relative performance of such markets, or of the past or
future performance of the Fund.
The following table compares the performance of the Class A shares of each Fund
over various periods with that of other mutual funds within the category
described below according to data reported by Lipper Analytical Services, Inc.
("Lipper"), New York, New York, which is a mutual fund reporting service. Lipper
performance figures are based on changes in net asset value, with all income and
capital gain dividends reinvested. Such calculations do not include the effect
of any sales charges. Future performance cannot be guaranteed. Lipper publishes
performance analyses on a regular basis.
<TABLE>
<CAPTION>
ASIAN FUND
Lipper Mutual Fund
Performance Analysis
--------------------
Pacific Ex-Japan Funds
----------------------
<S> <C>
One Year (Period ended 11/30/99).......................................... #57 of 84 Funds
Three Year................................................................ #38 of 70 Funds
The Lipper Pacific Ex-Japan Fund category includes funds that concentrate
their investments in equity securities with primary trading markets or
operations concentrated in the Pacific region (including Asian countries)
and that specifically does not invest in Japan.
GLOBAL FUND
Lipper Mutual Fund
Performance Analysis
--------------------
Global Income Funds
-------------------
Ten Years (Period ended 12/31/99)........................... #9 of 20 Funds
Five Years (Period ended 12/31/99).......................... #50 of 82 Funds
One Year (Period ended 12/31/99)............................ #102 of 137 Funds
The Lipper Global Income Fund category includes funds which by prospectus or
portfolio practice invest primarily in U.S. Dollar and non-U.S. Dollar debt
instruments of issuers located in at least 3 countries, one of which may be in
the United States. This category includes funds with a variety of objectives,
policies and market and credit risks that should be considered in reviewing
these rankings.
INTERNATIONAL FUND
41
<PAGE>
Lipper Mutual Fund
Performance Analysis
--------------------
International Funds
-------------------
Fifteen Years (Period ended 10/31/99)........................ #1 of 15 Funds
Ten Years (Period ended 10/31/99)............................ #23 of 42 Funds
Five Years (Period ended 10/31/99)........................... #82 of 217 Funds
One Year (Period ended 10/31/99)............................. #328 of 591 Funds
</TABLE>
The Lipper International Funds category includes funds which invest their assets
in securities whose primary trading markets are outside of the United States.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper" or "the
Adviser"), 345 Park Avenue, New York, New York, is each Fund's investment
manager. Scudder Kemper is approximately 70% owned by Zurich Financial Services,
a newly formed global insurance and financial services company. The balance of
the Adviser is owned by its officers and employees. Pursuant to investment
management agreements, Scudder Kemper acts as each Fund's investment adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of a Fund if elected to such positions. The investment
management agreements provide that the Fund shall pay the charges and expenses
of its operations, including the fees and expenses of the trustees (except those
who are affiliated with officers or employees of Scudder Kemper), independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, brokerage commissions or
transaction costs, costs of calculating net asset value and maintaining all
accounting records related thereto, taxes and membership dues. Each Fund bears
the expenses of registration of its shares with the Securities and Exchange
Commission, while Kemper Distributors, Inc., ("KDI") as principal underwriter,
pays the cost of qualifying and maintaining the qualification of each Fund's
shares for sale under the securities laws of the various states.
The investment management agreements provide that Scudder Kemper shall not be
liable for any error of judgment or of law, or for any loss suffered by a Fund
in connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Scudder Kemper in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under each agreement.
Each Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually by a majority of
the trustees who are not parties to such agreement or interested persons of any
such party except in their capacity as trustees of the Fund and by the
shareholders of the Fund subject thereto or the Board of Trustees. Each Fund's
investment management agreement may be terminated at any time upon 60 days'
notice by either party, or by a majority vote of the outstanding shares of the
Fund subject thereto, and will terminate automatically upon assignment. If
additional Funds become subject to an investment management agreement, the
provisions concerning continuation, amendment and termination shall be on a Fund
by Fund basis. Additional Funds may be subject to a different agreement.
Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by
Scudder Kemper. The investment management agreements provide that Scudder Kemper
shall act as each Fund's investment Advisor, manage its investments and provide
it with various services and facilities.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Advisor, with the balance
owned by the Advisor's officers and employees.
42
<PAGE>
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) and the financial services businesses of B.A.T Industries
p.l.c. ("B.A.T") were combined to form a new global insurance and financial
services company known as Zurich Financial Services, Inc. By way of a dual
holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
Upon consummation of this transaction, each Fund's existing investment
management agreement with Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the current
investment management agreement, except for the date of execution and
termination. This agreement became effective upon the termination of the then
current investment management agreement and was approved by shareholders at a
special meeting which concluded in December 1998.
Each Fund pays Scudder Kemper an investment management fee, payable monthly, at
1/12 of the annual rates shown below:
<TABLE>
<CAPTION>
Annual Management Fee Rates
---------------------------
Global
Average Daily Net Assets of the Fund and International Asian
- ------------------------------------ ----------------- -----
<S> <C> <C>
$0 - $250 million 0.75% 0.85%
$250 million - $1 billion 0.72 0.82
$1 billion - $2.5 billion 0.70 0.80
$2.5 billion - $5 billion 0.68 0.78
$5 billion - $7.5 billion 0.65 0.75
$7.5 billion - $10 billion 0.64 0.74
$10 billion - $12.5 billion 0.63 0.73
Over $12.5 billion 0.62 0.72
</TABLE>
The expenses of each Fund, and of other investment companies investing in
foreign securities, can be expected to be higher than for investment companies
investing primarily in domestic securities since the costs of operation are
higher, including custody and transaction costs for foreign securities and
investment management fees.
The investment management fees incurred by each Fund for its last three fiscal
years are shown in the table below.
<TABLE>
<CAPTION>
Fund Fiscal 1999 Fiscal 1998 Fiscal 1997
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
Asian................................ 0** 0** $45,000
Global............................... $536,000 $675,000 $858,000
International........................ $4,348,000 $4,612,000 $4,131,000
* After fee waiver of $109,000
**After fee waiver of waiver o$58,000.
</TABLE>
Fund Sub-Adviser. Scudder Investments U.K., Limited ("Scudder UK"), 1 South
Place, London, U.K. EC42M 2ZS, an affiliate of Scudder Kemper, is the
sub-adviser for the Global Income and International Funds. Scudder UK acts as
sub-adviser pursuant to the terms of the sub-advisory agreement between it and
Scudder Kemper for each Fund. Scudder UK is subject to regulations by the
Investment Management Regulatory Organization (IMRO) in England as well as the
U.S. Securities and Exchange Commission.
Under the terms of the sub-advisory agreement for a Fund, Scudder UK renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to Scudder UK by the
43
<PAGE>
Adviser from time to time for management, including services related to foreign
securities, foreign currency transactions and related investments. Scudder UK
may, under the terms of each sub-advisory agreement, render similar services to
others including other investment companies. For its services, Scudder UK will
receive from the Adviser a monthly fee at the annual rate of 0.30% for the
Global Income Fund and 0.35% for the International Funds of the portion of the
average daily net assets of each Fund allocated by the Adviser to Scudder UK for
management. Scudder UK permits any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions.
Each sub-advisory agreement provides that Scudder UK will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the sub-advisory agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Scudder UK in the performance of its duties or from reckless disregard
by Scudder UK of its obligations and duties under the sub-advisory agreement.
Each sub-advisory agreement continues in effect from year to year so long as its
continuation is approved at least annually by a majority of the trustees who are
not parties to such agreement or interested persons of any such party except in
their capacity as trustees of the Fund and by the shareholders of the Fund
subject thereto or the Board of Trustees. Each sub-advisory agreement may be
terminated at any time for a Fund upon 60 days notice by Scudder Kemper, Scudder
UK or the Board of Trustees, or by a majority vote of the outstanding shares of
the Fund subject thereto, and will terminate automatically upon assignment or
upon the termination of the Fund's investment management agreement. If
additional Funds become subject to a sub-advisory agreement, the provisions
concerning continuation, amendment and termination shall be on a Fund-by-Fund
basis. Additional Funds may be subject to a different agreement. No sub-advisory
fees were paid by the Adviser to Scudder UK for periods prior to the 1997 fiscal
year, although in such periods the Adviser has paid Scudder UK for its services
to Scudder Kemper with respect to foreign securities investments of the Funds.
The sub-advisory fees paid by each Fund for its last fiscal year are shown
below.
Fund Fiscal 1999
- ---- -----------
Global..................................................... $
International.............................................. $2,063,000
* Estimated.
FUND ACCOUNTING AGENT. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of Scudder
Kemper, is responsible for determining the daily net asset value per share of
the Funds and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to the Funds; however, subject to Board
approval, some time in the future, SFAC may seek payment for its services under
this agreement.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606, an affiliate of
Scudder Kemper, is the principal underwriter and distributor for the shares of
each Fund and acts as agent of the Fund in the continuous offering of its
shares. KDI bears all of its expenses of providing services pursuant to the
distribution agreement, including the payment of any commissions. Each Fund pays
the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI pays for the printing and
distribution of copies thereof used in connection with the offering of shares to
prospective investors. KDI also pays for supplementary sales literature and
advertising costs.
Each distribution agreement continues in effect from year to year so long as
such continuance is approved for each class at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to a
class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who
44
<PAGE>
have no direct or indirect financial interest in the agreement, or a "majority
of the outstanding voting securities" of the class of the Fund, as defined under
the Investment Company Act of 1940. The agreement may not be amended for a class
to increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.
CLASS A SHARES. KDI receives no compensation from the Funds as principal
underwriter for Class A shares and pays all expenses of distribution of each
Fund's Class A shares under the distribution agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of each Fund's shares. The
following information concerns the underwriting commissions paid in connection
with the distribution of each Fund's Class A shares for the fiscal years noted.
<TABLE>
<CAPTION>
Commissions Commissions Commissions Paid To
Retained By Underwriter Paid Kemper Affiliated
Fund Fiscal Year Underwriter To All Firms Firms
---- ----------- ----------- ------------ -----
<S> <C> <C> <C> <C>
Asian 1999 $6,000 0
1998 $3,000 $37,000 --
1997 $14,000 $59,000 --
Global 1999 $3,000 0
1998 $3,000 $24,000 --
1997 $9,000 $49,000 --
International 1999 $71,000 $887,000
1998 $105,000 --
1997 $96,000 $959,000 --
</TABLE>
Class B Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund under a Rule 12b-1 Plan, payable monthly, at the annual
rate of 0.75% of average daily net assets of each Fund attributable to Class B
shares. This fee is accrued daily as an expense of Class B shares. KDI also
receives any contingent deferred sales charges. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Class B Shares." KDI currently
compensates firms for sales of Class B shares at a commission rate of 3.75%.
Class C Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund under a Rule 12b-1 Plan, payable monthly, at the annual
rate of 0.75% of average daily net assets of each Fund attributable to Class C
shares. This fee is accrued daily as an expense of Class C shares. KDI currently
advances to firms the first year distribution fee at a rate of 0.75% of the
purchase price of Class C shares. For periods after the first year, KDI
currently pays firms for sales of Class C shares a distribution fee, payable
quarterly, at an annual rate of 0.75% of net assets attributable to Class C
shares maintained and serviced by the firm and the fee continues until
terminated by KDI or a Fund. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charges--Class C Shares".
CLASS B SHARES AND CLASS C SHARES. Each Fund has adopted a plan under Rule 12b-1
that provides for fees payable as an expense of the Class B shares and Class C
shares that are used by KDI to pay for distribution and services for those
classes. Because 12b-1 fees are paid out of fund assets on an ongoing basis,
they will, over time, increase the cost of an investment and cost more than
other types of sales charges.
45
<PAGE>
Expenses of the Funds and of KDI, in connection with the Rule 12b-1 Plans for
the Class B and Class C shares are set forth below. A portion of the marketing,
sales and operating expenses shown below could be considered overhead expense.
<TABLE>
<CAPTION>
Other Distribution Expenses Paid By Underwriter
--------------------------------------------------
Commissions
-----------
Contingent Total Paid By
---------- ----- -------
Distribution Deferred Commissions Underwriter
------------ -------- -----------------------
Fees Paid Sales Paid By To Advertising Marketing Misc. Interest
--------- ----- ------- -- ----------- --------- ----- --------
Fund Class Fiscal By Fund To Charges To Underwriter Affiliated and Prospectus and Sales Operating Fund
- ----------------- ---------- ---------- ----------- ---------- --- -------------------- --------------
B Shares Year Underwriter Underwriter To Firms Firms Literature Printing Expenses Expenses Expenses
- -------- ---- ----------- ----------- -------- ----- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asian 1999 $35,525 $17,772 $53,606 0 $3,659 $384 $10,587 $16,964 $31,874
1998 $21,000 $6,000 $53,000 -- $7,000 $1,000 $14,000 $28,000 $18,000
1997 $18,000 $7,000 $103,000 -- $12,000 $1,000 $25,000 $4,000 $9,000
Global 1999 $1,001,223 $431,781 $852,100 0 $79,748 $4,428 $200,250 $32,887 $567,732
1998 $120,000 $52,000 $58,000 -- $7,000 $1,000 $12,000 $19,000 ($41,000)
1997 $270,000 $62,000 $147,000 -- $22,000 $2,000 $64,000 $25,000 --
Internationa1 1999 $72,666 $39,693 $84,398 0 $4,475 $475 $12,834 $14,190 $(59,902)
1998 $1,234,000 $285,000 $1,313,000 -- $173,000 $20,000 $358,000 $74,000 $509,000
1997 $970,000 $227,000 $1,709,000 -- $219,000 $15,000 $595,000 $94,000 $395,000
Other Distribution Expenses Paid By Underwriter
Commissions --------------------------------------------------
-----------
Contingent Total Paid By
---------- ----- -------
Distribution Deferred Commissions Underwriter
--------------------- -----------------------
Fees Paid Sales Paid By To Advertising Marketing Misc. Interest
--------- ----- ------- -- ----------- --------- ----- --------
Fund Class Fiscal By Fund To Charges To Underwriter Affiliated and Prospectus and Sales Operating Fund
- ----------------- ---------- ---------------------- ---------- --- -------------------- --------- ----
C Shares Year Underwriter Underwriter To Firms Firms Literature Printing Expenses Expenses Expenses
- -------- ---- ----------- ----------- -------- ----- ------------------- -------- -------- --------
Asian 1999 $4,880 $377 $4495 0 $915 $113 $2777 $11,996 $3851
1998 $2,000 -- $4,000 -- $1,000 -- $1,000 $12,000 $3,000
1997 $2,000 -- $3,000 -- $2,000 -- $4,000 $10,000 $1,000
Global 1999 $16,115 $1,382 $17,339 0 $2601 $265 $7,337 $13,082 $10,781
1998 $12,000 -- $13,000 -- $3,000 -- $5,000 $12,000 $8,000
1997 $9,000 $1,000 $8,000 -- $4,000 -- $11,000 $4,000 $6,000
Internation1 1999 $218,397 $9,060 $236,313 0 $42,885 $2,972 $116,308 $24,070 $60,744
1998 $162,000 $7,000 $171,000 -- $48,000 $7,000 $103,000 $27,000 $45,000
1997 $96,000 $3,000 $117,000 -- $45,000 $3,000 $118,000 $4,000 $26,000
</TABLE>
If a Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of a Fund to make payments to KDI pursuant to the Plan will cease
and the Fund will not be required to make any payments past the termination
date. Thus, there is no legal obligation for the Fund to pay any expenses
incurred by KDI in excess of its fees under a Plan, if for any reason the Plan
is terminated in accordance with its terms. Future fees under a Plan may or may
not be sufficient to reimburse KDI for its expenses incurred.
46
<PAGE>
ADMINISTRATIVE SERVICES. Administrative services are provided to each Fund under
an administrative services agreement ("administrative agreement") with KDI. KDI
bears all its expenses of providing services pursuant to the administrative
agreement between KDI and each Fund, including the payment of service fees. For
the services under the administrative agreement, each Fund pays KDI an
administrative services fee, payable monthly, at the annual rate of up to 0.25%
of average daily net assets of Class A, B and C shares of the Fund.
KDI enters into related arrangements with various broker-dealers and other
service or administrative firms ("firms"), that provide services and facilities
for their customers or clients who are investors of a Fund. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding the Funds, assistance to
clients in changing dividend and investment options, account designations and
addresses and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. With respect to Class A
shares, KDI pays each firm a service fee, normally payable quarterly, at an
annual rate of (a) up to 0.15% of the net assets for the Global and 0.25% of the
net assets for the International Fund of these accounts in the fund that it
maintains and services that are attributable to Class A shares acquired prior to
October 1, 1993, and (b) up to 0.25% of the net assets in Fund accounts that it
maintains and services attributable to Class A shares acquired on or after
October 1, 1993, in each case commencing with the month after investment. With
respect to Class B shares and Class C shares, KDI currently advances to firms
the first-year service fee at a rate of up to 0.25% of the purchase price of
such shares. For periods after the first year, KDI currently intends to pay
firms a service fee at an annual rate of up to 0.25% (calculated monthly and
normally paid quarterly) of the net assets attributable to Class B and Class C
shares maintained and serviced by the firm and the fee continues until
terminated by KDI or the Fund. Firms to which service fees may be paid include
broker-dealers affiliated with KDI.
The following information concerns the administrative services fee paid by each
Fund.
47
<PAGE>
<TABLE>
<CAPTION>
Administrative Service
----------------------
Fees Paid Service Fees Service Fees
--------- ------------ ------------
By Fund Paid By Administrator Paid By Administrator
----------------------------------- --------------------- --------------------- --
Fund Fiscal Period Class A Class B Class C To Firms To Affiliated Firms
---- ------------- ------- ------- ------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Asian 1999 $14,949 $12200 0 $28,844 0
1998 $8,000 $6,000 0 $20,000 0
1997* $1,000 $5,000 $1,000 $19,000 0
Global 1999 $278,691 $62,196 0 $159,092 0
1998 $147,000 $38,000 $4,000 $192,000 0
1997 $149,000 $86,000 $3,000 $239,000 0
International 1999 $980,937 $332,107 $73,339 $1,386,619 0
1998 $1,013,000 $360,000 $51,000 $1,438,000 0
1997 $926,000 $322,000 $32,000 $1,301,000 0
- ----------------
* Amounts shown after expense waiver.
</TABLE>
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fees that it receives
from the Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of each Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record as well as, with respect to the
Global Fund's Class A shares, the date when shares representing such assets were
purchased. The Board of Trustees of a Fund, in its discretion, may approve
basing the fee to KDI on all Fund assets in the future.
Certain trustees or officers of each Fund are also directors or officers of
Scudder Kemper, Scudder UK or KDI as indicated under "Officers and Trustees."
48
<PAGE>
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a Fund. Currently, the
administrative services fee payable to KDI is payable at an annual rate of 0.25%
(0.10% for Class A shares acquired prior to October1, 1993) based upon Fund
assets in accounts for which a firm provides administrative services and,
effective January 1, 2000, at the annual rate of 0.15% (0.10% for Class A shares
acquired prior to October 1, 1993) based upon Fund assets in accounts for which
there is no firm of record (other than KDI) listed on the Fund's records. The
effective administrative services fee rate to be charged against all assets of a
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
Directors of each Fund, in its discretion, may approve basing the fee to KDI at
the annual rate of 0.25% on all Fund assets in the future. 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 Funds.
Certain trustees or officers of each Fund are also directors or officers of
Scudder Kemper, Scudder UK or KDI as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. The Chase Manhattan
Bank ("Chase"), Chase MetroTech Center, Brooklyn, New York 11245, as custodian,
has custody of all securities and cash of each Fund. Chase attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by each Fund. Investors Fiduciary Trust Company
("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, is each Fund's
transfer agent and dividend-paying agent.
Pursuant to a services agreement with IFTC, Kemper Service Company ("KSvC"), an
affiliate of Scudder Kemper, serves as "Shareholder Service Agent" of each Fund
and, as such, performs all of IFTC's duties as transfer agent and
49
<PAGE>
dividend paying agent. IFTC receives as transfer agent, and pays to KSvC as
follows: prior to January 1, 1999, annual account fees at a maximum rate of $6
per account plus account set up, transaction, and maintenance charges, annual
fees associated with the contingent deferred sales charge (Class B shares only)
and out-of-pocket expense reimbursement and effective January 1, 1999, for the
Asian Growth and International Funds, annual account fees of $10.00 ($18.00 for
retirement accounts) plus set up charges, annual fees associated with the
contingent deferred sales charges (Class B Shares only), an asset-based fee of
0.08% and out-of-pocket reimbursement and, for the Global Income Fund, annual
account fees of $14.00 ($23.00 for retirement accounts) plus set up charges,
annual fees associated with the contingent deferred sales charges (Class B
Shares only), an asset-based fee of 0.05% and out-of-pocket reimbursement.
The following shows for each Fund's 1998 fiscal year the shareholder service
fees IFTC remitted to KSvC.
Fees IFTC
---------
Fund Paid to KSVC
- ---- ------------
Asian $78,000
Global $197,000
International $2,432,000
For the fiscal year ended November 30, 1999, for the Asian Fund, KSvC received
shareholder services fees of $71,000 of which $20,000 was unpaid.
For the fiscal year ended December 31, 1999, for the Global Fund, KSvC received
shareholder services fees of $165,000 of which $15,000 was unpaid for the year
ended December 31, 1999.
For the fiscal year ended October 31, 1999, for the International Fund, KSvC
received shareholder services fees of $1,795,000 of which $196,000 was unpaid
for the year ended October 31, 1999.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Funds' independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Funds' annual financial statements, review certain
regulatory reports and the Funds' federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Funds.
PORTFOLIO TRANSACTIONS
Brokerage
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for a Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by a Fund to reported commissions paid by others.
The Adviser routinely reviews commission rates, execution and settlement
services performed and makes internal and external comparisons.
50
<PAGE>
The Funds' purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by a Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or a
Fund. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions, if applicable, for a
Fund to pay a brokerage commission in excess of that which another broker might
charge for executing the same transaction on account of execution services and
the receipt of research services. The Adviser has negotiated arrangements, which
are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services,
to the Adviser or a Fund in exchange for the direction by the Adviser of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Adviser may place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of a Fund. In effecting transactions in
over-the-counter securities, orders are placed with the principal market makers
for the security being traded unless, after exercising care, it appears that
more favorable results are available elsewhere.
Each Fund's average portfolio turnover rate is the ratio of the lesser of sales
or purchases to the monthly average value of the portfolio securities owned
during the year, excluding all securities with maturities or expiration dates at
the time of acquisition of one year or less. A higher rate involves greater
brokerage transaction expenses to a Fund and may result in the realization of
net capital gains, which would be taxable to shareholders when distributed.
Purchases and sales are made for a Fund's portfolio whenever necessary, in
management's opinion, to meet a Fund's objective.
The table below shows total brokerage commissions paid by each Fund for the last
three fiscal periods and for the most recent fiscal year, the percentage thereof
that was allocated to firms based upon research information provided.
<TABLE>
<CAPTION>
Percentage
----------
Allocated to
------------
Firms Based on
--------------
Fiscal 1999 Reasearch in Fiscal 1997
----------- ------------- -----------
Fiscal 1999
-----------
<S> <C> <C> <C> <C>
Asian $131,212 76.59% $99,000 $142,000
Global $0 0% $0 $0
International $3,594,955 81.99% $2,888,000 $2,339,000
- --------------------
</TABLE>
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
51
<PAGE>
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
<TABLE>
<CAPTION>
Annual 12b-1 Fees (As a % of
Sales Charge Average Daily Net Assets) Other Information
------------ ------------------------- -----------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of None Initial sales charge waived or
4.5% (for the Global Fund) and reduced for certain purchases
5.75% (for each of the Asian and
International Funds) of the
public offering price
Class B Maximum contingent deferred 0.75% Shares convert to Class A
sales charge of 4% of redemption shares six years after issuance
proceeds; declines to zero after
six years
Class C Contingent deferred sales charge 0.75% No conversion feature
of 1% of redemption proceeds for
redemptions made during first
year after purchase
</TABLE>
The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing and may not be
available for certain types of account registrations. It is recommended that
investors not request share certificates unless needed for a specific purpose.
You cannot redeem shares by telephone or wire transfer or use the telephone
exchange privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond worth 2% or more of the certificate value is normally required).
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of
Class A shares for purchasers of the Global Fund choosing the initial sales
charge alternative is the net asset value plus a sales charge, as set forth
below.
<TABLE>
<CAPTION>
Global Fund -- Sales Charge
---------------------------------------------------------------------------------
As A Percentage As A Percentage Allowed To Dealers As A
Amount of Purchase Of Offering Price of Net Asset Value* Percentage Of Offering Price
------------------ ----------------- ------------------- ----------------------------
<S> <C> <C> <C>
Less than $100,000................. 4.50% 4.71% 4.00%
52
<PAGE>
$100,000 but less than $250,000.... 3.50 3.63 3.00
$250,000 but less than $500,000.... 2.60 2.67 2.25
$500,000 but less than $1 million.. 2.00 2.04 1.75
$1 million and over................ 0.00** 0.00** ***
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as discussed below.
*** Commission is payable by KDI as discussed below.
The public offering price of Class A shares for purchasers of the Asian or
International Fund choosing the initial sales charge alternative is the net
asset value plus a sales charge, as set forth below.
Asian And International Funds -- Sales Charge
---------------------------------------------------------------------------------
As A Percentage As A Percentage Allowed To Dealers As A
Amount of Purchase Of Offering Price of Net Asset Value* Percentage Of Offering Price
------------------ ----------------- ------------------- ----------------------------
Less than $50,000.................. 5.75% 6.10% 5.20%
$50,000 but less than $100,000..... 4.50 4.71 4.00
$100,000 but less than $250,000.... 3.50 3.63 3.00
$250,000 but less than $500,000.... 2.60 2.67 2.25
$500,000 but less than $1 million.. 2.00 2.04 1.75
$1 million and over................ 0.00** 0.00** ***
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as discussed below.
*** Commission is payable by KDI as discussed below.
</TABLE>
Each Fund receives the entire net asset value of all Class A shares sold. KDI,
the Funds' principal underwriter, retains the sales charge on sales of Class A
shares from which it allows discounts from the applicable public offering price
to investment dealers, which discounts are uniform for all dealers in the United
States and its territories. The normal discount allowed to dealers is set forth
in the above table. Upon notice to all dealers with whom it has sales
agreements, KDI may reallow up to the full applicable sales charge, as shown in
the above table, during periods and for transactions specified in such notice
and such reallowances may be based upon attainment of minimum sales levels.
During periods when 90% or more of the sales charge is reallowed, such dealers
may be deemed to be underwriters as that term is defined in the Securities Act
of 1933.
Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which Scudder Kemper or an affiliate does not serve as
investment manager ("non-Kemper Fund") provided that: (a) the investor has
previously paid either an initial sales charge in connection with the purchase
of the non-Kemper Fund shares redeemed or a contingent deferred sales charge in
connection with the redemption of the non-Kemper Fund shares, and (b) the
purchase of Fund shares is made within 90 days after the date of such
redemption. To make such a purchase at net asset value, the investor or the
investor's dealer must, at the time of purchase, submit a request that the
purchase be processed at net asset value pursuant to this privilege. The
redemption of the shares of the non-Kemper fund is, for federal income tax
purposes, a sale upon which a gain or loss may be realized. KDI may in its
discretion compensate firms for sales of Class A shares under this privilege at
a commission rate of 0.50% of the amount of Class A shares purchased.
Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in the Fund or other Kemper Mutual
Funds listed under "Special Features -- Class A Shares -- Combined Purchases"
totals at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district provided in each case
that such plan has
53
<PAGE>
not less than 200 eligible employees (the "Large Order NAV Purchase Privilege").
Redemption within two years of shares purchased under the Large Order NAV
Purchase Privilege may be subject to a contingent deferred sales charge. See
"Redemption or Repurchase of Shares -- Contingent Deferred Sales Charge -- Large
Order NAV Purchase Privilege."
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of each Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer sponsored
employee benefit plans using the subaccount recordkeeping system made available
through KSvC. For purposes of determining the appropriate commission percentage
to be applied to a particular sale, KDI will consider the cumulative amount
invested by the purchaser in the Fund and other Kemper Mutual Funds listed under
"Special Features -- Class A Shares -- Combined Purchases," including purchases
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features referred to above. The privilege of purchasing Class A shares
of a Fund at net asset value under the Large Order NAV Purchase Privilege is not
available if another net asset value purchase privilege also applies.
Class A shares of a Fund or any other Kemper Mutual Fund listed under "Special
Features -- Class A Shares -- Combined Purchases" may be purchased at net asset
value in any amount by members of the plaintiff class in the proceeding known as
HOWARD AND AUDREY TABANKIN, ET AL. V. KEMPER SHORT-TERM GLOBAL INCOME FUND, ET
AL., Case No. 93 C 5231 (N.D.IL). This privilege is generally non-transferrable
and continues for the lifetime of individual class members and for a ten year
period for non-individual class members. To make a purchase at net asset value
under this privilege, the investor must, at the time of purchase, submit a
written request that the purchase be processed at net asset value pursuant to
this privilege specifically identifying the purchaser as a member of the
"Tabankin Class." Shares purchased under this privilege will be maintained in a
separate account that includes only shares purchased under this privilege. For
more details concerning this privilege, class members should refer to the Notice
of (1) Proposed Settlement with Defendants; and (2) Hearing to Determine
Fairness of Proposed Settlement dated August 31, 1995, issued in connection with
the aforementioned court proceeding. For sales of Fund shares at net asset value
pursuant to this privilege, KDI may in its discretion pay investment dealers and
other financial services firms a concession, payable quarterly, at an annual
rate of up to 0.25% of net assets attributable to such shares maintained and
serviced by the firm. A firm becomes eligible for the concession based upon
assets in accounts attributable to shares purchased under this privilege in the
month after the month of purchase and the concession continues until terminated
by KDI. The privilege of purchasing Class A shares of the Fund at net asset
value under this privilege is not available if another net asset value purchase
privilege also applies.
Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
the Fund, its investment manager, its principal underwriter or certain
affiliated companies, for themselves or members of their families; (b)
registered representatives and employees of broker-dealers having selling group
agreements with KDI and officers, directors and employees of service agents of
the Fund, for themselves or their spouses or dependent children; (c)
shareholders who owned shares of Kemper Value Series, Inc. ("KVS") on September
8, 1995, and have continuously owned shares of KVS (or a Kemper Fund acquired by
exchange of KVS shares) since that date, for themselves or members of their
families; and (d) any trust or pension, profit sharing or other benefit plan for
only such persons. Class A shares may be sold at net asset value in any amount
to selected employees (including their spouses and dependent children) of banks
and other financial services firms that provide administrative services related
to order placement and payment to facilitate transactions in shares of each Fund
for their clients pursuant to an agreement with KDI or one of its affiliates.
Only those employees of such banks and other firms who as part of their usual
duties provide services related to transactions in Fund shares may purchase Fund
Class A shares at net asset value hereunder. Class A shares may also be sold at
net asset value in any amount to unit investment trusts sponsored by Ranson &
Associates, Inc. In addition, unitholders of unit investment trusts sponsored by
Ranson & Associates, Inc. or its predecessors may purchase Fund Class A shares
at net asset value through reinvestment programs described herein of such trusts
that have such programs. Class A shares of a Fund may be sold at net asset value
through certain investment advisers registered under the 1940 Act and other
financial services firms that adhere to certain standards established by KDI,
including a requirement that such shares be sold for the benefit of their
clients participating in an investment advisory program
54
<PAGE>
under which such clients pay a fee to the investment adviser or other firm for
portfolio management and other services. Such shares are sold for investment
purposes and on the condition that they will not be resold except through
redemption or repurchase by the Fund. Each Fund may also issue Class A shares at
net asset value in connection with the acquisition of the assets of or merger or
consolidation with another investment company, or to shareholders in connection
with the investment or reinvestment of income and capital gain dividends.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.
Class A shares of a Fund may be purchased at net asset value in any amount by
certain professionals who assist in the promotion of Kemper Funds pursuant to
personal services contracts with KDI, for themselves or members of their
families. KDI in its discretion may compensate financial services firms for
sales of Class A shares under this privilege at a commission rate of 0.50% of
the amount of Class A shares purchased.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase shares of the Fund through KDI as part of an automated billing and wage
deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares -- Contingent Deferred
Sales Charge -- Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of a Fund will automatically convert to Class A shares of the
same Fund six years after issuance on the basis of the relative net asset value
per share. The purpose of the conversion feature is to relieve holders of Class
B shares from the distribution services fee when they have been outstanding long
enough for KDI to have been compensated for distribution related expenses. For
purposes of conversion to Class A shares, shares purchased through the
reinvestment of dividends and other distributions paid with respect to Class B
shares in a shareholder's Fund account will be converted to Class A shares on a
pro rata basis.
PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full amount
of the investor's purchase payment will be invested in Class C shares for his or
her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares -- Contingent Deferred Sales Charge --
Class C Shares." KDI currently advances to firms the first year distribution fee
at the rate of 0.75% of the purchase price of such shares. For periods after the
first year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained
55
<PAGE>
and serviced by the firm. KDI is compensated by each Fund for services as
distributor and principal underwriter for Class C shares. See "Investment
Manager and Underwriter."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in a Fund or other Kemper Mutual Funds
listed under "Special Features -- Class A Shares -- Combined Purchases" is in
excess of $5 million including purchases pursuant to the "Combined Purchases,"
"Letter of Intent" and "Cumulative Discount" features described under "Special
Features." For more information about the three sales arrangements, consult your
financial representative or the Shareholder Service Agent. Financial services
firms may receive different compensation depending upon which class of shares
they sell.
GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Fund for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers as
described above. Banks currently are prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of a Fund sold by the firm under the following conditions: (i) the
purchased shares are held in a Kemper IRA account, (ii) the shares are purchased
as a direct "roll over" of a distribution from a qualified retirement plan
account maintained on a participant subaccount record keeping system provided by
KSvC, (iii) the registered representative placing the trade is a member of
ProStar, a group of persons designated by KDI in acknowledgment of their
dedication to the employee benefit plan area and (iv) the purchase is not
otherwise subject to a commission.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash, to firms that sell shares of the Funds. In some
instances, such discounts, commissions or other incentives will be offered only
to certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of a Fund or other funds underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other firms
prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of its business day will be confirmed at a
price based on the net asset value effective on that day ("trade date"). The
Funds reserve the right to determine the net asset value more frequently than
once a day if deemed desirable. Dealers and other financial services firms are
obligated to transmit orders promptly. Collection may take significantly longer
for a check drawn on a foreign bank than for a check drawn on a domestic bank.
Therefore, if an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected before shares will be purchased.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may
56
<PAGE>
hold Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Funds through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase, repurchase and redemption of shares or the
reinvestment of dividends may not be available through such firms. Some firms
may participate in a program allowing them access to their clients' accounts for
servicing including, without limitation, transfers of registration and dividend
payee changes; and may perform functions such as generation of confirmation
statements and disbursement of cash dividends. Such firms, including affiliates
of KDI, may receive compensation from the Funds through the Shareholder Service
Agent for these services.
Each Fund reserves the right to withdraw all or any part of the offering made by
the prospectus and this statement of additional information and to reject
purchase orders. Also, from time to time, a Fund may temporarily suspend the
offering of any class of its shares to new investors. During the period of such
suspension, persons who are already shareholders of such class of such Fund
normally are permitted to continue to purchase additional shares of such class
and to have dividends reinvested.
Shareholders should direct their inquiries to KSvC, 811 Main Street, Kansas
City, Missouri 64105-2005 or to the firm from which they received this statement
of additional information.
As described herein, Fund shares are sold at their public offering price, which
is the net asset value next determined after an order is received in proper form
plus, with respect to Class A shares, an initial sales charge. The minimum
initial investment is $1,000 and the minimum subsequent investment is $100 but
such minimum amounts may be changed at any time. An order for the purchase of
shares that is accompanied by a check drawn on a foreign bank (other than a
check drawn on a Canadian bank in U.S. Dollars) will not be considered in proper
form and will not be processed unless and until the Fund determines that it has
received payment of the proceeds of the check. The time required for such a
determination will vary and cannot be determined in advance. The amount received
by a shareholder upon redemption or repurchase may be more or less than the
amount paid for such shares depending on the market value of the Fund's
portfolio securities at the time.
The Funds have authorized certain members of the National Association of
Securities Dealers, Inc. ("NASD"), other than Kemper Distributors, Inc. ("KDI")
to accept purchase and redemption orders for the Fund's shares. Those brokers
may also designate other parties to accept purchase and redemption orders on the
Fund's behalf. Orders for purchase or redemption will be deemed to have been
received by the Fund when such brokers or their authorized designees accept the
orders. Subject to the terms of the contract between the Fund and the broker,
ordinarily orders will be priced as the Fund's net asset value next computed
after acceptance by such brokers or their authorized designees. Further, if
purchases or redemptions of the Fund's shares are arranged and settlement is
made at an investor's election through any other authorized NASD member, that
member may, at its discretion, charge a fee for that service. The Board of
Trustees or Directors as the case may be ("Board") of the Fund and KDI each has
the right to limit the amount of purchases by, and to refuse to sell to, any
person. The Board and KDI may suspend or terminate the offering of shares of the
Fund at any time for any reason.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
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institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When a Fund is asked to redeem shares for which it may not have yet received
good payment (i.e., purchases by check, EXPRESS-Transfer or Bank Direct
Deposit), it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 10 days from receipt by the Fund of the purchase
amount. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase of Shares -- Initial Sales
Charge Alternative -- Class A Shares") and the redemption of Class B shares
within six years may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge -- Class B Shares" below) and the redemption
of Class C shares within the first year following purchase may be subject to a
contingent deferred sales charge (see "Contingent Deferred Sales Charge -- Class
C Shares" below).
Because of the high cost of maintaining small accounts, the Funds may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. A Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephone instructions are genuine. The shareholder will bear the risk of loss
including loss resulting from fraudulent or unauthorized transactions, so long
as the reasonable verification procedures are followed. The verification
procedures include recording instructions, requiring certain identifying
information before acting upon instructions and sending written confirmations.
TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without signature guarantee is sufficient for redemptions by individual or joint
account holders, and trust, executor and guardian account holders (excluding
custodial accounts for gifts and transfers to minors), provided the trustee,
executor or guardian is named in the account registration. Other institutional
account holders and guardian account holders of custodial accounts for gifts and
transfers to minors may exercise this special privilege of redeeming shares by
telephone request or written request without signature guarantee subject to the
same conditions as individual account holders and subject to the limitations on
liability described under "General" above, provided that this privilege has been
pre-authorized by the institutional account holder or guardian account holder by
written instruction to the Shareholder Service Agent with signatures guaranteed.
Telephone requests may be made by calling 1-800-621-1048. Shares purchased by
check or through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed
under this privilege of redeeming shares by telephone request until such shares
have been owned for at least 10 days. This privilege of redeeming shares by
telephone request or by written request without a signature guarantee may not be
used to redeem shares held in certificated form and may not be used if the
shareholder's account has had an address change within 30 days of the redemption
request. During periods when it is difficult to contact the Shareholder Service
Agent by telephone, it may be difficult to use the telephone redemption
privilege, although investors can still redeem by mail. The Funds reserve the
right to terminate or modify this privilege at any time.
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REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which a Fund has authorized to act as its agent. There is
no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value next determined after receipt of a request by KDI.
However, requests for repurchases received by dealers or other firms prior to
the determination of net asset value (see "Net Asset Value") and received by KDI
prior to the close of KDI's business day will be confirmed at the net asset
value effective on that day. The offer to repurchase may be suspended at any
time. Requirements as to stock powers, certificates, payments and delay of
payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value effective on
that day and normally the proceeds will be sent to the designated account the
following business day. Delivery of the proceeds of a wire redemption request of
$250,000 or more may be delayed by the Fund for up to seven days if Scudder
Kemper deems it appropriate under then current market conditions. Once
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048 or in writing, subject to the limitations on
liability described under "General" above. The Funds are not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. The Funds currently do not charge the account holder for wire
transfers. The account holder is responsible for any charges imposed by the
account holder's firm or bank. There is a $1,000 wire redemption minimum
(including any contingent deferred sales charge). To change the designated
account to receive wire redemption proceeds, send a written request to the
Shareholder Service Agent with signatures guaranteed as described above or
contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed by wire transfer until such shares have been owned for at least 10
days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
wire transfer redemption privilege. The Funds reserve the right to terminate or
modify this privilege at any time.
CONTINGENT DEFERRED SALES CHARGE -- LARGE ORDER NAV PURCHASE PRIVILEGE. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if they
are redeemed during the second year following purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares whose
dealer of record at the time of the investment notifies KDI that the dealer
waives the commission applicable to such Large Order NAV Purchase.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed excluding amounts not subject to the charge.
<TABLE>
<CAPTION>
Contingent Deferred
Year Of Redemption After Purchase Sales Charge
- --------------------------------- ------------
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<S> <C>
First................................................................................... 4%
Second.................................................................................. 3%
Third................................................................................... 3%
Fourth.................................................................................. 2%
Fifth................................................................................... 2%
Sixth................................................................................... 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 Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for redemptions
to satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts). The contingent deferred sales charge will
also be waived in connection with the following redemptions of shares held by
employer sponsored employee benefit plans maintained on the subaccount record
keeping system made available by the Shareholder Service Agent: (a) redemptions
to satisfy participant loan advances (note that loan repayments constitute new
purchases for purposes of the contingent deferred sales charge and the
conversion privilege), (b) redemptions in connection with retirement
distributions (limited at any one time to 10% of the total value of plan assets
invested in a Fund), (c) redemptions in connection with distributions qualifying
under the hardship provisions of the Internal Revenue Code and (d) redemptions
representing returns of excess contributions to such plans.
CONTINGENT DEFERRED SALES CHARGE -- CLASS C SHARES. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (limited to 10% of the
net asset value of the account during the first year, see "Special Features --
Systematic Withdrawal Plan"), (d) for redemptions made pursuant to any IRA
systematic withdrawal based on the shareholder's life expectancy including, but
not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts), (f) for any participant-directed redemption
of shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service Agent
and (g) redemption of shares by an employer sponsored employee benefit plan that
offers funds in addition to Kemper Funds and whose dealer of record has waived
the advance of the first year administrative service and distribution fees
applicable to such shares and agrees to receive such fees quarterly.
CONTINGENT DEFERRED SALES CHARGE -- GENERAL. The following example will
illustrate the operation of the contingent deferred sales charge. Assume that an
investor makes a single purchase of $10,000 of a Fund's Class B shares and that
16 months later the value of the shares has grown by $1,000 through reinvested
dividends and by an additional $1,000 in appreciation to a total of $12,000. If
the investor were then to redeem the entire $12,000 in share value, the
contingent deferred sales charge would be payable only with respect to $10,000
because neither the $1,000 of reinvested dividends nor the $1,000 of share
appreciation is subject to the charge. The charge would be at the rate of 3%
($300) because it was in the second year after the purchase was made.
The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in March
1999 will be eligible for the second year's charge if redeemed on or after March
1, 2000. In the event no specific order is requested, the
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redemption will be made first from shares representing reinvested dividends and
then from the earliest purchase of shares. KDI receives any contingent deferred
sales charge directly.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of a Fund
or any other Kemper Mutual Fund listed under "Special Features -- Class A Shares
- -- Combined Purchases" (other than shares of Kemper Cash Reserves Fund purchased
directly at net asset value) may reinvest up to the full amount redeemed at net
asset value at the time of the reinvestment in Class A shares of the Fund or of
the other listed Kemper Mutual Funds. A shareholder of a Fund or any other
Kemper Mutual Fund who redeems Class A shares purchased under the Large Order
NAV Purchase Privilege (see "Purchase of Shares -- Initial Sales Charge
Alternative -- Class A Shares"), Class B shares or Class C shares and incurs a
contingent deferred sales charge may reinvest up to the full amount redeemed at
net asset value at the time of the reinvestment in Class A shares, Class B
shares or Class C shares, as the case may be, of a Fund or of other Kemper
Mutual Funds. The amount of any contingent deferred sales charge also will be
reinvested. These reinvested shares will retain their original cost and purchase
date for purposes of the contingent deferred sales charge. Also, a holder of
Class B shares who has redeemed shares may reinvest up to the full amount
redeemed, less any applicable contingent deferred sales charge that may have
been imposed upon the redemption of such shares, at net asset value in Class A
shares of a Fund or of the other Kemper Mutual Funds listed under "Special
Features -- Class A Shares -- Combined Purchases." Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Mutual
Funds available for sale in the shareholder's state of residence as listed under
"Special Features -- Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of Fund
shares, the reinvestment in the same Fund may be subject to the "wash sale"
rules if made within 30 days of the redemption, resulting in a postponement of
the recognition of such loss for federal income tax purposes. The reinvestment
privilege may be terminated or modified at any time.
SPECIAL FEATURES
CLASS A SHARES -- Class A Shares -- Combined Purchases. Each 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 Adjustable Rate U.S. Government Fund,
Kemper Aggressive Growth Fund, Kemper Asian Growth Fund, Kemper Blue Chip Fund,
Kemper California Tax-Free Income Fund, Kemper Cash Reserves Fund, Kemper
Contrarian Fund, Kemper Diversified Income Fund, Kemper Emerging Markets Growth
Fund, Kemper Emerging Markets Income Fund, Kemper New Europe Fund, Kemper
Florida Tax-Free Income Fund, Kemper Global Blue Chip Fund, Kemper Global Income
Fund, Kemper Growth Fund, Kemper High Yield Fund, Kemper High Yield Opportunity,
Kemper Horizon 10+ Portfolio, Kemper Horizon 20+ Portfolio, Kemper Horizon 5
Portfolio, Kemper Income And Capital Preservation Fund, Kemper Intermediate
Municipal Bond, Kemper International Fund, Kemper International Growth and
Income Fund, Kemper Large Company Growth Fund (currently available only to
employees of Scudder Kemper Investments, Inc.; not available in all states),
Kemper Latin America Fund, Kemper Municipal Bond Fund, Kemper New York Tax-Free
Income Fund, Kemper Ohio Tax-Free Income Fund, Kemper Quantitative Equity Fund,
Kemper Research Fund (currently available only to employees of Scudder Kemper
Investments, Inc.; not available in all states), Kemper Retirement Fund --
Series I, Kemper Retirement Fund -- Series II, Kemper Retirement Fund -- Series
III, Kemper Retirement Fund -- Series IV, Kemper Retirement Fund -- Series V,
Kemper Retirement Fund -- Series VI, Kemper Retirement Fund -- Series VII,
Kemper Short-Intermediate Government Fund, Kemper Small Cap Value Fund, Kemper
Small Cap Value+Growth Fund (currently available only to employees of Scudder
Kemper Investments, Inc.; not available in all states), Kemper Small
Capitalization Equity Fund, Kemper Small Cap Relative Value Fund, Kemper
Technology Fund, Kemper Total Return Fund, Kemper U.S. Government Securities
Fund, Kemper U.S. Growth and Income Fund, Kemper U.S. Mortgage Fund, Kemper
Value+Growth Fund, Kemper Worldwide 2004 Fund, Kemper-Dreman High Return Equity
Fund, Kemper-Dreman Financial Services Fund ("Kemper Mutual Funds"). Except as
noted below, there is no combined purchase credit for direct purchases of shares
of Zurich Money Funds, Cash Equivalent Fund, Tax-Exempt California Money Market
Fund, Cash Account Trust, Investors Municipal Cash Fund or Investors Cash Trust
("Money Market Funds"), which are not considered "Kemper Mutual Funds" for
purposes hereof. For purposes of the Combined Purchases feature described above
as well as for the Letter of Intent and Cumulative Discount features described
below, employer sponsored employee benefit plans using the subaccount record
keeping system made available through the Shareholder Service Agent or its
affiliates may
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include: (a) Money Market Funds as "Kemper Mutual Funds," (b) all classes of
shares of any Kemper Mutual Fund, and (c) the value of any other plan
investments, such as guaranteed investment contracts and employer stock,
maintained on such subaccount record keeping system.
CLASS A SHARES -- LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Mutual Funds listed above made by any
purchaser within a 24-month period under a written Letter of Intent ("Letter")
provided by KDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than actually
paid, the appropriate number of escrowed shares are redeemed and the proceeds
used toward satisfaction of the obligation to pay the increased sales charge.
The Letter for an employer sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Mutual Funds held of record as of the initial purchase date under
the Letter as an "accumulation credit" toward the completion of the Letter, but
no price adjustment will be made on such shares. Only investments in Class A
shares of a Fund are included for this privilege.
CLASS A SHARES -- CUMULATIVE DISCOUNT. Each Fund's Class A shares also may be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of Fund shares being purchased the value of all Class A shares of the
above mentioned Kemper Mutual Funds (computed at the maximum offering price at
the time of the purchase for which the discount is applicable) already owned by
the investor.
CLASS A SHARES -- AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below.
CLASS A SHARES. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features -- Class A Shares -- Combined
Purchases" above may be exchanged for each other at their
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relative net asset values. Shares of Money Market Funds and Kemper Cash Reserves
Fund that were acquired by purchase (not including shares acquired by dividend
reinvestment) are subject to the applicable sales charge on exchange. Series of
Kemper Target Equity Fund are available on exchange only during the offering
period for such series as described in the applicable prospectus or statement of
additional information. Cash Equivalent Fund, Tax-Exempt California Money Market
Fund, Cash Account Trust, Investors Municipal Cash Fund and Investors Cash Trust
are available on exchange but only through a financial services firm having a
services agreement with KDI.
Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of another Kemper Mutual Fund or a Money
Market Fund under the exchange privilege described above without paying any
contingent deferred sales charge at the time of exchange. If the Class A shares
received on exchange are redeemed thereafter, a contingent deferred sales charge
may be imposed in accordance with the foregoing requirements provided that the
shares redeemed will retain their original cost and purchase date for purposes
of the contingent deferred sales charge.
CLASS B SHARES. Class B shares of a Fund and Class B shares of any other Kemper
Mutual Fund listed under "Special Features -- Class A Shares -- Combined
Purchases" may be exchanged for each other at their relative net asset values.
Class B shares may be exchanged without any contingent deferred sales charge
being imposed at the time of exchange. For purposes of the contingent deferred
sales charge that may be imposed upon the redemption of the Class B shares
received on exchange, amounts exchanged retain their original cost and purchase
date.
CLASS C SHARES. Class C shares of a Fund and Class C shares of any other Kemper
Mutual Fund listed under "Special Features -- Class A Shares -- Combined
Purchases" may be exchanged for each other at their relative net asset values.
Class C shares may be exchanged without a contingent deferred sales charge being
imposed at the time of exchange. For determining whether there is a contingent
deferred sales charge that may be imposed upon the redemption of the Class C
shares received by exchange, the cost and purchase date of the shares that were
originally purchased and exchanged are retained.
GENERAL. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged thereafter until
they have been owned for 15 days (the "15 Day Hold Policy"). Effective June 1,
1999, each fund reserves the right to invoke the 15-Day Hold Policy for accounts
of $1,000,000 or less if, in the investment manager's judgement, the exchange
activity may have an adverse effect on the fund. In particular, a pattern of
exchanges that coincides with a "market timing" strategy may be disruptive to
the fund and therefore may be subject to the 15 Day Hold Policy.
For purposes of determining whether the 15 Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, direction or advice, including without limitation, accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. The total value of shares being exchanged must
at least equal the minimum investment requirement of the Kemper Fund into which
they are being exchanged. Exchanges are made based on relative dollar values of
the shares involved in the exchange. There is no service fee for an exchange;
however, dealers or other firms may charge for their services in effecting
exchange transactions. Exchanges will be effected by redemption of shares of the
fund held and purchase of shares of the other fund. For federal income tax
purposes, any such exchange constitutes a sale upon which a gain or loss may be
realized, depending upon whether the value of the shares being exchanged is more
or less than the shareholder's adjusted cost basis of such shares. Shareholders
interested in exercising the exchange privilege may obtain prospectuses of the
other funds from dealers, other firms or KDI. Exchanges may be accomplished by a
written request to KSvC, Attention: Exchange Department, P.O. Box 419557, Kansas
City, Missouri 64141-6557, or by telephone if the shareholder has given
authorization. Once the authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-621-1048, subject to the limitations
on liability under "Redemption or Repurchase of Shares -- General." Any share
certificates must be deposited prior to any exchange of such shares. During
periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to implement the telephone exchange privilege.
The exchange privilege is not a right and may be suspended, terminated or
modified at any time. Exchanges may only be made for Kemper Funds that are
eligible for sale in the shareholder's state of
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residence. Currently Tax-Exempt California Money Market Fund is available for
sale only in California and the portfolios of Investors Municipal Cash Fund are
available for sale only in certain states.
SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of any class of the
shares of a Kemper Mutual Fund or Money Market Fund may authorize the automatic
exchange of a specified amount ($100 minimum) of such shares for shares of the
same class of another such Kemper Fund. If selected, exchanges will be made
automatically until the privilege is terminated by the shareholder or the other
Kemper Fund. Exchanges are subject to the terms and conditions described above
under "Exchange Privilege," except that the $1,000 minimum investment
requirement for the Kemper Fund acquired on exchange is not applicable. This
privilege may not be used for the exchange of shares held in certificated form.
EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $5,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from ANY PERSON to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares -- General." Once enrolled
in EXPRESS-Transfer, a shareholder can initiate a transaction by calling Kemper
Shareholder Services toll free at 1-800-621-1048 Monday through Friday, 8:00
a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege by
sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").
BANK DIRECT DEPOSIT. A shareholder may purchase additional Fund shares through
an automatic investment program. With the Bank Direct Deposit Purchase Plan,
investments are made automatically (minimum $50, maximum $50,000) from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account. By enrolling in Bank Direct Deposit, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
Clearing House debits against the designated account at a bank or other
financial institution. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting the Shareholder
Service Agent for appropriate forms. A shareholder may terminate his or her Plan
by sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination by a shareholder will become effective within thirty
days after the Shareholder Service Agent has received the request. A Fund may
immediately terminate a shareholder's Plan in the event that any item is unpaid
by the shareholder's financial institution. A Fund may terminate or modify this
privilege at any time.
PAYROLL DIRECT DEPOSIT AND GOVERNMENT DIRECT DEPOSIT. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) A Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount up to $50,000 to be paid to the owner or
a designated payee monthly, quarterly, semiannually or annually. The $5,000
minimum account size is not applicable to Individual Retirement Accounts. The
minimum periodic payment is $100. The maximum annual rate at which Class B
shares may be redeemed (and Class A shares purchased under the Large Order NAV
Purchase Privilege and Class C shares in their first year following the
purchase) under a systematic withdrawal plan is 10% of the net asset value of
the account. Shares are redeemed so that the payee will receive payment
approximately the first of the
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<PAGE>
month. Any income and capital gain dividends will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested and fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan ordinarily will be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may already have been
paid. Therefore, the Funds will not knowingly permit additional investments of
less than $2,000 if the investor is at the same time making systematic
withdrawals. KDI will waive the contingent deferred sales charge on redemption
of Class A shares purchased under the Large Order NAV Purchase Privilege, Class
B shares and Class C shares made pursuant to a systematic withdrawal plan. The
right is reserved to amend the systematic withdrawal plan on 30 days' notice.
The plan may be terminated at any time by the investor or the Funds.
TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
o Traditional, Roth and Education Individual Retirement Accounts ("IRAs")
with IFTC as custodian. This includes Savings Incentive Match Plan for
Employees of Small Employers ("SIMPLE") IRA accounts and Simplified
Employee Pension Plan ("SEP") IRA accounts and prototype documents.
o 403(b)(7) Custodial Accounts also with IFTC as custodian. This type of plan
is available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and materials
for establishing them are available from the Shareholder Service Agent upon
request. The brochures for plans with IFTC as custodian describe the current
fees payable to IFTC for its services as custodian. Investors should consult
with their own tax advisers before establishing a retirement plan.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by the Fund at the applicable net asset value
per share of such Fund as described in the Funds' prospectus.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B or Class C shares by certain classes of persons or
through certain types of transactions as described herein are provided because
of anticipated economies in sales and sales-related efforts.
A Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange ("Exchange") is closed
other than customary weekend and holiday closings or during any period in which
trading on the Exchange is restricted, (b) during any period when an emergency
exists as a result of which (i) disposal of a Fund's investments is not
reasonably practicable, or (ii) it is not reasonably practicable for the Fund to
determine the value of its net assets, or (c) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of a
Fund's shareholders.
Although it is each of the Asian and Global Funds' present policy to redeem in
cash, if the Board of Trustees determines that a material adverse effect would
be experienced by the remaining shareholders if payment were made wholly in
cash, the Fund will satisfy the redemption request in whole or in part by a
distribution of portfolio securities in lieu of cash, in conformity with the
applicable rules of the Securities and Exchange Commission, taking such
securities at the same value used to determine net asset value, and selecting
the securities in such manner as the Board of Trustees may deem fair and
equitable. If such a distribution occurred, shareholders receiving securities
and selling them could receive less than the redemption value of such securities
and in addition would incur certain transaction costs. Such a redemption would
not be so liquid as a redemption entirely in cash. Each of the Asian and
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<PAGE>
Global Funds has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which the Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder of record.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described herein.
OFFICERS AND TRUSTEES
The officers and trustees of each Fund, their birth dates, their principal
occupations and their affiliations, if any, with Scudder Kemper, the investment
manager, Scudder UK, the sub-adviser of the Funds, and KDI, principal
underwriter, are listed below. All persons named as trustees also serve in
similar capacities for other funds advised by Scudder Kemper.
TRUSTEES--
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
LINDA C. COUGHLIN (1/1/52), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Blvd., Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); prior thereto,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Scudder Kemper; formerly, Head
of Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.
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<PAGE>
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI International (research and
development); prior thereto, President and Chief Executive Officer, SRI
International; prior thereto, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) ; Director, PSI Inc., Evergreen Solar, Inc., and Litton Industries.
OFFICERS -- ALL FUNDS
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, Scudder Kemper.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Scudder Kemper.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper.
Additional Officers for Global Fund only:
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
Jan C. Faller (8/18/66), Vice President*, Two International Place, Boston,
Massachusetts; Vice President, Scudder Kemper.
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<PAGE>
Additional Officers for Asian Fund only:
THERESA GUSMAN (2/29/60), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Scudder Kemper.
TIEN YU SIEH (9/26/69), Senior Vice President*, 345 Park Avenue, New York, New
York, Senior Vice President, Scudder Kemper.
WILLIAM T. TRUSCOTT (9/14/60), Vice President*, 345 Park Avenue, New York, New
York, Managing Director, Scudder Kemper.
Additional Officers for International Fund only:
IRENE CHENG (6/6/54),Vice President*, 345 Park Avenue, New York, New
York;Managing Director, Scudder Kemper.
WILLIAM T. TRUSCOTT (9/14/60), Vice President*, 345 Park Avenue, New York, New
York, Managing Director, Scudder Kemper. * Interested persons of the Fund as
defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The tables below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during
each Fund's 1999 fiscal year except that the information in the last column is
for calendar year 1999.
Trustees -- Asian, Global and International Funds
<TABLE>
<CAPTION>
Aggregate Compensation From Funds Total Compensation
From Funds and Kemper
Fund Complex
Name of Trustee Asian Global International Paid To Trustees**
- --------------- ----- ------ ------------- ------------------
<S> <C> <C> <C> <C>
John W. Ballantine $500 $1,900 $57,200
Lewis A. Burnham............. $1,000 $1,800 $3,900 $89,300
Donald L. Dunaway*........... $1,400 $2,100 $4,200 $97,000
Robert B. Hoffman............ $900 $1,600 $3,500 $87,800
Donald R. Jones.............. $1,100 $1,700 $3,700 $87,800
Shirley D. Peterson.......... $900 $1,600 $3,500 $82,800
William P. Sommers........... $900 $1,600 $3,500 $82,800
</TABLE>
- ---------------------
* Pursuant to deferred compensation agreements with certain Kemperfunds,
deferred amounts accrue interest monthly at a rate equal to the yield of
Zurich Money Funds -- Zurich Money Market Fund. Total deferred fees
(including interest thereon) payable from Asian, Global and International
Funds, respectively are $0$$14,400 and $17,000$ for Mr. Dunaway.
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<PAGE>
** Includes compensation for service on the boards of 26 Kemper funds with 48
fund portfolios. Each trustee currently serves as a trustee of 26 Kemper
Funds with 45 fund portfolios.
As of January 29, 2000, the trustees and officers as a group owned less than 1%
of the then outstanding shares of each Fund and no person owned of record more
than 5% of the outstanding shares of any class of either Fund, except as shown
below:
<TABLE>
<CAPTION>
Kemper Global Income Fund
- -------------------------------------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National Financial Services Corp. A 6.53
FBO Irene Simpson
200 Liberty Street
New York, NY 10281
- -------------------------------------------------------------------------------------------------------------
First Union Securities A 8.98
Commission Accounting
77 W. Wacker Drive
Chicago, IL 60601
- -------------------------------------------------------------------------------------------------------------
National Financial Services Corp. B 5.55
Mutual Funds Dividend Redemption
Account
200 Liberty Street
New York, NY 10281
- -------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette B 6.83
Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303
- -------------------------------------------------------------------------------------------------------------
First Union Securities B 20.11
Commission Accounting
77 W. Wacker Drive
Chicago, IL 60601
- -------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette C 31.48
Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303
- -------------------------------------------------------------------------------------------------------------
Raymond James & Associates C 20.83
P.O. Box 12749
St. Petersburg, FL 33733
- -------------------------------------------------------------------------------------------------------------
Kemper Asian Growth Fund
- -------------------------------------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
- -------------------------------------------------------------------------------------------------------------
National Financial Services Corp. B 6.30
FBO Irene Simpson
200 Liberty Street
New York, NY 10281
- -------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette B 6.41
Securities Corp.
- -------------------------------------------------------------------------------------------------------------
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<PAGE>
- -------------------------------------------------------------------------------------------------------------
P.O. Box 2052
Jersey City, NJ 07303
- -------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette C 5.88
Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303
- -------------------------------------------------------------------------------------------------------------
Yu Chen Tod C 6.57
3456 Clearview Avenue
Columbus, Ohio 43220
- -------------------------------------------------------------------------------------------------------------
Prudential Securities Inc. C 12.46
FBO Michael Moscone
Michael Moscone, Trustee
Revocable Trust
- -------------------------------------------------------------------------------------------------------------
Kemper International Fund
- -------------------------------------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
- -------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette B 5.73
Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303
- -------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette C 7.19
Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303
- -------------------------------------------------------------------------------------------------------------
Merrill, Lynch, Pierce, Fenner & C 5.19
Smith
For the sole benefit of customers
4800 Deer Lake Drive East
Jacksonville, FL 32246
- -------------------------------------------------------------------------------------------------------------
Banc One Securities Corp. C 5.76
FBO The One Select Portfolio
733 Greencrest Drive
Westerville, Ohio 43081
- -------------------------------------------------------------------------------------------------------------
Scudder Kemper Investments I 11.79
Money Purchase Plan
345 Park Avenue
New York, NY 10154
- -------------------------------------------------------------------------------------------------------------
Scudder Kemper Investments I 65.88
Profit Sharing Plan
345 Park Avenue
New York, NY 10154
- -------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
SHAREHOLDER RIGHTS
The Funds are open-end management investment companies, organized as separate
business trusts under the laws of Massachusetts. The Asian Fund was organized as
a business trust under the laws of Massachusetts on June 12, 1995. The Global
Fund was organized as a business trust under the laws of Massachusetts on August
3, 1988. The International Fund was organized as a business trust under the laws
of Massachusetts on October 24, 1985 and, effective January 31, 1986, that Fund
pursuant to a reorganization succeeded to the assets and liabilities of Kemper
International Fund, Inc., a Maryland corporation organized in 1980.
The Asian Fund and the Global Fund each may in the future seek to achieve its
investment objective by pooling its assets with assets of other mutual funds for
investment in another investment company having the same investment objective
and substantially the same investment policies and restrictions as such Fund.
The purpose of such an arrangement is to achieve greater operational
efficiencies and to reduce costs. It is expected that any such investment
company will be managed by Scudder Kemper in substantially the same manner as
the corresponding Fund. Shareholders of a Fund will be given at least 30 days'
prior notice of any such investment, although they will not be entitled to vote
on the action. Such investment would be made only if the Trustees determine it
to be in the best interests of the respective Fund and its shareholders.
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<PAGE>
Each Fund may issue an unlimited number of shares of beneficial interest in one
or more series or "Portfolios," all having no par value, which may be divided by
the Board of Trustees into classes of shares. While only shares of a single
Portfolio are presently being offered by each Fund, the Board of Trustees of
each Fund may authorize the issuance of additional classes and additional
Portfolios if deemed desirable, each with its own investment objective, policies
and restrictions. Since the Funds may offer multiple Portfolios, each is known
as a "series company." Currently, each Fund offers four classes of shares of a
single Portfolio. These are Class A, Class B and Class C shares, as well as
Class I shares, which have different expenses, which may affect performance, and
that are available for purchase exclusively by the following investors: (a)
tax-exempt retirement plans of Scudder Kemper and its affiliates; and (b) the
following investment advisory clients of Scudder Kemper and its investment
advisory affiliates that invest at least $1 million in a Fund: (1) unaffiliated
benefit plans (other than individual retirement accounts and self-directed
retirement plans); (2) unaffiliated banks and insurance companies purchasing for
their own accounts; and (3) endowment funds of unaffiliated non-profit
organizations. Shares of a Fund have equal noncumulative voting rights except
that Class B and Class C shares have separate and exclusive voting rights with
respect to each Fund's Rule 12b-1 Plan. Shares of each class also have equal
rights with respect to dividends, assets and liquidation of such Fund subject to
any preferences (such as resulting from different Rule 12b-1 distribution fees),
rights or privileges of any classes of shares of a Fund. Shares are fully paid
and nonassessable when issued, are transferable without restriction and have no
preemptive or conversion rights. The Funds are not required to hold annual
shareholder meetings and do not intend to do so. However, they will hold special
meetings as required or deemed desirable for such purposes as electing trustees,
changing fundamental policies or approving an investment management agreement.
Subject to the Agreement and Declaration of Trust of each Fund, shareholders may
remove trustees. If shares of more than one Portfolio are outstanding,
shareholders will vote by Portfolio and not in the aggregate or by class except
when voting in the aggregate is required under the Investment Company Act of
1940, such as for the election of trustees, or when voting by class is
appropriate.
The Funds generally are not required to hold meetings of their shareholders.
Under the Agreement and Declaration of Trust of each Fund ("Declaration of
Trust"), however, shareholder meetings will be held in connection with the
following matters: (a) the election or removal of trustees if a meeting is
called for such purpose; (b) the adoption of any contract for which approval by
shareholders is required by the Investment Company Act of 1940 ("1940 Act"); (c)
any termination of the Fund or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund, supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision thereof); and (e) such additional matters as may be required by law,
the Declaration of Trust, the By-laws of the Fund, or any registration of the
Fund with the Securities and Exchange Commission or any state, or as the
trustees may consider necessary or desirable. The shareholders also would vote
upon changes in fundamental investment policies.
Each Fund's activities are supervised by the Fund's Board of Trustees.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) each Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of a Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, each
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
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<PAGE>
Each Fund's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of a Fund
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
independent auditors. Some matters requiring a larger vote under the Declaration
of Trust, such as termination or reorganization of a Fund and certain amendments
of the Declaration of Trust, would not be affected by this provision; nor would
matters which under the 1940 Act require the vote of a "majority of the
outstanding voting securities" as defined in the 1940 Act.
Each Fund's Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Fund or any Portfolio or class by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of each Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of a Fund and each Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.
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<PAGE>
APPENDIX--RATINGS OF INVESTMENTS
Standard & Poor's Corporation Bond Ratings
AAA. Debt rated AAA had the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC and C. Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Moody's Investors Service, Inc., Bond Ratings
AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
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<PAGE>
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
IBCA Limited Bond Ratings
AAA. Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly.
AA. Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions may increase investment
risk albeit not very significantly.
A. Obligations for which there is a low expectation of investment risk. Capacity
for timely repayment of principal and interest is strong, although adverse
changes in business, economic or financial conditions may lead to increased
investment risk.
BBB. Obligations for which there is currently a low expectation of investment
risk. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.
75
<PAGE>
Supplement to Statement of Additional
-------------------------------------
Information
-----------
Dated March 1, 2000
-------------------
KEMPER ASIAN GROWTH FUND
------------------------
KEMPER GLOBAL INCOME FUND
-------------------------
KEMPER INTERNATIONAL FUND
-------------------------
The following text supplements the section entitled "Purchase of Shares" in the
- -------------------------------------------------------------------------------
currently effective Statement of Additional Information:
- --------------------------------------------------------
From January 1, 2000 to April 30, 2000 ("Special Offering Period"), KDI, the
principal underwriter, intends to reallow to certain firms the full applicable
sales charge with respect to Class A shares purchased for self-directed
Individual Retirement Accounts ("IRA accounts") during the Special Offering
Period (not including Class A shares acquired at net asset value). IRA accounts
include Traditional, Roth and Education IRAs, Savings Incentive Match Plan for
Employees of Small Employers ("SIMPLE") IRA accounts and Simplified Employee
Pension Plan ("SEP") IRA accounts. Firms entitled to the full reallowance during
the Special Offering Period are those firms which allowKDI to participate in a
special promotion of self-directed IRA accounts, with other fund complexes,
sponsored by the firms during the Special Offering Period.
76
<PAGE>
KEMPER ASIAN GROWTH FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
-------- ---------
<S> <C>
(a)(1) Agreement and Declaration of Trust of Registrant.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on July 29, 1996.)
(a)(2) Written Instrument Amending the Agreement and Declaration of Trust.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on July 29, 1996.)
(b) By-laws.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on September 19, 1996.)
(c)(1) Written Instrument Establishing and Designating Separate Classes of Shares.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on September 19, 1996.)
(c)(2) Text of Share Certificate.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on July 29, 1996.)
(d)(1) Investment Management Agreement between the Registrant and Scudder Kemper
Investments, Inc., dated December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A which was filed on February
26, 1998.)
(d)(2) Investment Management Agreement between the Registrant and Scudder Kemper
Investments, Inc., dated September 7, 1998.
(Incorporated by reference to Registrant's Post-Effective Amendment No. 2
filed on December 30, 1998.)
(e)(1) Underwriting and Distribution Services Agreement.
(Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A which was filed on February
26, 1998.)
(e)(2) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc., dated August 1, 1998.
(Incorporated by reference to Registrant's Post-Effective Amendment No. 2
filed on December 30, 1998.)
(e)(3) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc., dated September 7, 1998.
(Incorporated by reference to Registrant's Post-Effective Amendment No. 2
filed on December 30, 1998.)
(e)(4) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc., dated October 1, 1999.
Filed herein.
1
<PAGE>
(e)(5) Form of Selling Group Agreement.
(Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A which was filed on March
25, 1997.)
(f) Inapplicable.
(g)(1) Custody Agreement.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on September 19, 1996.)
(g)(2) Foreign Custody Agreement.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on September 19, 1996.)
(g)(3) Custody Agreement between the Registrant and The Chase Manhattan Bank dated
November 17, 1999.
Filed herein.
(h)(1) Agency Agreement.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on September 19, 1996.)
(h)(2) Administrative Services Agreement.
(Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A which was filed on February
26, 1998.)
(h)(3) Amended Fee Schedule for Administrative Services Agreement dated January 1,
2000.
Filed herein.
(h)(4) Supplement to Agency Agreement.
(Incorporated by reference to Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-1A which was filed on February
26, 1999.)
(h)(5) Fund Accounting Agreement dated December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A which was filed on February
26, 1998.)
(i) Opinion of Counsel.
Filed herein.
(j) Consent and Report of Independent Auditors.
Filed herein.
(k) Inapplicable.
(l) Inapplicable.
(m)(1) Rule 12b-1 Plan between Kemper Asian Growth Fund (Class B shares) and Kemper
Distributors, Inc., dated August 1, 1998.
(Incorporated by reference to Registrant's Post-Effective Amendment No. 2
2
<PAGE>
filed on December 30, 1998.)
(m)(2) Rule 12b-1 Plan between Kemper Asian Growth Fund (Class C shares) and Kemper
Distributors, Inc., dated August 1, 1998.
(Incorporated by reference to Registrant's Post-Effective Amendment No. 2
filed on December 30, 1998.)
(n) Multi-Distribution System Plan.
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on September 19, 1996.)
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
Item 25. 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.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Item 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
3
<PAGE>
<S> <C>
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc. **
Chairman of the Board, Scudder, Stevens & Clark (Luxembourg) S.A. #
Director, Scudder Investments (UK) Ltd. Ooo
Chairman of the Board, Scudder Investments Asia, Ltd. @
Chairman of the Board, Scudder Investments Japan, Inc. &
Senior Vice President, Scudder Investor Services, Inc. **
Director, Scudder Trust (Cayman) Ltd. Xxx
Director, Scudder, Stevens & Clark Australia @@
Director, Korea Bond Fund Management Co., Ltd. +
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc.##
Chairman, Zurich-American Insurance Company o
Nick Bratt Director and Vice President, Scudder Kemper Investments, Inc. **
Vice President, Scudder MAXXUM Company ***
Vice President, Scudder, Stevens & Clark Corporation**
Vice President, Scudder, Stevens & Clark Overseas Corporation oo
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc.##
CEO/Branch Offices, Zurich Life Insurance Company##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
Director, Scudder Investments (UK) Ltd. Ooo
Director, Scudder Investments Japan, Inc. &
Director, Scudder Kemper Holdings (UK) Ltd. Ooo
President and Director, Zurich Investment Management, Inc. Xx
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
O Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman,
British West Indies
4
<PAGE>
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
Ooo 1 South Place 5th Floor, London EC2M 2ZS England
@ One Exchange Square 29th Floor, Hong Kong
& Kamiyachyo Mori Building, 12F1, 4-3-20, Toranomon, Minato-ku,
Tokyo 105-0001
@@ Level 3, 5 Blue Street North Sydney, NSW 2060
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other
funds managed by Scudder Kemper Investments, Inc..
(b)
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 27.
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
<S> <C> <C>
Lynn S. Birdsong Senior Vice President
345 Park Avenue
New York, NY 10154
Mark S. Casady Director, President and Assistant President
Two International Place Treasurer
Boston, MA 02110
Linda Coughlin Director and Senior Vice President Trustee
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President
345 Park Avenue
New York, NY 10154
Paul J. Elmlinger Senior Vice President and Assistant
345 Park Avenue Clerk
New York, NY 01054
Philip S. Fortuna Vice President
101 California Street
San Francisco, CA 94111
William F. Galvin Vice President
Two International Place
Boston, MA 02110
Margaret D. Hadzima Assistant Treasurer
Two International Place
Boston, MA 02110
5
<PAGE>
Name and Principal Positions and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
John R. Hebble Assistant Treasurer Treasurer
Two International Place
Boston, MA 02110
James J. McGovern Chief Financial Officer and Treasurer
345 Park Avenue
New York, NY 10154
Lorie C. O'Malley Vice President
Two International Place
Boston, MA 02110
Caroline Pearson Clerk Assistant Secretary
Two International Place
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President, Chief
345 Park Avenue Legal Officer and Assistant Clerk
New York, NY 10154
Robert Rudell Director and Vice President
Two International Place
Boston, MA 02110
William M. Thomas Vice President
Two International Place
Boston, MA 02110
Benjamin Thorndike Vice President
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President and Chief Compliance Vice President
Two International Place Officer
Boston, MA 02110
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of the Registrant's investment adviser, Scudder
Kemper Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at
the offices of the Registrant's principal underwriter, Kemper Distributors,
Inc., 222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of
records concerning custodial functions, at the offices of the transfer agent,
Investors Fiduciary Trust Company, 801 Pennsylvania Avenue, 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 29. Management Services.
- -------- --------------------
Inapplicable.
6
<PAGE>
Item 30. Undertakings.
- -------- -------------
Inapplicable.
7
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 25th day
of February, 2000.
KEMPER ASIAN GROWTH FUND
By /s/Mark S. Casady
---------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on February 25, 2000 on behalf of
the following persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/John W. Ballantine
----------------------------------------
John W Ballantine* Trustee
/s/Lewis A. Burnham
----------------------------------------
Lewis A. Burnham* Trustee
/s/Linda C. Coughlin
----------------------------------------
Linda C. Coughlin** Trustee
/s/Donald L. Dunaway
----------------------------------------
Donald L. Dunaway* Trustee
/s/Robert B. Hoffman
----------------------------------------
Robert B. Hoffman* Trustee
/s/Donald R. Jones
----------------------------------------
Donald R. Jones* Trustee
/s/Thomas W. Littauer
----------------------------------------
Thomas W. Littauer* Trustee
/s/ Shirley D. Peterson
----------------------------------------
Shirley D. Peterson* Trustee
/s/ William P. Sommers
----------------------------------------
William P. Sommers* Trustee
<PAGE>
SIGNATURE TITLE
--------- -----
/s/John R. Hebble
----------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
By: /s/Philip J. Collora
------------------------
Philip J. Collora
* Philip J. Collora signs this document pursuant to powers of attorney filed
with Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form N-1A filed on February 26, 1998, and Post-Effective
Amendment No. 5, filed December 21, 1999.
** Philip J. Collora signs this document pursuant to powers of attorney
contained herewith.
2
<PAGE>
LIMITED POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Caroline Pearson, Maureen E. Kane, and Philip J. Collora and any of
them, her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for her and in her name, place and stead, in
any and all capacities to sign the Registration Statement of Kemper Asian Growth
Fund, a Massachusetts business trust, on Form N-1A under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and any or
all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as all intents and purposes as he
might or could do in person, hereby ratifying and confirming all said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
DATED: 2/21, 2000
----
/s/Linda C. Coughlin
------------------------
Linda C. Coughlin
Trustee
<PAGE>
File No. 333-9069
File No. 811-7731
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 6
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 7
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
KEMPER ASIAN GROWTH FUND
<PAGE>
KEMPER ASIAN GROWTH FUND
EXHIBIT INDEX
Exhibit (e)(4)
Exhibit (g)(3)
Exhibit (h)(3)
Exhibit (i)
Exhibit (j)
Exhibit (e)(4)
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 1st day of October, 1999, between KEMPER ASIAN GROWTH FUND,
a Massachusetts business trust (the "Fund"), and KEMPER DISTRIBUTORS, INC., a
Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as principal underwriter of shares of
beneficial interest (hereinafter called "shares") of the Fund in jurisdictions
wherein shares of the Fund may legally be offered for sale; provided, however,
that the Fund in its absolute discretion may (a) issue or sell shares directly
to holders of shares of the Fund upon such terms and conditions and for such
consideration, if any, as it may determine, whether in connection with the
distribution of subscription or purchase rights, the payment or reinvestment of
dividends or distributions, or otherwise; (b) issue or sell shares at net asset
value to the shareholders of any other investment company, for which KDI shall
act as exclusive distributor, who wish to exchange all or a portion of their
investment in shares of such other investment company for shares of the Fund; or
(c) issue shares in connection with the merger or consolidation of any other
investment company with the Fund or the Fund's acquisition, by purchase or
otherwise, of all or substantially all of the assets of any other investment
company or all or substantially all of the outstanding shares of any such
company. KDI shall appoint various financial service firms ("Firms") to provide
distribution services to investors. The Firms shall provide such office space
and equipment, telephone facilities, personnel, literature distribution,
advertising and promotion as is necessary or beneficial for providing
information and distribution services to existing and potential clients of the
Firms. KDI may also provide some of the above services for the Fund.
KDI accepts such appointment as principal underwriter and agrees to render such
services and to assume the obligations herein set forth for the compensation
herein provided. KDI shall for all purposes herein provided be deemed to be an
independent contractor and, unless expressly provided herein or otherwise
authorized, shall have no authority to act for or represent the Fund in any way.
KDI, by separate agreement with the Fund, may also serve the Fund in other
capacities. The services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar services or other
services to others so long as its services hereunder are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will, pursuant to
separate written contracts, appoint various Firms to provide advertising,
promotion and other distribution services contemplated hereunder directly to or
for the benefit of existing and potential shareholders who may be clients of
such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell such part of
the authorized shares of the Fund remaining unissued as from time to time shall
be effectively registered under the Securities Act of 1933 ("Securities Act"),
at prices determined as hereinafter provided and on
<PAGE>
terms hereinafter set forth, all subject to applicable federal and state laws
and regulations and to the Fund's organizational documents, provided, however,
that KDI may in its discretion refuse to accept orders for shares from any
particular applicant.
2. KDI shall sell shares of the Fund to or through qualified Firms in such
manner, not inconsistent with the provisions hereof and the Fund's currently
effective registration statement, including the prospectus and statement of
additional information and any supplements or amendments thereto ("Registration
Statement"), as KDI may determine from time to time, provided that no Firm or
other person shall be appointed or authorized to act as agent of the Fund
without prior consent of the Fund. In addition to sales made by it as agent of
the Fund, KDI may, in its discretion, also sell shares of the Fund as principal
to persons with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold by KDI
shall be so offered or sold at a price per share determined in accordance with
the Registration Statement. The price the Fund shall receive for all shares
purchased from it shall be the net asset value used in determining the public
offering price applicable to the sale of such shares. Any excess of the sales
price over the net asset value of the shares of the Fund sold by KDI as agent
shall be retained by KDI as a commission for its services hereunder. KDI may
compensate Firms for sales of shares at the commission levels provided in the
Registration Statement from time to time. KDI may pay other commissions, fees or
concessions to Firms, and may pay them to others in its discretion, in such
amounts as KDI shall determine from time to time. KDI shall be entitled to
receive and retain any applicable contingent deferred sales charge as described
in the Registration Statement. KDI shall also receive any distribution services
fee payable by the Fund as provided in the Fund's Rule 12b-1 Plan, as amended
from time to time (the "Plan").
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement with respect to the public offering price or net asset
value, as applicable, of the Fund's shares, and neither KDI nor any such Firms
shall withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered under the
Securities Act for sale as herein contemplated such shares as KDI shall
reasonably request and as the Securities and Exchange Commission shall permit to
be so registered. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
2
<PAGE>
5. KDI shall issue and deliver or shall arrange for various Firms to issue and
deliver on behalf of the Fund such confirmations of sales made by it pursuant to
this Agreement as may be required. At or prior to the time of issuance of
shares, KDI will pay or cause to be paid to the Fund the amount due the Fund for
the sale of such shares. Certificates shall be issued or shares registered on
the transfer books of the Fund in such names and denominations as KDI may
specify.
6. KDI shall order shares of the Fund from the Fund only to the extent that it
shall have received purchase orders therefor. KDI will not make, or authorize
Firms or others to make (a) any short sales of shares of the Fund; or (b) any
sales of such shares to any Board member or officer of the Fund or to any
officer or Board member of KDI or of any corporation or association furnishing
investment advisory, managerial or supervisory services to the Fund, or to any
corporation or association, unless such sales are made in accordance with the
Registration Statement relating to the sale of such shares. KDI, as agent of and
for the account of the Fund, may repurchase the shares of the Fund at such
prices and upon such terms and conditions as shall be specified in the
Registration Statement. In selling or reacquiring shares of the Fund for the
account of the Fund, KDI will in all respects conform to the requirements of all
state and federal laws and the Conduct Rules of the National Association of
Securities Dealers, Inc., relating to such sale or reacquisition, as the case
may be. KDI will observe and be bound by all the provisions of the Fund's
organizational documents (and of any fundamental policies adopted by the Fund
pursuant to the Investment Company Act of 1940 (the "Investment Company Act"),
notice of which shall have been given to KDI) which at the time in any way
require, limit, restrict, prohibit or otherwise regulate any action on the part
of KDI hereunder.
KDI agrees to indemnify and hold harmless the Fund and each of its Board members
and officers and each person, if any, who controls the Fund within the meaning
of Section 15 of the Securities Act, against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
the Fund or such Board members, officers, or controlling persons may become
subject under such Act, under any other statute, at common law or otherwise,
arising out of the acquisition of any shares by any person which (i) may be
based upon any wrongful act by KDI or any of KDI's employees or representatives,
or (ii) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading if such statement or
omission was made in reliance upon information furnished to the Fund by KDI, or
(iii) may be incurred or arise by reason of KDI's acting as the Fund's agent
instead of purchasing and reselling shares as principal in distributing the
shares to the public, provided, however, that in no case (i) is KDI's indemnity
in favor of a Board member or officer or any other person deemed to protect such
Board member or officer or other person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of his duties or by reason of his
reckless disregard of obligations and duties under this Agreement or (ii) is KDI
to be liable under the indemnity agreement contained in this paragraph with
respect to any claim made against the Fund or any person indemnified unless the
Fund or such person, as the case may be, shall have notified KDI in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon the Fund or
upon such
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person (or after the Fund or such person shall have received notice of such
service on any designated agent), but failure to notify KDI of any such claim
shall not relieve KDI from any liability which KDI may have to the Fund or any
person against whom such action is brought otherwise than on account of KDI's
indemnity agreement contained in this paragraph. KDI shall be entitled to
participate, at KDI's own expense, in the defense, or, if KDI so elects, to
assume the defense of any suit brought to enforce any such liability, but if KDI
elects to assume the defense, such defense shall be conducted by counsel chosen
by KDI and satisfactory to the Fund, to its officers and Board members, or to
any controlling person or persons, defendant or defendants in the suit. In the
event that KDI elects to assume the defense of any such suit and retain such
counsel, the Fund, such officers and Board members or controlling person or
persons, defendant or defendants in the suit shall bear the fees and expenses of
any additional counsel retained by them, but, in case KDI does not elect to
assume the defense of any such suit, KDI will reimburse the Fund, such officers
and Board members or controlling person or persons, defendant or defendants in
such suit for the reasonable fees and expenses of any counsel retained by them.
KDI agrees to notify the Fund promptly of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any shares. The
Fund shall not, without the prior written consent of KDI, effect any settlement
of any pending or threatened action, suit or proceeding in respect of which the
Fund is or could have been a party and indemnity has or could have been sought
hereunder by the Fund, unless such settlement includes an unconditional release
of KDI from all liability on claims that are the subject matter of such action,
suit or proceeding.
The Fund agrees to indemnify and hold harmless KDI and each of KDI's directors
and officers and each person, if any, who controls KDI within the meaning of
Section 15 of the Securities Act, against any and all losses, claims, damages,
liabilities or litigation (including legal and other expenses) to which KDI or
such directors, officers or controlling persons may become subject under such
Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any shares by any person which (i) may be based upon any wrongful
act by the Fund or any of its employees or representatives, or (ii) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was not made
in reliance upon information furnished to KDI by the Fund; provided, however,
that in no case (i) is the Fund's indemnity in favor of a director or officer or
any other person deemed to protect such director or officer or other person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of obligations and duties
under this Agreement or (ii) is the Fund to be liable under its indemnity
agreement contained in this paragraph with respect to any claims made against
KDI or any such director, officer or controlling person unless KDI or such
director, officer or controlling person, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon KDI or upon such director, officer or controlling person (or after
KDI or such director, officer or controlling person shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
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indemnity agreement contained in this paragraph. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to KDI, its directors, officers, or controlling person or
persons, defendant or defendants in the suit. In the event that the Fund elects
to assume the defense of any such suit and retain such counsel, KDI, its
directors, officers or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Fund does not elect to assume the defense of any such
suit, it will reimburse KDI or such directors, officers or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees to notify KDI promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any shares. KDI
shall not, without the prior written consent of the Fund, effect any settlement
of any pending or threatened action, suit or proceeding in respect of which
either KDI is or could have been a party and indemnity has or could have been
sought hereunder by KDI, unless such settlement includes an unconditional
release of the Fund from all liability on claims that are the subject matter of
such action, suit or proceeding.
7. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by KDI under this Agreement or
the Plan. The Fund will pay (or will enter into arrangements providing that
others will pay) all fees and expenses in connection with the registration of
the Fund and its shares under the United States securities laws and, effective
January 1, 2000, the registration and qualification of shares for sale in the
various jurisdictions in which the Fund shall determine it advisable to qualify
such shares for sale (including registering the Fund as a broker or dealer or
any officer of the Fund or other person as agent or salesman of the Fund in any
such jurisdictions) ("Blue Sky expenses"). Prior to January 1, 2000, KDI will
pay all such Blue Sky expenses. In addition, KDI will pay all expenses (other
than expenses which one or more Firms may bear pursuant to any agreement with
KDI) incident to the sale and distribution of the shares issued or sold
hereunder, including, without limiting the generality of the foregoing, all (a)
expenses of printing and distributing any prospectus and of preparing, printing
and distributing or disseminating any other literature, advertising and selling
aids in connection with the offering of the shares for sale (except that such
expenses need not include expenses incurred by the Fund in connection with the
preparation, typesetting, printing and distribution of any registration
statement or prospectus, report or other communication to shareholders in their
capacity as such), and (b) expenses of advertising in connection with such
offering.
No transfer taxes, if any, which may be payable in connection with the issue or
delivery or shares sold as herein contemplated or of the certificates for such
shares shall be borne by the Fund, and KDI will bear all such transfer taxes.
8. This Agreement shall become effective on the date hereof and shall continue
until September 30, 2000; and shall continue from year to year thereafter only
so long as such continuance is approved in the manner required by the Investment
Company Act.
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This Agreement shall automatically terminate in the event of its assignment and
may be terminated at any time without the payment of any penalty by the Fund or
by KDI on sixty (60) days' written notice to the other party. The indemnity
provisions contained herein shall remain operative and in full force and effect
regardless of any termination of this Agreement. The Fund may effect termination
with respect to any class of any series of the Fund by a vote of (i) a majority
of the Board members who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan, this
Agreement, or in any other agreement related to the Plan, or (ii) a majority of
the outstanding voting securities of such series or class. Without prejudice to
any other remedies of the Fund, the Fund may terminate this Agreement at any
time immediately upon KDI's failure to fulfill any of its obligations hereunder.
All material amendments to this Agreement must be approved by a vote of a
majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as set forth
in the Plan. Termination of this Agreement shall not affect the right of KDI to
receive payments on any unpaid balance of the compensation earned prior to such
termination, as set forth in the Plan.
Notwithstanding anything in this Agreement to the contrary, KDI shall be
contractually bound hereunder by the terms of any publicly announced waiver of
or cap on the compensation received for its distribution services under the Plan
or by the terms of any written document provided to the Board of the Fund
announcing a waiver or cap, as if such waiver or cap were fully set forth
herein.
9. KDI will not use or distribute, or authorize the use, distribution or
dissemination by Firms or others in connection with the sale of Fund shares any
statements other than those contained in the Registration Statement, except such
supplemental literature or advertising as shall be lawful under federal and
state securities laws and regulations. KDI will furnish the Fund with copies of
all such material.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust, and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability
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contained therein. This Agreement has been executed by and on behalf of the Fund
by its representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
officers or shareholders of the Fund individually but are binding upon only the
assets and property of the Fund. With respect to any claim by KDI for recovery
of any liability of the Fund arising hereunder allocated to a particular series
or class, whether in accordance with the express terms hereof or otherwise, KDI
shall have recourse solely against the assets of that series or class to satisfy
such claim and shall have no recourse against the assets of any other series or
class for such purpose.
13. This Agreement shall be construed in accordance with applicable federal law
and with the laws of The Commonwealth of Massachusetts.
14. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
KEMPER ASIAN GROWTH FUND ATTEST:
By: /s/Mark S. Casady /s/Maureen E. Kane
--------------------------- ---------------------------
Mark S. Casady Maureen E. Kane
President Assistant Secretary
KEMPER DISTRIBUTORS, INC. ATTEST:
By: /s/James L. Greenawalt /s/Philip J. Collora
--------------------------- ---------------------------
Title: Title: Assist. Sec.
7
Exhibit (g)(3)
[LOGO] CHASE
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective November 17, 1999, and is between THE CHASE
MANHATTAN BANK ("Bank") and KEMPER ASIAN GROWTH FUND, on behalf of each fund on
Schedule A hereto as the same may be amended from time to time (each a
"Customer").
1. Customer Accounts.
Bank, acting as "Securities Intermediary" (as defined in Section 15(g)
hereof) shall establish and maintain the following accounts ("Accounts"): (a) a
Custody Account (as defined in Section 15(b) hereof) in the name of Customer for
Financial Assets, which shall, except as modified by Section 15(d) hereof, mean
stocks, shares, bonds, debentures, notes, mortgages or other obligations for the
payment of money, bullion, coin and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase or subscribe for the
same or evidencing or representing any other rights or interests therein and
other similar property whether certificated or uncertificated as may be received
by Bank or its Subcustodian (as defined in Section 3 hereof) for the account of
Customer, including as an "Entitlement Holder" as defined in Section 15(c)
hereof); and
(b) an account in the name of Customer ("Deposit Account") for any and
all cash in any currency received by Bank or its Subcustodian for the account of
Customer, which cash shall not be subject to withdrawal by draft or check.
Customer warrants its authority to: 1) deposit the cash and Financial
Assets (collectively "Assets") received in the Accounts and 2) give Instructions
(as defined in Section 11 hereof) concerning the Accounts. Bank may deliver
Financial Assets of the same class in place of those deposited in the Custody
Account.
Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.
2. Maintenance of Financial Assets and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
Bank:
(a) Financial Assets shall be held in the country or other jurisdiction
in which the principal trading market for such Financial Assets is located,
where such Financial Assets are to be presented for payment or where such
Financial Assets are acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and Bank can comply with such
Instructions, Bank is authorized to maintain cash balances on deposit for
Customer with itself or one of its "Affiliates" at such reasonable rates of
interest as may from time to time be paid on such accounts, or in
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non-interest bearing accounts as Customer may direct, if acceptable to Bank. For
purposes hereof, the term "Affiliate" shall mean an entity controlling,
controlled by, or under common control with, Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. Subcustodians and Securities Depositories.
Bank may act hereunder through the subcustodians listed in Schedule B
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of Financial
Assets in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
B. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
With respect to Financial Assets in the Accounts which are maintained
by Bank in the custody of a securities depository in which Bank participates:
(a) Bank shall identify on its books such Financial Assets as being
held for the account of Bank for Customer.
(b) Any Financial Assets held in a securities depository for the
account of the Bank will be subject only to the instructions of Bank.
(c) Financial Assets deposited with a securities depository will be
maintained in an account holding only assets of customers of Bank, unless
precluded by applicable law, rule, regulation, depository rule or the like.
(d) Upon receipt of Instructions, Bank shall terminate the use of any
such securities depository on behalf of Customer as promptly as practicable and
shall take all actions reasonably practicable to safeguard Financial Assets of
Customer that had been maintained with such securities depository; it being
acknowledged by Customer that removal of Financial Assets from a securities
depository may result in Customer having to liquidate such Financial Assets and
may expose Customer to market risk.
4. Use of Subcustodian.
(a) Bank shall identify the Assets on its books as belonging to
Customer.
(b) A Subcustodian shall hold such Assets together with assets
belonging to other customers of Bank in accounts identified on such
Subcustodian's books as custody accounts for the exclusive benefit of customers
of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Financial Assets held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian and unless not permitted by applicable
law, regulation, depository rule or the like, shall be held in an account at
such depository containing only assets held by Subcustodian as trustee,
custodian or the like for its customers.
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(d) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets shall provide either that: (A)(1) such assets shall not
be subject to any right, charge, security interest, lien or claim of any kind in
favor of such Subcustodian or its creditors except a claim of payment for their
safe custody or administration or, in the case of cash deposits, except for
liens or rights in favor of creditors of the Subcustodian arising under
bankruptcy, insolvency or similar laws, (2) the beneficial ownership of such
assets shall be freely transferable without the payment of money or value other
than for safe custody or administration, (3) adequate records will be maintained
identifying the assets as belonging to Customer, (4) subject to applicable law
and regulation, Customer's independent public accountants will be given access
those records or confirmations of the contents of these records, and (5) that
the Customer shall be adequately indemnified or its assets adequately insured in
the event of loss or (B) such other provisions as Chase may determine will
provide, in their entirety, the same or greater level of care and protection for
Assets as the provisions specified in (A) in their entirety. Where Securities
are deposited by a Subcustodian with a securities depository, Bank shall cause
the Subcustodian to identify on its books as belonging to Bank, as agent, the
Securities shown on the Subcustodian's account on the books of such securities
depository. The foregoing shall not apply to the extent of any special agreement
or arrangement made by Customer with any particular Subcustodian.
5. Deposit Account Transactions.
(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, Bank, in its discretion, may
advance Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by Bank on similar
loans.
(c) If Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. Custody Account Transactions.
(a) Financial Assets shall be transferred, exchanged or delivered by
Bank or its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Financial Assets
received for, and delivery of Financial Assets out of, the Custody Account may
be made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Financial Assets to a purchaser, dealer or their agents against a receipt with
the expectation of receiving later payment and free delivery. Delivery of
Financial Assets out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Financial Assets with respect to any
sale, exchange or purchase of Financial Assets. Otherwise, such transactions
shall be credited or debited to the Accounts on the date cash or Financial
Assets are actually received by Bank and reconciled to the Account.
(i) Bank may reverse credits or debits made to the Accounts in
its discretion if the related transaction fails to settle within a
reasonable period, determined by Bank in its discretion, after the
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<PAGE>
contractual settlement date for the related transaction and Bank shall
advise Customer of any such reversal.
(ii) If any Financial Assets delivered pursuant to this
Section 6 are returned by the recipient thereof, Bank may reverse the
credits and debits of the particular transaction at any time.
7. Actions of Bank.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(a) Present for payment any Financial Assets which are called, redeemed
or retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that Bank or
Subcustodian has received notice of such opportunities.
(b) Execute in the name of Customer such ownership and other
certificates as may be required to obtain payments in respect of Financial
Assets.
(c) Exchange interim receipts or temporary Financial Assets for
definitive Financial Assets.
(d) Appoint brokers and agents for any transaction involving the
Financial Assets, including, without limitation, Affiliates of Bank or any
Subcustodian.
(e) Issue statements to Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
(f) In the event of any loss of Financial Assets or cash, use
reasonable efforts to ascertain the circumstances relating to such loss and
promptly report the same to Customer.
Where depository procedures permit, Bank shall pay for Financial Assets
purchased for the account of customer only upon (i) receipt of advice from the
securities depository that such Financial Assets have been transferred to the
Account, and (ii) the making of an entry on the records of Bank to reflect such
payment and transfer for the account of Customer. Where depository procedures
permit, Bank shall transfer Financial Assets sold for the account of Customer
only upon (1) receipt of advice from the securities depository that payment of
such Financial Assets has been transferred to the Account, and (2) the making of
an entry on the records of Bank to reflect such transfer and payment for the
account of Customer. Bank shall furnish Customer confirmation of each such
transfer to or from the account of Customer (which confirmation can be in
electronic form) on the next business day.
All collections of funds or other property paid or distributed in
respect of Financial Assets in the Custody Account shall be made at the risk of
Customer, unless such failure to collect was occasioned by Bank's failure to
exercise reasonable care, in which case Bank shall be liable to Customer for
losses and damages in accordance with Section 12 hereof, including the
limitations on Bank's liability contained therein. Bank shall have no liability
for any loss occasioned by delay in the actual receipt of notice by Bank or by
its Subcustodians of any payment, redemption or other transaction regarding
Financial Assets in the Custody Account in respect of which Bank has agreed to
take any action hereunder.
8. Corporate Actions; Proxies; Tax Reclaims.
(a) Corporate Actions. Whenever Bank receives information concerning
the Financial Assets which requires discretionary action by the beneficial owner
of the Financial Assets (other than a proxy), such as subscription rights, bonus
issues, stock repurchase plans and rights offerings, or legal notices or other
material intended to be transmitted to securities holders ("Corporate Actions"),
Bank shall give Customer notice of such
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<PAGE>
Corporate Actions to the extent that Bank's central corporate actions department
has received notice of a Corporate Action in time to notify its customers; it
being understood that a failure by a Subcustodian to advise Bank's Corporate
Actions Department of a Corporate Action of which such Subcustodian knew, or in
the exercise of reasonable care, should have known, shall not excuse Bank from a
failure of its Corporate Actions Department to have such knowledge.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, Bank shall use reasonable efforts to
obtain Instructions from Customer or its Authorized Person (as defined in
Section 10 hereof), but if Instructions are not received in time for Bank to
take timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or take
any other action it deems, in good faith and without negligence, to be
appropriate in which case it shall be held harmless for any such action.
(b) Proxy Voting. Bank shall provide proxy voting services, if elected
by Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) Tax Reclaims.
(i) Subject to the provisions hereof, Bank shall apply for a reduction
of withholding tax and any refund of any tax paid or tax credits which
apply in each applicable market in respect of income payments on
Financial Assets for Customer's benefit which Bank believes may be
available to Customer.
(ii) The provision of tax reclaim services by Bank is conditional upon
Bank's receiving from Customer or, to the extent the Financial Assets
are beneficially owned by others, from each beneficial owner, A) a
declaration of the beneficial owner's identity and place of residence
and (B) certain other documentation (pro forma copies of which are
available from Bank). Customer acknowledges that, if Bank does not
receive such declarations, documentation and information, Bank shall be
unable to provide tax reclaim services.
(iii) Bank shall not be liable to Customer or any third party for any
taxes, fines or penalties payable by Bank or Customer, and shall be
indemnified accordingly, whether these result from the inaccurate
completion of documents by Customer or any third party, or as a result
of the provision to Bank or any third party of inaccurate or misleading
information or the withholding of material information by Customer or
any other third party, or as a result of any delay of any revenue
authority or any other matter beyond Bank's control.
(iv) Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to
Customer from time to time and Bank may, by notification in writing, at
Bank's absolute discretion, supplement or amend the markets in which
tax reclaim services are offered. Other than as expressly provided in
this sub-clause, Bank shall have no responsibility with regard to
Customer's tax position or status in any jurisdiction.
(v) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body
in relation to Customer or the securities and/or cash held for
Customer, provided, however, that as soon as is practicable upon
receipt of such request which is other than a routine request and prior
to fulfilling the request where practical and permissible, Bank shall
notify customer of the identify of the revenue authority or
governmental body making the request and the information to be
provided..
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(vi) Tax reclaim services may be provided by Bank or, in whole or in
part, by one or more third parties appointed by Bank (which may be
Bank's affiliates); provided that Bank shall be liable for the
performance of any such third party to the same extent as Bank would
have been if Bank had performed such services.
(d) Tax Obligations and Indemnification.
------------------------------------
(i) Customer confirms that Bank is authorized to deduct from any cash
received or credited to the Deposit Account any taxes or levies
required by any revenue or governmental authority for whatever reason
in respect of the Custody Account.
(ii) If Bank does not receive appropriate declarations, documentation
and information that additional United Kingdom taxation shall be
deducted from all income received in respect of the Financial Assets
issued outside the United Kingdom and any applicable United States
withholding tax shall be deducted from income received from the
Financial Assets. Bank shall furnish to Customer relevant documentation
and Customer shall return to Bank such documentation and information as
Bank may require in connection with taxation, and warrants that, when
given, this information shall be true and correct in every respect, not
misleading in any way, and contain all material information. Customer
undertakes to notify Bank immediately if any such information requires
updating or amendment.
(iii) Customer shall be responsible for the payment of all taxes
relating to the Financial Assets in the Custody Account, and Customer
agrees to pay, indemnify and hold Bank harmless from and against any
and all liabilities, penalties, interest or additions to tax with
respect to or resulting from any delay in, or failure by, Bank (1) to
pay, withhold or report any U.S. federal, state or local taxes or
foreign taxes imposed on the Deposit Account or (2) to report interest,
dividend or other income paid or credited to the Deposit Account,
whether such failure or delay by Bank to pay, withhold or report tax or
income is the result of (x) Customer's failure to comply with the terms
of this paragraph, or (y) Bank's own acts or omissions; provided
however, Customer shall not be liable to Bank for any liabilities,
penalties, interest or additions to tax due as a result of Bank's
failure to pay, withhold or report any tax or to report interest,
dividend or other income paid or credited to the Deposit Account solely
as a result of Bank's negligent acts or omissions.
9. Nominees.
Financial Assets which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be, held in an account containing only assets of Customer or only
assets held by Bank as fiduciary or custodian for customers. Bank may without
notice to Customer cause any such Financial Assets to cease to be registered in
the name of any such nominee and to be registered in the name of Customer. In
the event that any Financial Assets registered in a nominee name are called for
partial redemption by the issuer, Bank may allot the called portion to the
respective beneficial holders of such class of security in a manner Bank deems
to be fair and equitable in its reasonable discretion in-light of market factors
such as minimum tradable lot sizes, with the understanding that Bank would
typically use a pro rata allocation or lottery as the basis of allotment among
its customers. Customer shall hold Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Financial Assets in the Custody Account.
10. Authorized Persons.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of
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<PAGE>
Customer hereunder. Such persons shall continue to be Authorized Persons until
such time as Bank receives Instructions from Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded. The term "Instructions" includes, without
limitation, instructions to sell, assign, transfer, deliver, purchase or receive
for the Custody Account, any and all stocks, bonds and other Financial Assets or
to transfer funds in the Deposit Account.
Any Instructions delivered to Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but Customer shall hold Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or Bank's failure to produce such confirmation at any
subsequent time (it being understood that Bank shall use reasonable efforts to
advise the Customer if Bank does not receive such confirmation or if such
confirmation does not conform to the telephone Instructions). Either party may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. Customer acknowledges
that it is to use telephone Instructions only when there is insufficient time to
use another authorized means of transmitting Instructions. Customer shall be
responsible for safeguarding any testkeys, identification codes or other
security devices which Bank shall make available to Customer or its Authorized
Persons.
12. Standard of Care; Liabilities.
(a) Bank shall be responsible for the performance of only such duties
as are set forth herein or expressly contained in Instructions which are
consistent with the provisions hereof as follows:
(i) Notwithstanding any other provisions of this Agreement,
Bank's responsibilities shall be limited to the exercise of reasonable
care with respect to its obligations hereunder. Bank shall only be
liable to Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to
the safekeeping of such Assets where such loss results directly from
the failure by the Subcustodian to use reasonable care in the provision
of custodial services by it in accordance with the standards prevailing
in its local market or from the willful default of such Subcustodian in
the provision of custodial services by it. In the event of any loss to
Customer which is compensable hereunder (i.e. a loss arising by reason
of willful misconduct or the failure of Bank or its Subcustodian to use
reasonable care), Bank shall be liable to Customer only to the extent
of Customer's direct damages, to be determined based on the market
value of the property which is the subject of the loss at the date of
discovery of such loss and without reference to any special conditions
or circumstances. Bank shall have no liability whatsoever for any
consequential, special, indirect or speculative loss or damages
(including, but not limited to, lost profits) suffered by Customer in
connection with the transactions and services contemplated hereby and
the relationship established hereby even if Bank has been advised as to
the possibility of the same and regardless of the form of the action.
(ii) Bank shall exercise reasonable care in the selection of
its Subcustodians and in monitoring their performance and financial
condition. Subject to Bank having selected a Subcustodian with
reasonable care and Bank's duty to use reasonable care in the
monitoring of a Subcustodian's financial condition as reflected in its
published financial statements and other publicly
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available financial information, Bank shall not be responsible for the
insolvency of any Subcustodian which is not a branch or Affiliate of
Bank. Bank shall not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) (A) Customer shall indemnify and hold Bank and its
directors, officers, agents and employees (collectively the
"Indemnitees") harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties, and expenses, including
out-of-pocket and incidental expenses and legal fees ("Losses") that
may be imposed on, incurred by, or asserted against, the Indemnitees or
any of them for following any instructions or other directions upon
which Bank is authorized to rely pursuant to the terms of this
Agreement. (B) In addition to and not in limitation of the preceding
subparagraph, customer shall also indemnify and hold the Indemnitees
and each of them harmless from and against any and all Losses that may
be imposed on, incurred by, or asserted against, the Indemnitees or any
of them in connection with or arising out of Bank's performance under
this Agreement, provided the Indemnitees have not acted with negligence
or engaged in willful misconduct. (C) In performing its obligations
hereunder, Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) Customer shall pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for Customer) on all matters and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
(vi) While Bank need not maintain any insurance for the
benefit of Customer, it shall maintain standard insurance coverage for
loss of assets held on behalf of its clients whether held with itself,
its branches or subsidiaries worldwide or its Subcustodians. Bank shall
notify Customer in the event that such insurance is canceled or
otherwise terminated. Bank confirms that it presently maintains a
bankers' blanket bond ("Bond"), which provides standard fidelity and
non-negligent loss coverage with respect to Financial Assets that may
be held by Bank and Financial Assets that may be held in the offices of
foreign banks and foreign securities depositories that may be used by
Bank pursuant to this Agreement; it being understood that insurance
coverage for certain losses affecting uncertificated securities may not
be available. If at any time Bank discontinues such coverage, it shall
promptly notify Customer in writing. Bank confirms that only the named
insured on the Bond, which includes Bank but not any of Bank's
customers, is directly protected against loss.
(vii) Without limiting the foregoing, Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or
2) investing or holding Assets in a particular country including, but
not limited to, losses resulting from malfunction, interruption of or
error in the transmission of information caused by any machines or
system or interruption of communication facilities, abnormal operating
conditions, nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which
prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss
due to forces beyond their control including, but not limited to
strikes or work stoppages, acts of war (whether declared or undeclared)
or terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
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(i) question Instructions or make any suggestions to Customer
or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Financial Assets;
(iii) advise Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party
to which Financial Assets are delivered or payments are made pursuant
hereto; and
(v) review or reconcile trade confirmations received from
brokers. Customer or its Authorized Persons issuing Instructions shall
bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank; it being
understood, however, that , Bank shall be responsible for following
Instructions.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank
or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Financial Assets, act as a lender to the issuer of Financial Assets,
act in the same transaction as agent for more than one customer, have a material
interest in the issue of Financial Assets, or earn profits from any of the
activities listed herein.
13. Fees and Expenses.
Customer shall pay Bank for its services hereunder the fees set forth
in Schedule C hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, including,
but not limited to, legal fees.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
Customer's trading and investment activity, Bank is authorized to enter into
spot or forward foreign exchange contracts with Customer or an Authorized Person
for Customer and may also provide foreign exchange through its subsidiaries,
Affiliates or Subcustodians. Instructions, including standing instructions, may
be issued with respect to such contracts but Bank may establish rules or
limitations concerning any foreign exchange facility made available. In all
cases where Bank, its subsidiaries, Affiliates or Subcustodians enter into a
foreign exchange contract related to Accounts, the terms and conditions of the
then current foreign exchange contract of Bank, its subsidiary, Affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply to
such transaction.
(b) Certification of Residency, etc. Customer certifies that it is a
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) Access to Records. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any
9
<PAGE>
Subcustodian which has physical possession of any Assets as may be
required in connection with the examination of Customer's books and
records.
(d) Governing Law; Successors and Assigns, Captions. THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN NEW YORK and shall not be assignable by either
party, but shall bind the successors in interest of Customer and Bank. The
captions given to the sections and subsections of this Agreement are for
convenience of reference only and are not to be used to interpret this
Agreement.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):
X Investment Company assets subject to certain U.S. Securities and
Exchange Commission rules and regulations;
___ Other (specify)
This Agreement consists exclusively of this document together with
Schedules A-C, Exhibits I -______ and the following Rider(s) [Check
applicable rider(s)]:
X INVESTMENT COMPANY
X PROXY VOTING
X SPECIAL TERMS AND CONDITIONS
There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions hereof are
held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided herein, no failure or delay on
the part of either party in exercising any power or right hereunder operates as
a waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) Representations and Warranties. (i) Customer hereby represents and
warrants to Bank that: (A) it has full authority and power to deposit and
control the Financial Assets and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange transactions; and (E) it has not relied on any oral or
written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank. (ii) Bank hereby represents and warrants to Customer that: (A) it has the
full power and authority to perform its obligations hereunder, (B) this
Agreement constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms; and (C) that it has taken all necessary action to
authorize the execution and delivery hereof.
(i) Notices. All notices hereunder shall be effective when actually
received. Any notices or other communications which may be required hereunder
are to be sent to the parties at the following addresses or such
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other addresses as may subsequently be given to the other party in writing: (a)
Bank: The Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, N.Y. 11245,
Attention: Global Investor Services, Investment Management Group; and (b)
Customer: Scudder Kemper Investments, Inc., 222 South Riverside Plaza , Chicago,
IL 60606-5808, Attention: Mr. Philip Collora.
(j) Termination. This Agreement may be terminated by Customer or Bank
by giving sixty (60) days' written notice to the other, provided that such
notice to Bank shall specify the names of the persons to whom Bank shall deliver
the Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within sixty (60) days following receipt of the notice, deliver to Bank
Instructions specifying the names of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to the persons so
specified, after deducting any amounts which Bank determines in good faith to be
owed to it under Section 13. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets, Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions hereof, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to Bank.
(k) Money Laundering. Customer warrants and undertakes to Bank for
itself and its agents that all Customer's customers are properly identified in
accordance with U.S. Money Laundering Regulations as in effect from time to
time.
(l) Imputation of certain information. Bank shall not be held
responsible for and shall not be required to have regard to information held by
any person by imputation or information of which Bank is not aware by virtue of
a "Chinese Wall" arrangement. If Bank becomes aware of confidential information
which in good faith it feels inhibits it from effecting a transaction hereunder
Bank may refrain from effecting it.
(m) Year 2000. Bank confirms to Customer that Bank: (a) is aware of the
risk that critical applications and computer systems and equipment containing
embedded microchips that it uses relating to its operations (the "Systems") may
be unable to process properly and calculate date-related information and data
from and after January 1, 2000 (the "Year 2000 Problem") and that it has
developed and has implemented a program to prepare its Systems so that they will
be capable of processing, on and after January 1, 2000, date and date related
data consistent with the functionality of such Systems. In addition, Bank's Year
2000 program includes assessing the readiness of the systems and applications of
each Affiliate and Subcustodian used by Bank to provide services hereunder. Bank
reasonably expects that the effects of the Year 2000 Problem should not result
in a material adverse effect on its ability timely to perform any of its
material obligations under this Agreement (a "Material Adverse Effect"). Bank
shall notify Customer promptly if it has reason to believe that a Material
Adverse Effect is likely to result from a Year 2000 Problem with respect to
Bank. In connection with this paragraph, Bank's obligations to Customer, as
respects both Bank's performance and Bank's liability (and the limitations
thereon), shall continue as and to the extent provided elsewhere in this
Agreement.
(n) Records. Bank hereby agrees that Bank shall create, maintain, and
retain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of Customer under the
Investment Company Act, particularly Section 31 thereof and Rules 31a-1, 31a-2
and 31a-3 thereunder, and applicable Federal, state and foreign tax laws and
other laws or administrative rules or procedures, in each case as currently in
effect, which may be applicable to Customer. All records so maintained in
connection with the performance of its duties under this Agreement shall be
preserved and maintained as required by regulation and, in the event of
termination of the Agreement, shall be available to Customer or its agent upon
request.
(o) Additional Portfolios. If the Fund shall issue shares of more than
one portfolio during the term hereof, Bank shall segregate all Financial Assets
of the Fund by portfolio and all books and records, account values or actions
shall be maintained, held, made or taken, as the case may be, separately for
each
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portfolio. Other than as encompassed by the preceding sentence, references in
this Agreement to "the Fund" are applicable either to the entire trust or to a
particular portfolio or portfolios, as the context may make reasonable and
appropriate. If the Fund has more than one portfolio, instructions shall
designate the portfolio or portfolios to which they apply.
(p) Disclaimer of Liability. This Agreement has been executed by and on
behalf of Customer by its representatives as such representatives and not
individually, and the obligations of Customer hereunder are not binding upon any
of the Trustees, officers or shareholders of Customer individually but are
binding upon only the assets and property of Customer. With respect to any claim
by Bank for recovery of that portion of the compensation (or any other liability
of Customer arising hereunder) allocated to a particular Customer, whether in
accordance with the express terms hereof or otherwise, Bank shall have recourse
solely against the assets of that Customer to satisfy such claim and shall have
no recourse against the assets of any other Customer for such purpose. Moreover,
the rights and benefits to which a given Customer is entitled hereunder shall be
solely those of such Customer and no other Customer hereunder shall receive such
benefits. For the avoidance of doubt, each Customer or the Bank may terminate
this Agreement pursuant to its provisions and the Agreement shall survive such
termination in respect of the remaining Customers that have not so terminated or
been terminated.
15. Definitions.
As used herein, the following terms shall have the meaning hereinafter
stated:
a) "Certificated Security" shall mean a security that is represented by a
certificate.
b) "Custody Account" means each Securities custody account on Bank's
records to which Financial Assets are or may be credited pursuant
hereto.
c) "Entitlement Holder" shall mean the person on the records of a
Securities Intermediary as the person having a Securities Entitlement
against the Securities Intermediary.
d) "Financial Asset" shall mean, as the context requires, either the asset
itself or the means by which a person's claim to it is evidenced,
including a Certificated Security or Uncertificated Security, a
security certificate, or a Securities Entitlement.
e) "Securities" means stocks, bonds, rights, warrants and other negotiable
and non-negotiable paper whether issued as Certificated Securities or
Uncertificated Securities and commonly traded or dealt in on securities
exchanges or financial markets, and other obligations of an issuer, or
shares, participations and interests in an issuer recognized in an area
in which it is issued or dealt in as a medium for investment and any
other property as shall be acceptable to Bank for the Custody Account.
f) "Securities Entitlement" shall mean the rights and property interest of
an Entitlement Holder with respect to a Financial Asset as set forth in
Part 5 of the Uniform Commercial Code.
g) "Securities Intermediary" shall mean Bank, a Subcustodian, a securities
depository, and any other financial institution which in the ordinary
course of business maintains custody accounts for others and acts in
that capacity.
h) "Uncertificated Security" shall mean a security that is not represented
by a certificate.
i) "Uniform Commercial Code" means Article 8 of the Uniform Commercial
Code of the State of New York, as the same may be amended from time to
time.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first-above written.
KEMPER ASIAN GROWTH FUND,
on behalf of each fund on Schedule A
By: /s/Mark S. Casady
------------------------------
Title: President
THE CHASE MANHATTAN BANK
By:
------------------------------
Title:
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<PAGE>
COMMONWEALTH OF MASSACHUSETTTS )
) ss.
COUNTY OF SUFFOLK )
On this 17th day of November, 1999, before me personally came Mark S.
Casady, to me known, who being by me duly sworn, did depose and say that he/she
is President of Kemper Asian Growth Fund, the entity described in and which
executed the foregoing instrument; that he/she knows the seal of said entity,
that the seal affixed to said instrument is such seal, that it was so affixed by
order of said entity, and that he/she signed his/her name thereto by like order.
/s/Maureen Kane
---------------
Notary Public
My commission expires:
MAUREEN E. KANE
Notary Public
My Commission Expires March 4, 2005
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<PAGE>
STATE OF NEW YORK )
): ss.
COUNTY OF NEW YORK )
On this day of , 199 , before me personally came,
to me known, who being by me duly sworn, did depose and say that he/she resides
in at ; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, the corporation described in and which
executed the foregoing instrument; that he/she knows the seal of said
corporation, that the seal affixed to said instrument is such corporate seal,
that it was so affixed by order of the Board of Directors of said corporation,
and that he/she signed his/her name thereto by like order.
Sworn to before me this ____________
day of ________________, 199__.
Notary
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<PAGE>
INVESTMENT COMPANY RIDER
To Global Custody Agreement
between
THE CHASE MANHATTAN BANK
and
Kemper Asian Growth Fund, on behalf of each fund on Schedule A
Dated November 17, 1999
Customer represents that the Assets being placed in Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extent that Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the Securities and Exchange Commission ("SEC") or unless Bank has
otherwise specifically agreed, Customer shall be solely responsible to assure
that the maintenance of Assets under this Agreement complies with such rules,
regulations, interpretations or exemptive order promulgated by or under the
authority of the SEC.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
------------------------------------------
Add the following language to the end of Section 3:
The term "Subcustodian" as used in this Agreement shall mean a branch
of a qualified U.S. bank or an eligible foreign custodian and the term
"securities depositories" as used in this Agreement shall mean an
eligible foreign securities depository, which are further defined as
follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in SEC Rule 17f-5(a)(7); under the Act;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country
other than the United States that is regulated as such by that
country's government or an agency thereof, (ii) a majority owned direct
or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other
than the United States, or (iii) any other entity that shall have been
so qualified by exemptive order, rule or other appropriate action of
the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws
of a country other than the United States: (i) that acts as a system
for the central handling of securities or equivalent book-entries in
that country and that is regulated by a foreign financial regulatory
authority as defined under section 2(a)(50) of the 1940 Act or (ii) to
the extent acting as a transnational system for the central handling of
securities or equivalent book-entries.
Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule B to this Agreement and the terms of the
subcustody agreements between Bank and each Subcustodian, which are attached as
Exhibits I through of Schedule B, and further represents that its Board has
determined that the use of each: (a) Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Fund(s) and
its (their) shareholders; and (b) securities depository is consistent with the
best
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<PAGE>
interests of the Fund(s) and its (their) shareholders. Bank will supply Customer
with any amendment to Schedule B for approval. Customer has supplied or will
supply Bank with certified copies of its Board of Directors resolution(s) with
respect to the foregoing prior to placing Assets with any Subcustodian so
approved.
Section 14. Access to Records.
----------- ------------------
Add the following language to the end of Section 14(c):
-------------------------------------------------------
Upon reasonable request from Customer, Bank shall furnish Customer with
the annual report (SAS 70 Report) prepared by Bank's external auditors
on Bank's system of internal accounting controls applicable to the
Bank's duties under this Agreement. Bank shall endeavor to obtain and
furnish the Customer with such similar reports as it may reasonably
request with respect to each Subcustodian and securities depository
holding Customer's assets.
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<PAGE>
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
between
THE CHASE MANHATTAN BANK
and
Kemper Asian Growth Fund, on behalf of each fund on Schedule A
Dated November 17, 1999
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures")
furnished to Customer, as the same may be amended by Bank from time to
time on prior notice to Customer. The Procedures are incorporated by
reference herein and form a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by
Bank to Customer of the dates of pending shareholder meetings,
resolutions to be voted upon and the return dates as may be received by
Bank or provided to Bank by its Subcustodians or third parties, and (b)
voting by Bank of proxies based on Customer Instructions. Original
proxy materials or copies thereof shall not be provided. Notifications
shall generally be in English and, where necessary, shall be summarized
and translated from such non-English materials as have been made
available to Bank or its Subcustodian. In this respect Bank's only
obligation is to provide information from sources it believes to be
reliable and/or to provide materials summarized and/or translated in
good faith. Bank reserves the right to provide Notifications, or parts
thereof, in the language received. Upon reasonable advance request by
Customer, backup information relative to Notifications, such as annual
reports, explanatory material concerning resolutions, management
recommendations or other material relevant to the exercise of proxy
voting rights shall be provided as available, but without translation.
3. While Bank shall attempt to provide accurate and complete
Notifications, whether or not translated, Bank shall not be liable for
any losses or other consequences that may result from reliance by
Customer upon Notifications where Bank prepared the same in good faith.
4 Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as
the agent of Customer, and shall not exercise any discretion with
regard to such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the relevant
Financial Assets are: (i) on loan; (ii) at registrar for registration
or reregistration; (iii) the subject of a conversion or other corporate
action; (iv) not held in a name subject to the control of Bank or its
Subcustodian or are otherwise held in a manner which precludes voting;
(v) not capable of being voted on account of local market regulations
or practices or restrictions by the issuer; or (vi) held in a margin or
collateral account.
6 Customer acknowledges that in certain countries Bank may be unable to
vote individual proxies but shall only be able to vote proxies on a net
basis (e.g., a net yes or no vote given the voting instructions
received from all customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall
in no event sell, license, give or otherwise make the information
provided hereunder available, to any third party, and shall not
directly or indirectly compete with Bank
18
<PAGE>
or diminish the market for Proxy Services by provision of such
information, in whole or in part, for compensation or otherwise, to any
third party.
8. The names of Authorized Persons for Proxy Services shall be furnished
to Bank in accordance with ss.10 of the Agreement. Proxy Services fees
shall be as set forth in ss.13 of the Agreement or as separately
agreed.
19
<PAGE>
SPECIAL TERMS AND CONDITIONS RIDER
To Global Custody Agreement
between
THE CHASE MANHATTAN BANK
and
Kemper Asian Growth Fund, on behalf of each fund on Schedule A
Dated November 17, 1999
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in DTC), the following provisions shall apply rather than the pertinent
provisions of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Financial Assets in the Custody Account as call for voting
or relate to legal proceedings within a reasonable time after
sufficient copies are received by Bank for forwarding to its customers.
In addition, Bank shall follow coupon payments, redemptions, exchanges
or similar matters with respect to Financial Assets in the Custody
Account and advise Customer or the Authorized Person for such Account
of rights issued, tender offers or any other discretionary rights with
respect to such Financial Assets, in each case, of which Bank has
received notice from the issuer of the Financial Assets, or as to which
notice is published in publications routinely utilized by Bank for this
purpose.
20
<PAGE>
SCHEDULE A
To Global Custody Agreement
between
THE CHASE MANHATTAN BANK
and
Kemper Asian Growth Fund
Dated November 17, 1999
Kemper Asian Growth Fund
21
<PAGE>
SCHEDULE B
[LOGO] CHASE
Kemper Asian Growth Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
COUNTRY SUBCUSTODIAN DEPOSITORY
------- ------------ ----------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA The Chase Manhattan Bank - Austraclear Ltd.
- The Clearing House Electronic
Sub-register System (CHESS)
- The Reserve Bank Information
and Transfer System (RITS)
- --------------------------------------------------------------------------------------------------------------------
CHINA
Shanghai -Hongkong and Shanghai Banking -Shanghai Securities Central Clearing
Corporation Limited and Registration Corporation (SSCCRC)
Shenzhen -Hongkong and Shanghai Banking -Securities Clearing Co., Ltd. (SSCC)
Corporation Limited
- --------------------------------------------------------------------------------------------------------------------
HONG KONG The Chase Manhattan Bank -Hong Kong Securities Clearing Co Ltd
(HKSCC)
-Central Moneymarkets Unit (CMU)
- --------------------------------------------------------------------------------------------------------------------
INDIA -Deutsche Bank AG National Securities Depository Limited
-Hongkong and Shanghai Banking (NSDL)
Corporation Limited
- --------------------------------------------------------------------------------------------------------------------
INDONESIA -Standard Chartered Bank None
-Hongkong and Shanghai Banking
Corporation Limited
- --------------------------------------------------------------------------------------------------------------------
JAPAN The Fuji Bank, Ltd -The Japan Securities Depository Center
(JASDEC)
-Bank of Japan
- --------------------------------------------------------------------------------------------------------------------
MALAYSIA The Chase Manhattan Bank Malaysian Central Depository Sdn.
Berhad
- --------------------------------------------------------------------------------------------------------------------
NEW ZEALAND National Nominees Ltd Austraclear New Zealand
- --------------------------------------------------------------------------------------------------------------------
PHILIPPINES The Hongkong and Shanghai Banking PCDI (Philippine Central Depository)
Corporation Limited
- --------------------------------------------------------------------------------------------------------------------
SINGAPORE Standard Chartered Bank CDP (Central Depository Pte. Ltd.)
- --------------------------------------------------------------------------------------------------------------------
SOUTH KOREA Hongkong and Shanghai Banking Korea Securities Depository (KSD)
Corporation, Ltd.
- --------------------------------------------------------------------------------------------------------------------
TAIWAN The Chase Manhattan Bank Taipei Taiwan Securities Central Depository
Co., Ltd. (TSCD)
- --------------------------------------------------------------------------------------------------------------------
THAILAND The Chase Manhattan Bank TSD (Thailand Securities Depository
Company Ltd.)
- --------------------------------------------------------------------------------------------------------------------
TRANSNATIONAL The Chase Manhattan Bank CEDEL
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit (h)(3)
KEMPER ASIAN GROWTH FUND
AMENDED FEE SCHEDULE FOR ADMINISTRATIVE SERVICES AGREEMENT
Pursuant to Section 2 of the Administrative Services Agreement between Kemper
Asian Growth Fund (the "Fund") and Kemper Distributors, Inc. ("KDI"), the Fund
and KDI agree that the administrative service fee will be computed at an annual
rate of .25 of 1% based upon the assets with respect to which a Firm other than
KDI provides administrative services and .15 of 1% based upon the assets with
respect to which KDI provides administrative services.
KEMPER ASIAN GROWTH FUND KEMPER DISTRIBUTORS, INC.
By: /s/Mark S. Casady By: /s/James L. Greenawalt
----------------------- ----------------------
Title: President Title: President
Dated: January 1, 2000
February 17, 2000
Kemper Asian Growth Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A under the Securities Act of 1933 being filed by Kemper
Asian Growth Fund (the "Fund") in connection with the public offering from time
to time of units of beneficial interest, no par value ("Shares"), in one
authorized series (the "Portfolio").
We have acted as counsel to the Fund, and in such capacity are familiar
with the Fund's organization and have counseled the Fund regarding various legal
matters. We have examined such Fund records and other documents and certificates
as we have considered necessary or appropriate for the purposes of this opinion.
In our examination of such materials, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us.
Based upon the foregoing and assuming that the Fund's Agreement and
Declaration of Trust dated June 12, 1995, the Written Instrument Amending the
Agreement and Declaration of Trust dated May 22, 1996, the Written Instrument
Establishing and Designating Separate Classes of Shares dated May 30, 1996, and
the By-Laws of the Fund adopted May 30, 1996, are presently in full force and
effect and have not been amended in any respect and that the resolutions adopted
by the Board of Trustees of the Fund on May 30, 1996, relating to organizational
matters, securities matters and the issuance of shares are presently in full
force and effect and have not been amended in any respect, we advise you and
opine that (a) the Fund is a validly existing voluntary association with
transferrable shares under the laws of the Commonwealth of Massachusetts and is
authorized to issue an unlimited number of Shares in the Portfolio; and (b)
presently and upon such further issuance of the Shares in accordance with the
Fund's Agreement and Declaration of Trust and the receipt by the Fund of a
purchase price not less than the net asset value per Share and when the
pertinent provisions of the Securities Act of
<PAGE>
Kemper Asian Growth Fund
February 17, 2000
Page 2
1933 and such "blue-sky" and securities laws as may be applicable have been
complied with, and assuming that the Fund continues to validly exist as provided
in (a) above, the Shares are and will be legally issued and outstanding, fully
paid and nonassessable.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund or the
Portfolio. However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts and obligations of the Fund or the Portfolio and requires
that notice of such disclaimer be given in each note, bond, contract,
instrument, certificate share or undertaking made or issued by the Trustees or
officers of the Fund. The Agreement and Declaration of Trust provides for
indemnification out of the property of the Portfolio for all loss and expense of
any shareholder of the Portfolio held personally liable for the obligations of
such Portfolio. Thus, the risk of liability is limited to circumstances in which
the Portfolio would be unable to meet its obligations.
This opinion is solely for the benefit of the Fund, the Fund's Board of
Trustees and the Fund's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this opinion
in connection with said Post-Effective Amendment.
Very truly yours,
/s/VEDDER, PRICE, KAUFMAN & KAMMHOLZ
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated January 18, 2000 in the Registration Statement (Form
N-1A) of Kemper Asian Growth Fund, and its incorporation by reference in the
related Prospectus and Statement of Additional Information filed with the
Securities and Exchange Commission in this Post-Effective Amendment No. 6 to the
Registration Statement under the Securities Act of 1933 (File No. 333-9069) and
in this Amendment No. 7 to the Registration Statement under the Investment
Company Act of 1940 (File No. 811-7731).
ERNST & YOUNG LLP
Chicago, Illinois
February 25, 2000
