<PAGE>
Table of Contents
Summary 2
Summary of Expenses 4
Investment Objective, Policies and Risk Factors 6
Investment Manager and Underwriter 10
Dividends, Distributions and Taxes 14
Net Asset Value 15
Purchase of Shares 16
Redemption or Repurchase of Shares 22
Special Features 27
Performance 31
Fund Organization and Capital Structure 32
This prospectus contains concisely the information about the Kemper
U.S. Growth and Income Fund (the "Fund"), a diversified series of Kemper
Securities Trust (the "Trust"), an open-end management investment company,
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 Fund and the Trust, dated
January 30, 1998, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. It is available upon
request without charge from the Fund at the address or telephone number on
this cover or the firm from which this prospectus was received. It is also
available along with other related materials on the SEC's Internet Web Site
(http://www.sec.gov)
The Fund's shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are they federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. Investment in the Fund's shares involves risk, including the
possible loss of principal.
Kemper
U.S. Growth
and Income Fund
PROSPECTUS DATED JANUARY 30, 1998
KEMPER U.S. GROWTH AND
INCOME FUND
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
The investment objective of Kemper U.S. Growth and Income Fund is to
provide long-term growth of capital, current income and growth of income.
The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of U.S. companies that offer the
prospect for growth of earnings while paying current dividends.
There is no assurance that the Fund's objective will be achieved.
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 U.S. GROWTH AND INCOME FUND
222 South Riverside Plaza, Chicago, Illinois 60606, Telephone
1-800-621-1048
SUMMARY
Investment Objective. Kemper U.S. Growth and Income Fund (the "Fund") is a
diversified series of Kemper Securities Trust (the "Trust"), a registered
open- end management investment company. The Fund's investment objective is
to seek long-term growth of capital, current income and growth of income.
There is no assurance that the Fund's objective will be achieved. The Fund
invests primarily in common stocks, preferred stocks and securities
convertible into common stocks of U.S. companies that offer the prospect
for growth of earnings while paying current dividends. Over time, continued
growth of earnings tends to lead to higher dividends and enhancement of
capital value. The Fund allocates its investments among different
industries and companies, and adjusts its portfolio securities for
investment considerations and not for trading purposes. The Fund may also
engage in options and financial futures transactions ("Strategic
Transactions") and may lend its portfolio securities. The Fund may also
invest to a limited extent in illiquid and restricted securities. See
"Investment Objective, Policies and Risk Factors" below.
Risk Factors. The Fund's risks are determined by the nature of the
securities held in the Fund and the portfolio management strategies used by
Scudder Kemper Investments, Inc. (the "Adviser"). The Fund is designed for
long-term investors who can accept moderate stock market risk. In return
for accepting stock market risk, investors may earn a greater return on
their investments in the Fund than from lower risk alternatives such as a
money market or an income fund, but may experience less risk than from a
portfolio of more speculative equity securities. The Fund's returns and net
asset value will fluctuate. The following are descriptions of certain risks
related to the investments and techniques that the Fund may use from time
to time. For a more complete discussion of risks involved in an investment
in the Fund, please see "Special Risk Factors."
Securities lending. 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 deemed by the Adviser to be in
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 investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid investments. Disposing
of illiquid investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Fund to sell them
promptly at an acceptable price.
Strategic Transactions and derivatives. 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 the 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 the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell.
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
the Fund creates the possibility that losses on the hedging instrument may
be greater than gains in the value of the 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. See "Investment
Objective, Policies and Risk Factors."
Purchases and Redemptions. The 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
1.00% 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 the Fund. The minimum initial investment for each class is
$1,000 and investments thereafter must be at least $100. Shares are
redeemable at net asset value, which may be more or less than original
cost, subject 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.
serves as the Fund's investment manager. The Fund pays the Adviser an
investment management fee, payable monthly, at the annual rate of 0.60% for
the first $250 million of average daily net assets, 0.57% of such assets
for the next $750 million, 0.55% of such assets for the next $1.5 billion
and 0.53% of such assets in excess of $2.5 billion. Kemper
Distributors, Inc. ("KDI"), a subsidiary of the Adviser, is principal
underwriter and administrator for the Fund. For each of the Class B and
Class C shares, 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.
Administrative services are provided to shareholders under an
administrative services agreement with KDI. The Fund pays an administrative
services fee at an annual rate of up to 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. The Fund normally distributes quarterly dividends of net
investment income, and any net realized short-term and long-term capital
gains at least annually. Income and capital gain dividends of the Fund are
automatically reinvested in additional shares of the Fund, without a sales
charge, unless the investor makes an election otherwise. See "Dividends and
Taxes."
SUMMARY OF EXPENSES
Shareholder Transaction Expenses] Class Class Class
A B C
Maximum Sales Charge on Purchases (as a percentage 5.75%] 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 Deferred Sales Charge (as a percentage of None] 4%] 1%]
redemption proceeds)
_________
] Investment dealers and other firms may independently charge additional
fees for shareholder transactions or for advisory services; please see
their materials for details. The table does not include the $9.00
quarterly small account fee. See "Redemption or Repurchase of Shares."
] Reduced sales charges apply to purchases of $50,000 or more. See
"Purchase of Shares_Initial Sales Charge Alternative_Class A Shares."
] 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."
] 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.
] 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)
Class A Shares
Management Fees (after waiver)* 0.45%
12b-1 Fees None
Other Expenses 0.79%
Total Fund Operating Expenses (after waiver)* 1.24%
Class B Shares
Management Fees (after waiver)* 0.45%
12b-1 Fees] 0.75%
Other Expenses 0.81%
Total Fund Operating Expenses (after waiver)* 2.01%
_________
* For a one year period, the Adviser has agreed to waive a portion of
its management fee amounting to 0.15% of average daily net assets for
the Fund. Absent such waiver, estimated management fees would be 0.60%
for each class and total fund operating expenses would be 1.39%, 2.16%
and 2.14% for Class A Shares, Class B Shares and Class C Shares,
respectively.
] Long-term Class B shareholders of the Fund may, as a result of the
Fund's 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."
Class C Shares
Management Fees (after waiver)* 0.45
%
12b-1 Fees] 0.75
%
Other Expenses 0.79
%
Total Fund Operating Expenses (after waiver)* 1.99
%
_________
] As a result of the accrual of Rule 12b-1 fees, long-term Class C
shareholders of the 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.
1 3
year years
Class A Shares]
Based on the estimated level of total operating expenses $69 $95
listed above, you would pay the following expenses on a
$1,000 investment, assuming a 5% annual return and
redemption at the end of each time period:
Class B Shares]
Based on the estimated level of total operating expenses $60 $93
listed above, you would pay the following expenses on a
$1,000 investment, assuming a 5% annual return and
redemption at the end of each time period:
You would pay the following expenses on the same investment, $20 $63
assuming no redemption:
Class C Shares]
Based on the estimated level of total operating expenses $30 $62
listed above, you would pay the following expenses on a
$1,000 investment, assuming a 5% annual return and
redemption at the end of each time period:
You would pay the following expenses on the same investment $20 $62
assuming no redemption:
_________
** Based on Total Fund Operating Expenses net of fee waiver (see "Annual
Fund Operating Expenses" table above).
] 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.
] 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%).
] Assumes that the shareholder was an 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 tables is to assist investors in
understanding the various costs and expenses that an investor in the Fund
will bear directly or indirectly. See "Investment Manager and Underwriter"
for more information. The Fund commenced operations on January 30, 1998
thus "Management Fees" and "Other Expenses" are estimated for the current
fiscal year and expenses are shown for only the one and three year periods.
The Example assumes a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission (the "SEC"). This
hypothetical rate of return is not intended to be representative of past or
future performance of the Fund. The Example should not be considered to be
a representation of past or future expenses. Actual expenses may be greater
or less than those shown.
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
The following information sets forth the Fund's investment objective,
policies and risk factors. The Fund's returns and net asset value will
fluctuate, and there is no assurance that the Fund will achieve its
objective.
The Fund seeks long-term growth of capital, current income and growth
of income. The Fund seeks this objective by investing primarily in common
stocks, preferred stocks, and securities convertible into common stocks of
U.S. companies that offer the prospect for growth of earnings while paying
current dividends. Over time, continued growth of earnings tends to lead to
higher dividends and enhancement of capital value. The Fund will invest at
least 80% of its assets in the equity securities of U.S. issuers and has no
current intention of investing in the equity securities of foreign issuers.
The Fund allocates its investments among different industries and
companies, and adjusts its portfolio securities for investment
considerations and not for trading purposes.
The Fund may also purchase securities of real estate investment trusts
("REITs"), as well as securities that do not pay current dividends but that
offer prospects for growth of capital and future income. Convertible
securities (which may be current coupon or zero coupon securities) are
bonds, notes, debentures, preferred stocks and other securities that may be
converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. The Fund may also invest in
nonconvertible preferred stocks consistent with the Fund's objective. From
time to time, for temporary defensive purposes, when the Adviser feels such
a position is advisable in light of economic or market conditions, the Fund
may invest all or a portion of its assets in cash and cash equivalents. It
is impossible to accurately predict for how long such alternative
strategies will be utilized. The Fund may also invest in repurchase
agreements and loan securities and may engage in strategic transactions.
The Fund will not invest in foreign securities. The Fund may also invest to
a limited extent in illiquid and restricted securities. The Fund's share
price fluctuates with changes in interest rates and market conditions.
These fluctuations may cause the value of shares to be higher or lower than
when purchased. The Fund may also invest in Standard and Poor's Depository
Receipts ("SPDRs") and DIAMONDS. SPDRs and DIAMONDS typically trade like a
share of common stock and provide investment results that generally
correspond to the price and yield performance of the component common
stocks of the S&P 500 Index and Dow Jones Industrial Average, respectively.
More information about investment techniques is provided under "Additional
Investment Information."
The Fund seeks to provide participation in the long-term growth of the
economy through the potential investment returns offered by U.S. common
stocks and other domestic equity securities. It maintains a diversified
portfolio consisting primarily of common stocks, preferred stocks and
convertible securities of companies with long-standing records of earnings
growth and higher-than-average dividend payouts. These companies, many of
which are mainstays of the U.S. economy, offer prospects for future growth
of earnings and dividends, and therefore may offer investors attractive
long-term investment opportunities. The Fund's investment strategy, which
emphasizes higher-yielding equity securities issued by U.S. companies
deemed to be underrated by the Adviser, may be more appropriate for the
conservative portion of an investor's equity portfolio.
The Fund cannot guarantee a gain or eliminate the risk of loss. The
net asset value of the Fund's shares will increase or decrease with changes
in the market prices of the Fund's investments and there is no assurance
that the Fund's objective will be achieved. Except as otherwise indicated,
the Fund's investment objective and policies are not fundamental and may be
changed without a vote of shareholders. If there is a change in investment
objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position
and needs.
Investment Process
The Adviser applies a disciplined investment approach for selecting
holdings for the Fund. The first stage of this process involves analyzing a
selected pool of dividend-paying equity securities to identify stocks that
have high yields relative to the yield of the Standard & Poor's 500
Composite Price Index ("S&P 500"), a commonly-accepted benchmark for the
U.S. stock market. Also, the Adviser screens for stocks that have yields at
the upper end of their historical yield range.
In the Adviser's opinion, this subset of higher-yielding stocks
identified by applying these criteria offers the potential for returns over
time that are greater than or equal to the S&P 500, at less risk than this
market index. In the Adviser's opinion, these favorable risk and return
characteristics exist because the higher dividends offered by these stocks
may act as a "cushion" when markets are volatile and because stocks with
higher yields tend to sell at more attractive valuations (e.g., lower
price-to-earning ratios and lower price-to- book ratios).
Once this subset of higher-yielding stocks is identified, the Adviser
conducts a fundamental analysis of each company's financial strength,
profitability, projected earnings, sustainability of dividends, competitive
outlook, and ability of management. The Fund's portfolio may include stocks
that are out of favor in the market, but which, in the opinion of the
Adviser, offer compelling valuations and potential for long-term
appreciation in price and dividends. In order to diversify the Fund's
portfolio among different industry sectors, the Adviser evaluates how each
sector reacts to broad economic factors such as interest rates, inflation,
Gross Domestic Product, and consumer spending. The Fund's portfolio is
constructed by attaining a proper balance of stocks in these sectors based
on the Adviser's economic forecasts.
The Adviser applies disciplined criteria for selling stocks in the
Fund's portfolio as well. When the Adviser determines that the relative
yield of a stock has declined excessively below the yield of the S&P 500,
or that the yield is at the lower end of the stock's historic range, the
stock generally is sold from the Fund's portfolio. Similarly, if the
Adviser's fundamental analysis determines that the payment of the stock's
dividend is at risk, or that market expectations for the stock are
unreasonably high, the stock is generally targeted for sale.
In summary, the Adviser applies disciplined buy and sell criteria,
fundamental company and industry analysis, and economic forecasts in
managing the Fund to pursue long-term price appreciation and income with a
tendency for lower overall volatility than the market, as measured by the
S&P 500.
Special Risk Factors. The 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 the Fund may use from time to time. The
Fund is designed for long-term investors who can accept moderate stock
market risk. In return for accepting stock market risk, you may earn a
greater return on your investment than from lower risk alternatives such as
a money market fund or an income fund, but experience less risk than from a
portfolio of more speculative equity securities.
Common Stock. Common stock is issued by companies to raise cash for
business purposes and represents a proportionate interest in the issuing
companies. Therefore, the 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. Small companies are especially sensitive to these factors and
may even become valueless. 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.
Repurchase Agreements. As a means of earning income for periods as
short as overnight, the Fund may enter into repurchase agreements with
selected banks and broker/dealers. Under a repurchase agreement, the 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 the 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, the Fund may
encounter delay and incur costs, including a decline in the value of the
securities, before being able to sell the securities.
Convertible Securities. The 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 the 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. 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 entail less credit risk than the issuer's common
stock.
Real Estate Investment Trusts. The Fund may purchase real estate
investment trusts ("REITs"), which pool investors' funds for investment
primarily in income-producing real estate or real estate-related loans or
interests. REITs can generally be classified as equity REITs, mortgage
REITs and hybrid REITs. Equity REITs, which invest the majority of their
assets directly in real property, derive their income primarily from rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs, which invest the majority of their
assets in real estate mortgages, derive their income primarily from
interest payments on real estate mortgages in which they are invested.
Hybrid REITs combine the characteristics of both equity REITs and mortgage
REITs. Investment in REITs may subject the Fund to risks similar to those
associated with the direct ownership of real estate (in addition to
securities markets risks). REITs are sensitive to factors such as changes
in real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, supply and demand, and the management skill
and creditworthiness of the issuer. REITs may also be affected by tax and
regulatory requirements.
Zero Coupon Securities. The 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.
Illiquid Securities. The 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 the Fund may not be able to dispose of them at an advantageous time or
price. 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 the Fund to sell them promptly at an acceptable
price. Some restricted securities purchased by the Fund, however, may be
considered liquid despite resale restrictions, since they can be sold to
other qualified institutional buyers under a rule of the Securities and
Exchange Commission (Rule 144A). The Trust's Board of Trustees has
delegated to the Adviser the authority to determine those Rule 144A
securities that will be considered liquid.
Securities Lending. The Fund may lend portfolio securities to
registered broker/dealers as a means of increasing its income. These loans
may not exceed 30% of the Fund's total assets taken at market value. Loans
of portfolio securities will be secured continuously by collateral
consisting of U.S. Government securities or fixed-income 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 deemed by the Adviser to be in
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.
Strategic Transactions and Derivatives. The Fund may, but is not
required to, utilize various other investment strategies as described below
to hedge various market risks (such as interest 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, the 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 (collectively, all the above are called "Strategic
Transactions").
Strategic Transactions may be used without limit to attempt to protect
against possible changes in the market value of securities held in or to be
purchased for the Fund's portfolio resulting from securities markets, to
protect the 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 the 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 the 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 the Fund to
utilize these Strategic Transactions successfully will depend on the
Adviser's ability to predict pertinent market movements, which cannot be
assured. The 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 to create leveraged
exposure in the Fund. 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 the 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 the Fund can realize on its investments or cause the
Fund to hold a security it might otherwise sell. 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 the Fund creates
the possibility that losses on the hedging instrument may be greater than
gains in the value of the 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, the 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 the Fund may use and some of
their risks are described more fully in the Fund's Statement of Additional
Information. See "Investment Policies and Techniques" in the Statement of
Additional Information.
Additional Investment Information. It is anticipated that, under normal
circumstances, the portfolio turnover rate for the Fund will not exceed
100%. Higher portfolio turnover involves correspondingly greater brokerage
commissions or other transaction costs. Higher portfolio turnover may
result in the realization of greater net short-term or long-term capital
gains.
The Fund has adopted certain fundamental investment policies, which
are described in the Statement of Additional Information and which cannot
be changed without a vote of shareholders and which are designed to reduce
the Fund's investment risk. The investment objective and policies of the
Fund that are not incorporated into any of the fundamental investment
restrictions may be changed by the Board of Trustees of the Trust without
shareholder approval.
As a matter of fundamental policy, the Fund may not borrow money
except as permitted under Federal law. Further, as a matter of
non-fundamental policy, the Fund may not borrow money in an amount greater
than 5% of total assets, except for temporary or emergency purposes,
although the Fund may engage up to 5% of total assets in reverse repurchase
agreements or dollar rolls.
As a matter of fundamental policy, the Fund may not make loans except
through the lending of portfolio securities, the purchase of debt
securities or through repurchase agreements.
A complete description of these and other policies and restrictions is
contained in "Investment Restrictions" in the Fund's Statement of
Additional Information.
INVESTMENT MANAGER AND UNDERWRITER
Investment Manager. The Fund retains the investment management firm of
Scudder Kemper Investments, Inc., a Delaware corporation, to manage the
Fund's daily investment and business affairs subject to the policies
established by the Trust's Board of Trustees and pursuant to an Investment
Management Agreement dated January 30, 1998. The Trustees have overall
responsibility for the management of the Fund under Massachusetts law.
Under the Investment Management Agreement with the Adviser, the 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 the 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 or qualifying securities for sale; the fees and expenses of
Trustees, officers and employees of the Trust 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 for these services.
The Fund pays the Adviser an investment management fee, payable monthly, at
the annual rate of 0.60% for the first $250 million of average daily net
assets, 0.57% of such assets for the next $750 million, 0.55% of such
assets for the next $1.5 billion and 0.53% of such assets in excess of $2.5
billion. The fee is graduated so that increases in the Fund's net assets
may result in a lower annual fee rate and decreases in the Fund's net
assets may result in a higher annual fee rate. The fee is payable monthly,
provided that the 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. All of the Fund's expenses are paid out
of gross investment income.
The Adviser is located at 345 Park Avenue, New York, New York.
Scudder Kemper Investments, Inc., an investment counsel firm, acts as
investment manager to the Fund. This organization, which resulted from the
combination of the businesses of Scudder, Stevens & Clark, Inc. ("Scudder")
and Zurich Kemper Investments, Inc., ("Kemper"), is one of the largest and
most experienced investment counsel firms in the United States. Scudder was
established as a partnership in 1919 and reorganized into a corporation in
1985. Since launching its first fund in 1948, Kemper had grown into one of
the industry's leading mutual fund companies. On December 31, 1997,
Kemper's parent company, Zurich Insurance Company ("Zurich"), acquired a
majority interest in Scudder and combined the businesses of the two
organizations to create a single global money-management firm, Scudder
Kemper Investments, Inc., which has more than $200 billion under
management.
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.
A Team Approach to Investing. The Fund is managed by a team of investment
professionals who each plays an important role in the Fund's investment
process. Team members work together to develop investment strategies and
select securities for the 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.
Lori J. Ensinger, Lead Portfolio Manager of the Fund and Senior Vice
President of Scudder Kemper Investments, Inc., is a member of the Global
Equity Group. Ms. Ensinger is responsible for the development of the Fund's
strategy and management of the portfolio on a daily basis. Prior to joining
the Adviser as a portfolio manager in 1993, Ms. Ensinger was a senior
portfolio manager at an investment management firm where she managed
portfolios for institutions and individuals.
Robert T. Hoffman, Portfolio Manager of the Fund and Managing Director
of Scudder Kemper Investments, Inc., is a member of the Global Equity
Group, where his responsibilities focus on portfolio management and
domestic equity research. He joined the Adviser in 1990. Mr. Hoffman has
over 13 years of experience in the investment industry.
Benjamin W. Thorndike, Portfolio Manager of the Fund and Managing
Director of Scudder Kemper Investments, Inc., joined the Adviser in 1983 as
a portfolio manager and has 18 years of investment experience.
Mr. Thorndike will develop portfolio strategy utilizing the research,
analysis and guidance provided by other members of the investment team.
Principal Underwriter. Pursuant to an underwriting and distribution
services agreement ("distribution agreement") with the Fund, Kemper
Distributors, Inc. ("KDI"), 222 South Riverside Plaza, Chicago, Illinois
60606, a subsidiary of the Adviser, is the principal underwriter and
distributor of the Fund's shares and acts as agent of the Fund in the sale
of its shares. KDI bears all 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 registering or qualifying and
maintaining the qualification of Fund shares for sale under the securities
laws of the various states and the Fund bears the expense of registering
its shares with the SEC. KDI may enter into related selling group
agreements with various broker-dealers, including affiliates of KDI, that
provide distribution services.
Class A Shares. KDI receives no compensation from the Fund as
principal underwriter for Class A shares and pays all expenses of
distribution of the Fund's Class A shares under the distribution agreement
not otherwise paid by dealers or other financial services firms. As
indicated under "Purchase of Shares," KDI retains the sales charge upon the
purchase of Class A shares and pays out a portion of this sales charge or
allows concessions or discounts to firms for the sale of Class A Fund
shares.
Class B Shares. For its services under the Class B distribution plan,
KDI receives a fee from the Fund, payable monthly, at an annual rate of
0.75% of average daily net assets of the 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 received on redemptions of
Class B shares. 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 the Fund, payable monthly, at an annual rate of
0.75% of average daily net assets of the 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 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
and the fee continues until terminated by KDI or the Fund. KDI also
receives any contingent deferred sales charges received on redemptions of
Class C shares. See "Redemption or Repurchase of Shares_Contingent Deferred
Sales Charge_Class C Shares."
Rule 12b-1 Plans. Since the distribution agreement provides for fees
payable as an expense of the Class B shares and the Class C shares that are
used by KDI to pay for distribution services for those classes, the
agreement is approved and reviewed separately for the Class B shares and
the Class C shares, in accordance with Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"), which regulates the manner in which
an investment company may, directly or indirectly, bear the expenses of
distributing its shares.
If the Rule 12b-1 Plan (the "Plan") for a class is terminated in
accordance with its terms, the obligation of the Fund to make payments to
KDI pursuant to the Plan will cease and the Fund will not be required to
make any payments past the termination date. Thus, there is no legal
obligation for the Fund to pay any expenses incurred by KDI in excess of
its fees under the Plan, if for any reason the Plan is terminated in
accordance with its terms. Future fees under the Plan may or may not be
sufficient to reimburse KDI for its expenses incurred.
Administrative Services. KDI also provides information and administrative
services for Fund shareholders pursuant to an administrative services
agreement ("administrative agreement"). KDI may enter into related
arrangements with various financial services firms, such as broker-dealer
firms or banks ("firms") that provide services and facilities for their
customers or clients who are shareholders in the Fund. Such administrative
services and assistance may include, but are not limited to, establishing
and maintaining shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund and
its special features and such other administrative 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 agreement, the Fund pays KDI a fee,
payable monthly, at an annual rate of up to 0.25% of average daily net
assets of Class A, B and C shares of the Fund. KDI then pays each firm a
service fee, normally payable quarterly, at an annual rate of up to 0.25%
of net assets attributable to Class A, B and C shares maintained and
serviced by the firm. Firms to which service fees may be paid include
affiliates of KDI.
Class A Shares. For Class A shares, a firm becomes eligible for the
service fee based upon assets in the accounts in the month following the
month of purchase and the fee continues until terminated by KDI or the
Fund. The fees are calculated monthly and normally 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. 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 normally paid quarterly) of the net assets attributable to
Class B and Class C shares maintained and serviced by the firm during such
period and the fee continues until terminated by KDI or the Fund.
KDI also may provide some of the above services and may retain any
portion of the fee under the administrative agreement not paid to firms to
compensate itself for administrative functions performed for the Fund.
Currently, the administrative services fee payable to KDI is based only
upon Fund assets in accounts for which there is a firm listed on the Fund's
records and it is intended that KDI will pay all of the administrative
services fee that it receives from the Fund to firms in the form of service
fees. The effective administrative services fee rate to be charged against
all assets of the Fund while this procedure is in effect will depend upon
the proportion of Fund assets that is in accounts for which a firm provides
administrative services as well as, with respect to Class A shares, the
date when shares representing such assets were purchased. In addition, KDI
may, from time to time, from its own resources pay certain firms additional
amounts for ongoing administrative services and assistance provided to
their customers and clients who are shareholders of the Fund.
Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank
and Trust Company, 225 Franklin Street, Boston, Massachusetts, as
custodian, has custody of all securities and cash of the Fund. Pursuant to
an agency agreement with the Fund, Kemper Service Company (the "Shareholder
Servicing Agent"), a subsidiary of the Adviser, serves as transfer agent
and dividend-paying agent. For a description of the transfer agency fees
payable to Kemper Service Company, 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 the Fund. The Fund pays Scudder Fund
Accounting Corporation an annual fee. See "Investment Manager and
Underwriter" in the Statement of Additional Information.
Portfolio Transactions. The Adviser places all orders for purchases and
sales of the Fund's securities. Subject to seeking best execution of
orders, it may consider sales of shares of the Fund and other funds managed
by the Adviser as a factor in selecting broker-dealers. See "Portfolio
Transactions" in the Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Other Distributions. The Fund normally distributes quarterly
dividends of net investment income and any net realized short-term and
long-term capital gains at least annually. The Fund intends to distribute
net realized capital gains after utilization of capital loss carryforwards,
if any, in December to prevent application of a federal excise tax. An
additional distribution may be made at a later date, if necessary.
Dividends paid by the 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 fees applicable to each
of 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 gains dividends, if any, of the Fund will be
credited to shareholder accounts in full and fractional Fund shares of the
same class at net asset value 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 income and short-term capital gains dividends in cash and
long- term capital gain dividends in shares of the same class at net
asset value; or
(2) To receive income and capital gain dividends in cash.
Any dividends of the Fund that are reinvested normally will be
reinvested in Fund shares of the same class. However, upon written request
to the Shareholder Service Agent, a shareholder may elect to have dividends
of the Fund invested without sales charge in shares of the same class of
another Kemper Fund at the net asset value of such class of such other
fund. See "Special Features_Class A Shares_Combined Purchases" for a list
of such other Kemper Funds. To use this privilege of investing dividends of
the Fund in shares of another Kemper Fund, shareholders must maintain a
minimum account balance of $1,000 in the Fund distributing the dividends.
The Fund will reinvest dividend checks (and future dividends) in shares of
that same class of the Fund if checks are returned as undeliverable.
Dividends and other distributions in the aggregate amount of $10 or less
are automatically reinvested in shares of the Fund unless the shareholder
requests that such policy not be applied to the shareholder's account.
Taxes. The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code ("Code") and, if so qualified,
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 long-term capital gain dividends are taxable to shareholders
as long-term capital gain regardless of how long the shares have been held
and whether received in cash or shares. Long-term capital gain dividends
received by individual shareholders are taxed at a maximum rate of 20% on
gains realized by the Fund from securities held more than 18 months and at
a maximum rate of 28% on gains realized by the Fund from securities held
more than 12 months but not more than 18 months. Dividends declared in
October, November or December to shareholders of record as of a date in one
of those months and paid during the following January are treated as paid
on December 31 of the calendar year declared. Dividends from domestic
corporations are expected to comprise a substantial part of the Fund's
gross income. To the extent that such dividends constitute a portion of the
Fund's gross income, a portion of the dividends paid by the Fund 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 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 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 the Fund may be
subject to state, local and foreign taxes on Fund distributions and
dispositions of Fund shares. Shareholders should consult their own tax
advisers regarding the particular tax consequences of an investment in the
Fund.
The Fund is required by law to withhold 31% of taxable dividends and
redemption proceeds paid to certain shareholders who do not furnish a
correct taxpayer identification number (in the case of individuals, a
social security number) and in certain other circumstances. Any amounts so
withheld are not an additional tax, and may be applied against the affected
shareholder's U.S. federal income tax liability. Trustees of qualified
retirement plans and 403(b)(7) accounts are required by law to withhold 20%
of the taxable portion of any distribution that is eligible to be "rolled
over." The 20% withholding requirement does not apply to distributions from
Individual Retirement Accounts ("IRAs") or any part of a distribution that
is transferred directly to another qualified retirement plan,
403(b)(7) account, or IRA. Shareholders should consult with their tax
advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation
statement giving complete details of the transaction except that statements
will be sent quarterly for transactions involving reinvestment of dividends
and periodic investment and redemption programs. Information for income tax
purposes 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 the 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 the Fund will generally be lower than that of the Class A shares
of the Fund because of the higher expenses borne by the Class B and Class C
shares. The net asset value of shares of the 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 Trustees.
PURCHASE OF SHARES
Alternative Purchase Arrangements. Class A shares of the Fund are sold to
investors subject to an initial sales charge. Class B shares are sold
without an initial sales charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically convert to Class A shares
six years after issuance. Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses than Class A shares, are
subject to a contingent deferred sales charge payable upon certain
redemptions within the first and second year following purchase, and do not
convert into another class. When placing purchase orders, investors must
specify whether the order is for Class A, Class B or Class C shares.
The primary distinctions among the classes of the Fund's shares lie in
their initial and contingent deferred sales charge structures and in their
ongoing expenses, including asset-based sales charges in the form of
Rule 12b-1 distribution fees. These differences are summarized in the table
below. See, also, "Summary of Expenses." Each class has distinct advantages
and disadvantages for different investors, and investors may choose the
class that best suits their circumstances and objectives.
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 the Fund is $1,000
and the minimum subsequent investment is $100. The minimum initial
investment for an Individual Retirement Account is $250 and the minimum
subsequent investment is $50. Under an automatic investment plan, such as
Bank Direct Deposit, Payroll Direct Deposit or Government Direct Deposit,
the minimum initial and subsequent investment is $50. These minimum amounts
may be changed at any time in management's discretion.
Share certificates will not be issued unless requested in writing and
may not be available for certain types of account registrations. It is
recommended that investors not request share certificates unless needed for
a specific purpose. You cannot redeem shares by telephone or wire transfer
or use the telephone exchange privilege if share certificates have been
issued. A lost or destroyed certificate is difficult to replace and can be
expensive to the shareholder (a bond worth 2% or more of the certificate
value is normally required).
Initial Sales Charge Alternative_Class A Shares. The public offering price
of Class A shares for purchasers choosing the initial sales charge
alternative is the net asset value plus a sales charge, as set forth below.
Amount of Purchase As a As a Allowed to
Percentage Percentage Dealers as a
of Offering of Net Asset Percentage
Price Value* of
Offering
Price
Sales Charge
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.
The Fund receives the entire net asset value of all of its shares
sold. KDI, the Fund's principal underwriter, retains the sales charge on
sales of Class A shares from which it allows discounts from the applicable
public offering price to investment dealers, which discounts are uniform
for all dealers in the United States and its territories. The normal
discount allowed to dealers is set forth in the above table. Upon notice to
all dealers with whom it has sales agreements, KDI may 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 the Fund may be purchased at net asset value to the
extent that the amount invested represents the net proceeds from a
redemption of shares of a mutual fund for which 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. The redemption of
the shares of the non-Kemper Fund is, for federal income tax purposes, a
sale upon which a gain or loss may be realized. KDI may in its discretion
compensate firms for sales of Class A shares under this privilege at a
commission rate of 0.50% of the amount of Class A shares purchased.
Class A shares of the Fund may be purchased at net asset value by:
(a) any purchaser, provided that the amount invested in the 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) or a participant-directed non- qualified deferred compensation plan
described in Code Section 457 or a participant-directed qualified
retirement plan described in Code Section 403(b)(7) which is not sponsored
by a K-12 school district provided in each case that such plan has not less
than 200 eligible employees (the "Large Order NAV Purchase Privilege").
Redemption within two years of shares purchased under the Large Order NAV
Purchase Privilege may be subject to a contingent deferred sales charge.
See "Redemption or Repurchase of Shares_Contingent Deferred Sales
Charge_Large Order NAV Purchase Privilege."
KDI may in its discretion compensate investment dealers or other
financial services firms in connection with the sale of Class A shares of
the Fund at net asset value in accordance with the Large Order NAV Purchase
Privilege up to the following amounts: 1.00% of the net asset value of
shares sold on amounts up to $5 million, 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 under the foregoing schedules, KDI will
consider the cumulative amount invested by the purchaser in the 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 the Fund at net asset value
under the Large Order NAV Purchase Privilege is not available if another
net asset value purchase privilege is also applicable.
Class A shares of the 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 at its
discretion pay investment dealers and other financial services firms a
concession, payable quarterly, at an annual rate of up to 0.25% of net
assets attributable to such shares maintained and serviced by the firm. A
firm becomes eligible for the concession based upon assets in accounts
attributable to shares purchased under this privilege in the month after
the month of purchase and the concession continues until terminated by KDI.
The privilege of purchasing Class A shares of the Fund at net asset value
under this privilege is not available if another net asset value purchase
privilege also applies.
Class A shares may be sold at net asset value in any amount to:
(a) officers, trustees, directors, employees (including retirees) and sales
representatives of the Fund, its investment manager, its principal
underwriter or certain affiliated companies, for themselves or members of
their families: (b) registered representatives and employees of
broker-dealers having selling group agreements with KDI and officers,
directors and employees of service agents of the Fund, for themselves or
their spouses or dependent children; (c) shareholders who owned shares of
Kemper Value 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
or 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; (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 Fund for their clients pursuant
to an agreement with KDI or one of its affiliates. Only those employees of
such banks and other firms who as part of their usual duties provide
services related to transactions in Fund Class A shares may purchase Fund
Class A shares at net asset value hereunder. Class A shares may be sold at
net asset value in any amount to unit investment trusts sponsored by
Ranson & Associates, Inc. In addition, unitholders of unit investment
trusts sponsored by Ranson & Associates, Inc. or its predecessors may
purchase the Fund's Class A shares at net asset value through reinvestment
programs described in the prospectuses of such trusts that have such
programs. The Fund's Class A shares may be sold at net asset value through
certain investment advisers registered under the 1940 Act and other
financial services firms that adhere to certain standards established by
KDI, including a requirement that such shares be sold for the benefit of
their clients participating in an investment advisory program under which
such clients pay a fee to the investment adviser or other firm for
portfolio management and other services. Such shares are sold for
investment purposes and on the condition that they will not be resold
except through redemption or repurchase by the Fund. The Fund may also
issue Class A shares at net asset value in connection with the acquisition
of the assets of or merger or consolidation with another investment
company, or to shareholders in connection with the investment or
reinvestment of income and capital gain dividends.
Class A shares of the Fund may be purchased at net asset value in any
amount by certain professionals who assist in the promotion of Kemper Funds
pursuant to personal services contracts with KDI, for themselves or members
of their families. KDI in its discretion may compensate financial services
firms for sales of Class A shares under this privilege at a commission rate
of 0.50% of the amount of Class A shares purchased.
The sales charge scale is applicable to purchases made at one time by
any "purchaser" which includes an individual; or an individual, his or her
spouse and children under the age of 21; or a trustee or other fiduciary of
a single trust estate or single fiduciary account; or an organization
exempt from federal income tax under Section 501(c)(3) or (13) of the Code;
or a pension, profit- sharing or other employee benefit plan whether or not
qualified under Section 401 of the Code; or other organized group of
persons whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the
purchase of redeemable securities of a registered investment company at a
discount. In order to qualify for a lower sales charge, all orders from an
organized group will have to be placed through a single investment dealer
or other firm and identified as originating from a qualifying purchaser.
Deferred Sales Charge Alternative_Class B Shares. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset
value per share without any sales charge at the time of purchase. Since
Class B shares are being sold without an initial sales charge, the full
amount of the investor's purchase payment will be invested in Class B
shares for his or her account. A contingent deferred sales charge may be
imposed upon redemption of Class B shares. See "Redemption or Repurchase of
Shares_Contingent Deferred Sales Charge_Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale
at a commission rate of up to 3.75% of the amount of Class B shares
purchased. KDI is compensated by the Fund for services as distributor and
principal underwriter for Class B shares. See "Investment Manager and
Underwriter."
Class B shares of the Fund will automatically convert to Class A
shares of the Fund six years after issuance on the basis of the relative
net asset value per share of the Class B shares. Class B shareholders of
the Fund who originally acquired their shares as Initial Shares of Kemper
Portfolios, formerly known as Kemper Investment Portfolios ("KIP"), hold
them subject to the same conversion period schedule as that of their KIP
Portfolio. Class B shares originally representing Initial Shares of a KIP
Portfolio will automatically convert to Class A shares of the Fund six
years after issuance of the Initial Shares for shares issued on or after
February 1, 1991 and seven years after issuance of the Initial Shares for
shares issued before February 1, 1991. The purpose of the conversion
feature is to relieve holders of Class B shares from the distribution
services fee when they have been outstanding long enough for KDI to have
been compensated for distribution related expenses. For purposes of
conversion to Class A shares, shares purchased through the reinvestment of
dividends and other distributions paid with respect to Class B shares in a
shareholder's Fund account will be converted to Class A shares on a pro
rata basis.
Purchase of Class C Shares. The public offering price of the Class C
shares of the Fund is the next determined net asset value. No initial sales
charge is imposed. Since Class C shares are sold without an initial sales
charge, the full amount of the investor's purchase payment will be invested
in Class C shares for his or her account. A contingent deferred sales
charge may be imposed upon the redemption of Class C shares if they are
redeemed within one year of purchase. See "Redemption or Repurchase of
Shares_Contingent Deferred Sales Charge_Class C Shares." KDI currently
advances to firms the first year distribution fee at a rate of 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 the Fund for services as distributor and principal
underwriter for Class C shares. See "Investment Manager and Underwriter."
Which Arrangement is Better for You? The decision as to which class of
shares provides a more suitable investment for an investor depends on a
number of factors, including the amount and intended length of the
investment. Investors making investments that qualify for reduced sales
charges might consider Class A shares. Investors who prefer not to pay an
initial sales charge and who plan to hold their investment for more than
six years might consider Class B shares. Investors who prefer not to pay an
initial sales charge but who plan to redeem their shares within six years
might consider Class C shares. Orders for Class B shares or Class C shares
for $500,000 or more will be declined. Orders for Class B shares or Class C
shares by employer sponsored employee benefit plans using the subaccount
record keeping system made available through the Shareholder Service Agent
will be invested instead in Class A shares at net asset value where the
combined subaccount value in the 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 the Fund for their clients, and KDI
may pay them a transaction fee up to the level of the discount or
commission allowable or payable to dealers as described above. Banks
currently are prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. Banks or other financial
services firms may be subject to various state laws regarding the services
described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what
action, if any, would be appropriate. KDI does not believe that termination
of a relationship with a bank would result in any material adverse
consequences to the Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on
the amount of shares of the Fund sold by the firm under the following
conditions: (i) the purchased shares are held in a Kemper IRA account,
(ii) the shares are purchased as a direct "roll over" of a distribution
from a qualified retirement plan account maintained on a participant
subaccount record keeping system provided by 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 Fund. Non-cash compensation includes luxury
merchandise and trips to luxury resorts. In some instances, such discounts,
commissions or other incentives will be offered only to certain firms that
sell or are expected to sell during specified time periods certain minimum
amounts of shares of the Fund or other funds underwritten by KDI.
Orders for the purchase or redemption of shares of the Fund will be
confirmed at a price based on the net asset value of the Fund next
determined after receipt in good order by KDI of the order accompanied by
payment. However, orders received by dealers or other firms prior to the
determination of net asset value (see "Net Asset Value") and received 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"). The Fund reserves the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may
take significantly longer for a check drawn on a foreign bank than for a
check drawn on a domestic bank. Therefore, if an order is accompanied by a
check drawn on a foreign bank, funds must normally be collected before
shares will be purchased. See "Purchase and Redemption of Shares" in the
Statement of Additional Information.
Investment dealers and other firms provide varying arrangements for
their clients to purchase and redeem Fund shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange
with their clients for other investment or administrative services. Such
firms may independently establish and charge additional amounts to their
clients for such services, which charges would reduce the clients' return.
Firms also may hold Fund shares in nominee or street name as agent for and
on behalf of their customers. In such instances, the Fund's transfer agent
will have no information with respect to or control over accounts of
specific shareholders. Such shareholders may obtain access to their
accounts and information about their accounts only from their firm. Certain
of these firms may receive compensation from the Fund through the
Shareholder Service Agent for recordkeeping and other expenses relating to
these nominee accounts. In addition, certain privileges with respect to the
purchase and redemption of shares or the reinvestment of dividends may not
be available through such firms. Some firms may participate in a program
allowing them access to their clients' accounts for servicing including,
without limitation, transfers of registration and dividend payee changes;
and may perform functions such as generation of confirmation statements and
disbursement of cash dividends. Such firms, including affiliates of KDI,
may receive compensation from the Fund through the Shareholder Service
Agent for these services. This prospectus should be read in connection with
such firms' material regarding their fees and services.
The Fund reserves the right to withdraw all or any part of the
offering made by this prospectus and to reject purchase orders for any
reason. Also, from time to time, the Fund may temporarily suspend the
offering of any class of its shares to new investors. During the period of
such suspension, persons who are already shareholders of such class of the
Fund normally are permitted to continue to purchase additional shares of
such class and to have dividends reinvested.
Special Promotion. From February 2, 1998 to June 30, 1998 ("Special
Offering Period"), KDI, the principal underwriter for the Fund, intends to
reallow to dealers the full applicable sales charge with respect to Class A
shares of the Fund purchased during the Special Offering Period (not
including shares acquired at net asset value). KDI also intends to pay to
firms an additional commission of 0.50% with respect to Class B shares of
the Fund purchased during the Special Offering Period, not including
exchanges or other transactions for which commissions are not paid.
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 the 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. The 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 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 the Fund to redeem his or her shares.
When shares are held for the account of a shareholder by the Fund's
transfer agent, the shareholder may redeem 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 the Fund will be the net
asset value per share of that class of the Fund next determined following
receipt by the Shareholder Service Agent of a properly executed request
with any required documents as described above. Payment for shares redeemed
will be made in cash as promptly as practicable but in no event later than
seven days after receipt of a properly executed request accompanied by any
outstanding share certificates in proper form for transfer. When the Fund
is asked to redeem shares for which it may not have yet received good
payment (i.e., purchases by check, EXPRESS- Transfer or Bank Direct
Deposit), it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 10 days from receipt by the Fund of the
purchase amount. The redemption within two years of Class A shares
purchased at net asset value under the Large Order NAV Purchase Privilege
may be subject to a contingent deferred sales charge (see "Purchase of
Shares_Initial Sales Charge Alternative_Class A Shares") and the redemption
of Class B shares within six years may be subject to a contingent deferred
sales charge (see "Contingent Deferred Sales Charge_Class B Shares" below),
and the redemption of Class C shares within the first year following
purchase may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge_Class C Shares" below).
Because of the high cost of maintaining small accounts, the Fund 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.
The Fund or its agents may be liable for any losses, expenses or costs
arising out of any fraudulent or unauthorized telephone requests pursuant
to these privileges unless the Fund or its agents reasonably believe, based
upon reasonable verification procedures, that the telephonic instructions
are genuine. The shareholder will bear the risk of loss, including loss
resulting from fraudulent or unauthorized transactions, so long as
reasonable verification procedures are followed. Verification procedures
include recording instructions, requiring certain identifying information
before acting upon instructions and sending written confirmations.
Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of
record, normally a telephone request or a written request by any one
account holder without a signature guarantee is sufficient for redemptions
by individual or joint account holders, and trust, executor and guardian
account holders (excluding custodial accounts for gifts and transfers to
minors), provided the trustee, executor or guardian is named in the account
registration. Other institutional account holders and guardian account
holders of custodial accounts for gifts and transfers to minors may
exercise this special privilege of redeeming shares by telephone request or
written request without a signature guarantee subject to the same
conditions as individual account holders and subject to the limitations on
liability described under "General" above, provided that this privilege has
been pre-authorized by the institutional account holder or guardian account
holder by written instruction to the Shareholder Service Agent with
signatures guaranteed. Telephone requests may be made by calling
1-800-621-1048. Shares purchased by check or through EXPRESS- Transfer or
Bank Direct Deposit may not be redeemed under this privilege of redeeming
shares by telephone request until such shares have been owned for at least
10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem
shares held in certificated form and may not be used if the shareholder's
account has had an address change within 30 days of the redemption request.
During periods when it is difficult to contact the Shareholder Service
Agent by telephone, it may be difficult to use the telephone redemption
privilege, although investors can still redeem by mail. The Fund reserves
the right to terminate or modify this privilege at any time.
Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other
financial services firm to KDI, which the Fund has authorized to act as its
agent. There is no charge by KDI with respect to repurchases; however,
dealers or other firms may charge customary commissions for their services.
Dealers and other financial services firms are obligated to transmit orders
promptly. The repurchase price will be the net asset value next determined
after receipt of a request by KDI. However, requests for repurchases
received by dealers or other firms prior to the determination of net asset
value (see "Net Asset Value") and received by KDI prior to the close of
KDI's business day will be confirmed at the net asset value effective on
that day. The offer to repurchase may be suspended at any time.
Requirements as to stock powers, certificates, payments and delay of
payments are the same as for redemptions.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's
brokerage or bank account, shares of the Fund can be redeemed and proceeds
sent by federal wire transfer to a single previously designated account.
Requests received by the Shareholder Service Agent prior to the
determination of net asset value will result in shares being redeemed that
day at the net asset value effective on that day and normally the proceeds
will be sent to the designated account the following business day. Delivery
of the proceeds of a wire redemption request of $250,000 or more may be
delayed by the Fund for up to seven days if the Fund or the Adviser deems
it appropriate under then current market conditions. Once authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-621-1048 or in writing, subject to the limitations on liability
described under "General" above. The Fund is not responsible for the
efficiency of the federal wire system or the account holder's financial
services firm or bank. The Fund currently does not charge the account
holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000
wire redemption minimum (including any contingent deferred sales charge).
To change the designated account to receive wire redemption proceeds, send
a written request to the Shareholder Service Agent with signatures
guaranteed as described above or contact the firm through which shares of
the Fund were purchased. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed by wire
transfer until such shares have been owned for at least 10 days. Account
holders may not use this privilege to redeem shares held in certificated
form. During periods when it is difficult to contact the Shareholder
Service Agent by telephone, it may be difficult to use the expedited wire
transfer redemption privilege. The Fund reserves the right to terminate or
modify this privilege at any time.
Contingent Deferred Sales Charge_Large Order NAV Purchase Privilege. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if
they are redeemed during the second year following purchase. The charge
will not be imposed upon redemption of reinvested dividends or share
appreciation. The charge is applied to the value of the shares redeemed,
excluding amounts not subject to the charge. The contingent deferred sales
charge will be waived in the event of: (a) redemptions by a
participant-directed qualified retirement plan described in Code Section
401(a) or a participant-directed non-qualified deferred compensation plan
described in Code Section 457 or a participant- directed qualified
retirement plan described in Code Section 403(b)(7) which is not sponsored
by a K-12 school district; (b) redemptions by employer sponsored employee
benefit plans using the subaccount record keeping system made available
through the Shareholder Service Agent; (c) redemption of shares of a
shareholder (including a registered joint owner) who has died;
(d) redemption of shares of a shareholder (including a registered joint
owner) who after purchase of the shares being redeemed becomes totally
disabled (as evidenced by a determination by the federal Social Security
Administration); (e) redemptions under the Fund's Systematic Withdrawal
Plan at a maximum of 10% per year of the net asset value of the account;
and (f) redemptions of shares whose dealer of record at the time of the
investment notifies KDI that the dealer waives the commission applicable to
such Large Order NAV Purchase.
Contingent Deferred Sales Charge_Class B Shares. A contingent deferred
sales charge may be imposed upon redemption of Class B shares. There is no
such charge upon redemption of any share appreciation or reinvested
dividends on Class B shares. The charge is computed at the following rates
applied to the value of the shares redeemed, excluding amounts not subject
to the charge.
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 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 the Fund), (c) redemptions in connection
with distributions qualifying under the hardship provisions of the Code and
(d) redemptions representing returns of excess contributions to such plans.
Contingent Deferred Sales Charge_Class C Shares. A contingent deferred
sales charge of 1% may be imposed upon redemption of Class C shares if they
are redeemed within one year of purchase. The charge will not be imposed
upon redemption of reinvested dividends or share appreciation. The charge
is applied to the value of the shares redeemed, excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived:
(a) in the event of the total disability (as evidenced by a determination
by the federal Social Security Administration) of the shareholder
(including a registered joint owner) occurring after the purchase of the
shares being redeemed, (b) in the event of the death of the shareholder
(including a registered joint owner), (c) for redemptions made pursuant to
a systematic withdrawal plan (limited to 10% of the net asset value of the
account during the first year, see "Special Features_Systematic Withdrawal
Plan"), (d) for redemptions made pursuant to any IRA systematic withdrawal
based on the shareholder's life expectancy including, but not limited to,
substantially equal periodic payments described in Internal Revenue Code
Section 72(t)(2)(A)(iv) prior to age 59 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 Fund 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 the Fund's Class B
shares and that 16 months later the value of the shares has grown by $1,000
through reinvested dividends and by an additional $1,000 in appreciation to
a total of $12,000. If the investor were then to redeem the entire $12,000
in share value, the contingent deferred sales charge would be payable only
with respect to $10,000 because neither the $1,000 of reinvested dividends
nor the $1,000 of share appreciation is subject to the charge. The charge
would be at the rate of 3% ($300) because it was in the second year after
the purchase was made.
The rate of the contingent deferred sales charge is determined by the
length of the period of ownership. Investments are tracked on a monthly
basis. The period of ownership for this purpose begins the first day of the
month in which the order for the investment is received. For example, an
investment made in January, 1998 will be eligible for the second year's
charge if redeemed on or after January 1, 1999. In the event no specific
order is requested, the redemption will be made first from shares
representing reinvested dividends and then from the earliest purchase of
shares. KDI receives any contingent deferred sales charge directly.
Reinvestment Privilege. A shareholder who has redeemed Class A shares of
the Fund or any other Kemper Fund listed under "Special Features_Class A
Shares_Combined Purchases" (other than shares of Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A
shares of the Fund or of the other listed Kemper Funds. A shareholder of
the Fund or any 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"), 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 of the 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 the 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 Fund shares, the
reinvestment in shares of the Fund may be subject to the "wash sale"
rules if made within 30 days of the redemption, resulting in a postponement
of the recognition of such loss for federal income tax purposes. The
reinvestment privilege may be terminated or modified at any time.
Redemption in Kind. Although it is the Fund's present policy to redeem in
cash, if the Board of Trustees determines that a material adverse effect
would be experienced by the remaining shareholders if payment were made
wholly in cash, the Fund will satisfy the redemption request in whole or in
part by a distribution of portfolio securities in lieu of cash, in
conformity with the applicable rules of the SEC, taking such securities at
the same value used to determine net asset value, and selecting the
securities in such manner as the Board of Trustees may deem fair and
equitable. If such a distribution occurred, shareholders receiving
securities and selling them could receive less than the redemption value of
such securities and in addition would incur certain transaction costs. Such
a redemption would not be as liquid as a redemption entirely in cash.
SPECIAL FEATURES
Class A Shares_Combined Purchases. The Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of
the following funds: Kemper U.S. Growth and Income Fund, 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, 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 Fund, Inc., Kemper Value+Growth Fund, Kemper
Quantitative Equity Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper
Asian Growth Fund and Kemper Aggressive Growth Fund ("Kemper Funds").
Except as noted below, there is no combined purchase credit for direct
purchases of shares of Kemper Money Funds, Cash Equivalent Fund, Tax-Exempt
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 investments, such as guaranteed investment
contracts and employer stock, maintained on such subaccount record keeping
system.
Class A Shares_Letter of Intent. The same reduced sales charges for
Class A shares, as shown in the applicable prospectus, also apply to the
aggregate amount of purchases of such Kemper 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 of the Fund are included for
this privilege.
Class A Shares_Cumulative Discount. The Fund's Class A shares also may be
purchased at the rate applicable to the discount bracket attained by adding
to the cost of Fund shares being purchased the value of all Class A shares
of the above mentioned Kemper 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 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, Investors Municipal Cash Fund and Investors Cash Trust
are available on exchange but only through a financial services firm having
a services agreement with KDI.
Class A shares of the 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 the 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 any 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, retain the cost
and purchase date of the shares that were originally purchased and
exchanged.
Class C Shares. Class C shares of the 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, 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 through exchange from 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, direction or advice, including without
limitation, accounts administered by a financial services firm offering
market timing, asset allocation or similar services. The total value of
shares being exchanged must at least equal the minimum investment
requirement of the Kemper Fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved
in the exchange. There is no service fee for an exchange; however, dealers
or other firms may charge for their services in effecting exchange
transactions. Exchanges will be effected by redemption of shares of the
fund held and purchase of shares of the other fund. For federal income tax
purposes, any such exchange constitutes a sale upon which a gain or loss
may be realized, depending upon whether the value of the shares being
exchanged is more or less than the shareholder's adjusted cost basis of
such shares. Shareholders interested in exercising the exchange privilege
may obtain prospectuses of the other funds from dealers, other firms or
KDI. Exchanges may be accomplished by a written request to Kemper Service
Company, Attention: Exchange Department, P.O. Box 419557, Kansas City,
Missouri 64141- 6557, or by telephone if the shareholder has given
authorization. Once the authorization is on file, the Shareholder Service
Agent will honor requests by telephone at 1-800-621-1048, subject to the
limitations on liability under "Redemption or Repurchase of
Shares_General." Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to implement
the telephone exchange privilege. The exchange privilege is not a right and
may be suspended, terminated or modified at any time. Exchanges may only be
made for Kemper Funds that are eligible for sale in the shareholder's state
of residence. Currently, Tax-Exempt California Money Market Fund is
available for sale only in California and Investors Municipal Cash Fund is
available for sale only in certain states. 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 other Kemper Fund. Exchanges are subject to the
terms and conditions described above under "Exchange Privilege," except
that the $1,000 minimum investment requirement for the Kemper Fund acquired
on exchange is not applicable. This privilege may not be used for the
exchange of shares held in certificated form.
EXPRESS-Transfer. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase
shares in the Fund. Shareholders can also redeem shares (minimum $100 and
maximum $50,000) from their Fund account and transfer the proceeds to their
bank, savings and loan, or credit union checking account. Shares purchased
by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
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 Fund shares
through an automatic investment program. With the Bank Direct Deposit
Purchase Plan, investments are made automatically (minimum $50, maximum
$50,000) from the shareholder's account at a bank, savings and loan or
credit union into the shareholder's Fund account. By enrolling in Bank
Direct Deposit, the shareholder authorizes the Fund and its agents to
either draw checks or initiate Automated Clearing House debits against the
designated account at a bank or other financial institution. This privilege
may be selected by completing the appropriate section on the Account
Application or by contacting the Shareholder Service Agent for appropriate
forms. A shareholder may terminate his or her Plan by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination by a shareholder will become effective within
thirty days after the Shareholder Service Agent has received the request.
The Fund may immediately terminate a shareholder's Plan in the event that
any item is unpaid by the shareholder's financial institution. The Fund may
terminate or modify this privilege at any time.
Payroll Direct Deposit and Government Direct Deposit. A shareholder may
invest in the Fund through Payroll Direct Deposit or Government Direct
Deposit. Under these programs, all or a portion of a shareholder's net pay
or government check is automatically invested in their Fund account each
payment period. A shareholder may terminate participation in these programs
by giving written notice to the shareholder's employer or government
agency, as appropriate. (A reasonable time to act is required.) The Fund is
not responsible for the efficiency of the employer or government agency
making the payment or any financial institutions transmitting payments.
Systematic Withdrawal Plan. The owner of $5,000 or more of a class of the
Fund's shares at the offering price (net asset value plus, in the case of
Class A shares, the initial sales charge) may provide for the payment from
the owner's account of any requested dollar amount up to $50,000 to be paid
to the owner or a designated payee monthly, quarterly, semiannually or
annually. The $5,000 minimum account size is not applicable to Individual
Retirement Accounts. The minimum periodic payment is $100. The maximum
annual rate at which Class B shares (and Class A shares purchased under the
Large Order NAV Purchase Privilege and Class C shares in the first year
following the purchase) may be redeemed under a systematic withdrawal plan
is 10% of the net asset value of the account. Any income and capital gain
dividends will be automatically reinvested at net asset value. A sufficient
number of full and fractional shares will be redeemed to make the
designated payment. Depending upon the size of the payments requested and
fluctuations in the net asset value of the shares redeemed, redemptions for
the purpose of making such payments may reduce or even exhaust the account.
The purchase of Class A shares while participating in a systematic
withdrawal plan ordinarily will be disadvantageous to the investor because
the investor will be paying a sales charge on the purchase of shares at the
same time that the investor is redeeming shares upon which a sales charge
may already have been paid. Therefore, the Fund will not knowingly permit
additional investments of less than $2,000 if the investor is at the same
time making systematic withdrawals. KDI will waive the contingent deferred
sales charge on redemption of Class 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 Fund.
Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor
accounts in any of the following types of retirement plans:
Traditional, Roth and Education Individual Retirement
Accounts ("IRAs"). This includes Savings Incentive Match Plan For
Employees of Small Employers ("SIMPLE") IRA accounts and
Simplified Employee Pension Plan ("SEP") IRA accounts and
prototype documents.
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, SIMPLE 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
The Fund may advertise several types of performance information for a class
of shares, including "average annual total return" and "total return."
Performance information will be computed separately for Class A, Class B
and Class C shares. Each of these figures is based upon historical results
and is not representative of the future performance of any class of the
Fund. The Adviser has agreed to a temporary reduction in its investment
management fee payable by the Fund to the extent specified under
"Investment Manager and Underwriter." This fee reduction will improve the
performance results of the Fund.
Average annual total return and total return figures measure both the
net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in a
particular class of the 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 the Fund during a specified period.
Average annual total return will be quoted for at least the one, five and
ten year periods ending on a recent calendar quarter (or if 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.
The Fund's performance may be compared to that of the Consumer Price
Index or various unmanaged equity indices, including, but not limited to,
the Dow Jones Industrial Average, Value Line, and the Standard & Poor's 500
Composite Price Index. The performance of the 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
Financial Data, Inc.'s Money Fund Report(R) or Money Market Insight(R),
reporting services on money market funds. Performance of U.S. Treasury
obligations may be based upon, among other things, various U.S. Treasury
bill indexes. Certain of these alternative investments may offer fixed
rates of return and guaranteed principal and may be insured.
The Fund may depict the historical performance of the securities in
which the Fund may invest over periods reflecting a variety of market or
economic conditions either alone or in comparison with alternative
investments, performance indexes of those investments or economic
indicators. The Fund may also describe its portfolio holdings and depict
its size or relative size compared to other mutual funds, the number and
make-up of its shareholder base and other descriptive factors concerning
the Fund.
The Fund's Class A shares are sold at net asset value plus a maximum
sales charge of 5.75% of the offering price. While the maximum sales charge
is normally reflected in a Fund's Class A performance figures, certain
total return calculations may not include such charge and those results
would be reduced if it were included. Class B shares and Class C shares are
sold at net asset value. Redemptions of Class B shares within the first six
years after purchase may be subject to a contingent deferred sales charge
that ranges from 4% during the first year to 0% after six years. Redemption
of Class C shares within the first year after purchase may be subject to a
1% contingent deferred sales charge. Average annual total return figures
do, and total return figures may, include the effect of the contingent
deferred sales charge for the Class B and Class C shares that may be
imposed at the end of the period in question. Performance figures for the
Class B shares and Class C shares not including the effect of the
applicable contingent deferred sales charge would be reduced if it were
included.
The Fund's returns and net asset value will fluctuate and shares of a
class of the 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
the Fund's performance appears in the Statement of Additional Information.
Additional information about the Fund's performance will also appear in its
Annual Report to Shareholders, which will be available without charge from
the Fund.
FUND ORGANIZATION AND CAPITAL STRUCTURE
The Fund is a diversified series of Kemper Securities Trust, an open-end
management investment company registered under the 1940 Act. The Trust was
organized as a business trust under the laws of Massachusetts on October 2,
1997.
The Trust may issue an unlimited number of shares of beneficial
interest in one or more series or "Portfolios," all having a par value of
$0.01, which may be divided by the Board of Trustees into classes of
shares. While only shares of a single Portfolio with three classes are
presently being offered by the Trust, the Board of Trustees of the Fund may
authorize the issuance of additional classes and additional Portfolios if
deemed desirable, each with its own investment objective, policies and
restrictions. Since the Trust may offer multiple Portfolios, it is known as
a "series company." Currently, the Trust offers three classes of shares of
a single Portfolio. These are Class A, Class B and Class C shares. Shares
of a Portfolio 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 the Fund
subject to any preferences (such as resulting from different Rule 12b-1
distribution fees), rights or privileges of any classes of shares of the
Fund. Shares are fully paid and nonassessable when issued, are transferable
without restriction and have no preemptive or conversion rights. If shares
of more than one Portfolio are outstanding, shareholders will vote by
Portfolio and not in the aggregate or by class except when voting in the
aggregate is required under the 1940 Act, such as for the election of
trustees, or when voting by class is appropriate.
The Fund's activities are supervised by the Trust's Board of Trustees.
The Trust 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 Trustees, changing fundamental
investment policies or approving an investment management contract. Subject
to the Declaration of Trust, shareholders may remove Trustees. Shareholders
will be assisted in communicating with other shareholders in connection
with removing a Trustee as if Section 16(c) of the 1940 Act were
applicable.
