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Table of Contents
Summary 1
Summary of Expenses 3
Investment Objectives, Policies and Risk Factors 7
Investment Manager and Underwriter 24
Dividends, Distributions and Taxes 28
Net Asset Value 30
Purchase of Shares 30
Redemption or Repurchase of Shares 36
Special Features 41
Performance 45
Fund Organization and Capital Structure 46
This combined prospectus of the Kemper Global and International Funds
(the "Funds"), each a series of Kemper Global/International Series, Inc.
(the "Corporation"), an open-end management investment company, contains
concisely the information about each of the Funds that a prospective
investor should know before investing and should be retained for future
reference. A Statement of Additional Information, which contains additional
information about the Funds and the Corporation, dated December 31, 1997,
has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. It is available upon request without
charge from the Funds at the address or telephone number on this cover or
the firm from which this prospectus was received. It is also available
along with other related materials on the SEC's Internet Web Site
(http://www.sec.gov).
The Funds' shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are they federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. Investment in a Fund's shares involves risk, including the possible
loss of principal.
Kemper
Global and
International Funds
PROSPECTUS DATED DECEMBER 31, 1997
AS REVISED JANUARY 14, 1998
KEMPER GLOBAL and
INTERNATIONAL FUNDS
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This prospectus describes a selection of global and international
mutual funds managed by Scudder Kemper Investments, Inc. (the "Adviser").
Kemper Global Blue Chip Fund
Kemper International Growth and Income Fund
Kemper Emerging Markets Income Fund
Kemper Emerging Markets Growth Fund
Kemper Latin America Fund
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEMPER EMERGING MARKETS INCOME FUND INVESTS PREDOMINANTLY IN LOWER
QUALITY BONDS, COMMONLY REFERRED TO AS JUNK BONDS. BONDS OF THIS TYPE ARE
CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT OF INTEREST AND
RETURN OF PRINCIPAL. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THE FUND.
KEMPER GLOBAL/INTERNATIONAL SERIES, INC.
222 South Riverside Plaza, Chicago, Illinois 60606, Telephone
1-800-621-1048
SUMMARY
Investment Objectives. The five series (the "Funds") of Kemper
Global/International Series, Inc. (the "Corporation") covered in this
combined prospectus are as follows:
KEMPER GLOBAL BLUE CHIP FUND (the "Global Blue Chip Fund") seeks
long-term growth of capital through a diversified worldwide portfolio of
marketable securities, primarily equity securities, including common
stocks, preferred stocks and debt securities convertible into common
stocks.
KEMPER INTERNATIONAL GROWTH AND INCOME FUND (the "International Growth
and Income Fund") seeks long-term growth of capital and current income,
primarily from foreign equity securities.
KEMPER EMERGING MARKETS INCOME FUND (the "Emerging Markets Income
Fund") has dual investment objectives. The Fund's primary investment
objective is to provide investors with high current income. As a secondary
objective, the Fund seeks long-term capital appreciation.
KEMPER EMERGING MARKETS GROWTH FUND (the "Emerging Markets Growth
Fund") seeks long-term growth of capital primarily through equity
investment in emerging markets around the globe.
KEMPER LATIN AMERICA FUND (the "Latin America Fund") seeks to provide
long-term capital appreciation through investment primarily in the
securities of Latin American issuers.
Each Fund is a series of Kemper Global/International Series, Inc., an
open-end management investment company. Global Blue Chip Fund and
International Growth and Income Fund each are diversified series. Emerging
Markets Income Fund, Emerging Markets Growth Fund and Latin America Fund
are non-diversified series. The Funds may purchase and sell put and call
options, engage in financial futures transactions ("strategic
transactions"), invest in foreign securities, and engage in related foreign
currency transactions. International Growth and Income Fund may lend
portfolio securities.
Risk Factors. Each Fund's risks are determined by the nature of the
securities held and the portfolio management strategies used by the
Adviser. The following are descriptions of certain risks related to the
investments and techniques that a Fund may use from time to time. For a
more complete discussion of risks involved in an investment in a Fund, see
"Special Risk Factors."
Each Fund involves above-average investment risk. They are designed as
long-term investments and not for short-term trading purposes, and each
should not be considered a complete investment program.
There is no assurance that the investment objective of any Fund will
be achieved and investment in each Fund includes risks that vary in kind
and degree depending upon the investment policies of that Fund. The returns
and net asset value of each Fund will fluctuate. The non-diversified status
of each of Emerging Markets Income Fund, Emerging Markets Growth Fund and
Latin America Fund involves greater risk than typical diversified mutual
funds, since each of these Funds may invest a greater proportion of its
assets in the securities of a smaller number of issuers and therefore may
be subject to greater market and credit risk than a more broadly
diversified portfolio.
Foreign investments by the Funds involve risk and opportunity
considerations not typically associated with investing in U.S. companies.
The U.S. Dollar value of a foreign security tends to decrease when the
value of the U.S. Dollar rises against the foreign currency in which the
security is denominated and tends to increase when the value of the U.S.
Dollar falls against such currency. Thus, the U.S. Dollar value of foreign
securities in a Fund's portfolio, and the Fund's net asset value, may
change in response to changes in currency exchange rates even though the
value of the foreign securities in local currency terms may not have
changed. With the exception of International Growth and Income Fund, each
Fund may invest a portion of its assets in developing or "emerging"
markets, which involve exposure to economic structures that are generally
less diverse and mature than in the United States, and to political systems
that may be less stable. Non-diversification by the Latin America Fund of
investments in a single issuer creates greater risk than investments across
more diversified markets. A portion of the assets of each Fund may be
invested in lower rated or unrated high yield bonds, which entail greater
risk of loss of principal and interest than higher rated fixed-income
securities. International Growth and Income Fund may lend portfolio
securities. The risks of lending portfolio securities, as with other
extensions of secured credit, consist of possible delays in recovering
additional collateral or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially. There are
special risks associated with options, financial futures and foreign
currency transactions and other derivatives and there is no assurance that
use of those investment techniques will be successful. Emerging Markets
Income Fund may borrow money for leverage purposes, which can exaggerate
the effect on its net asset value of any increase or decrease in the market
value of the Fund. In an attempt to eliminate currency risk, Emerging
Markets Income Fund invests exclusively in U.S. dollar-denominated debt
securities, or in foreign currency denominated debt securities that are
fully hedged back into the U.S. dollar. See "Investment Objectives,
Policies and Risk Factors."
Purchases and Redemptions. Each Fund provides investors with the option of
purchasing shares in the following ways:
Class A Shares Offered at net asset value plus a
maximum sales charge of 5.75% of the
offering price. Reduced sales charges
apply to purchases of $50,000 or
more. Class A shares purchased at net
asset value under the "Large Order
NAV Purchase Privilege" may be
subject to a 1% contingent deferred
sales charge if redeemed within one
year of purchase and a 0.50%
contingent deferred sales charge if
redeemed within the second year of
purchase.
Class B Shares Offered at net asset value, subject
to a Rule 12b-1 distribution fee and
a contingent deferred sales charge
applied to the value of shares
redeemed within six years of
purchase. The contingent deferred
sales charge is computed at the
following rates:
Year of Redemption After Purchase Contingent
Deferred
Sales Charge
First 4%
Second 3%
Third 3%
Fourth 2%
Fifth 2%
Sixth 1%
Class C Shares Offered at net asset value without an
initial sales charge, but subject to
a Rule 12b-1 distribution fee and a
1% contingent deferred sales charge
on redemptions made within one year
of purchase. Class C shares do not
convert into any other class.
Each class of shares represents interests in the same portfolio of
investments of a Fund. The minimum initial investment for each class is
$1,000 and investments thereafter must be for at least $100. Shares are
redeemable at net asset value, which may be more or less than original
cost, subject to any applicable contingent deferred sales charge. See
"Purchase of Shares" and "Redemption or Repurchase of Shares."
Investment Manager and Underwriter. Scudder Kemper Investments, Inc. (the
"Adviser") serves as investment manager for each Fund. The Adviser is paid
an investment management fee by each Fund based upon the average daily net
assets of that Fund at an effective annual rate that differs for each Fund.
Kemper Distributors, Inc. ("KDI"), a subsidiary of the Adviser, is
principal underwriter and administrator for each Fund. For Class B shares
and Class C shares of each Fund, KDI receives a Rule 12b-1 distribution fee
of 0.75% of average daily net assets of each such class. KDI also receives
the amount of any contingent deferred sales charges paid on the redemption
of shares. 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, but not necessarily
higher than the fees charged to funds with investment objectives similar to
those of the Funds. Administrative services are provided to shareholders
under an administrative services agreement with KDI. Each Fund pays an
administrative services fee at an annual rate of up to 0.25% of average
daily net assets of each of Class A, B and C shares of the Fund, which KDI
pays to financial services firms. See "Investment Manager and Underwriter."
Dividends. Each of Emerging Markets Growth Fund, Global Blue Chip Fund and
Latin America Fund normally distributes annual dividends of net investment
income. Any net realized short-term and long-term capital gains for these
Funds are distributed at least annually. International Growth and Income
Fund and Emerging Markets Income Fund distribute net investment income on a
semi-annual and monthly basis, respectively. Income and capital gain
dividends of a Fund are automatically reinvested in additional shares of
the Fund, without a sales charge, unless the investor makes an election
otherwise. See "Dividends, Distributions and Taxes."
SUMMARY OF EXPENSES
Shareholder Transaction Expenses Class Class Class
(applicable to all Funds)1 A B C
Maximum Sales Charge on Purchases (as a percentage 5.75%2 None None
of offering price)
Maximum Sales Charge on Reinvested Dividends None None None
Redemption Fees None None None
Exchange Fee None None None
Maximum Contingent Deferred Sales Charge (as a None3 4%4 1%5
percentage of redemption proceeds)
_________
1 Investment dealers and other firms may independently charge additional
fees for shareholder transactions or for advisory services; please see
their materials for details.
2 Reduced sales charges apply to purchases of $50,000 or more. See
"Purchase of Shares_Initial Sales Charge Alternative_Class A Shares."
3 The redemption of Class A Shares purchased at net asset value under
the "Large Order NAV Purchase Privilege" may be subject to a
contingent deferred sales charge of 1% during the first year and 0.50%
during the second year. See "Purchase of Shares_Initial Sales Charge
Alternative_Class A Shares."
4 The maximum Contingent Deferred Sales Charge on Class B Shares applies
to redemptions during the first year. The charge is 4% during the
first year, 3% during the second and third years, 2% during the fourth
and fifth years and 1% in the sixth year.
5 The Contingent Deferred Sales Charge of 1% on Class C Shares applies
to redemptions during the first year after purchase.
Annual Fund Operating Expenses
(estimated as a percentage of average net assets)
Global Internati Emerging Emerging Latin
Blue onal Markets Markets America
Chip Growth Income Fund Growth Fund
Fund and Fund
Income
Fund
Class A Shares
Management Fees* (after 0.85% 0.70% 0.30% 0.90% 0.90%
waiver)
12b-1 Fees None None None None None
Other Expenses 0.95% 1.11% 1.38% 1.27% 1.29%
Total Fund Operating 1.80% 1.81% 1.68% 2.17% 2.19%
Expenses* (after waiver)
Global Internati Emerging Emerging Latin
Blue onal Markets Markets America
Chip Growth Income Fund Growth Fund
Fund and Fund
Income
Fund
Class B Shares
Management Fees* (after 0.85% 0.70% 0.30% 0.90% 0.90%
waiver)
12b-1 Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Other Expenses 1.08% 1.24% 1.51% 1.40% 1.42%
Total Fund Operating 2.68% 2.69% 2.56% 3.05% 3.07%
Expenses* (after waiver)
Global Internati Emerging Emerging Latin
Blue onal Markets Markets America
Chip Growth Income Fund Growth Fund
Fund and Fund
Income
Fund
Class C Shares
Management Fees* (after 0.85% 0.70% 0.30% 0.90% 0.90%
waiver)
12b-1 Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Other Expenses 1.05% 1.21% 1.48% 1.37% 1.39%
Total Fund Operating 2.65% 2.66% 2.53% 3.02% 3.04%
Expenses* (after waiver)
_________
* For a one year period, the Adviser has agreed to waive a portion of
its management fee amounting to 0.15%, 0.30%, 0.70%, 0.35%, and 0.35%
of average daily net assets for Global Blue Chip Fund, International
Growth and Income Fund, Emerging Markets Income Fund, Emerging Markets
Growth Fund, and Latin America Fund, respectively.
If the Adviser had not agreed to waive a portion of its management
fee, the annualized expenses of the Funds would be:
Global Internatio Emerging Emerging Latin
Blue nal Growth Markets Markets Americ
Chip and Income Income Fund Growth a Fund
Fund Fund Fund
Class A Shares
Management Fees 1.00% 1.00% 1.00% 1.25% 1.25%
12b-1 Fees None None None None None
Other Expenses 0.95% 1.11% 1.38% 1.27% 1.29%
Total Fund Operating 1.95% 2.11% 2.38% 2.52% 2.54%
Expenses
Class B Shares6
Management Fees 1.00% 1.00% 1.00% 1.25% 1.25%
12b-1 Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Other Expenses 1.08% 1.24% 1.51% 1.40% 1.42%
Total Fund Operating 2.83% 2.99% 3.26% 3.40% 3.42%
Expenses
Class C Shares7
Management Fees 1.00% 1.00% 1.00% 1.25% 1.25%
12b-1 Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Other Expenses 1.05% 1.21% 1.48% 1.37% 1.39%
Total Fund Operating 2.80% 2.96% 3.23% 3.37% 3.39%
Expenses
_________
6 Long-term Class B shareholders of a Fund may, as a result of the
Funds' Rule 12b-1 fees, pay more than the economic equivalent of the
maximum initial sales charges permitted by the National Association of
Securities Dealers, Inc., although KDI believes that this is unlikely
because of the automatic conversion feature described under "Purchase
of Shares_Deferred Sales Charge Alternative_Class B Shares."
7 As a result of the accrual of Rule 12b-1 fees, long-term Class C
shareholders of a Fund may pay more than the economic equivalent of
the maximum initial sales charges permitted by the National
Association of Securities Dealers, Inc.
Example**
The following example assumes reinvestment of all dividends and
distributions and that the percentage amounts under "Total Fund Operating
Expenses" remain the same each year.
Fund 1 3
year years
Class A Shares8
Based on the estimated level of total Global Blue Chip $75 $111
operating expenses listed above, you International Growth & $75 $111
would pay the following expenses on Income
a $1,000 investment, assuming a 5% Emerging Markets Income $74 $107
annual return and redemption at the Emerging Markets Growth $78 $122
end of each time period: Latin America $78 $122
Class B Shares9
Based on the estimated level of total Global Blue Chip $67 $113
operating expenses listed above, you International Growth & $67 $114
would pay the following expenses on Income
a $1,000 investment, assuming a 5% Emerging Markets Income $66 $110
annual return and redemption at the Emerging Markets Growth $71 $125
end of each time period: Latin America
You would pay the following expenses Global Blue Chip $27 $83
on the same investment, assuming no International Growth & $27 $84
redemption: Income
Emerging Markets Income $26 $80
Emerging Markets Growth $31 $94
Latin America $31 $95
Class C Shares]
Based on the estimated level of total Global Blue Chip $37 $82
operating expenses listed above, you International Growth &
would pay the following expenses on Income $37 $83
a $1,000 investment, assuming a 5% Emerging Markets Income $36 $79
annual return and redemption at the Emerging Markets Growth $41 $93
end of each time period: Latin America $41 $94
You would pay the following expenses Global Blue Chip $27 $82
on the same investment, assuming no International Growth &
redemption: Income $27 $83
Emerging Markets Income $26 $79
Emerging Markets Growth $31 $93
Latin America $31 $94
_________
** Based on Total Fund Operating Expenses net of fee waiver (see "Annual
Fund Operating Expenses" table above).
8 Assumes deduction of the maximum 5.75% initial sales charge at the
time of purchase and no deduction of a Contingent Deferred Sales
Charge at the time of redemption.
9 Assumes that the shareholder was an owner of the shares on the first
day of the first year and the contingent deferred sales charge was
applied as follows: 1 year (4%) and 3 years (3%).
10 Assumes that the shareholder was the owner on the first day of the
first year and the contingent deferred sales charge of 1.00% was
applied.
The purpose of the preceding table is to assist investors in
understanding the various costs and expenses that an investor in a Fund
will bear directly or indirectly. See "Investment Manager and Underwriter"
for more information. Each Fund commenced operations on December 31, 1997
thus "Management Fees" and "Other Expenses" are estimates for the fiscal
year ending October 31, 1998, and expenses are shown for only the one and
three year periods.
Each Example assumes a 5% annual rate of return pursuant to
requirements of the SEC and assumes reinvestment of all dividends and
distributions. This hypothetical rate of return is not intended to be
representative of past or future performance of any Fund. The Examples
should not be considered to be a representation of past or future expenses.
Actual expenses may be greater or less than those shown.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The following information sets forth each Fund's investment objectives and
policies. Each Fund's returns and net asset value will fluctuate, and there
is no assurance that any Fund will meet its objectives. Except as otherwise
indicated, a Fund's investment objectives and policies are not fundamental
and may be changed without a vote of shareholders. If there is a change in
a Fund's investment objectives, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current
financial position and needs.
Each Fund is designed for long-term investors who can accept
international investment risk in pursuit of additional opportunities that
foreign securities may provide. Since a Fund normally will be invested in
both U.S. and foreign securities markets, changes in the Fund's share price
may have a low correlation with movements in the U.S. markets. A Fund's
share price will reflect the movements of both the different stock and bond
markets in which it is invested and the currencies in which the investments
are denominated; the strength or weakness of the U.S. dollar against
foreign currencies may account for part of the Fund's investment
performance. As with any long-term investment, the value of shares when
sold may be higher or lower than when purchased. In the opinion of the
Adviser, foreign capital markets provide investors with opportunities to
participate in the economic growth taking place outside the U.S., which
should translate into positive securities market performance over the long
term. In addition, the Adviser believes that international investing offers
the benefits of diversification, which can lower the overall price
volatility of an investor's portfolio. Foreign investing does involve
significant risks, as discussed in this prospectus, and no Fund should be
considered a complete investment program.
Global Blue Chip Fund. Global Blue Chip Fund seeks long-term growth of
capital through a diversified worldwide portfolio of marketable securities,
primarily equity securities, including common stocks, preferred stocks and
debt securities convertible into common stocks. The Fund invests in equity
securities of companies which are incorporated in the U.S. and in foreign
countries. The Fund will invest primarily in developed markets, with a
maximum of 15% of the Fund's total assets invested in emerging markets. It
also may invest in the debt securities of U.S. and foreign issuers. Income
is an incidental consideration.
In pursuing its objective, the Fund will emphasize investments in
common stocks of large, well known companies. Companies of this general
type are often referred to as "Blue Chip" companies. While specific
investment and financial criteria may vary from market to market, Blue Chip
companies around the world are generally identified by the Adviser as
having substantial capitalization, established financial history, ready
access to credit, good industry position and superior management structure.
While these companies may be among the largest in their local markets, they
may be small by the standards of U.S. stock market capitalization. Global
Blue Chip companies are believed to generally exhibit less investment risk
and less price volatility, on average, than companies lacking these
characteristics, such as smaller, less-seasoned companies. In addition, the
large market of publicly held shares for such companies and the generally
higher trading volume in those shares generally result in a relatively high
degree of liquidity for such investments.
The Fund invests in companies that the Adviser believes will benefit
from global economic trends, promising technologies or products and
specific country opportunities resulting from changing geopolitical,
currency or economic relationships. The Fund's global framework allows it
to take advantage of investment opportunities created by the growing
integration of economies around the world. The Fund offers investors access
to opportunities wherever they arise, without being constrained by location
of a company's headquarters or the trading market for its shares.
It is expected that investments will be spread broadly around the
world with an emphasis on developed economies and capital markets. The Fund
will usually be invested in securities of issuers located in at least three
countries, one of which may be the U.S. The Fund may be invested 100% in
non-U.S. issues, and for temporary defensive purposes may be invested 100%
in U.S. issues, although under normal circumstances it is expected that
both foreign and U.S. investments will be represented in the Fund's
portfolio. It is expected that investments will include securities of
companies of varying sizes, as measured by assets, sales, income or market
capitalization.
The Fund generally invests in equity securities of established
companies listed on U.S. or foreign securities exchanges, but also may
invest in securities traded over-the-counter. It also may invest in debt
securities convertible into common stock, and convertible and
non-convertible preferred stock, and fixed-income securities of
governments, government agencies, supranational agencies and companies when
the Adviser believes the potential for appreciation will equal or exceed
that available from investments in equity securities. These debt and
fixed-income securities will be predominantly investment-grade securities,
that is, those rated Aaa, Aa, A or Baa by Moody's Investor Services, Inc.
("Moody's") or AAA, AA, A or BBB by Standard & Poor's Corporation ("S&P")
or those of equivalent quality as determined by the Adviser. The Fund may
not invest more than 5% of its total assets in debt securities rated Baa or
below by Moody's, or BBB or below by S&P or deemed by the Adviser to be of
comparable quality (commonly referred to as "high yield" or "junk" bonds).
(See "Special Risk Factors").
The Fund may invest in zero coupon securities. In addition,
fixed-income securities may be held without limit for temporary defensive
purposes when the Adviser believes market conditions so warrant and for
temporary investment. It is impossible to accurately predict how long such
alternative strategies may be utilized. Similarly, the Fund may invest in
cash equivalents (including domestic and foreign money market instruments,
such as bankers' acceptances, certificates of deposit, commercial paper,
short-term government and corporate obligations and repurchase agreements)
for temporary defensive purposes and for liquidity. The Fund may invest in
closed-end investment companies holding foreign securities, as well as
shares of closed-end investment companies that invest primarily in emerging
market debt securities. In addition, the Fund may engage in strategic
transactions, which may include derivatives. (See "Special Risk Factors").
International Growth and Income Fund. International Growth and Income Fund
seeks long-term growth of capital and current income primarily from foreign
equity securities. The Fund invests generally in common stocks of
established companies listed on foreign exchanges, which offer prospects
for growth of earnings while paying relatively high current dividends. The
Fund can also invest in other types of equity securities, including
preferred stocks and securities convertible into common stock. The Fund
does not invest in emerging markets, but instead focuses its investments on
the developed foreign countries included in the Morgan Stanley Capital
International World ex-US Index (the "MSCI").
The Fund's income-oriented strategy, which can help cushion returns in
volatile periods, and its concentration in developed markets, may make it
appropriate for investors seeking lower share price volatility than many
other international equity funds.
While the Fund offers the potential for price appreciation and
dividend income, it also involves various types of risk. The Fund's net
asset value can fluctuate with changes in world securities market levels,
political developments, movements in currencies, investment flows and other
factors. (See "Special Risk Factors").
In pursuing its dual objective, at least 80% of the Fund's net assets
will normally be invested in the equity securities of established non-U.S.
companies. The Fund generally invests in equity securities of established
companies listed on foreign securities exchanges, but also may invest in
securities traded over-the-counter. The Fund's equity investments include
common stock, convertible and non-convertible preferred stock, sponsored
and unsponsored depository receipts, and warrants.
The Fund intends to diversify investments among several developed
foreign markets and normally to invest in securities of issuers located in
at least three different countries. The Fund will invest predominantly in
securities of issuers in the developed foreign countries included in the
MSCI.
Under normal conditions, the Fund may also invest up to 20% of its net
assets in debt securities convertible into common stock and fixed-income
securities of governments, governmental agencies, supranational agencies
and private issuers when the Adviser believes the potential for
appreciation and income will equal or exceed that available from
investments in equity securities. These securities will predominantly be
"investment grade" securities, which are those rated Aaa, Aa, A, or Baa by
Moody's or AAA, AA, A or BBB by S&P or if unrated, judged by the Adviser to
be of equivalent quality. The Fund may also invest up to 5% of its total
assets in debt securities which are rated below-investment grade. (See
"Special Risk Factors").
The Fund may also hold up to 20% of its net assets in U.S. and foreign
fixed income securities for temporary defensive purposes when the Adviser
believes market conditions so warrant. Similarly, the Fund may invest up to
20% of its net assets in cash or cash equivalents including domestic and
foreign money market instruments, short-term government and corporate
obligations and repurchase agreements under normal circumstances and
without limit for temporary defensive purposes and to maintain liquidity.
It is impossible to accurately predict for how long such alternative
strategies may be utilized. In addition, the Fund may engage in strategic
transactions, which may include derivatives. (See "Special Risk Factors").
The Adviser applies a disciplined, multi-part investment approach for
selecting stocks for the Fund. The first stage of this process involves
analyzing the pool of dividend-paying foreign securities, primarily from
the world's more mature markets, and targeting stocks that have high
relative yields compared to the average for their markets. In the Adviser's
opinion, this group of higher-yielding stocks offers the potential for
returns that is greater than or equal to the average market return, with
price volatility that is lower than the overall market volatility. The
Adviser believes that these potentially favorable risk and return
characteristics exist because the higher dividends offered by these stocks
act as a "cushion" when markets are volatile and because the stocks with
higher yields tend to have more attractive valuations (e.g., lower
price-to-earnings ratios and lower price-to-book ratios).
The second stage of portfolio construction involves a fundamental
analysis of each company's financial strength, profitability, projected
earnings, competitive positioning and ability of management. During this
step, the Adviser's research team identifies what it believes are the most
promising stocks for the Fund's portfolio.
The third stage of the investment process involves diversifying the
portfolio among different industry sectors. The key element of this stage
is evaluating how the stocks in different sectors react to economic factors
such as interest rates, inflation, Gross Domestic Product and consumer
spending, and then attaining a proper balance of stocks in these sectors
based on the Adviser's economic forecast.
The fourth and final stage of this ongoing process is diversifying the
portfolio among different countries. The Adviser will seek to have broad
country representation, favoring those countries that it believes have
sound economic conditions and open markets. The Fund's strategy is to
manage risk and create opportunity at each of its four stages in the
investment process, starting with the focus on stocks with high relative
yields.
Emerging Markets Income Fund. Emerging Markets Income Fund has dual
investment objectives. The Fund's primary investment objective is to
provide investors with high current income. As a secondary objective, the
Fund seeks long-term capital appreciation. In pursuing these goals, the
Fund invests primarily in high-yielding debt securities issued by
governments and corporations in emerging markets. Many developing regions
of the world have undertaken sweeping political and economic changes that
favor increased business activity and demand for capital. In the opinion of
the Adviser, these changes present attractive investment opportunities,
both in terms of income and appreciation potential, for long-term
investors. In an attempt to eliminate currency risk, the Fund invests
exclusively in U.S. dollar-denominated debt securities, or in foreign
currency denominated debt securities that are fully hedged back into the
U.S. dollar.
The Fund involves above-average bond fund risk and can invest entirely
in high yield/high risk bonds. While designed to provide a high level of
current income, the Fund may not be appropriate for all income investors.
The Fund should not be viewed as a substitute for a money market or
short-term bond fund. The Fund invests in lower quality securities of
emerging market issuers, some of which have in the past defaulted on
certain of their financial obligations.
In seeking high current income and, secondarily, long-term capital
appreciation, the Fund invests, under normal market conditions, at least
65% of its total assets in debt securities issued by governments,
government-related entities and corporations in emerging markets, or in
debt securities, the return on which is derived primarily from emerging
markets. The Fund considers "emerging markets" to include any country that
is defined as an emerging or developing economy by any one of the
following: the International Bank for Reconstruction and Development (i.e.,
the World Bank), the International Finance Corporation or the United
Nations or its authorities.
The Fund takes a global approach to portfolio management. The Adviser
currently weights its investments toward countries in Latin America, which
has offered the largest and most liquid debt markets of the emerging
nations around the globe in the past few years. However, the Adviser may
pursue investment opportunities in Asia, Africa, the Middle East and the
developing countries of Europe, primarily in Eastern Europe. The Fund deems
an issuer to be located in an emerging market if:
the issuer is organized under the laws of an emerging market
country;
the issuer's principal securities trading market is in an
emerging market; or
at least 50% of the issuer's non-current assets,
capitalization, gross revenue or profit in any one of the two
most recent fiscal years is derived (directly or indirectly from
subsidiaries) from assets or activities located in emerging
markets.
The Fund may invest in a wide variety of high-yielding debt
obligations, including sovereign debt securities issued or guaranteed by
governments, government-related entities and central banks based in
emerging markets (including participations in and assignments of portions
of loans between governments and financial institutions); government owned,
controlled or sponsored entities located in emerging markets; entities
organized and operated for the purpose of restructuring investment
characteristics of instruments issued by government or government-related
entities in emerging markets; and debt obligations issued by supranational
organizations such as the Asian Development Bank and the Inter-American
Development Bank, among others.
The Fund may also consider for purchase debt securities issued by
commercial banks and companies in emerging markets. The Fund may invest in
both fixed- and floating-rate issues. Debt instruments held by the Fund
take the form of bonds, notes, bills, debentures, convertible securities,
warrants, bank obligations, short-term paper, loan participations, loan
assignments and trust interests. The Fund may invest regularly in "Brady
Bonds," which are debt securities issued under the framework of the Brady
Plan as a mechanism for debtor countries to restructure their outstanding
bank loans. Some "Brady Bonds" have their principal collateralized by zero
coupon U.S. Treasury bonds.
The Fund is not restricted by limits on weighted average portfolio
maturity or the maturity of an individual issue. Debt securities in which
the Fund may invest may have stated maturities from overnight to 30 years
or longer. The weighted average maturity of the Fund's portfolio is
actively managed and will vary from period to period based upon the
Adviser's assessment of economic and market conditions, taking into account
the Fund's investment objectives.
In addition to maturity, the Fund's investments are actively managed
in terms of geography and industry allocation. In managing the Fund's
portfolio, the Adviser takes into account such factors as the credit
quality of issuers, changes in and levels of interest rates, projected
economic growth rates, capital flows, debt levels, trends in inflation, and
governmental initiatives.
While the Fund is not "diversified" for purposes of the Investment
Company Act of 1940, as amended (the "1940 Act"), it intends to invest in a
minimum of three countries at any one time and will not commit more than
40% of its total assets to issuers in a single country.
By focusing on fixed-income instruments issued in emerging markets,
the Fund invests predominantly in debt securities that are rated below
investment-grade, or unrated but equivalent to those rated below
investment-grade by internationally recognized rating agencies such as S&P
or Moody's. Debt securities rated below BBB by S&P or below Baa by Moody's
are considered to be below investment-grade. These types of high yield/high
risk debt obligations (commonly referred to as "junk bonds") are
predominantly speculative with respect to the capacity to pay interest and
repay principal in accordance with their terms and generally involve a
greater risk of default and often more volatility in price than securities
in higher rating categories, such as investment-grade U.S. bonds. On
occasion, the Fund may invest up to 5% of its net assets in non-performing
securities whose quality is comparable to securities rated as low as D by
S&P or C by Moody's. A large portion of the Fund's bond holdings may trade
at substantial discounts from face value. Please refer to "Special Risk
Factors_High yield/high risk securities" for more information.
The Fund may invest in indexed securities, the value of which is
linked to currencies, interest rates, commodities, indices or other
financial indicators ("reference instruments"), as well as Synthetic
Investments.
The Fund may invest up to 35% of its total assets in securities other
than debt obligations issued in emerging markets. These holdings include
debt securities and money market instruments issued by corporations and
governments based in developed markets, including up to 20% of total assets
in U.S. fixed-income instruments.
However, for temporary, defensive or emergency purposes, the Fund may
invest without limit in U.S. debt securities, including short-term money
market securities. It is impossible to predict accurately how long such
alternative strategies will be utilized. In addition, the Fund may engage
in strategic transactions. The Fund may also acquire shares of closed-end
investment companies that invest primarily in emerging market debt
securities.
The Fund is authorized to borrow money from banks and other entities
in an amount equal to up to 20% of the Fund's total assets (including the
amount borrowed), less all liabilities and indebtedness other than the
borrowing, and may use the proceeds of the borrowings for investment
purposes. Borrowings create leverage, which is a speculative
characteristic. Although the Fund intends to borrow frequently, it will do
so only when the Adviser believes that borrowing will benefit the Fund
after taking into account considerations such as the costs of the borrowing
and the likely investment returns on the securities purchased with the
borrowed moneys. The extent to which the Fund will borrow will depend upon
the availability of credit. No assurance can be given that the Fund will be
able to borrow on terms acceptable to the Fund and the Adviser.
Emerging Markets Growth Fund. Emerging Markets Growth Fund seeks long-term
growth of capital primarily through equity investment in emerging markets
around the globe.
The Fund will invest in the Asia-Pacific region, Latin America, less
developed nations in Europe, the Middle East and Africa, focusing
investments in countries and regions where there appear to be the best
value and appreciation potential, subject to considerations of portfolio
diversification and liquidity. In the opinion of the Adviser, many emerging
nations around the globe are likely to continue to experience economic
growth rates well in excess of those found in the U.S., Japan and other
developed markets. In the opinion of the Adviser, this economic growth
should translate into strong stock market performance over the long term.
The Fund's net asset value can fluctuate significantly with changes in
stock market levels, political developments, movements in currencies,
investment flows and other factors.
At least 65% of the Fund's total assets will be invested in the equity
securities of emerging market issuers. The Fund considers "emerging
markets" to include any country that is defined as an emerging or
developing economy by any one of the following: the International Bank for
Reconstruction and Development (i.e., the World Bank), the International
Finance Corporation or the United Nations or its authorities. The Fund
intends to allocate its investments among issuers located in at least three
countries at all times, and does not expect to concentrate in any
particular industry. There is no limitation, however, on the amount the
Fund can invest in a specific country or region of the world.
The Fund deems an issuer to be located in an emerging market if:
the issuer is organized under the laws of an emerging market
country;
the issuer's principal securities trading market is in an
emerging market; or
at least 50% of the issuer's non-current assets,
capitalization, gross revenue or profit in any one of the two
most recent fiscal years is derived (directly or indirectly
through subsidiaries) from assets or activities located in
emerging markets.
The Fund's equity investments are common stock, preferred stock
(either convertible or non-convertible), depository receipts and warrants.
Equity securities may also be purchased through rights. Securities may be
listed on securities exchanges, traded over-the-counter, or have no
organized market. The Fund may invest in illiquid securities.
The Fund may invest up to 35% of its total assets in emerging market
and domestic debt securities if the Adviser determines that the capital
appreciation of debt securities is likely to equal or exceed the capital
appreciation of equity securities. Debt instruments held by the Fund take
the form of bonds, notes, bills, debentures, convertible securities,
warrants, bank obligations, short-term paper, loan participations, loan
assignments, and trust interests.
Under normal market conditions, the Fund may invest up to 35% of its
assets in equity securities of issuers in the U.S. and other developed
markets. In evaluating the appropriateness of such investments for the
Fund, the Adviser takes into account the issuer's involvement in the
emerging markets and the potential impact of that involvement on business
results. The Fund may also purchase securities on a when-issued or forward
delivery basis, and may engage in various strategic transactions, including
derivatives. In addition, to maintain liquidity, the Fund may borrow from
banks. The Fund does not expect to borrow for investment purposes.
For temporary defensive purposes, the Fund may hold, without limit,
debt instruments as well as cash and cash equivalents, including foreign
and domestic money market instruments, short-term government and corporate
obligations, and repurchase agreements. It is impossible to accurately
predict for how long such alternative strategies will be utilized. The Fund
may also invest in closed-end investment companies investing primarily in
the emerging markets. Such closed-end investment company investments will
generally only be made when market
access or liquidity considerations restricts direct investment in the
market. More information about the risks related to the investments and
policies of the Fund is provided under "Special Risk Factors."
The Adviser takes a top-down approach to evaluating investments for
the Fund, using extensive fundamental and field research. The process
begins with a study of the economic fundamentals of each country and region
as well as an examination of regional themes such as growing trade,
increases in direct foreign investment and deregulation of capital markets.
Understanding regional themes allows the Adviser to identify the industries
and companies most likely to benefit from the political, social and
economic changes taking place in a given region of the world.
Within a market, the Adviser looks for individual companies with
exceptional business prospects, which may be due to market dominance,
unique franchises, high growth potential, or innovative services, products
or technologies. The Adviser seeks to identify companies with favorable
potential for appreciation through growing earnings or greater market
recognition over time. While these companies may be among the largest in
their local markets, they may be small by the standards of U.S. stock
market capitalization.
Latin America Fund. Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
The Fund seeks to benefit from economic and political trends emerging
throughout Latin America. These trends are supported by governmental
initiatives designed to promote freer trade and market-oriented economies.
The Adviser believes that efforts by Latin American countries to, among
other things, reduce government spending and deficits, control inflation,
lower trade barriers, stabilize currency exchange rates, increase foreign
and domestic investment and privatize state-owned companies, will help
support attractive investment returns over time.
In seeking its objective to provide long-term capital appreciation,
the Fund normally invests at least 65% of its total assets in Latin
American equity securities. For purposes of this prospectus, Latin America
is defined as Mexico, Central America, South America and the islands of the
Caribbean. The Fund defines securities of Latin American issuers as
follows:
Securities of companies organized under the laws of a Latin
American country or for which the principal securities trading
market is in Latin America;
Securities issued or guaranteed by the government of a
country in Latin America, its agencies or instrumentalities,
political subdivisions or the central bank of such country;
Securities of companies, wherever organized, when at least
50% of an issuer's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years
represents (directly or indirectly through subsidiaries) assets
or activities located in Latin America; or
Securities of Latin American issuers, as defined above, in
the form of depositary shares.
Although the Fund may participate in markets throughout Latin America,
under present conditions the Fund expects to focus its investments in
Argentina, Brazil, Chile, Colombia, Mexico and Peru. In the opinion of the
Adviser, these six countries offer the most developed capital markets in
Latin America. The Fund may invest in other countries in Latin America when
the Adviser deems it appropriate. The Fund intends to allocate investments
among at least three countries at all times and does not expect to
concentrate investments in any particular industry.
The Fund's equity investments include common stock, preferred stock
(either convertible or non-convertible), depositary receipts and warrants.
These may be restricted securities and may also be purchased through
rights. Securities may be listed on securities exchanges, traded
over-the-counter, or have no organized market.
The Fund may invest in debt securities when management anticipates
that the potential for capital appreciation is likely to equal or exceed
that of equity securities. Capital appreciation in debt securities may
arise from a favorable change in relative foreign exchange rates, in
relative interest rate levels, or in the creditworthiness of issuers.
Receipt of income from such debt securities is incidental to the Fund's
objective of long-term capital appreciation. Most debt securities in which
the Fund invests are not rated. When debt securities are rated, it is
expected that such ratings will generally be below investment grade; that
is, rated below Baa by Moody's or below BBB by S&P.
The Fund may invest up to 35% of its total assets in the equity
securities of U.S. and other non-Latin American issuers. In this regard,
the Fund will focus on larger, multinational corporations, which generally
will comprise as much as 15% of the Fund's total assets. In evaluating
non-Latin American investments, the Adviser generally seeks investments
where an issuer's Latin American business activities and the impact of
developments in Latin America may have a positive and significant effect on
the issuer's business results.
In selecting companies for investment, the Fund typically evaluates
industry trends, a company's financial strength, its competitive position
in domestic and export markets, technology, recent developments and
profitability, together with overall growth prospects. Other considerations
generally include quality and depth of management, government regulation,
and availability and cost of labor and raw materials. Investment decisions
are made without regard to arbitrary criteria as to minimum asset size,
level of sales or the dividend history of companies.
The allocation between equity and debt, and among countries in Latin
America, varies based on a number of factors, including: expected rates of
economic and corporate profit growth; past performance and current and
comparative valuations in Latin American capital markets; the level and
anticipated direction of interest rates; changes or anticipated changes in
Latin American government policy; and the condition of the balance of
payments and changes in the terms of trade. The Fund, in seeking
undervalued markets or individual securities, also considers the effects of
past economic crises or ongoing financial and political uncertainties.
To provide for redemptions, or in anticipation of investment in Latin
American securities, the Fund may hold cash or cash equivalents (in U.S.
dollars or foreign currencies) and other short-term securities, including
money market securities denominated in U.S. dollars or foreign currencies.
In addition, to provide for redemptions or distributions, the Fund may
borrow from banks. The Fund does not expect to borrow for investment
purposes. The Fund may assume a defensive position when, due to political
or other factors, the Adviser determines that opportunities for capital
appreciation in Latin American markets would be significantly limited over
an extended period or that investing in those markets poses undue risk to
investors. The Fund may, for temporary defensive purposes, invest up to
100% of its assets in cash and money market instruments or invest all or a
portion of its assets in securities of U.S. or other non-Latin American
issuers when the Adviser deems such a position advisable in light of
economic or market conditions. It is impossible to predict accurately for
how long such alternative strategies may be utilized. The Fund may also
invest in closed-end investment companies investing primarily in Latin
America. In addition, the Fund may invest in loan participations and
assignments, when-issued securities, convertible securities and repurchase
agreements and may engage in strategic transactions. See "Special Risk
Factors" for more information about these investment techniques.
Special Risk Factors. A Fund's risks are determined by the nature of the
securities held and the portfolio management strategies used by the
Adviser. The following are descriptions of certain risks related to the
investments and techniques that a Fund may use from time to time.
Non-Diversified Investment Company. Emerging Markets Income Fund,
Emerging Markets Growth Fund and Latin America Fund is each classified as a
non-diversified investment company under the 1940 Act, which means that
each Fund is not limited by the 1940 Act in the percentage of its assets
that it may invest in the obligations of a single issuer. As a
"non-diversified" investment company, a Fund may be subject to greater
market and credit risk than a more broadly diversified portfolio. The
investment of a large percentage of a Fund's assets in the securities of a
small number of issuers may cause a Fund's share price to fluctuate more
than that of a diversified investment company.
Foreign Securities. Investments in foreign securities involve special
considerations, due to more limited information, higher brokerage costs,
different accounting standards, thinner trading markets and the likely
impact of foreign taxes on the yield from debt securities. They may also
entail certain other risks, such as the possibility of one or more of the
following: imposition of dividend or interest withholding or confiscatory
taxes; currency blockages or transfer restrictions; expropriation,
nationalization, military coups or other adverse political or economic
developments; less government supervision and regulation of securities
exchanges, brokers and listed companies; and the difficulty of enforcing
obligations in other countries. Further, it may be more difficult for a
Fund's agents to keep currently informed about corporate actions which may
affect the prices of portfolio securities. Communications between the U.S.
and foreign countries may be less reliable than within the U.S., increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Certain markets may require payment
for securities before delivery. A Fund's ability and decision to purchase
and sell portfolio securities may be affected by laws or regulations
relating to the convertibility of currencies and repatriation of assets.
Some countries restrict the extent to which foreigners may invest in their
securities markets.
Each Fund has foreign currency exposure. In an attempt to eliminate
currency risk, Emerging Markets Income Fund invests exclusively in U.S.
dollar-denominated debt securities, or in foreign currency denominated debt
securities that are fully hedged back into the U.S. dollar. Accordingly,
changes in the value of these currencies against the U.S. dollar will
result in corresponding changes in the U.S. dollar value of a Fund's assets
denominated in those currencies.
Some foreign countries also may have managed currencies, which are not
free floating against the U.S. dollar. In addition, there is risk that
certain foreign countries may restrict the free conversion of their
currencies into other currencies. Further, it generally will not be
possible to eliminate a Fund's foreign currency risk through hedging. Any
devaluations in the currencies in which a Fund's portfolio securities are
denominated may have a detrimental impact on a Fund's net asset value.
High Yield/High Risk Securities. Each Fund may invest in debt
securities with varying degrees of credit quality. High quality bonds
(rated AAA or AA by S&P or Aaa or Aa by Moody's) characteristically have a
strong capacity to pay interest and repay principal. Medium
investment-grade bonds (rated A or BBB by S&P or A or Baa by Moody's) are
defined as having adequate capacity to pay interest and repay principal. In
addition, certain medium investment-grade bonds are considered to have
speculative characteristics. Each Fund may invest in debt securities which
are rated below investment-grade (hereinafter referred to as "lower rated
securities") or which are unrated, but deemed equivalent to those rated
below investment-grade by the Adviser. These are commonly referred to as
"junk bonds." The lower the ratings of such debt securities, the greater
their risks render them like equity securities. These debt instruments
generally offer a higher current yield than that available from higher
grade issues, but typically involve greater risk. Lower rated and unrated
securities are especially subject to adverse changes in general economic
conditions, to changes in the financial condition of their issuers, and to
price fluctuation in response to changes in interest rates. During periods
of economic downturn or rising interest rates, issuers of these instruments
may experience financial stress that could adversely affect their ability
to make payments of principal and interest and increase the possibility of
default. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may also decrease the values and liquidity of
these securities especially in a market characterized by only a small
amount of trading. Perceived credit quality in this market can change
suddenly and unexpectedly and may not fully reflect the actual risk posed
by a particular lower rated or unrated security.
Global Blue Chip Fund will invest no more than 5% of its total assets
in debt securities rated BBB or Baa or below or in unrated securities.
International Growth and Income Fund will invest no more than 5% of its
total assets in debt securities rated below BBB or Baa or in unrated
securities.
Emerging Markets Income Fund invests predominantly in debt securities
that are rated below investment-grade, or unrated but equivalent to those
rated below investment-grade by internationally recognized rating agencies
such as S&P or Moody's.
Emerging Markets Growth Fund may invest in debt securities with
varying degrees of credit quality. The Fund may invest in securities whose
quality is comparable to securities rated as low as D by S&P or C by
Moody's. Latin America Fund will invest no more than 10% of its net assets
in securities rated B or lower by Moody's or S&P, and may invest in
securities rated C by Moody's or D by S&P.
For a more complete description of the risks of high yield/high risk
securities, please refer to the Funds' Statement of Additional Information.
Common Stocks. Global Blue Chip Fund, International Growth and Income
Fund, Emerging Markets Growth Fund and Latin America Fund may invest in
common stocks. Common stock is issued by companies to raise cash for
business purposes and represents a proportionate interest in the issuing
companies. Therefore, a Fund participates in the success or failure of any
company in which it holds stock. The market values of common stock can
fluctuate significantly, reflecting the business performance of the issuing
company, investor perception and general economic or financial market
movements. Smaller companies are especially sensitive to these factors. An
investment in common stock entails greater risk of becoming valueless than
does an investment in fixed-income securities. Despite the risk of price
volatility, however, common stock also offers the greatest potential for
long-term gain on investment, compared to other classes of financial assets
such as bonds or cash equivalents.
Zero Coupon Securities. Each Fund may invest in zero coupon
securities, which pay no cash income and are sold at substantial discounts
from their maturity value. When held to maturity, their entire income,
which consists of accretion of discount, comes from the difference between
the issue price and their maturity value. Zero coupon securities are
subject to greater market value fluctuations from changing interest rates
than debt obligations of comparable maturities that make current cash
distributions of interest.
Convertible Securities. Each Fund may invest in convertible securities
which may offer higher income than the common stocks into which they are
convertible. The convertible securities in which International Growth and
Income Fund and Latin America Fund may invest include fixed-income or zero
coupon debt securities, which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock.
Emerging Markets Income Fund and Emerging Markets Growth Fund may invest in
bonds, notes, debentures and preferred stocks which may be converted or
exchanged at a stated or determinable exchange ratio into underlying shares
of common stock. Prior to their conversion, convertible securities may have
characteristics similar to both nonconvertible debt securities and equity
securities. While convertible securities generally offer lower yields than
nonconvertible debt securities of similar quality, their prices may reflect
changes in the value of the underlying common stock. Convertible securities
generally entail less credit risk than the issuer's common stock. Emerging
Markets Income Fund may be required to permit the issuer of a convertible
security to redeem the security, convert it into the underlying common
stock or sell it to a third party. Thus, the Fund may not be able to
control whether the issuer of a convertible security chooses to convert
that security. If the issuer chooses to do so, this action could have an
adverse effect on this Fund's ability to achieve its investment objectives.
When-Issued Securities. Each Fund may purchase securities on a
when-issued or forward delivery basis, for payment and delivery at a later
date. The price and yield are generally fixed on the date of commitment to
purchase. During the period between purchase and settlement, no interest
accrues to a Fund. At the time of settlement, the market value of the
security may be more or less than the purchase price.
Investing in Emerging Markets. The Funds consider "emerging markets"
to include any country that is defined as an emerging or developing economy
by any one of the following: the International Bank for Reconstruction and
Development (i.e., the World Bank), the International Finance Corporation
or the United Nations or its authorities.
Each Fund, with the exception of International Growth and Income Fund,
may invest in securities of issuers in emerging markets. Most emerging
securities markets may have substantially less volume and are subject to
less government supervision than U.S. securities markets. Securities of
many issuers in emerging markets may be less liquid and more volatile than
securities of comparable domestic issuers. In addition, there is less
regulation of securities exchanges, securities dealers, and listed and
unlisted companies in emerging markets than in the U.S.
Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements
have not kept pace with the volume of securities transactions. Delays in
settlement could result in temporary periods when a portion of the assets
of a Fund is uninvested and no return is earned thereon. The inability of a
Fund to make intended security purchases due to settlement problems could
cause a Fund to miss attractive investment opportunities. Inability to
dispose of portfolio securities due to 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. Costs
associated with transactions in foreign securities are generally higher
than costs associated with transactions in U.S. securities. Such
transactions also involve additional costs for the purchase or sale of
foreign currency.
Certain emerging markets require prior governmental approval of
investments by foreign persons, limit the amount of investment by foreign
persons in a particular company, limit the investment by foreign persons
only to a specific class of securities of a company that may have less
advantageous rights than the classes available for purchase by
domiciliaries of the countries and/or impose additional taxes on foreign
investors. Certain emerging markets may also restrict investment
opportunities in issuers in industries deemed important to national
interest. Certain 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 or for other reasons, a country
could impose temporary restrictions on foreign capital remittances. A Fund
could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation of capital, as well as by
the application to a Fund of any restrictions on investments.
In the course of investment in emerging markets, a Fund will be
exposed to the direct or indirect consequences of political, social and
economic changes in one or more emerging markets. While a Fund will manage
its assets in a manner that will seek to minimize the exposure to such
risks, there can be no assurance that adverse political, social or economic
changes will not cause a Fund to suffer a loss of value in respect of the
securities in a Fund's portfolio.
The risk also exists that an emergency situation may arise in one or
more emerging markets as a result of which trading of securities may cease
or may be substantially curtailed and prices for a Fund's securities in
such markets may not be readily available. The Corporation may suspend
redemption of a Fund's shares for any period during which an emergency
exists, as determined by the Securities and Exchange Commission (the
"SEC"). Accordingly, if a Fund believes that appropriate circumstances
exist, it will promptly apply to the SEC for a determination that an
emergency is present. During the period commencing from a Fund's
identification of such condition until the date of the SEC action, the
Fund's securities in the affected markets may be valued at fair value
determined in good faith by or under the direction of the Board of
Directors.
Volume and liquidity in most foreign markets are less than in the
U.S., and securities of many foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. Fixed commissions on
foreign securities exchanges are generally higher than negotiated
commissions on U.S. exchanges, although a Fund endeavors to achieve the
most favorable net results on its portfolio transactions. There is
generally less governmental supervision and regulation of business and
industry practices, securities exchanges, brokers, dealers and listed
companies than in the U.S. Mail service between the U.S. and foreign
countries may be slower or less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or
loss of certificates for portfolio securities. In addition, with respect to
certain emerging markets, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect a Fund's investments in those countries.
Moreover, individual emerging market economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Income from securities held by a Fund could be reduced by a
withholding tax on the source or other taxes imposed by the emerging market
countries in which a Fund makes its investments. A Fund's net asset value
may also be affected by changes in the rates or methods of taxation
applicable to a Fund or to entities in which a Fund has invested. The
Adviser will consider the cost of any taxes in determining whether to
acquire any particular investments, but can provide no assurance that the
taxes will not be subject to change.
Many emerging markets have experienced substantial, and, in some
periods, extremely high rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities markets of certain emerging
market countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries. Of these countries, some,
in recent years, have begun to control inflation through prudent economic
policies.
Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial
organizations and other financial institutions. Certain emerging market
governmental issuers have not been able to make payments of interest on or
principal of debt obligations as those payments have come due. Obligations
arising from past restructuring agreements may affect the economic
performance and political and social stability of those issuers.
Governments of many emerging market countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some
of the largest in any given country. As a result, governmental actions in
the future could have a significant effect on economic conditions in
emerging markets, which in turn, may adversely affect companies in the
private sector, general market conditions and prices and yields of certain
of the securities in a Fund's portfolio. Expropriation, confiscatory
taxation, nationalization, political, economic or social instability or
other similar developments have occurred frequently over the history of
certain emerging markets and could adversely affect a Fund's assets should
these conditions recur.
The ability of emerging market country governmental issuers to make
timely payments on their obligations is likely to be influenced strongly by
the issuer's balance of payments, including export performance, and its
access to international credits and investments. An emerging market whose
exports are concentrated in a few commodities could be vulnerable to a
decline in the international prices of one or more of those commodities.
Increased protectionism on the part of an emerging market's trading
partners could also adversely affect the country's exports and diminish its
trade account surplus, if any. To the extent that an emerging market
receives payment for its exports in currencies other than dollars or
non-emerging market currencies, its ability to make debt payments
denominated in dollars or non-emerging market currencies could be affected.
Another factor bearing on the ability of emerging market countries to
repay debt obligations is the level of international reserves of the
country. Fluctuations in the level of these reserves affect the amount of
foreign exchange readily available for external debt payments and thus
could have a bearing on the capacity of emerging market countries to make
payments on these debt obligations.
To the extent that an emerging market country cannot generate a trade
surplus, it must depend on continuing loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and on inflows of foreign investment. The access of
emerging markets to these forms of external funding may not be certain, and
a withdrawal of external funding could adversely affect the capacity of
emerging market country governmental issuers to make payments on their
obligations. In addition, the cost of servicing emerging market debt
obligations can be affected by a change in international interest rates
since the majority of these obligations carry interest rates that are
adjusted periodically based upon international rates.
Investments in emerging markets can be volatile. A Fund's share price
and yield can fluctuate daily in response to political events, changes in
the perceived creditworthiness of other nations, fluctuations in interest
rates and, to a limited extent, movements in foreign currencies.
The portion of Latin America Fund's assets invested directly in Chile
may be less than the portions invested in other countries in Latin America
because, at present, capital invested in Chile normally cannot be
repatriated for as long as five years. As such, direct investment in Chile
will be limited by a Fund's policy of not investing a percentage in
securities which are not readily marketable.
Repurchase Agreements. As a means of earning income for periods as
short as overnight, each Fund may enter into repurchase agreements with
selected banks and broker/dealers. Under a repurchase agreement, a Fund
acquires securities, subject to the seller's agreement to repurchase them
at a specified time and price. If the seller under a repurchase agreement
becomes insolvent, the Fund's right to dispose of the securities may be
restricted, or the value of the securities may decline before a Fund is
able to dispose of them. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of the securities before
repurchase of the securities under a repurchase agreement, a Fund may
encounter delay and incur costs, including a decline in the value of the
securities, before being able to sell the securities.
Emerging Markets Income Fund may enter into repurchase commitments
with any party deemed creditworthy by the Adviser, including foreign banks
and broker/dealers, if the transaction is entered into for investment
purposes and the counterparty's creditworthiness is at least equal to that
of issuers of securities which the Fund may purchase. Some repurchase
commitment transactions may not provide Emerging Markets Income Fund with
collateral marked-to-market during the term of the commitment. Emerging
Markets Growth Fund and Latin America Fund may also enter into repurchase
commitments for investment purposes for periods of 30 days or more. Such
commitments involve investment risk similar to that of debt securities.
Indexed Securities. Emerging Markets Income Fund may invest in indexed
securities, the value of which is linked to currencies, interest rates,
commodities, indices or other financial indicators ("reference
instruments"). These securities may be positively or negatively indexed, so
that appreciation of the reference instrument may produce an increase or a
decrease in the interest rate or value of the security at maturity. In
addition, the change in the interest rate or value of the security at
maturity may be some multiple of the change in the value of the reference
instrument. Thus, in addition to the credit risk of the security's issuer,
the Fund will bear the market risk of the reference instrument.
Synthetic Investments. Under certain circumstances, the Emerging
Markets Income Fund may wish to obtain the price performance of a security
without actually purchasing the security in circumstances where, for
example, the security is illiquid, or is unavailable for direct investment
or available only on less attractive terms. In such circumstances, the Fund
may invest in synthetic or derivative alternative investments ("Synthetic
Investments") that are based upon or otherwise relate to the economic
performance of the underlying securities. Synthetic Investments may include
swap transactions, notes or units with variable redemption amounts, and
other similar instruments and contracts. Synthetic Investments typically do
not represent beneficial ownership of the underlying security, usually are
not collateralized or otherwise secured by the counterparty and may or may
not have any credit enhancements attached to them. Accordingly, Synthetic
Investments involve exposure not only to the creditworthiness of the issuer
of the underlying security, changes in exchange rates and future
governmental actions taken by the jurisdiction in which the underlying
security is issued, but also to the creditworthiness and legal standing of
the counterparties involved. In addition, Synthetic Investments typically
are illiquid. As such, investments in these securities will be limited by
the Fund's policy of investing in illiquid securities.
Reverse Repurchase Agreements. Each Fund may enter into "reverse
repurchase agreements," which are repurchase agreements in which a Fund, as
the seller of the securities, agrees to repurchase them at an agreed time
and price. Each Fund maintains a segregated account in connection with
outstanding reverse repurchase agreements. A Fund will enter into reverse
repurchase agreements only when the Adviser believes that the interest
income to be earned from the investment of the proceeds of the transaction
will be greater than the interest expense of the transaction.
Borrowing. Each Fund is authorized to borrow money for purposes of
liquidity and to provide for redemptions and distributions. Each Fund will
borrow only when the Adviser believes that borrowing will benefit the Fund
after taking into account considerations such as the costs of the
borrowing. Borrowing by each Fund will involve special risk considerations.
Although the principal of each Fund's borrowings will be fixed, a Fund's
assets may change in value during the time a borrowing is outstanding, thus
increasing exposure to capital risk.
In addition, Emerging Markets Income Fund anticipates borrowing
opportunistically up to 20% of its total assets (including the amount
borrowed) for investment purposes. The borrowings would constitute
leverage, which is a speculative characteristic. Leveraging will magnify
declines as well as increases in the net asset and in the yield of the
Fund's portfolio. If the income earned on the assets obtained with borrowed
funds exceeds the interest and other expenses paid on the borrowing, the
Fund's net income will be greater than if borrowings were not used.
Conversely, however, if the income on the assets is insufficient to cover
the cost of borrowing, the Fund's net income will be less than if
borrowings were not used.
Brady Bonds. Each Fund, with the exception of International Growth and
Income Fund, may invest in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to public and
private entities in certain emerging markets for new bonds in connection
with debt restructurings under a debt restructuring plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady
Plan"). Brady Plan debt restructurings have been implemented to date in
Argentina, Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador,
Mexico, Morocco, Nigeria, the Philippines, Poland and Uruguay.
Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the
dollar) and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate
bonds or floating-rate bonds, are generally collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as
the bonds.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity;
the collateralized interest payments; the uncollateralized interest
payments; and any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constituting the "residual risk"). In light
of the residual risk of Brady Bonds and the history of defaults of
countries issuing Brady Bonds with respect to commercial bank loans by
public and private entities, investments in Brady Bonds may be viewed as
speculative.
Loan Participations and Assignments. Emerging Markets Income Fund,
Emerging Markets Growth Fund and Latin America Fund may invest in fixed-
and floating- rate loans arranged through private negotiations between an
issuer of emerging market debt instruments and one or more financial
institutions ("lenders"). Generally, a Fund's investments in loans are
expected to take the form of loan participations and assignments of
portions of loans from third parties.
When investing in a participation, a Fund will typically have the
right to receive payments only from the lender to the extent the lender
receives payments from the borrower, and not from the borrower itself.
Likewise, a Fund typically will be able to enforce its rights only through
the lender, and not directly against the borrower. As a result, the Fund
will assume the credit risk of both the borrower and the lender that is
selling the participation.
When a Fund purchases assignments from lenders, it will acquire direct
rights against the borrower, but these rights and a Fund's obligations may
differ from, and be more limited than those held by the assigning lender.
Loan participations and assignments may be illiquid. Please refer to
"Special Risk Factors_Illiquid Securities" for more information.
Investment Company Securities. Securities of other investment
companies may be acquired by each Fund, to the extent permitted under the
1940 Act. Investment companies incur certain expenses such as management,
custodian, and transfer agency fees, and, therefore, any investment by a
Fund in shares of other investment companies may be subject to such
duplicate expenses.
Securities Lending. International Growth and Income Fund may lend
portfolio securities to registered broker/dealers or other financial
institutions as a means of increasing its income. These loans may not
exceed 33 13% of the Fund's total assets taken at market value. Loans of
portfolio securities will be secured continuously by collateral consisting
of cash, U.S. Government securities, or liquid high grade debt obligations
that are maintained at all times in an amount at least equal to the current
market value of the loaned securities. The Fund will earn any interest or
dividends paid on the loaned securities and may share with the borrower
some of the income received on the collateral for the loan, or will be paid
a premium for the loan. The risks of lending portfolio securities, as with
other extensions of secured credit, consist of possible delays in receiving
additional collateral or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially. Loans
will be made to registered broker/dealers or other financial institutions
deemed by the Adviser to be of good standing and will not be made unless,
in the judgment of the Adviser, the consideration to be earned from such
loans would justify the risk.
Illiquid Securities. Each Fund may invest a portion of its assets in
securities for which there is not an active trading market, or which have
resale restrictions. Such securities may have been acquired through private
placements (transactions in which the securities acquired have not been
registered with the SEC). These illiquid securities generally offer a
higher return than more readily marketable securities, but carry the risk
that each Fund may not be able to dispose of them at an advantageous time
or price. Some restricted securities purchased by each Fund, however, may
be considered liquid despite resale restrictions since they can be sold to
other qualified institutional buyers under a rule of the SEC (Rule 144A).
The absence of a trading market can make it difficult to ascertain a market
value for illiquid securities. Disposing of illiquid securities may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for a Fund to sell them promptly at an acceptable price. Upon
approval from a Fund's Board of Directors, the Adviser may determine which
Rule 144A securities will be considered liquid.
Investing in Small Companies. There is typically less publicly
available information concerning foreign and smaller companies than for
domestic and larger, more established companies. Some small companies have
limited product lines, distribution channels and financial and managerial
resources. Also, because smaller companies normally have fewer shares
outstanding than larger companies and trade less frequently, it may be more
difficult for a Fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices. Some of the
companies in which a Fund may invest may distribute, sell or produce
products which have recently been brought to market and may be dependent on
key personnel with varying degrees of experience.
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 the
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, a 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 of 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 a Fund's portfolio resulting from securities markets or
currency exchange rate fluctuations, to protect a 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 a 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 a 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 a Fund to
utilize these Strategic Transactions successfully will depend on the
Adviser's ability to predict pertinent market movements, which cannot be
assured. A Fund will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments.
Strategic Transactions involving financial futures and options thereon
will be purchased, sold or entered into only for bona fide hedging, risk
management or portfolio management purposes and not for leveraging
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 a 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 a Fund can realize on its investments or cause a Fund to hold
a security it might otherwise sell. The use of currency transactions can
result in a Fund's 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
a Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a 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, a Fund might not be able to close out a transaction without
incurring substantial losses, if at all. Although the use of futures
contracts 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. The Strategic Transactions that a Fund may use and
some of their risks are described more fully in the Funds' Statement of
Additional Information.
Additional Investment Information. It is anticipated that, under normal
circumstances, the portfolio turnover rate for Global Blue Chip Fund,
International Growth and Income Fund, Emerging Markets Growth Fund and
Latin America Fund will not exceed 75%. Emerging Markets Income Fund may
have a portfolio turnover rate that exceeds 100%. Higher portfolio turnover
involves correspondingly greater brokerage commissions or other transaction
costs. Higher portfolio turnover (100% or more) may result in the
realization of greater net short-term or long-term capital gains. See
"Dividends and Taxes" in the Statement of Additional Information.
Each Fund has adopted certain fundamental policies which are described
in the Statement of Additional Information and cannot be changed without a
vote of shareholders and which are designed to reduce each Fund's
investment risk. Investment objectives and policies of each Fund that are
not incorporated into any of the fundamental investment restrictions
referred to above may be changed by the Board of Directors of the Fund
without shareholder approval.
As a matter of fundamental policy, each Fund may not borrow money
except as permitted under Federal law. Further, as a matter of
non-fundamental policy, each Fund, with the exception of Emerging Markets
Income Fund, may not borrow money in an amount greater than 5% of total
assets, except for temporary or emergency purposes, although each Fund may
engage up to 5% of total assets in reverse repurchase agreements or dollar
rolls.
As a matter of fundamental policy, each Fund may not make loans except
through the lending of portfolio securities, the purchase of debt
securities or through repurchase agreements. Each Fund, with the exception
of International Growth and Income Fund, has adopted a non-fundamental
policy restricting the lending of portfolio securities to no more than 5%
of total assets.
A complete description of these and other policies and restrictions is
contained under "Investment Restrictions" in the Funds' Statement of
Additional Information.
INVESTMENT MANAGER AND UNDERWRITER
Investment Manager. The Funds retain the investment management firm of
Scudder Kemper Investments, Inc. (the "Adviser") a Delaware corporation, to
manage each Fund's daily investment and business affairs subject to the
policies established by the Corporation's Board of Directors. The Directors
have overall responsibility for the management of the Funds under Maryland
law.
Under the Investment Management Agreement with the Adviser, dated
December 31, 1997, each Fund is responsible for all of its expenses,
including fees and expenses incurred in connection with membership in
investment company organizations; fees and expenses of a Fund's accounting
agent; brokers' commissions; legal, auditing and accounting expenses; taxes
and governmental fees; the fees and expenses of the transfer agent; the
expenses of and the fees for registering and qualifying securities for
sale; the fees and expenses of Directors, officers and employees of the
Corporation who are not affiliated with the Adviser; the cost of printing
and distributing reports and notices to shareholders; and the fees and
disbursements of custodians.
The Adviser receives an investment management fee from each Fund for
these services. The fee is payable monthly, provided that a Fund will make
such interim payments as may be requested by the Adviser not to exceed 75%
of the amount of the fee then accrued on the books of the Fund and unpaid.
The Adviser is located at 345 Park Avenue, New York, New York.
Scudder Kemper Investments, Inc. an investment counsel firm, acts as
investment adviser to the Fund. This organization, the predecessor of which
is Scudder, Stevens & Clark, Inc. ("Scudder"), is one of the most
experienced investment counsel firms in the U.S. It was established as a
partnership in 1919 and pioneered the practice of providing investment
counsel to individual clients on a fee basis. In 1953 the Adviser
introduced Scudder International Fund, Inc., the first mutual fund
available in the U.S. investing internationally in securities of issuers in
several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On June 26, 1997, the
Adviser's predecessor entered into an agreement with Zurich Insurance
Company ("Zurich") pursuant to which the predecessor and Zurich agreed to
form an alliance. On December 31, 1997, Zurich acquired a majority interest
in Scudder, and Zurich made its subsidiary Zurich Kemper Investments, Inc.,
a part of the predecessor organization. The predecessor's name has been
changed to Scudder Kemper Investments, Inc.
Founded in 1872, Zurich is a multinational, public corporation
organized under the laws of Switzerland. Its home office is located at
Mythenquai 2, 8002 Zurich, Switzerland. Historically, Zurich's earnings
have resulted from its operations as an insurer as well as from its
ownership of its subsidiaries and affiliated companies (the "Zurich
Insurance Group"). Zurich and the Zurich Insurance Group provide an
extensive range of insurance products and services and have branch offices
and subsidiaries in more than 40 countries throughout the world.
The Funds each pay the Adviser an investment management fee, payable
monthly, at the annual rates shown below.
Global Blue Chip Fund 1.00% for the first
$250 million
0.95% for the next
$750 million
0.90% over $1 billion
International Growth and Income Fund 1.00%
Emerging Markets Income Fund 1.00%
Emerging Markets Growth Fund 1.25%
Latin America Fund 1.25% for the first
$250 million
1.20% for the next
$750 million
1.15% over $1 billion
For a one year period, the Adviser has agreed to maintain its annual
management fee for each Fund at the following rates:
Global Blue Chip Fund 0.85
%
International Growth and Income Fund 0.70
%
Emerging Markets Income Fund 0.30
%
Emerging Markets Growth Fund 0.90
%
Latin America Fund 0.90
%
The expenses of the Fund, and of other investment companies investing
in foreign securities can be expected to be higher than for investment
companies investing primarily in domestic securities since the costs of
operation are higher, including custody and transaction costs for foreign
securities and investment management fees.
A Team Approach to Investing. Each Fund is managed by a team of investment
professionals who each play an important role in the Fund's management
process. Team members work together to develop investment strategies and
select securities for each Fund's portfolio. They are supported by the
Adviser's large staff of economists, research analysts, traders, and other
investment specialists who work in the Adviser's offices across the United
States and abroad. The Adviser believes its team approach benefits Fund
investors by bringing together many disciplines and leveraging its
extensive resources.
Global Blue Chip Fund. Lead Portfolio Manager Diego Espinosa joined
the Adviser in 1996. Mr. Espinosa is responsible for development of the
Fund's strategy and management of the portfolio on a daily basis.
Mr. Espinosa has four years of direct investment experience as both an
analyst and a portfolio manager. Prior to that, he worked in commercial
banking for two years and as a management consultant for three years.
William E. Holzer, Portfolio Manager, also has day-to-day responsibility
for the Fund's worldwide strategy and investment themes. Mr. Holzer has
over 20 years' experience in global investing - first as an analyst and
later as a portfolio manager. He joined the Adviser in 1980. Nicholas
Bratt, Portfolio Manager, directs the Fund's overall global equity
investment strategies. Mr. Bratt joined the Adviser as a portfolio manager
in 1976.
International Growth and Income Fund. Lead Portfolio Manager Sheridan
Reilly joined the Adviser in 1995 and has over 10 years of experience as an
international economic analyst in the financial service industry where he
developed strategies for global portfolios, currency hedging, and foreign
equity markets. Portfolio Manager Irene Cheng joined the Adviser in 1993.
Ms. Cheng, who has over 13 years of industry experience, including five
years as a portfolio manager, focuses on portfolio management and research
for the Adviser's international equity accounts.
Emerging Markets Income Fund. Lead Portfolio Manager M. Isabel
Saltzman has responsibility for the Fund's investment strategies and
day-to-day management. Ms. Saltzman, who joined the Adviser in 1990 as a
portfolio manager, has been involved in foreign finance and investing since
1979 and contributes special expertise in Latin America. Susan E. Dahl,
Portfolio Manager, assists with the development of investment strategy.
Ms. Dahl, who has over six years of emerging markets investment experience
as a portfolio manager, has worked with the Adviser since 1987.
Emerging Markets Growth Fund. Joyce E. Cornell, Lead Portfolio
Manager, has responsibility for the Fund's day-to-day management and
investment strategies. Ms. Cornell has been a portfolio manager since 1993,
and joined the Adviser in 1991 after five years of investment experience as
a research analyst. Andre DeSimone, Portfolio Manager, joined the Adviser
in 1997 after spending two years as CEO of a stock brokerage company in
Kenya. Prior to that, he was a vice president of an investment firm.
Mr. DeSimone assists with the Fund's research and investment strategy.
Latin America Fund. Lead Portfolio Manager Tara C. Kenney has
responsibility for the Fund's investment strategy and oversees its daily
operation. Ms. Kenney has over ten years of financial industry experience
specializing in the Latin America region. She was a vice president of
corporate finance for an investment banking firm for seven years, and most
recently, a portfolio manager for two years. Edmund B. Games, Jr.,
Portfolio Manager, assists with the Fund's research and investment
strategy. Mr. Games joined the Adviser's equity research area in 1960 and
has focused on Latin American stocks since 1988. He has been a portfolio
manager with the Adviser since 1991. Paul H. Rogers, Portfolio Manager, is
primarily responsible for research on Latin American corporations, joined
the Adviser in 1994 and has over 10 years of investment experience as an
analyst and a portfolio manager in the Latin American region.
Principal Underwriter. Pursuant to an underwriting and distribution
services agreement (the "distribution agreement") with the Corporation,
Kemper Distributors, Inc. ("KDI"), 222 South Riverside Plaza, Chicago,
Illinois, 60606, a subsidiary of the Adviser, is the principal underwriter
and distributor of each Fund's shares and acts as agent of each Fund in the
sale of its shares. KDI bears all of its expenses of providing services
pursuant to the distribution agreement, including the payment of any
commissions. KDI provides for the preparation of advertising or sales
literature and bears the cost of printing and mailing prospectuses to
persons other than shareholders. KDI bears the cost of qualifying and
maintaining the qualification of Fund shares for sale under the securities
laws of the various states and each Fund bears the expense of registering
its shares with the SEC. KDI may enter into related selling group
agreements with various broker-dealers, including affiliates of KDI, that
provide distribution services to investors. KDI also may provide some of
the distribution services.
Class A Shares. KDI receives no compensation from the 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 out a portion of this sales charge or
allows concessions or discounts to firms for the sale of each Fund's
Class A shares.
Class B Shares. For its services under the Class B distribution plan,
KDI receives a fee from each Fund, payable monthly, at the annual rate of
0.75% of average daily net assets of each Fund attributable to its 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 Class C distribution plan,
KDI receives a fee from each Fund, payable monthly, at the annual rate of
0.75% of average daily net assets of each Fund attributable to its 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".
Rule 12b-1 Plans. Since each distribution plan provides for fees payable
as an expense of each of the Class B shares and the Class C shares that are
used by KDI to pay for distribution services for those classes, each
agreement is approved and reviewed separately for the Class B shares and
the Class C shares in accordance with Rule 12b-1 under the 1940 Act, which
regulates the manner in which an investment company may, directly or
indirectly, bear the expenses of distributing its shares.
If a Rule 12b-1 Plan (the "Plan") for a class is terminated in
accordance with its terms, the obligation of a Fund to make payments to KDI
pursuant to such 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 a 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. (See "Principal Underwriter" for more
information.)
Administrative Services. KDI also provides information and administrative
services for shareholders of each Fund pursuant to an administrative
services agreement with the Corporation (the "administrative agreement").
KDI may enter into related arrangements with various financial services
firms, such as broker-dealer firms or banks ("firms"), that provide
services and facilities for their customers or clients who are shareholders
of the Funds. Such administrative services and assistance may include, but
are not limited to, establishing and maintaining shareholder accounts and
records, processing purchase and redemption transactions, answering routine
inquiries regarding each Fund and its special features, and such other
services as may be agreed upon from time to time and permitted by
applicable statute, rule or regulation. KDI bears all of its expenses of
providing services pursuant to the administrative agreement, including the
payment of any service fees. For services under the administrative
agreements, each Fund pays KDI a fee, payable monthly, at the annual rate
of up to 0.25% of average daily net assets of each of Class A, B and C
shares of such Fund. KDI then pays each firm a service fee at an annual
rate of up to 0.25% of net assets of each of Class A, B and C shares
maintained and serviced by the firm. Firms to which service fees are paid
may include affiliates of KDI.
Class A Shares. For Class A shares, a firm becomes eligible for the
service fee based upon assets in the Fund accounts maintained and serviced
by the firm commencing in the month following the month of purchase and the
fee continues until terminated by KDI or the Fund. The fees are calculated
monthly and paid quarterly.
Class B and Class C Shares. KDI currently advances to firms the
first-year service fee at a rate of up to 0.25% of the purchase price of
Class B and Class C shares of a Fund. For periods after the first year, KDI
currently intends to pay firms a service fee at a rate of up to 0.25%
(calculated monthly and paid quarterly) of average daily net assets
attributable to each of Class B and Class C shares maintained and serviced
by the firm during such period. After the first year, a firm becomes
eligible for the quarterly service fee and the fee continues until
terminated by KDI or the Fund.
KDI also may provide some of the above services and may retain any
portion of the fee under the administrative agreements not paid to firms to
compensate itself for administrative functions performed for each 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 a Fund's
records and it is intended that KDI will pay all of the administrative
services fee that it receives from each 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. 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.
Custodian, Transfer Agent and Shareholder Service Agent. Brown Brothers
Harriman & Co., as custodian, has custody of all securities and cash of
each Fund. Pursuant to a services agreement with Kemper Service Company, an
subsidiary of the Adviser, Kemper Service Company serves as "Shareholder
Service Agent" of the Funds and, as such, performs all of the duties as
transfer agent and dividend-paying agent. For a description of transfer
agent and shareholder service agent fees payable to Kemper Service Company
and the Shareholder Service Agent, see "Investment Manager and Underwriter"
in the Statement of Additional Information.
Fund Accounting Agent. Scudder Fund Accounting Corporation, Two
International Place, Boston, Massachusetts, 02110-4103, a subsidiary of the
Adviser, computes net asset value for each Fund. Each Fund pays Scudder
Fund Accounting Corporation an annual fee.
Portfolio Transactions. The Adviser places all orders for purchases and
sales of a Fund's securities. Subject to seeking best execution of orders,
it may consider sales of shares of a Fund and other funds managed by the
Adviser or its affiliates as a factor in selecting broker-dealers. See
"Portfolio Transactions" in the Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Other Distributions. Each of Emerging Markets Growth Fund,
Global Blue Chip Fund and Latin America Fund normally distributes annual
dividends of net investment income, and any net realized short-term and
long-term capital gains at least annually. International Growth and Income
Fund intends to distribute dividends from its net investment income
semiannually in June and December. Emerging Markets Income Fund intends to
distribute dividends from its net investment income monthly. Global Blue
Chip Fund, International Growth and Income and Emerging Markets Income Fund
intend to distribute net realized capital gains after utilization of
capital loss carryforwards, if any, in November or December. Emerging
Markets Growth Fund and Latin America Fund each intend to distribute any
dividends from net investment income and any net realized capital gains
after utilization of capital loss carryforwards, if any, in December.
A Fund may make the election permitted under Section 853 of the Code.
If this election is made, shareholders may be able to claim a credit or
deduction on their income tax returns for their pro rata portion of
qualified taxes paid by the Fund to foreign countries. Additional
distributions may be made at a later date, if necessary.
For all the Funds, any dividends or capital gains distributions
declared in October, November or December with a record date in such a
month and paid during the following January will be treated by shareholders
for federal income tax purposes as if received on December 31 of the
calendar year declared. According to preference, shareholders may receive
distributions in cash or have them reinvested in additional shares of a
Fund. If an investment is in the form of a retirement plan, all dividends
and capital gains distributions must be reinvested in the shareholder's
account.
Dividends paid by a Fund with respect to each class of its shares will
be calculated in the same manner, at the same time and on the same day. The
level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares
primarily as a result of the distribution services fee applicable to
Class B and Class C shares. Distributions of capital gains, if any, will be
paid in the same proportion for each class.
Income and capital gain dividends, if any, of a Fund will be credited
to shareholder accounts in full and fractional shares of the same class of
that Fund at net asset value on the reinvestment date, except that, upon
written request to the Shareholder Service Agent, a shareholder may select
one of the following options:
(1) To receive dividends from income and short-term capital gain in
cash and net 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 shares of the same class of that same Fund. However, upon
written request to the Shareholder Service Agent, a shareholder may elect
to have dividends of a Fund invested 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
will reinvest dividend checks (and future dividends) in shares of that same
Fund and class if checks are returned as undeliverable. Dividends and other
distributions of a Fund in the aggregate amount of $10 or less are
automatically reinvested in shares of the Fund unless the shareholder
requests that such policy not be applied to the shareholder's account.
Taxes. Each Fund intends to qualify as a regulated investment company
under Subchapter M of the Code and, if so qualified, generally will not be
liable for federal income taxes to the extent its earnings are distributed.
To so qualify, the Fund must satisfy certain income, asset diversification
and distribution requirements annually. Dividends derived from net
investment income and net short-term capital gains are taxable to
shareholders as ordinary income and properly designated net capital gain
dividends are taxable to shareholders at the applicable mid-term or
long-term capital gains rate regardless of how long the shares have been
held and whether received in cash or shares. Dividends declared in October,
November or December to shareholders of record as of a date in one of those
months and paid during the following January are treated as paid on
December 31 of the calendar year declared. A portion of the dividends paid
by the Funds may qualify for the dividends received deduction available to
corporate shareholders.
A dividend received shortly after the purchase of shares reduces the
net asset value of the shares by the amount of the dividend and, although
in effect a return of capital, will be taxable to the shareholder. Thus,
investors should consider the tax implications of buying shares just prior
to a dividend. The price of shares purchased at that time includes the
amount of the forthcoming dividend, which nevertheless will be taxable to
them.
A sale or exchange of shares is a taxable event that may result in
gain or loss that will be a capital gain or loss if held by the shareholder
as a capital asset, and may qualify for reduced tax rates applicable to
certain capital gains, depending upon the shareholder's holding period for
the shares. Further information relating to tax consequences is contained
in the Statement of Additional Information. Shareholders of a Fund may be
subject to state, local and foreign taxes on Fund distributions and
dispositions of fund shares. Shareholders should consult their own tax
advisors regarding the particular tax consequences of an investment in a
Fund. 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. Any amounts so
withheld are not an additional tax, and may be applied against the affected
shareholder's U.S. federal income tax liability.
A Fund's investment income derived from foreign securities may be
subject to foreign income taxes withheld at the source. Because the amount
of a Fund's investments in various countries will change from time to time,
it is not possible to determine the effective rate of such taxes in
advance. A Fund may make the election permitted under Section 853 of the
Code. If this election is made, shareholders may be able to claim a credit
or deduction on their income tax returns for their pro rata portion of
qualified taxes paid by the Fund to foreign countries.
After each transaction, shareholders will receive a confirmation
statement giving complete details of the transaction except that statements
will be sent quarterly for transactions involving reinvestment of dividends
and periodic investment and redemption programs. Information for income tax
purposes, including, when appropriate, information regarding any foreign
taxes and credits, will be provided after the end of the calendar year.
Shareholders are encouraged to retain copies of their account confirmation
statements or year-end statements for tax reporting purposes. However,
those who have incomplete records may obtain historical account transaction
information at a reasonable fee.
When more than one shareholder resides at the same address, certain
reports and communications to be delivered to such shareholders may be
combined in the same mailing package, and certain duplicate reports and
communications may be eliminated. Similarly, account statements to be sent
to such shareholders may be combined in the same mailing package or
consolidated into a single statement. However, a shareholder may request
that the foregoing policies not be applied to the shareholder's account.
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 the Fund's
net assets attributable to that class by the number of shares of that class
outstanding. The per share net asset value of the Class B and Class C
shares of a Fund will generally be lower than that of the Class A shares of
the Fund because of the higher expenses borne by the Class B and Class C
shares. The net asset value of shares of a Fund is computed as of the close
of regular trading 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, Martin Luther King 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. All
other securities may be valued at fair value as determined in good faith by
or under the direction of the Board of Directors.
PURCHASE OF SHARES
Alternative Purchase Arrangements. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold
without an initial sales charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically convert to Class A shares
six years after issuance. Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses than Class A shares, are
subject to a contingent deferred sales charge payable upon certain
redemptions within the first year following purchase, and do not convert
into another class. When placing purchase orders, investors must specify
whether the order is for Class A, Class B or Class C shares.
The primary distinctions among the classes of each Fund's shares lie
in their initial and contingent deferred sales charge structures and in
their ongoing expenses, including asset-based sales charges in the form of
Rule 12b-1 distribution fees. These differences are summarized in the table
below. See also, "Summary of Expenses." Each class has distinct advantages
and disadvantages for different investors, and investors may choose the
class that best suits their circumstances and objectives.
Sales Charge Annual 12b-1 Fees Other Information
(as a % of average
daily
net assets)
Class A Maximum initial sales None Initial sales charge
charge of 5.75% of the waived or reduced for
public offering price certain purchases
Class B Maximum contingent 0.75% Shares convert to
deferred sales charge Class A shares six
of 4% of redemption years after issuance
proceeds; declines to
zero after six years
Class C Contingent deferred 0.75% No conversion feature
sales charge of 1% of
redemption proceeds
for redemptions made
during first year
after purchase
The minimum initial investment for each class of 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 value of 2% or more of the certificate
value is normally required).
Initial Sales Charge Alternative_Class A Shares. The public offering price
of Class A shares for purchasers choosing the initial sales charge
alternative is the net asset value plus a sales charge, as set forth below.
Amount of Purchase As a Sales Charge Allowed to
Percentage as a Dealers as a
of Percentage of Percentage
Offering Net Asset of
Price Value* Offering
Price
Less than $50,000 5.75% 6.10% 5.20%
$50,000 but less than $100,000 4.50 4.71 4.00
$100,000 but less than $250,000 3.50 3.63 3.00
$250,000 but less than $500,000 2.60 2.67 2.25
$500,000 but less than $1 million 2.00 2.04 1.75
$1 million and over 0.00** 0.00** ***
_________
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales
charge as discussed below.
*** Commission is payable by KDI as discussed below.
Each Fund receives the entire net asset value of all its 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 re-allow 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 the Adviser does not serve
as investment manager and KDI does not serve as Distributor ("non-Kemper
Fund") provided that: (a) the investor has previously paid either an
initial sales charge in connection with the purchase of the non-Kemper Fund
shares redeemed or a contingent deferred sales charge in connection with
the redemption of the non-Kemper Fund shares, and (b) the purchase of Fund
shares is made within 90 days after the date of such redemption. To make
such a purchase at net asset value, the investor or the investor's dealer
must, at the time of purchase, submit a request that the purchase be
processed at net asset value pursuant to this privilege. KDI may in its
discretion compensate firms for sales of Class A shares under this
privilege at a commission rate of 0.50% of the amount of Class A shares
purchased. The redemption of the shares of the non-Kemper Fund is, for
Federal income tax purposes, a sale upon which a gain or loss may be
realized.
Class A shares of a Fund may be purchased at net asset value by:
(a) any purchaser provided that the amount invested in such Fund or other
Kemper 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), a participant-directed non-qualified deferred compensation
plan described in Code Section 457 or a participant-directed qualified
retirement plan described in Code Section 403(b)(7) which is not sponsored
by a K-12 school district, provided in each case that such plan has not
less than 200 eligible employees (the "Large Order NAV Purchase
Privilege"). Redemption within two years of shares purchased under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge. See "Redemption or Repurchase of Shares_Contingent Deferred
Sales Charge_Large Order NAV Purchase Privilege."
KDI may at its discretion compensate investment dealers or other
financial services firms in connection with the sale of Class A shares of a
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 record keeping system made available through Kemper Service
Company. For purposes of determining the appropriate commission percentage
to be applied to a particular sale, KDI will consider the cumulative amount
invested by the purchaser in a Fund and other Kemper 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 is
also applicable.
As of February 1, 1996, Class A shares of a Fund or any other Kemper
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-transferable 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 a Fund at net asset value
under this privilege is not available if another net asset value purchase
privilege also applies.
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 may be sold at net asset value in any amount to:
(a) officers, trustees, directors, employees (including retirees) and sales
representatives of a 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 Funds, for themselves or
their spouses or dependent children; (c) shareholders who owned shares of
Kemper Value Fund, Inc. ("KVF") on September 8, 1995, and have continuously
owned shares of KVF (or a Kemper Fund acquired by exchange of KVF shares)
since that date, for themselves or members of their families; (d) any
trust, pension, profit-sharing or other benefit plan for only such persons;
(e) 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; and (f) 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. Class A shares may
be sold at net asset value in any amount to selected employees (including
their spouses and dependent children) of banks and other financial services
firms that provide administrative services related to order placement and
payment to facilitate transactions in shares of the Funds 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 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 a Fund's Class A shares at net asset value through reinvestment
programs described in the prospectuses of such trusts that have such
programs. Class A shares of a Fund may be sold at net asset value through
certain investment advisers registered under the 1940 Act and other
financial services firms that adhere to certain standards established by
KDI, including a requirement that such shares be sold for the benefit of
their clients participating in an investment advisory program under which
such clients pay a fee to the investment adviser or other firm for
portfolio management and other services. Such shares are sold for
investment purposes and on the condition that they will not be resold
except through redemption or repurchase by the Funds. The Funds may also
issue Class A shares at net asset value in connection with the acquisition
of the assets of or merger or consolidation with another investment
company, or to shareholders in connection with the investment or
reinvestment of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by
any "purchaser" which includes: an individual; or an individual, his or her
spouse and children under the age of 21; or a trustee or other fiduciary of
a single trust estate or single fiduciary account; or an organization
exempt from federal income tax under Section 501(c)(3) or (13) of the Code;
or a pension, profit- sharing or other employee benefit plan whether or not
qualified under Section 401 of the Code; or other organized group of
persons whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the
purchase of redeemable securities of a registered investment company at a
discount. In order to qualify for a lower sales charge, all orders from an
organized group will have to be placed through a single investment dealer
or other firm and identified as originating from a qualifying purchaser.
Deferred Sales Charge Alternative_Class B Shares. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset
value per share without any sales charge at the time of purchase. Since
Class B shares are being sold without an initial sales charge, the full
amount of the investor's purchase payment will be invested in Class B
shares for his or her account. A contingent deferred sales charge may be
imposed upon redemption of Class B shares. See "Redemption or Repurchase of
Shares_Contingent Deferred Sales Charge_Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale
at a commission rate of up to 3.75% of the amount of Class B shares
purchased. KDI is compensated by 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 of the Class B shares. The purpose of the conversion
feature is to relieve holders of Class B shares from the distribution
services fee when the shares 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 a rate of 0.75% of the
purchase price of such shares. For periods after the first year, KDI
currently intends to pay firms for sales of Class C shares a distribution
fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by each Fund for services as distributor and principal
underwriter for Class C shares. See "Investment Manager and Underwriter."
Which Arrangement is Best for You? The decision as to which class of
shares provides the most 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 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 are currently
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 a Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on
the amount of shares of a Fund sold under the following conditions: (i) the
purchased shares are held in a Kemper IRA account, (ii) the shares are
purchased as a direct "roll over" of a distribution from a qualified
retirement plan account maintained on a participant subaccount record
keeping system provided by Kemper Service Company, (iii) the registered
representative placing the trade is a member of ProStar, a group of persons
designated by 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 or other compensation, to firms
that sell shares of the Funds. Non cash compensation includes luxury
merchandise and trips to luxury resorts. In some instances, such discounts,
commissions or other incentives will be offered only to certain firms that
sell or are expected to sell during specified time periods certain minimum
amounts of shares of the Funds, 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 in good order by KDI of the order accompanied by payment. However,
orders received by dealers or other financial services firms prior to the
determination of net asset value (see "Net Asset Value") and received in
good order 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"). Each Fund reserves the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may
take significantly longer for a check drawn on a foreign bank than for a
check drawn on a domestic bank. Therefore, if an order is accompanied by a
check drawn on a foreign bank, funds must normally be collected before
shares will be purchased. See "Purchase and Redemption of Shares" in the
Statement of Additional Information.
Investment dealers and other firms provide varying arrangements for
their clients to purchase and redeem the Funds' shares. Some may establish
higher minimum investment requirements than set forth above. Firms may
arrange with their clients for other investment or administrative services.
Such firms may independently establish and charge additional amounts to
their clients for such services, which charges would reduce the clients'
return. Firms also may hold the Funds' 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 the
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 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. This prospectus should be read in connection with
such firms' material regarding their fees and services.
Each Fund reserves the right to withdraw all or any part of the
offering made by this prospectus and to reject purchase orders for any
reason. Also, from time to time, each 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.
Tax Identification Number. Be sure to complete the Tax Identification
Number section of the Fund's application when you open an account. Federal
tax law requires each Fund to withhold 31% of taxable dividends, capital
gains distributions and redemption and exchange proceeds from accounts
(other than those of certain exempt payees) without a correct certified
Social Security or tax identification number and certain other certified
information or upon notification from the IRS or a broker that withholding
is required. Each Fund reserves the right to reject new account
applications without a correct certified Social Security or tax
identification number. The Fund also reserves the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the applicable Fund with a tax identification
number during the 30-day notice period. Shareholders should direct their
inquiries to Kemper Service Company, 811 Main Street, Kansas City, Missouri
64105-2005 or to the firm from which they received this prospectus.
REDEMPTION OR REPURCHASE OF SHARES
General. Any shareholder may require a Fund to redeem his or her shares.
When shares are held for the account of a shareholder by a Fund's transfer
agent, the shareholder may redeem such shares by sending a written request
with signatures guaranteed to Kemper Funds, Attention: Redemption
Department, P.O. Box 419557, Kansas City, Missouri 64141-6557. When
certificates for shares have been issued, they must be mailed to or
deposited with the Shareholder Service Agent, along with a duly endorsed
stock power and accompanied by a written request for redemption. Redemption
requests and a stock power must be endorsed by the account holder with
signatures guaranteed by a commercial bank, trust company, savings and loan
association, federal savings bank, member firm of a national securities
exchange or other eligible financial institution. The redemption request
and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional
documentation may be requested, and a signature guarantee is normally
required, from institutional and fiduciary account holders, such as
corporations, custodians (e.g., under the Uniform Transfers to Minors Act),
executors, administrators, trustees or guardians.
The redemption price for shares of a class of a Fund will be the net
asset value per share of that class 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 a 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"), the redemption of Class B shares within six
years may be subject to a contingent deferred sales charge (see "Contingent
Deferred Sales Charge_Class B Shares" below), and the redemption of Class C
shares within the first year following purchase may be subject to a
contingent deferred sales charge (see "Contingent Deferred Sales
Charge_Class C Shares" below).
Because of the high cost of maintaining small accounts, the Fund may
assess a quarterly fee of $9 on any account with a balance below $1,000 for
the quarter. The fee will not apply to accounts enrolled in an automatic
investment program, Individual Retirement Accounts or employer sponsored
employee benefit plans using the subaccount record-keeping system made
available through the Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited
wire transfer redemptions and EXPRESS-Transfer transactions (see "Special
Features") and exchange transactions for individual and institutional
accounts and pre- authorized telephone redemption transactions for certain
institutional accounts. Shareholders may choose these privileges on the
account application or by contacting the Shareholder Service Agent for
appropriate 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 telephonic instructions
are genuine. The shareholder will bear the risk of loss, including loss
resulting from fraudulent or unauthorized transactions, so long as
reasonable verification procedures are followed. Verification procedures
include recording instructions, requiring certain identifying information
before acting upon instructions and sending written confirmations.
Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of
record, normally a telephone request or a written request by any one
account holder without a signature guarantee is sufficient for redemptions
by individual or joint account holders, and trust, executor and guardian
account holders (excluding custodial accounts for gifts and transfers to
minors), provided the trustee, executor or guardian is named in the account
registration. Other institutional account holders and guardian account
holders of custodial accounts for gifts and transfers to minors may
exercise this special privilege of redeeming shares by telephone request or
written request without signature guarantee subject to the same conditions
as individual account holders and subject to the limitations on liability
described under "General" above, provided that this privilege has been
pre-authorized by the institutional 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. Each Fund reserves
the right to terminate or modify this privilege at any time.
Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other
financial services firm to KDI, which each 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 of the Fund 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 of a class of the Fund 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 of $250,000 or
more may be delayed by the Fund for up to seven days if the Fund or the
Shareholder Servicing Agent 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. No Fund is
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. Each Fund currently does not
charge the account holder for wire transfers. The account holder is
responsible for any charges imposed by the account holder's firm or bank.
There is a $1,000 wire redemption minimum (including any contingent
deferred sales charge). To change the designated account to receive wire
redemption proceeds, send a written request to the Shareholder Service
Agent with signatures guaranteed as described above or contact the firm
through which shares of the Fund were purchased. Shares purchased by check
or through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed by
wire transfer until such shares have been owned for at least 10 days.
Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. Each Fund reserves the right
to terminate or modify this privilege at any time.
Contingent Deferred Sales Charge_Large Order NAV Purchase Privilege. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if
they are redeemed during the second year after 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), 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 discretionary commission
applicable to such Large Order NAV Purchase.
Contingent Deferred Sales Charge_Class B Shares. A contingent deferred
sales charge may be imposed upon redemption of Class B shares. There is no
such charge upon redemption of any share appreciation or reinvested
dividends on Class B shares. The charge is computed at the following rates
applied to the value of the shares redeemed, excluding amounts not subject
to the charge.
Year of Redemption After Purchase Contingent
Deferred
Sales Charge
First 4%
Second 3%
Third 3%
Fourth 2%
Fifth 2%
Sixth 1%
The contingent deferred sales charge will be waived: (a) in the event
of the total disability (as evidenced by a determination by the federal
Social Security Administration) of the shareholder (including a registered
joint owner) occurring after the purchase of the shares being redeemed,
(b) in the event of the death of the shareholder (including a registered
joint owner), (c) for redemptions made pursuant to a systematic withdrawal
plan (see "Special Features_Systematic Withdrawal Plan" below), (d) for
redemptions made pursuant to any IRA systematic withdrawal based on the
shareholder's life expectancy including, but not limited to, substantially
equal periodic payments described in Internal Revenue Code Section
72(t)(2)(A)(iv) prior to age 59 12 and (e) for redemptions to satisfy
required minimum distributions after age 70 12 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 12, (e) for redemptions to satisfy
required minimum distributions after age 70 12 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) for redemption of shares by an employer
sponsored employee benefit plan that (i) offers funds in addition to Kemper
Funds (i.e., "multi- manager"), and (ii) 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 of share
appreciation to a total of $12,000. If the investor were then to redeem the
entire $12,000 in share value, the contingent deferred sales charge would
be payable only with respect to $10,000 because neither the $1,000 of
reinvested dividends nor the $1,000 of share appreciation is subject to the
charge. The charge would be at the rate of 3% ($300) because it was in the
second year after the purchase was made.
The rate of the contingent deferred sales charge is determined by the
length of the period of ownership. Investments are tracked on a monthly
basis. The period of ownership for this purpose begins the first day of the
month in which the order for the investment is received. For example, an
investment made in December, 1996 will be eligible for the second year's
charge if redeemed on or after December 1, 1997. In the event no specific
order is requested when redeeming shares subject to a contingent deferred
sales charge, the redemption will be made first from shares representing
reinvested dividends and then from the earliest purchase of shares. KDI
receives any contingent deferred sales charge directly.
Reinvestment Privilege. A shareholder who has redeemed Class A shares of a
Fund or any other Kemper Fund listed under "Special Features_Class A
Shares_Combined Purchases" (other than shares of the 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 a Fund or of the other listed Kemper Funds. A shareholder
of a Fund or other Kemper Fund who redeems Class A shares purchased under
the Large Order NAV Purchase Privilege (see "Purchase of Shares_Initial
Sales Charge Alternative_Class A Shares") or Class B shares or Class C
shares and incurs a contingent deferred sales charge may reinvest up to the
full amount redeemed at net asset value at the time of the reinvestment, in
the same class of shares as the case may be, of a Fund or of other Kemper
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
schedule. 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 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 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 shares of a Fund,
the reinvestment in shares of a 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. In
addition, upon a reinvestment, the shareholder may not be permitted to take
into account sales charges incurred on the original purchase of shares in
computing their taxable gain or loss. The reinvestment privilege may be
terminated or modified at any time.
Redemption in Kind. Although it is each Fund's present policy to redeem in
cash, if the Board of Directors 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
Directors may deem fair and equitable. If such a distribution occurred,
shareholders receiving securities and selling them could receive less than
the redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash.
SPECIAL FEATURES
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 Technology Fund, Kemper Total Return Fund,
Kemper Growth Fund, Kemper Small Capitalization Equity Fund, Kemper Income
and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income
Series, Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund,
Kemper Global Income Fund, Kemper Target Equity Fund (series are subject to
a limited offering period), Kemper Intermediate Municipal Bond Fund, Kemper
Cash Reserves Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate
Government Fund, Kemper Value Plus Growth Fund, Kemper Value Fund, Inc.,
Kemper Quantitative Equity Fund, Kemper Horizon Fund, Kemper Europe Fund,
Kemper Asian Growth Fund, Kemper Aggressive Growth Fund and Kemper
Global/International Series, Inc. ("Kemper 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 Funds"
for purposes hereof. For purposes of the Combined Purchases feature
described above as well as for the Letter of Intent and Cumulative Discount
features described below, employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent may include: (a) Money Market Funds as "Kemper Funds",
(b) all classes of shares of any Kemper Fund and (c) the value of any other
plan investment, such as guaranteed investment contracts and employer
stock, maintained on such subaccount record keeping system.
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 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 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 are included in this privilege.
Class A Shares_Cumulative Discount. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding
to the cost of shares of a Fund being purchased, the value of all Class A
shares of the above mentioned Kemper 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 Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Funds and shares of the Money
Market Funds listed under "Special Features_Class A Shares_Combined
Purchases" above may be exchanged for each other at their relative net
asset values. Shares of Money Market Funds and the Kemper Cash Reserves
Fund that were acquired by purchase (not including shares acquired by
dividend reinvestment) are subject to the applicable sales charge on
exchange. Series of Kemper Target Equity Fund are available on exchange
only during the Offering Period for such series as described in the
applicable prospectus. Cash Equivalent Fund, Tax- Exempt California Money
Market Fund, Cash Account Trust, Investor's 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 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 calculating the contingent deferred
sales charge.
Class B Shares. Class B shares of a Fund and Class B shares of any other
Kemper 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 a contingent deferred sales
charge being imposed at the time of exchange. For purposes of calculating
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 Fund listed under "Special Features_Class A Shares_Combined
Purchases" may be exchanged for each other at their relative net asset
values. Class C shares may be exchanged without a contingent deferred sales
charge being imposed at the time of exchange. For determining whether there
is a contingent deferred sales charge that may be imposed upon the
redemption of the Class C shares received by exchange, they retain the cost
and purchase date of the shares that were originally purchased and
exchanged.
General. Shares of a Kemper Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange through another
Kemper Fund, or from a Money Market Fund, may not be exchanged thereafter
until they have been owned for 15 days (the "15-Day Hold Policy"). For
purposes of determining whether the 15-Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be
computed by aggregating the value of shares being exchanged for all
accounts under common control, discretion 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 Kemper Service
Company, Attention: Exchange Department, P.O. Box 419557, Kansas City,
Missouri 64141-6557, or by telephone if the shareholder has given
authorization. Once the authorization is on file, the Shareholder Service
Agent will honor requests by telephone at 1-800-621-1048, subject to the
limitations on liability under "Redemption or Repurchase of
Shares_General." Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use 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 funds that are available for sale in the shareholder's state of
residence. Currently, Tax-Exempt California Money Market Fund is available
for sale only in California and Investors Municipal Cash Fund is available
for sale only in New York, Connecticut, New Jersey and Pennsylvania. Except
as otherwise permitted by applicable regulations, 60 days' prior written
notice of any termination or material change will be provided.
Systematic Exchange Privilege. The owner of $1,000 or more of any class of
the shares of a Kemper 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 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 $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase
shares in a 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 Kemper Service Company, P.O. Box 419415, Kansas
City, Missouri 64141-6415. Termination will become effective as soon as the
Shareholder Service Agent has had a reasonable amount of 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 shares of a
Fund through an automatic investment program. With the Bank Direct Deposit
Purchase Plan, investments are made automatically (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
Kemper Service Company, P.O. Box 419415, Kansas City, Missouri 64141-6415.
Termination by a shareholder will become effective within thirty days after
the Shareholder Service Agent has received the request. A Fund may
immediately terminate a shareholder's Plan in the event that any item is
unpaid by the shareholder's financial institution. The Funds 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 to be paid to the owner
or a designated payee monthly, quarterly, semiannually or annually. The
$5,000 minimum account size is not applicable to Individual Retirement
Accounts. The minimum periodic payment is $100. The maximum annual rate at
which Class B shares may be redeemed (and Class A shares purchased under
the Large Order NAV Purchase Privilege and Class C shares in their first
year following the purchase) under a systematic withdrawal plan is 10% of
the net asset value of the account. Shares are redeemed so that the payee
will receive payment approximately the first of the month. Any income and
capital gain dividends will be automatically reinvested at net asset value.
A sufficient number of full and fractional shares will be redeemed to make
the designated payment. Depending upon the size of the payments requested
and fluctuations in the net asset value of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the
account.
The purchase of Class A shares while participating in a systematic
withdrawal plan will ordinarily 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 have already been paid. Therefore, a Fund will not knowingly permit
additional investments of less than $2,000 if the investor is at the same
time making systematic withdrawals. KDI will waive the contingent deferred
sales charge on redemptions 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:
Traditional, Roth and Education Individual Retirement
Accounts ("IRAs"). This includes Simplified Employee Pension Plan
("SEP") IRA accounts and prototype documents.
403(b)(7) Custodial Accounts. This type of plan is available
to employees of most non-profit organizations.
Prototype money purchase pension and profit-sharing plans
may be adopted by employers. The maximum annual contribution per
participant is the lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon
request. Investors should consult with their own tax advisers before
establishing a retirement plan.
PERFORMANCE
Each Fund may advertise several types of performance information for a
class of shares, including "average annual total return" and "total
return." Performance information will be computed separately for Class A,
Class B and Class C shares. Each of these figures is based upon historical
results and is not representative of the future performance of any class of
a particular Fund.
Average annual total return and total return figures measure both the
net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in a
particular class of 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 any such period has 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 may be compared to that of the Consumer Price
Index or various unmanaged indices including, but not limited to, the Dow
Jones Industrial Average, the Standard & Poor's Composite Stock Price 500
Index, the Russell 1000r Index, the Russell 1000r Growth Index, the
Wilshire Large Company Growth Index, the Wilshire 750 Mid Cap Company
Growth Index, the Standard & Poor's/Barra Value Index, Standard &
Poor's/Barra Growth Index, the Russell 1000r Value Index, the
Europe/Australia/Far East Index, International Finance Corporation's Latin
America Investable Return Index, the Morgan Stanley Capital International
World Index, the J.P. Morgan Global Traded Bond Index, and the Salomon
Brothers World Government Bond Index. The performance of a Fund may also be
compared to the performance of other mutual funds or mutual fund indices
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, money market funds and U.S. Treasury obligations. Bank product
performance may be based upon, among other things, the BANK RATE MONITOR
National IndexO or various certificate of deposit indexes. Money market
fund performance may be based upon, among other things, the IBC/Donoghue's
Money Fund Reportr or Money Market Insightr, 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.
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. The relative performance of growth stocks versus value stocks may
also be discussed.
Because some or all of each Fund's investments are denominated in
foreign currencies, the strength or weakness of the U.S. dollar as against
these currencies may account for part of the Fund's investment performance.
Historical information on the value of the dollar versus foreign currencies
may be used from time to time in advertisements concerning the Funds. Such
historical information is not indicative of future fluctuations in the
value of the U.S. dollar against these currencies. In addition, marketing
materials may cite country and economic statistics and historical stock
market performance for any of the countries in which any of the Funds
invest, including, but not limited to, the following: population growth,
gross domestic product, inflation rate, average stock market price-earnings
ratios and the total value of stock markets. Sources for such statistics
may include official publications of various foreign governments and
exchanges.
Each Fund's Class A shares are sold at net asset value plus a maximum
sales charge of 5.75% of the offering price. While the maximum sales charge
is normally reflected in the Fund's Class A performance figures, certain
total return calculations may not include such charge and those results
would be reduced if it were included. Class B shares and Class C shares are
sold at net asset value. Redemptions of Class B shares within the first six
years after purchase may be subject to a contingent deferred sales charge
that ranges from 4% during the first year to 0% after six years. Redemption
of Class C shares within the first year after purchase may be subject to a
1% contingent deferred sales charge. Average annual total return figures
do, and total return figures may, include the effect of the contingent
deferred sales charge for the Class B 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.
Each Fund's returns and net asset value will fluctuate. Shares of a
class of Fund are redeemable by an investor at the class' then current net
asset value, which may be more or less than original cost. Redemption of
Class B shares and Class C shares may be subject to a contingent deferred
sales charge as described above. Additional information concerning each
Fund's performance appears in the Statement of Additional Information.
Additional information about each Fund's performance also appears in its
Annual Report to Shareholders, which is available without charge from the
Fund.
FUND ORGANIZATION AND CAPITAL STRUCTURE
The Funds are series of the Corporation, an open-end management investment
company registered under the 1940 Act. The Corporation was organized as a
corporation under the laws of Maryland on October 2, 1997.
The Corporation may issue an indefinite amount of shares of capital
stock, all having $.001 par value, which may be divided by the Board of
Directors into classes of shares. Initially, 100,000,000 shares have been
classified for each of the Corporation's five series. Currently, each Fund
offers three classes of shares. These are Class A, Class B and Class C
shares. The Board of Directors may authorize the issuance of additional
classes and additional series or Funds if deemed desirable, each with its
own investment objectives, policies and restrictions. Since the Corporation
may offer multiple Funds, each is known as a "series company." 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 such
class' 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 the Fund. Shares of
each Fund are fully paid and nonassessable when issued, are transferable
without restriction and have no preemptive or conversion rights. Each
Fund's activities are supervised by the Corporation's Board of Directors.
The Corporation is not required to hold and has no current intention of
holding annual shareholder meetings, although special meetings may be
called for purposes such as electing or removing Directors, changing
fundamental investment policies or approving an investment management
contract. Shareholders will be assisted in communicating with other
shareholders in connection with removing a Director as if Section 16(c) of
the 1940 Act were applicable.
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