<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD-SM-
January 30, 1998
Prospectus
KEMPER EQUITY FUNDS/
VALUE STYLE
Kemper U.S. Growth And Income Fund
PROSPECTUS ENCLOSED
[LOGO]KEMPER FUNDS
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TABLE OF CONTENTS
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Summary 4
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Summary of Expenses 7
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Investment Objective, Policies and Risk Factors 9
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Investment Manager and Underwriter 17
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Dividends, Distributions and Taxes 21
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Net Asset Value 24
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Purchase of Shares 24
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Redemption or Repurchase of Shares 34
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Special Features 41
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Performance 47
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Fund Organization and Capital Structure 49
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</TABLE>
(Neither this table of contents nor the outside cover are part of the
prospectus.)
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[LOGO]
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
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 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.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN THE
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
3
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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
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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:
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Offered at net asset value plus a
Class A Shares............... 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:
CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
---------------------- ---------------
First................. 4%
Second................ 3%
Third................. 3%
Fourth................ 2%
Fifth................. 2%
Sixth................. 1%
</TABLE>
5
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<TABLE>
<S> <C> <C>
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.
</TABLE>
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."
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SUMMARY OF EXPENSES
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<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases (as a
percentage of offering price)......... 5.75%(2) None None
Maximum Sales Charge on Reinvested
Dividends............................. None None None
Redemption Fees......................... None None None
Exchange Fee............................ None None None
Maximum Deferred Sales Charge (as a
percentage of redemption proceeds).... None(3) 4%(4) 1%(5)
</TABLE>
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(1) 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."
(2) Reduced sales charges apply to purchases of $50,000 or more. See "Purchase
of Shares--Initial Sales Charge Alternative--Class A Shares."
(3) The redemption of Class A shares purchased at net asset value under the
"Large Order NAV Purchase Privilege" may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
See "Purchase of Shares--Initial Sales Charge Alternative-- Class A Shares."
(4) The maximum Contingent Deferred Sales Charge on Class B Shares applies to
redemptions during the first year. The Charge is 4% during the first year,
3% during the second and third years, 2% during the fourth and fifth years,
and 1% in the sixth year.
(5) The Contingent Deferred Sales Charge of 1% on Class C Shares applies to
redemptions during the first year after purchase.
ANNUAL FUND OPERATING EXPENSES
(estimated as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASS A SHARES
<S> <C> <C>
Management Fees (after waiver)*.................... 0.45%
12b-1 Fees......................................... None
Other Expenses..................................... 0.79%
-----------
Total Fund Operating Expenses (after waiver)*...... 1.24%
-----------
-----------
<CAPTION>
CLASS B SHARES
<S> <C> <C>
Management Fees (after waiver)*.................... 0.45%
12b-1 Fees(6)...................................... 0.75%
Other Expenses..................................... 0.81%
-----------
Total Fund Operating Expenses (after waiver)*...... 2.01%
-----------
-----------
</TABLE>
- --------------------
* 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
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<PAGE>
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.
(6) 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."
<TABLE>
<CAPTION>
CLASS C SHARES
<S> <C>
Management Fees (after waiver)*............................... 0.45%
12b-1 Fees(7)................................................. 0.75%
Other Expenses................................................ 0.79%
---------
Total Fund Operating Expenses (after waiver)*................. 1.99%
---------
---------
</TABLE>
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(7) 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.
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<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
CLASS A SHARES(8)
Based on the estimated level of total operating expenses listed $69 $95
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(9)
Based on the estimated level of total operating expenses listed $60 $93
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:
</TABLE>
8
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<TABLE>
<CAPTION>
1 YEAR 3 YEARS
----------- -----------
CLASS C SHARES(10)
<S> <C> <C>
Based on the estimated level of total operating expenses listed $30 $62
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:
</TABLE>
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** Based on Total Fund Operating Expenses net of fee waiver (see "Annual Fund
Operating Expenses" table above).
(8) Assumes deduction of the maximum 5.75% initial sales charge at the time of
purchase and no deduction of a Contingent Deferred Sales Charge at the time
of redemption.
(9) Assumes that the shareholder was an owner of the shares on the first day of
the first year and the contingent deferred sales charge was applied as
follows: 1 year (4%) and 3 years (3%).
(10) Assumes that the shareholder was 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.
9
<PAGE>
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,
10
<PAGE>
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.
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
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
15
<PAGE>
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.
16
<PAGE>
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
17
<PAGE>
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
18
<PAGE>
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
19
<PAGE>
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.
20
<PAGE>
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for 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
21
<PAGE>
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
22
<PAGE>
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
23
<PAGE>
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
24
<PAGE>
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.
The primary distinctions among the classes of the Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12b-1 FEES
(AS A % OF AVERAGE
DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------------------ ---------------------- ------------------------
<S> <C> <C> <C>
Class A Maximum initial sales 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 Class
deferred sales charge of A shares six years after
4% of redemption 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
</TABLE>
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
25
<PAGE>
redeem shares by telephone or wire transfer or use the telephone exchange
privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond worth 2% or more of the certificate value is normally required).
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------------------
AS A ALLOWED TO
AS A PERCENTAGE PERCENTAGE DEALERS AS A
OF OFFERING OF NET ASSET PERCENTAGE OF
AMOUNT OF PURCHASE PRICE VALUE* OFFERING PRICE
- --------------------------------------- --------------- ------------------ ---------------
<S> <C> <C> <C>
Less than $50,000...................... 5.75% 6.10% 5.20%
$50,000 but less than $100,000......... 4.50 4.71 4.00
$100,000 but less than $250,000........ 3.50 3.63 3.00
$250,000 but less than $500,000........ 2.60 2.67 2.25
$500,000 but less than $1 million...... 2.00 2.04 1.75
$1 million and over.................... 0.00** 0.00** ***
</TABLE>
- --------------------
* 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.
26
<PAGE>
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.
27
<PAGE>
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
28
<PAGE>
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
29
<PAGE>
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,
30
<PAGE>
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
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<PAGE>
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
32
<PAGE>
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.
33
<PAGE>
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,
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<PAGE>
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
35
<PAGE>
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
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<PAGE>
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
37
<PAGE>
dividends on Class B shares. The charge is computed at the following rates
applied to the value of the shares redeemed, excluding amounts not subject to
the charge.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR OF REDEMPTION AFTER PURCHASE SALES CHARGE
- ------------------------------------- -------------------------
<S> <C>
First................................ 4%
Second............................... 3%
Third................................ 3%
Fourth............................... 2%
Fifth................................ 2%
Sixth................................ 1%
</TABLE>
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts). The contingent deferred sales charge will
also be waived in connection with the following redemptions of shares held by
employer sponsored employee benefit plans maintained on the subaccount record
keeping system made available by the Shareholder Service Agent: (a) redemptions
to satisfy participant loan advances (note that loan repayments constitute new
purchases for purposes of the contingent deferred sales charge and the
conversion privilege), (b) redemptions in connection with retirement
distributions (limited at any one time to 10% of the total value of plan assets
invested in the Fund), (c) redemptions in connection with distributions
qualifying under the hardship provisions of the Code and (d) redemptions
representing returns of excess contributions to such plans.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed, excluding amounts not subject to the
charge. The contingent deferred sales charge will be waived: (a) in the event of
the total disability (as evidenced by a determination by the federal
38
<PAGE>
Social Security Administration) of the shareholder (including a registered joint
owner) occurring after the purchase of the shares being redeemed, (b) in the
event of the death of the shareholder (including a registered joint owner), (c)
for redemptions made pursuant to a systematic withdrawal plan (limited to 10% of
the net asset value of the account during the first year, see "Special
Features--Systematic Withdrawal Plan"), (d) for redemptions made pursuant to any
IRA systematic withdrawal based on the shareholder's life expectancy including,
but not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper 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
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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.
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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
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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
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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
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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
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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
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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.
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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,
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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 Index-TM- 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.
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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.
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INVESTMENT MANAGER
SCUDDER KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER
KEMPER DISTRIBUTORS, INC.
222 SOUTH RIVERSIDE PLAZA CHICAGO, IL 60606-5808
WWW.KEMPER.COM E-MAIL [email protected]
TEL (800) 621-1048
[LOGO]KEMPER FUNDS
Long-term investing in a short-term world-SM-
[RECYCLE SYMBOL] Printed on recycled paper. KUSGIF-1 (1/98) KDI 801236
