Filed electronically with the Securities and Exchange Commission on
January 18, 2000
File No. 333-65661
File No. 811-09057
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 /___/
Pre-Effective Amendment No. __ /___/
Post-Effective Amendment No. 7 /_X_/
And
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /___/
Amendment No. 8 /_X_/
KEMPER FUNDS TRUST
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(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora, Vice President and Secretary
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Kemper Funds Trust
------------------
222 South Riverside Plaza
-------------------------
Chicago, Illinois 60606
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
<TABLE>
<CAPTION>
<S> <C>
/___/ Immediately upon filing pursuant to paragraph (b) /___/ 60 days after filing pursuant to paragraph (a)(1)
/___/ 75 days after filing pursuant to paragraph (a)(2) /___/ On ____________ pursuant to paragraph (b)
/_X_/ On April 3, 2000 pursuant to paragraph (a)(1) /___/ On ____________ pursuant to paragraph (a)(3) of Rule 485
/___/ If the following is appropriate, check the preceding box:
</TABLE>
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD(SM)
April 3, 2000
Prospectus
KEMPER S&P 500 INDEX FUND
As with all mutual funds, the Securities and
Exchange Commission (SEC) does not approve
or disapprove these shares or determine
whether the information in this prospectus
is truthful or complete. It is a criminal
offense for anyone to inform you otherwise.
[LOGO] KEMPER FUNDS
<PAGE>
HOW THE INVESTING IN
FUND WORKS THE FUND
2 Kemper S&P 500 Index Fund 10 Choosing A Share Class
8 Other Policies and Risks 15 How To Buy Shares
16 How To Exchange Or Sell Shares
17 Policies You Should Know About
23 Understanding Distributions
And Taxes
<PAGE>
How The Fund Works
This fund invests mainly in common stocks, as a way of seeking growth of your
investment.
The fund invests mainly in growth companies: those that seem poised for
above-average growth of earnings.
Remember that mutual funds are investments, not bank deposits. They're not
guaranteed or insured by the FDIC or any other government agency. Their share
prices will go up and down, so be aware that you could lose money.
<PAGE>
TICKER SYMBOLS CLASS: A) B) C)
Kemper S&P 500
Index Fund
FUND GOAL The fund seeks returns that, before expenses, correspond to the
total return of U.S. common stocks as represented by the Standard & Poor's 500
Composite Stock Price Index.
2
<PAGE>
The Fund's Main Strategy
The fund seeks returns that, before expenses, correspond to the total return of
U.S. common stocks as represented by the Standard & Poor's 500 Composite Stock
Price Index. It does this by investing at least 80% of [net][total] assets in
common stocks of the large U.S. companies comprise the index.
In choosing stocks, the fund uses an indexing strategy, seeking to approximate
the risk and return of the S&P 500 Index. To do this, the portfolio managers use
a statistical process to select stocks whose performance as a group is expected
to be very close to that of the index. The fund may avoid a stock if the
managers believe it could be difficult to sell or if the company has suffered
unusual declines. The fund seeks to keep its composition of the portfolio
similar to the index in industry distribution, market capitalization and
significant fundamental characteristics (such as price-to-book ratios and
dividend yields). Over the long term, the portfolio managers seek a correlation
between the performance of the fund, before expenses, and the index, of 98% or
better. A figure of 100% would indicate perfect correlation.
Because the fund incurs expenses that the index does not have, and does not
invest in all of the stocks in the index, its long term performance is likely to
be slightly lower or higher than that of the index.
The fund will normally sell a stock when it is removed from the index or as a
result of its statistical process.
[ICON]
OTHER INVESTMENTS
Although most of the fund's investments are common stocks, the fund may also
invest up to 20% of [net] [total] assets in stock index futures and options, as
well as short-term debt securities. The fund typically invests new flows of
money in index futures in order to gain immediate exposure to the index.
3
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the large company portion of the U.S. market.
When large company stock prices fall, you should expect the value of your
investment to fall as well. Large company stocks may be less risky than shares
of smaller companies, but at times may not perform as well either. Because a
stock represents ownership in its issuer, stock prices can be hurt by poor
management, shrinking product demand and other business risks.
These may affect single companies as well as groups of companies.
The fund's index strategy involves several risks. Because the fund is designed
to reflect the performance of the index, it can't take any measures to manage
losses in a market downturn. The fund could underperform the index during short
periods or over the long term, either because its selection of stocks failed to
track the index or because of the effects of expenses or shareholder
transactions.
Other factors that could affect performance include:
o derivatives could produce disproportionate losses
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund is designed for long-term investors who want a fund that is designed
to avoid substantially underperforming the overall large-cap stock market.
4
<PAGE>
Performance
As this is a new fund, no past performance data are available.
5
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases 4.50% None None
(as % of offering price)
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Maximum Deferred Sales Charge (Load) (as % of None* 4.00% 1.00%
redemption proceeds)
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee % % %
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee
- ------------------------------------------------------------------------------
Other Expenses**
- ------------------------------------------------------------------------------
Total Annual Operating Expenses
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Choosing a Share Class -- Class A Shares") may
be subject to a contingent deferred sales charge of 1.00% if redeemed within
one year of purchase and 0.50% if redeemed during the second year following
purchase.
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and blue
sky fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $ $ $ $
- ------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $ $ $ $
- ------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------
Class C shares
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6
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee.
The fund's subadviser is Deutsche Asset Management, L.L.C. Deutsche Asset
Management L.L.C. is located at 885 Third Avenue, 32nd Floor, New York, New York
10022. Deutsche Asset Management L.L.C. provides a full range of investment
advisory services to institutional clients. Deutsche Asset Management L.L.C.
serves as investment adviser to ten other investment companies and as
sub-adviser to five other investment companies.
[ICON] FUND MANAGERS
The following people handle the fund's day-to-day
management:
o
o
o
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
<PAGE>
Other Policies And Risks
While the previous pages describe the main points of the fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, the fund's Board could
change the fund's investment goal without seeking shareholder approval.
o As a temporary defensive measure, the fund could shift up to 100% of
assets into investments such as money market securities. This could
prevent losses, but would mean that the fund would not be pursuing its
goal.
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This prospectus doesn't tell you about every policy or risk of investing in the
fund. For more information, you may want to request a copy of the Statement of
Additional Information (the back cover tells you how to do this).
8
<PAGE>
Investing In The Fund
[ICON] The following pages tell you about many of the services, choices and
benefits of being a Kemper Funds shareholder. You'll also find information on
how to check the status of your account using the method that's most convenient
for you.
You can find out more about the topics covered here by speaking with your
financial representative or a representative of your workplace retirement plan
or other investment provider.
<PAGE>
Choosing A Share Class
[GRAPHIC OMITTED]
In this prospectus, there are three share classes for the fund. Each class has
its own fees and expenses, offering you a choice of cost structures.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
- ------------------------------------------------------------------------------
Classes and features Points to help you compare
- ------------------------------------------------------------------------------
Class A
o Sales charges of up to 4.5%, o Some investors may be able to
charged when you buy shares reduce or eliminate their sales
o In most cases, no charges when you charges; see next page
sell shares o Total annual expenses are lower
o No distribution fee than those for Class B or Class C
- ------------------------------------------------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate
o Deferred sales charge of up to falls to zero after six years
4.00%, charged when you sell shares o Shares automatically convert to
you bought within the last six years Class A after six years after
o 0.75% distribution fee purchase, which means lower
annual expenses going forward
- ------------------------------------------------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is
o Deferred sales charge of 1.00%, lower, but your shares never
charged when you sell shares you convert to Class A, so annual
bought within the last year expenses remain higher
o 0.75% distribution fee
- ------------------------------------------------------------------------------
10
<PAGE>
Class A shares
Class A shares have a sales charge that varies with the amount you invest:
Sales charge Sales charge
as a % of as a % of your
Your investment offering price net investment
- ---------------------------------------------------------
Up to $100,000 4.50 4.71
- ---------------------------------------------------------
$100,000-$249,999 3.50 3.63
- ---------------------------------------------------------
$250,000-$499,999 2.60 2.67
- ---------------------------------------------------------
$500,000-$999,999 2.00 2.04
- ---------------------------------------------------------
$1 million or more 0.00 0.00
- ---------------------------------------------------------
You may be able to lower your Class A sales charges if:
o you plan to invest at least $100,000 over the next 24 months ("letter
of intent")
o the amount of Kemper shares you already own (including shares in
certain other Kemper funds) plus the amount you're investing now is at
least $100,000 ("cumulative discount")
o you are investing a total of $100,000 or more in several Kemper funds
at once ("combined purchases")
The point of these three features is to let you count investments made at other
times for purposes of calculating your present sales charge. Any time you can
use the privileges to "move" your investment into a lower sales charge category
in the table above, it's generally beneficial for you to do so. You can take
advantage of these methods by filling in the appropriate sections of your
application or by speaking with your financial representative.
11
<PAGE>
You may be able to buy Class A shares without sales charges when you are:
o reinvesting dividends or distributions
o investing through certain workplace retirement plans
o participating in an investment advisory program under which you pay a
fee to an investment advisor or other firm for portfolio management
services
There are a number of additional provisions that apply in order to be eligible
for a sales charge waiver. The fund may waive the sales charges for investors in
other situations as well. Your financial representative or Kemper can answer
your questions and help you determine if you are eligible.
If you're investing $1 million or more, either as a lump sum or through one of
the sales charge reduction features described on the previous page, you may be
eligible to buy Class A shares without sales charges. However, you may be
charged a contingent deferred sales charge (CDSC) of 1.00% on any shares you
sell within the first year of owning them, and a similar charge of 0.50% on
shares you sell within the second year of owning them. This CDSC is waived under
certain circumstances (see "Policies You Should Know About"). Your financial
representative or Kemper can answer your questions and help you determine if
you're eligible.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class A shares may make sense for long-term investors, especially those who are
eligible for reduced or eliminated sales charges.
12
<PAGE>
Class B shares
With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% is deducted
from fund assets each year. This means the annual expenses for Class B shares
are somewhat higher (and their performance correspondingly lower) compared to
Class A shares, which don't have a 12b-1 fee. After six years, Class B shares
automatically convert to Class A, which has the net effect of lowering the
annual expenses from the seventh year on.
Class B shares have a contingent deferred sales charge (CDSC). This charge
declines over the years you own shares, and disappears completely after six
years of ownership. But for any shares you sell within those six years, you may
be charged as follows:
Year after you bought shares CDSC on shares you sell
- -----------------------------------------------------------
First year 4.00%
- -----------------------------------------------------------
Second or third year 3.00
- -----------------------------------------------------------
Fourth or fifth year 2.00
- -----------------------------------------------------------
Sixth year 1.00
- -----------------------------------------------------------
Seventh year and later None
(automatic conversion to
Class A)
- -----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses mean that over the years you could end up paying more than the
equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class B shares can be a logical choice for long-term investors who would prefer
to see all of their investment go to work right away, and can accept somewhat
higher annual expenses in exchange.
13
<PAGE>
Class C shares
Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan under which a distribution fee of 0.75% is deducted from fund assets
each year. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a contingent deferred sales charge (CDSC), but only on
shares you sell within one year of buying them:
Year after you bought shares CDSC on shares you sell
- ----------------------------------------------------------
First year 1.00%
- ----------------------------------------------------------
Second year and later None
- ----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.
14
<PAGE>
How to Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
- ------------------------------------------------------------------------------
First investment Additional investments
- ------------------------------------------------------------------------------
$1,000 or more for regular accounts $100 or more for regular accounts
$250 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic
Investment Plan
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative using o Contact your representative using
the method that's most convenient the method that's most convenient
for you for you
- ------------------------------------------------------------------------------
By mail or express mail (see below)
o Fill out and sign an application o Send a check and a Kemper
investment slip to us at the
o Send it to us at the appropriate appropriate address below
address, along with an investment
check o If you don't have an investment
slip, simply include a letter with
your name, account number, the full
name of the fund and the share class
and your investment instructions
- ------------------------------------------------------------------------------
By wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By phone
-- o Call (800) 621-1048 for
instructions
- ------------------------------------------------------------------------------
With an automatic investment plan
-- o To set up regular investments,
call (800) 621-1048
- ------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9415
Express, registered, or certified mail:
Kemper Service Company, 811 Main Street, Kansas City, MO 64105-2005
Fax number: (800)-818-7526 (for exchanging and selling only)
15
<PAGE>
How to Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
- ------------------------------------------------------------------------------
Exchanging into another fund Selling shares
- ------------------------------------------------------------------------------
$1,000 or more to open a new account Some transactions, including most
for over $50,000, can only be
$100 or more for exchanges between ordered in writing with a signature
existing accounts guarantee; if you're in doubt, see
page 00
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by
method that's most convenient for the method that's most convenient
you for you
- ------------------------------------------------------------------------------
By phone or wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By mail, express mail or fax
(see previous page)
Write a letter that includes: Write a letter that includes:
o the fund, class and account number o the fund, class and account
you're exchanging out of number from which you want to
sell shares
o the dollar amount or number of
shares you want to exchange o the dollar amount or number of
shares you want to sell
o the name and class of the fund you
want to exchange into o your name(s), signature(s) and
address, as they appear on your
o your name(s), signature(s) and account
address, as they appear on your
account o a daytime telephone number
o a daytime telephone number
- ------------------------------------------------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from a o To set up regular cash payments
Kemper fund account, call from a Kemper fund account, call
(800) 621-1048 (800) 621-1048
- ------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
16
<PAGE>
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you
received from them. As a general rule, you should follow the information in
those materials wherever it contradicts the information given here. Please note
that an investment provider may charge its own fees.
Policies about transactions
The fund is open for business each day the New York Stock Exchange is open. The
fund calculates its share price every business day, as of the close of regular
trading on the Exchange (typically 3 p.m. Central time, but sometimes earlier,
as in the case of scheduled half-day trading or unscheduled suspensions of
trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
17
<PAGE>
EXPRESS-Transfer lets you set up a link between a Kemper account and a bank
account. Once this link is in place, you can move money between the two with a
phone call. You'll need to make sure your bank has Automated Clearing House
(ACH) services. Transactions take two to three days to be completed, and there
is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the account
application; to add it to an existing account, call (800) 621-1048.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that, with respect to certain pre-authorized privileges,
as long as we take reasonable steps to ensure that an order appears genuine, we
are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are normally completed within 24 hours. The fund can only send
or accept wires of $1,000 or more.
Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www. kemper.com to get up-to-date information, review balances or
even place orders for exchanges.
18
<PAGE>
When you want to sell more than $100,000 worth of shares or send the proceeds to
a third party or to a new address you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers and
most banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a contingent deferred sales charge (CDSC), we
calculate the CDSC as a percentage of what you paid for the shares or what you
are selling them for -- whichever results in the lowest charge to you. In
processing orders to sell shares, we turn to the shares with the lowest CDSC
first. Exchanges from one Kemper fund into another don't affect CDSCs: for each
investment you make, the date you first bought Kemper shares is the date we use
to calculate a CDSC on that particular investment.
There are certain cases in which you may be exempt from a CDSC. These include:
o the death or disability of an account owner (including a joint owner)
o withdrawals made through a systematic withdrawal plan
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns
of excess contributions from retirement plans
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.
19
<PAGE>
o for Class A shares purchased through the Large Order NAV Purchase
Privilege, redemption of shares whose dealer of record at the time of
the investment notifies Kemper Distributors that the dealer waives the
applicable commission
In each of these cases, there are a number of additional provisions that apply
in order to be eligible for a CDSC waiver. Your financial representative or
Kemper can answer your questions and help you determine if you are eligible.
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take of advantage of the "reinstatement feature."
With this feature, you can put your money back into the same class of a Kemper
fund at its current NAV and for purposes of sales charges it will be treated as
if it had never left Kemper. You'll be reimbursed (in the form of fund shares)
for any CDSC you paid when you sold. Future CDSC calculations will be based on
your original investment date, rather than your reinstatement date. There is
also an option that lets investors who sold Class B shares buy Class A shares
with no sales charge, although they won't be reimbursed for any CDSC they paid.
You can only use the reinstatement feature once for any given group of shares.
To take advantage of this feature, contact Kemper or your financial
representative.
Money from shares you sell is normally sent out within one business day of when
your order is received in proper form, although it could be delayed for up to
seven days. There are also two circumstances when it could be longer: when you
are selling shares you bought recently by check and that check hasn't cleared
yet (maximum delay: 10 days) or when unusual circumstances prompt the SEC to
allow further delays. Certain expedited redemption processes may also be delayed
when you are selling recently purchased shares.
20
<PAGE>
How the fund calculates share price
The price at which you buy shares is as follows:
Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")
Class B and Class C shares -- net asset value per share, or NAV
To calculate NAV, each share class of the fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
------------------------------------ = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
For the fund and each share class, the price at which you sell shares is also
the NAV, although for Class B and Class C investors a contingent deferred sales
charge may be taken out of the proceeds (see "Choosing A Share Class").
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
21
<PAGE>
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if we have
been notified by the IRS that you are subject to backup withholding, or
if you fail to provide us with a correct taxpayer ID number or
certification that you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been
opened, we may give you 30 days' notice to provide the correct number
o charge you $9 each calendar quarter if your account balance is below
$1,000 for the entire quarter; this policy doesn't apply to most
retirement accounts or if you have an automatic investment plan
o pay you for shares you sell by "redeeming in kind," that is, by giving
you marketable securities (which typically will involve brokerage costs
for you to liquidate) rather than cash; a fund generally won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the fund's assets, whichever is less
o change, add or withdraw various services, fees and account policies
(for example, we may change or terminate the exchange privilege at any
time)
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Understanding Distributions And Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The fund intends to pay dividends and distributions to its shareholders in
November or December, and if necessary may do so at other times as well.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
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The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:
Generally taxed at ordinary income rates
- -------------------------------------------------------
o short-term capital gains from selling fund shares
- -------------------------------------------------------
o income dividends you receive from a fund
- -------------------------------------------------------
o short-term capital gains distributions received from a
fund
Generally taxed at capital gains rates
- -------------------------------------------------------
o long-term capital gains from selling fund shares
- -------------------------------------------------------
o long-term capital gains distributions received from a
fund
- -------------------------------------------------------
You may be able to claim a tax credit or deduction for your share of any foreign
taxes the fund pays.
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
If you invest right before the fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.
Corporations may be able to take a dividends- received deduction for a portion
of income dividends they receive.
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<PAGE>
To Get More Information
Shareholder reports -- These include commentary from the fund's management team
about recent market conditions and the effects of the fund's strategies on its
performance. They also have detailed performance figures, a list of everything
the fund owns, and the fund's financial statements. Shareholders get these
reports automatically. To reduce costs, we may mail one copy per household. For
more copies, call (800) 621-1048.
Statement of Additional Information (SAI) -- This tells you more about the
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-6009
www.sec.gov
Tel (800) SEC-0330
Kemper Funds
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
Tel (800) 621-1048
- --------------------------------------------------------------------------------
SEC File Numbers
Kemper S&P 500 Index Fund 811-09057
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)
<PAGE>
KEMPER FUNDS TRUST
STATEMENT OF ADDITIONAL INFORMATION
April 3, 2000
KEMPER S&P 500 INDEX FUND
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for Kemper S&P 500 Index Fund (the "Fund"),
a diversified series of Kemper Funds Trust ("KFT" or the "Trust"). It should be
read in conjunction with the Fund's prospectus dated April 3, 2000. The
prospectus may be obtained without charge from the Fund at the address or
telephone number on this cover or the firm from which this Statement of
Additional Information was received and is also available along with other
related materials on the SEC's Internet web site (http://www.sec.gov).
- ---------------
TABLE OF CONTENTS
Page
----
Investment Restrictions................................................ 2
Investment Policies and Techniques..................................... 3
Portfolio Transactions................................................. 11
Investment Manager and Underwriter..................................... 13
Purchase, Repurchase and Redemption of Shares.......................... 19
Dividends, Distributions and Taxes..................................... 32
Performance............................................................ 36
Officers and Trustees.................................................. 37
Shareholder Rights..................................................... 40
Net Asset Value........................................................ 31
Additional Information................................................. 42
Scudder Kemper Investments, Inc. acts as the Fund's investment manager and
Deutsche Asset Management L.L.C., acts as the Fund's sub-adviser.
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions which cannot be
changed without approval of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, as amended (the "1940 Act"), this
means the lesser of the vote of (a) 67% of the shares of the Fund present at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy or (b) more than 50% of the outstanding shares of the Fund.
As a matter of fundamental policy, the Fund has elected to be classified as a
diversified series of a registered open-end management investment company.
The Fund may not, as a fundamental policy:
(a) borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having
jurisdiction from time to time;
(b) issue senior securities, except as permitted under the 1940
Act and as interpreted or modified by regulatory authority
having jurisdiction, from time to time;
(c) purchase physical commodities or contracts relating to
physical commodities;
(d) engage in the business of underwriting securities issued by
others, except to the extent that a Fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities;
(e) purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages
or investments secured by real estate or interests therein,
except that the Fund reserves freedom of action to hold and to
sell real estate acquired as a result of the Fund's ownership
of securities;
(f) make loans except as permitted under the 1940 Act, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time; or
(g) concentrate its investments in a particular industry, as that
term is used in the 1940 Act, and as interpreted or modified
by regulatory authority having jurisdiction, from time to
time, except that the Fund will concentrate its investments in
the financial services industry.
With regard to Item (e) above, to the extent the Fund holds real estate acquired
as a result of the Fund's ownership of securities such holdings would be subject
to the Fund's non-fundamental investment restriction on illiquid securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation.
The Fund may not, as a non-fundamental policy which may be changed by the
Trustees without a vote of shareholders:
(1) invest for the purpose of exercising control over management
of any company;
(2) invest its assets in securities of any investment company,
except by open market purchases, including an ordinary
broker's commission, or in connection with a merger,
acquisition of assets, consolidation or reorganization, and
any investments in the securities of other investment
companies will be in compliance with the 1940 Act; or
(3) invest more than 15% of the value of its net assets in
illiquid securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond that specified limit resulting from a
change in values or net assets will not be considered a violation.
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Master/feeder Fund Structure. The Board of Trustees may determine, without
further shareholder approval, in the future that the objective of the Fund would
be achieved more effectively by investing in a master fund in a master/feeder
structure. A master/feeder structure is one in which a fund (a "feeder fund"),
instead of investing directly in a portfolio of securities, invests all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds in the master fund in an effort to achieve possible economies of
scale and efficiencies in portfolio management, while preserving separate
identities, management or distribution channels at the feeder fund level. An
existing investment company is able to convert to a feeder fund by selling all
of its investments, which involves brokerage and other transaction costs and the
realization of taxable gain or loss, or by contributing its assets to the master
fund and avoiding transaction costs and the realization of taxable gain or loss.
Interfund Borrowing and Lending Program. The Fund has received exemptive relief
from the SEC which permits the Fund to participate in an interfund lending
program among certain investment companies advised by the Adviser. The interfund
lending program allows the participating funds to borrow money from and loan
money to each other for temporary or emergency purposes. The program would be
subject to a number of conditions designed to ensure fair and equitable
treatment of all participating funds, including the following: (1) no fund may
borrow money through the program unless it receives a more favorable interest
rate than a rate approximating the lowest interest rate at which bank loans
would be available to any of the participating funds under a loan agreement; and
(2) no fund may lend money through the program unless it receives a more
favorable return than that available from an investment in repurchase agreements
and, to the extent applicable, money market cash sweep arrangements. In
addition, a fund would participate in the program only if and to the extent that
such participation is consistent with the fund's investment objectives and
policies (for instance, money market funds would normally participate only as
lenders and tax exempt funds only as borrowers). Interfund loans and borrowings
would extend overnight, but could have a maximum duration of seven days. Loans
could be called on one day's notice. A fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity or
additional costs. The program is subject to the oversight and periodic review of
the Boards of the participating funds. To the extent the Fund is actually
engaged in borrowing through the interfund lending program, the Fund, as a
matter of non-fundamental policy, may not borrow for other than temporary or
emergency purposes (and not for leveraging).
INVESTMENT POLICIES AND TECHNIQUES
General. The Fund is a diversified series of Kemper Funds Trust, an open-end,
registered management investment company. There is no assurance that the
investment objective of the Fund will be achieved. The return and net asset
value of the Fund will fluctuate. Kemper S&P 500 Index Fund will seek to match,
as closely as possible, before expenses, the performance of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index"), which emphasizes
stocks of large U.S. companies.
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which the Fund may engage (such as hedging,
etc.) or a financial instrument which the Fund may purchase (such as options,
forward foreign currency contracts, etc.) are meant to describe the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Adviser") and Deutsche
Asset Management L.L.C (the "Sub-adviser"), in their discretion, might, but are
not required to, use in managing the Fund's assets. The Adviser employs such
practice, technique or instrument at its discretion. Furthermore, it is possible
that certain types of financial instruments or investment techniques described
herein may not be available, permissible, economically feasible or effective for
their intended purposes in all markets. Certain practices, techniques, or
instruments may not be principal activities of the Fund, but, to the extent
employed, could, from time to time, have a material impact on the Fund's
performance.
Additional Information Regarding the S&P 500 Index
The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no representation
or warranty, express or implied, to the shareholders of the Fund or any member
of the public regarding the advisability of investing in securities generally,
or in the Fund particularly, or the ability of the S&P 500 Index to track
general stock market performance. S&P's only relationship to the Fund is the
licensing of certain trademarks and trade names of S&P and of the S&P 500 Index,
which is determined, composed and calculated by S&P without regard to the Fund.
S&P has no obligation to take the needs of the shareholders of the Fund into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination of the prices
and amount of the Fund, or the timing of the
3
<PAGE>
issuance or sale of shares of the Fund, or in the determination or calculation
of the equation by which the Fund is to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN, AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE ADVISER, THE FUND, SHAREHOLDERS OF THE FUND,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
General Investment Policies and Techniques
Equity Securities. The Fund may invest in equity securities listed on any
domestic or foreign securities exchange or traded in the over-the-counter market
as well as certain restricted or unlisted securities. As used herein, "equity
securities" are defined as common stock, preferred stock, trust or limited
partnership interests, rights and warrants to subscribe to or purchase such
securities, sponsored or unsponsored ADRs, EDRs, GDRs, and convertible
securities, consisting of debt securities or preferred stock that may be
converted into common stock or that carry the right to purchase common stock.
Common stocks, the most familiar type, represent an equity (ownership) interest
in a corporation. They may or may not pay dividends or carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
Although equity securities have a history of long-term growth in value, their
prices fluctuate based on changes in a company's financial condition and on
overall market and economic conditions. Smaller companies are especially
sensitive to these factors.
Short-Term Instruments. When the Fund experiences large cash inflows through the
sale of securities and desirable equity securities, that are consistent with the
Fund's investment objective, which are unavailable in sufficient quantities or
at attractive prices, the Fund may hold short-term investments (or shares of
money market mutual funds) for a limited time pending availability of such
equity securities. Short-term instruments consist of foreign and domestic: (i)
short-term obligations of sovereign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other short-term
debt securities rated AA or higher by Standard & Poor's Ratings Services ("S&P")
or Aa or higher by Moody's Investors Service, Inc. ("Moody's") or, if unrated,
of comparable quality in the opinion of the Sub-adviser; (iii) commercial paper;
(iv) bank obligations, including negotiable certificates of deposit, time
deposits and banker's acceptances; and (v) repurchase agreements. At the time
the Fund invests in commercial paper, bank obligations or repurchase agreements,
the issuer of the issuer's parent must have outstanding debt rated AA or higher
by S&P or Aa or higher by Moody's or outstanding commercial paper or bank
obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such ratings are
available, the instrument must be of comparable quality in the opinion of the
Sub-adviser.
Certificates Of Deposit and Bankers' Acceptances. Certificates of deposit are
receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to enable
businesses to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.
Commercial Paper. Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts. For a description of commercial paper
ratings, see Appendix A.
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<PAGE>
Derivatives. The Fund may invest in various instruments that are commonly known
as "derivatives." Generally, a derivative is a financial arrangement, the value
of which is based on, or "derived" from, a traditional security, asset, or
market index. Some derivatives such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There is a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. However, some
derivatives are used for leverage, which tends to magnify the effects of an
instrument's price changes as market conditions change. Leverage involves the
use of a small amount of money to control a large amount of financial assets,
and can in some circumstances, lead to significant losses. The Adviser will use
derivatives only in circumstances where they offer the most efficient means of
improving the risk/reward profile of the Fund and when consistent with the
Fund's investment objective and policies. The use of derivatives for non-hedging
purposes may be considered speculative.
Illiquid Securities. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the 1933 Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
A large institutional market has developed for certain securities that are not
registered under the 1933 Act, including repurchase agreements, commercial
paper, foreign securities, municipal securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment. The fact that there are contractual or legal restrictions
on resale of such investments to the general public or to certain institutions
may not be indicative of their liquidity.
The Securities and Exchange Commission (the "SEC") has adopted Rule 144A, which
allows a broader institutional trading market for securities otherwise subject
to restriction on their resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the 1933 Act of resales of
certain securities to qualified institutional buyers. The Adviser anticipates
that the market for certain restricted securities such as institutional
commercial paper will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
Rule 144A Securities are securities in the United States that are not registered
for sale under federal securities laws but which can be resold to institutions
under SEC Rule 144A. Provided that a dealer or institutional trading market in
such securities exists, these restricted securities are treated as exempt from
the 15% limit on illiquid securities. Under the supervision of the Board of
Trustees of the Fund, the Adviser determines the liquidity of restricted
securities and, through reports from the Adviser, the Board will monitor trading
activity in restricted securities. If institutional trading in restricted
securities were to decline, the liquidity of the Fund could be adversely
affected.
In reaching liquidity decisions, the Adviser will consider, among other things,
the following factors: (i) the frequency of trades and quotes for the security;
(ii) the number of dealers and other potential purchasers wishing to purchase or
sell the security; (iii) dealer undertakings to make a market in the security
and (iv) the nature of the security and of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
When-Issued and Delayed Delivery Securities. The Fund may purchase securities on
a when-issued or delayed delivery basis. Delivery of and payment for these
securities can take place a month or more after the date of the purchase
commitment. The purchase price and the interest rate payable, if any, on the
securities are fixed on the purchase commitment date or at the time the
settlement date is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to the Fund until settlement takes place. At
the time the Fund makes the commitment to purchase securities on a when-issued
or delayed delivery basis, it will record the transaction, reflect the value
each day of such securities in determining its net asset value and, if
applicable, calculate the maturity for the purposes of average maturity from
that date. At the time of settlement a when-issued security may be valued at
less than the
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<PAGE>
purchase price. To facilitate such acquisitions, the Fund identifies, as part of
a segregated account, cash or liquid securities, in an amount at least equal to
such commitments. On delivery dates for such transactions, the Fund will meet
its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition, it could, as
with the disposition of any other portfolio obligation, incur a gain or loss due
to market fluctuation. It is the current policy of the Fund not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Fund's total assets, less liabilities other than the obligations created by
when-issued commitments.
Lending Of Portfolio Securities. The Fund has the authority to lend up to 30% of
the total value of its portfolio securities to brokers, dealers and other
financial organizations. By lending its securities, the Fund may increase its
income by continuing to receive payments in respect of dividends and interest on
the loaned securities as well as by either investing the cash collateral in
short-term securities or obtaining yield in the form of a fee paid by the
borrower when irrevocable letters of credit and U.S. Government Obligations are
used as collateral. The Fund will adhere to the following conditions whenever
its securities are loaned: (i) the Fund must receive at least 100% collateral
from the borrower; (ii) the borrower must increase this collateral whenever the
market value of the securities including accrued interest rises above the level
of the collateral; (iii) the Fund must be able to terminate the loan at any
time; (iv) the Fund must substitute payments in respect of all dividends,
interest or other distributions on the loaned securities; and (v) voting rights
on the loaned securities may pass to the borrower; provided, however, that if a
material event adversely affecting the investment occurs, the Board of Trustees
must retain the right to terminate the loan and recall and vote the securities.
Cash collateral may be invested in a money market fund managed by the
Sub-adviser (or its affiliates) and the Sub-adviser may serve as the Fund's
lending agent and may share in revenue received from securities lending
transactions as compensation for this service.
Repurchase Agreements. In a repurchase agreement, the Fund buys a security at
one price and simultaneously agrees to sell it back at a higher price at a
future date. In the event of the bankruptcy of the other party to a repurchase
agreement, the Fund could experience delays in recovering either its cash or
selling securities subject to the repurchase agreement. To the extent that, in
the meantime, the value of the securities repurchased had decreased or the value
of the securities had increased, the Fund could experience a loss. In all cases,
the Adviser must find the creditworthiness of the other party to the transaction
satisfactory.
Index Futures Contracts and Options on Index Futures Contracts
Futures Contracts. Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchanges and clear through their clearing
corporations. The Fund may enter into contracts for the purchase or sale for
future delivery of the Index.
At the same time a futures contract on the Index is entered into, the Fund must
allocate cash or securities as a deposit payment ("initial margin"). Initial
margin deposits are set by exchanges and may range between 1% and 10% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Fund would
provide or receive cash that reflects any decline or increase in the contract's
value.
Although futures contracts (other than those that settle in cash) by their terms
call for the actual delivery or acquisition of the instrument underlying the
contract, in most cases the contractual obligation is fulfilled by offset before
the date of the contract without having to make or take delivery of the
instrument underlying the contract. The offsetting of a contractual obligation
is accomplished by buying entering into an opposite position in the identical
futures contract on the commodities exchange on which the futures contract was
entered into (or a linked exchange). Such a transaction, which is effected
through a member of an exchange, cancels the obligation to make or take delivery
of the instrument underlying the contract. Since all transactions in the futures
market are made, offset or fulfilled through a clearinghouse associated with the
exchange on which the contracts are traded, the Fund will incur brokerage fees
when it enters into futures contracts.
The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on most
participants entering into offsetting transactions rather than making or taking
delivery. To the extent that many participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin requirements in the securities
market.
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<PAGE>
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of securities price trends by the Adviser may still not result
in a successful transaction.
In addition, futures contracts entail risks. Although the Adviser believes that
use of such contracts will benefit the Fund, if the Adviser's investment
judgment about the general direction of the Index is incorrect, the Fund's
overall performance would be poorer than if it had not entered into any such
contract. For example, if the Fund has hedged against the possibility of a
decrease in the Index which would adversely affect the value of the securities
held in its Fund and securities prices increase instead, the Fund will lose part
or all of the benefit of the increased value of its securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities from its portfolio to meet daily variation margin requirements.
Such sales of securities may be, but will not necessarily be, at increased
prices which reflect the rising market. The Fund may have to sell securities at
a time when it may be disadvantageous to do so.
Options On Index Futures Contracts. The Fund may purchase and write options on
futures contracts with respect to the Index. The purchase of a call option on an
index futures contract is similar in some respects to the purchase of a call
option on such an index. For example, when the Fund is not fully invested it may
purchase a call option on an index futures contract to hedge against a market
advance.
The writing of a call option on a futures contract with respect to the Index may
constitute a partial hedge against declining prices of the underlying securities
which are deliverable upon exercise of the futures contract. If the futures
price at expiration of the option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's holdings. The writing
of a put option on an index futures contract may constitute a partial hedge
against increasing prices of the underlying securities which are deliverable
upon exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase. If a put or call option
the Fund has written is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and changes
in the value of its futures positions, the Fund's losses from existing options
on futures may to some extent be reduced or increased by changes in the value of
portfolio securities.
The purchase of a put option on a futures contract with respect to the Index is
similar in some respects to the purchase of protective put options on the Index.
For example, the Fund may purchase a put option on an index futures contract to
hedge against the risk of lowering securities values.
The amount of risk the Fund assumes when it purchases an option on a futures
contract with respect to the Index is the premium paid for the option plus
related transaction costs. In addition to the correlation risks discussed above,
the purchase of such an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value of
the option purchased.
The Board of Trustees of the Fund has adopted the requirement that index futures
contracts and options on index futures contracts be used only for cash
management purposes. In compliance with current CFTC regulations, the Fund will
not enter into any futures contracts or options on futures contracts if
immediately thereafter the amount of margin deposits on all the futures
contracts of the Fund and premiums paid on outstanding options on futures
contracts owned by the Fund would exceed 5% of the Fund's net asset value, after
taking into account unrealized profits and unrealized losses on any such
contracts.
Options On Securities Indexes. The Fund may write (sell) covered call and put
options to a limited extent on the Index ("covered options") in an attempt to
increase income. Such options give the holder the right to receive a cash
settlement during the term of the option based upon the difference between the
exercise price and the value of the Index. The Fund may forgo the benefits of
appreciation on the Index or may pay more than the market price of the Index
pursuant to call and put options written by the Fund.
By writing a covered call option, the Fund forgoes, in exchange for the premium
less the commission ("net premium"), the opportunity to profit during the option
period from an increase in the market value of the Index above the exercise
price. By writing a covered put option, the Fund, in exchange for the net
premium received, accepts the risk of a decline in the market value of the Index
below the exercise price.
The Fund may terminate its obligation as the writer of a call or put option by
purchasing an option with the same exercise price and expiration date as the
option previously written.
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When the Fund writes an option, an amount equal to the net premium received by
the Fund is included in the liability section of the Fund's Statement of Assets
and Liabilities as a deferred credit. The amount of the deferred credit will be
subsequently marked to market to reflect the current market value of the option
written. The current market value of a traded option is the last sale price or,
in the absence of a sale, the mean between the closing bid and asked prices. If
an option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, the Fund will realize a gain (or loss if the cost
of a closing purchase transaction exceeds the premium received when the option
was sold), and the deferred credit related to such option will be eliminated. If
a call option is exercised, the Fund will realize a gain or loss from the sale
of the underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Fund.
The Fund may purchase call and put options on the Index. The Fund would normally
purchase a call option in anticipation of an increase in the market value of the
Index. The purchase of a call option would entitle the Fund, in exchange for the
premium paid, to purchase the underlying securities at a specified price during
the option period. The Fund would ordinarily have a gain if the value of the
securities increased above the exercise price sufficiently to cover the premium
and would have a loss if the value of the securities remained at or below the
exercise price during the option period.
The Fund would normally purchase put options in anticipation of a decline in the
market value of the Index ("protective puts"). The purchase of a put option
would entitle the Fund, in exchange for the premium paid, to sell the underlying
securities at a specified price during the option period. The purchase of
protective puts is designed merely to offset or hedge against a decline in the
market value of the Index. The Fund would ordinarily recognize a gain if the
value of the Index decreased below the exercise price sufficiently to cover the
premium and would recognize a loss if the value of the Index remained at or
above the exercise price. Gains and losses on the purchase of protective put
options would tend to be offset by countervailing changes in the value of the
Index.
The Fund has adopted certain other nonfundamental policies concerning index
option transactions which are discussed below. The Fund's activities in index
options may also be restricted by the requirements of the Code, for
qualification as a regulated investment company.
The hours of trading for options on the Index may not conform to the hours
during which the underlying securities are traded. To the extent that the option
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying securities markets
that cannot be reflected in the option markets. It is impossible to predict the
volume of trading that may exist in such options, and there can be no assurance
that viable exchange markets will develop or continue.
Because options on securities indices require settlement in cash, the Adviser
may be forced to liquidate portfolio securities to meet settlement obligations.
Asset Coverage. To assure that the Fund's use of futures and related options, as
well as when-issued and delayed-delivery securities and foreign currency
exchange transactions, are not used to achieve investment leverage, the Fund
will cover such transactions, as required under applicable interpretations of
the SEC, either by owning the underlying securities or by segregating with the
Fund's Custodian or futures commission merchant liquid securities in an amount
at all times equal to or exceeding the Fund's commitment with respect to these
instruments or contracts.
Investment Company Securities. The Fund may acquire securities of other
investment companies to the extent consistent with its investment objective and
subject to the limitations of the 1940 Act. The Fund will indirectly bear its
proportionate share of any management fees and other expenses paid by such other
investment companies.
For example, the Fund may invest in a variety of investment companies which seek
to track the composition and performance of specific indexes or a specific
portion of an index. These index-based investments hold substantially all of
their assets in securities representing their specific index. Accordingly, the
main risk of investing in index-based investments is the same as investing in a
portfolio of equity securities comprising the index. The market prices of
index-based investments will fluctuate in accordance with both changes in the
market value of their underlying portfolio securities and due to supply and
demand for the instruments on the exchanges on which they are traded (which may
result in their trading at a discount or premium to their NAVs). Index-based
investments may not replicate exactly the performance of their specified index
because of transaction costs and because of the temporary unavailability of
certain component securities of the index.
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Examples of index-based investments include:
SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary Receipts," are
based on the S&P 500 Composite Stock Price Index. They are issued by the SPDR
Trust, a unit investment trust that holds shares of substantially all the
companies in the S&P 500 in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.
MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They are
issued by the MidCap SPDR Trust, a unit investment trust that holds a portfolio
of securities consisting of substantially all of the common stocks in the S&P
MidCap 400 Index in substantially the same weighting and seeks to closely track
the price performance and dividend yield of the Index.
Select Sector SPDRs(R): Select Sector SPDRs are based on a particular sector or
group of industries that are represented by a specified Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end management investment company with nine
portfolios that each seeks to closely track the price performance and dividend
yield of a particular Select Sector Index.
DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM). They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.
Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are
issued by the Nasdaq-100 Trust, a unit investment trust that holds a portfolio
consisting of substantially all of the securities, in substantially the same
weighting, as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.
WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are based on 17
country-specific Morgan Stanley Capital International Indexes. They are issued
by the WEBs Index Fund, Inc., an open-end management investment company that
seeks to generally correspond to the price and yield performance of a specific
Morgan Stanley Capital International Index.
PORTFOLIO TRANSACTIONS
Under the sub-advisory agreement between Scudder Kemper Investments, Inc. (the
"Adviser") and Deutsche Asset Management L.L.C., the Sub-Adviser places all
orders for purchases and sales of the Fund's securities. At times investment
decisions may be made to purchase or sell the same investment securities of the
Fund and for one or more of the other clients managed by the Sub-Adviser. When
two or more such clients are simultaneously engaged in the purchase or sale of
the same security through the same trading facility, the transactions are
allocated as to amount and price in a manner considered equitable to each.
Position limits imposed by national securities exchanges may restrict the number
of options the Fund will be able to write on a particular security.
The above-mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or future contracts available to the Fund. On the
other hand, the ability of the Fund to participate in volume transactions may
produce better executions for the Fund in some cases. The Board of Trustees
believes that the benefits of the Sub-Adviser's organization outweigh any
limitations that may arise from simultaneous transactions or position
limitations.
The Sub-Adviser in effecting purchases and sale of portfolio securities for the
account of the Fund, will implement the Fund's policy of seeking best execution
of orders. The Sub-Adviser may be permitted to pay higher brokerage commissions
for research services as described below. Consistent with this policy, orders
for portfolio transactions are placed with broker-dealer firms giving
consideration to the quality, quantity and nature of each firm's professional
services, which include execution, financial responsibility, responsiveness,
clearance procedures, wire service quotations and statistical and other research
information provide to the Fund and the Sub-Adviser. Subject to seeking best
execution of an order, brokerage is allocated on the basis of all service
provided. Any research benefits derived are available for all clients of the
Sub-Adviser. In selecting among firms believed to meet the criteria for handling
a particular transaction, the Sub-Adviser may give consideration to those firms
that have sold or are selling shares of the Fund and of other funds managed by
the Adviser and its affiliates, as well as to those firms that provide market,
statistical and other research information to the Fund and the Sub-Adviser,
although the Sub-Adviser is not authorized to pay higher commissions to firms
that provide such services, except as described below.
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The Sub-Adviser may in certain instances be permitted to pay higher brokerage
commissions solely for receipt of market, statistical and other research
services as defined in Section 28(e) of the Securities Exchange Act of 1934 and
interpretations thereunder. Such services may include among other things:
economic, industry or company research reports or investment recommendations;
computerized databases; quotation and execution equipment and software; and
research or analytical computer software and services. Where products or
services have a "mixed use," a good faith effort is made to make a reasonable
allocation of the cost of products or services in accordance with the
anticipated research and non research uses and the cost attributable to
non-research use is paid by the Sub-Adviser in cash. Subject to Section 28(e)
and procedures adopted by the Board of Trustees of KFT, the Fund could pay a
firm that provides research services commissions for effecting a securities
transactions for the Fund in excess of the amount other firms would have charged
for the transaction if the Sub-Adviser determines in good faith that the greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing firm viewed in terms either of a particular
transaction or the Sub-Adviser's overall responsibilities to the Fund and other
clients. Not all of such research services may be useful or of value in advising
the Fund. Research benefits will be available for all clients of the
Sub-Adviser. The sub-advisory fee paid by the Adviser to the Sub-Adviser is not
reduced because these research services are received.
The Trustees for the Fund review from time to time whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
The Fund's average portfolio turnover rate is the ratio of the lesser of sales
or purchases to the monthly average value of the portfolio securities owned
during the year, excluding all securities with maturities or expiration dates at
the time of acquisition of one year or less. A higher rate involves greater
brokerage transaction expenses to the Fund and may result in the realization of
net capital gains, which would be taxable to shareholders when distributed.
Purchases and sales are made for the Fund's portfolio whenever necessary, in
management's opinion, to meet the Fund's objective. Under normal investment
conditions, it is anticipated that the portfolio turnover rate in the Fund's
initial fiscal year will not exceed 100%.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc., an investment counsel
firm, 345 Park Avenue, New York, New York, is the Fund's investment manager.
This organization is one of the most experienced investment management firms in
the United States. It was established as a partnership in 1919 and pioneered the
practice of providing investment counsel to individual clients on a fee basis.
The predecessor firm reorganized from a partnership to a corporation on June 28,
1985. On June 26, 1997, the Adviser's predecessor, Scudder Stevens & Clark, Inc.
("Scudder") entered into an agreement with Zurich Insurance Company ("Zurich")
pursuant to which Scudder and Zurich agreed to form an alliance.
On December 31, 1997, Zurich acquired a majority interest in Scudder, and Zurich
made the business of its subsidiary, Zurich Kemper Investments, Inc., a part of
Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.
Founded in 1872, Zurich is a multinational, public corporation organized under
the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world.
Pursuant to an investment management agreement (the "Agreement"), the Adviser
acts as the investment adviser of the Fund, manages its investments, administers
its business affairs, furnishes office facilities and equipment, provides
clerical, bookkeeping and administrative services, and permits any of its
officers or employees to serve without compensation as trustees or officers of
KFT if elected to such positions. The investment management agreement provides
that the Fund pays the charges and expenses of its operations, including the
fees and expenses of the trustees (except those who are affiliates of the
Adviser or its affiliates), independent auditors, counsel, custodian and
transfer agent and the cost of share certificates, reports and notices to
shareholders, brokerage commissions or transaction costs, costs of calculating
net asset value and maintaining all accounting records therefor, taxes and
membership dues. KFT bears the expenses of registration of its shares with the
SEC, while Kemper Distributors, Inc., as principal underwriter, pays the cost of
qualifying and maintaining the qualification of the Fund's shares for sale under
the securities laws of the various states.
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On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in the Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services, Inc. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services, Inc., with the balance initially owned by former
B.A.T shareholders.
Upon consummation of this transaction, the Fund's existing investment management
agreement with the Adviser was deemed to have been assigned and, therefore,
terminated. The Board approved a new investment management agreement with the
Adviser, which is substantially identical to the investment management agreement
dated March 2, 1998, except for the dates of execution and termination. This
agreement became effective on September 7, 1998 and was approved at a special
shareholder meeting held in December 1998.
The Agreement dated September 7, 1998 was approved by the Trustees in July 1998
and ratified in September, 1998. The Agreement will continue in effect until
September 30, 1999 and from year to year thereafter only if its continuance is
approved annually by the vote of a majority of those Trustees who are not
parties to such Agreement or interested persons of the Adviser or the Fund, cast
in person at a meeting called for the purpose of voting on such approval, and
either by a vote of the Trust's Trustees or of a majority of the outstanding
voting securities of the Fund. The Agreement may be terminated at any time
without payment of penalty by either party on sixty days' notice and
automatically terminates in the event of its assignment.
Under the Agreement, the Adviser provides the Fund with continuing investment
management for the Fund's portfolio consistent with the Fund's investment
objectives, policies and restrictions and determines which securities shall be
purchased for the portfolio of the Fund, which portfolio securities shall be
held or sold by the Fund and what portion of the Fund's assets shall be held
uninvested, subject always to the provisions of the Trust's Declaration of Trust
and By-Laws, the 1940 Act and the Internal Revenue Code of 1986, as amended (the
"Code") and to the Fund's investment objectives, policies and restrictions and
subject, further, to such policies and instructions as the Trustees may from
time to time establish. The Adviser also advises and assists the officers of the
Fund in taking such steps as are necessary or appropriate to carry out the
decisions of its Trustees and the appropriate committees of the Trustees
regarding the conduct of the business of the Fund.
The Adviser also renders significant administrative services (not otherwise
provided by third parties) necessary for the Fund's operations as a series of an
open-end investment company including, but not limited to, preparing reports and
notices to the Trustees and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants
and others); preparing and making filings with the SEC and other regulatory
agencies; assisting in the preparation and filing of the Fund's federal, state
and local tax returns; preparing and filing the Fund's federal excise tax
returns; assisting with investor and public relations matters; monitoring the
valuation of securities and the calculation of net asset value; monitoring the
registration of shares of the Fund under applicable federal and state securities
laws; maintaining the Fund's books and records to the extent not otherwise
maintained by a third party; assisting in establishing accounting policies of
the Fund; assisting in the resolution of accounting and legal issues;
establishing and monitoring the Fund's operating budget; processing the payment
of the Fund's bills; assisting the Fund in, and otherwise arranging for, the
payment of distributions and dividends; and otherwise assisting the Fund in the
conduct of its business, subject to the direction and control of the Trustees.
The Adviser pays the compensation and expenses of all Trustees, officers and
executive employees of KFT affiliated with the Adviser and makes available,
without expense to KFT, the services of such Trustees, officers and employees of
the Adviser as may duly be elected officers or Trustees of KFT, subject to their
individual consent to serve and to any limitations imposed by law, and provides
KFT's office space and facilities.
Under the Agreement, the Fund is responsible for all of its other expenses
including organizational costs, fees and expenses incurred in connection with
membership in investment company organizations; brokers' commissions; legal,
auditing and accounting expenses; the calculation of net asset value; taxes and
governmental fees; the fees and expenses of the transfer agent; the cost of
preparing stock certificates and any other expenses including clerical expenses
of issue, redemption or repurchase of shares; the fees and expenses of Trustees,
officers and employees of KFT 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 Fund may arrange to have third parties
assume all or part of the expenses of sale, underwriting and distribution of
shares of the Fund. The Fund is also responsible for its expenses incurred in
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connection with litigation, proceedings and claims and the legal obligation it
may have to indemnify its officers and Trustees with respect thereto.
The Agreement expressly provides that the Adviser shall not be required to pay a
pricing agent of the Fund for portfolio pricing services, if any.
The Fund pays the Adviser an investment management fee at the annual rate of
___%. 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
In reviewing the terms of the Agreement and in discussions with the Adviser
concerning such Agreement, the Trustees of KFT who are not "interested persons"
of KFT have been represented by Vedder, Price, Kaufman & Kammholz, as
independent counsel at the Fund's expense.
The Agreement provides that the Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by the Adviser of its
obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may enter into
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
None of the officers or Trustees of KFT may have dealings with KFT as principals
in the purchase or sale of securities, except as individual subscribers or
holders of shares of the Fund.
Employees of the Adviser and certain of its subsidiaries are permitted to make
personal securities transactions, subject to requirements and restrictions set
forth in the Adviser's Code of Ethics. The Code of Ethics contains provisions
and requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as those of the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
TO BE UPDATED
SUB-ADVISER. Deutsche Asset Management L.L.C. is located at 885 Third Avenue,
32nd Floor, New York, New York 10022. The Sub-Adviser provides a full range of
investment advisory services to institutional clients. The Sub-Adviser serves as
investment adviser to ten other investment companies and as sub-adviser to five
other investment companies. The Sub-Adviser serves as sub-adviser pursuant to
the terms of a sub-advisory agreement between it and the Adviser.
Under the terms of the Sub-Advisory Agreement, the Sub-Adviser manages the
investment and reinvestment of the Fund's portfolio and will provide such
investment advice, research and assistance as the Adviser may, from time to
time, reasonably request. The Adviser pays the Sub-Adviser for its services a
sub-advisory fee, payable monthly, at the annual rate of ___________________.
The Sub-Advisory Agreement provides that the Sub-Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Sub-Advisory Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser in the performance of its duties or from reckless
disregard by the Sub-Adviser of its obligations and duties under the
Sub-Advisory Agreement.
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The Sub-Advisory Agreement dated ____________ was approved by the Trustees on
_____________ and remains in effect until ____________ unless sooner terminated
or not annually approved as described below. Notwithstanding the foregoing, the
Sub-Advisory Agreement shall continue in effect through _______________ and year
to year thereafter, but only as long as such continuance is specifically
approved at least annually (a) by a majority of the trustees who are not parties
to such agreement or interested persons of any such party except in their
capacity as trustees of KFT, and (b) by the shareholders of the Fund or the
Board of Trustees of KFT. The Sub-Advisory Agreement may be terminated at any
time upon 60 days' notice by the Adviser or by the Board of Trustees of the Fund
or by majority vote of the outstanding shares of the Fund, and will terminate
automatically upon assignment or upon termination of the Fund's investment
management agreement. The Sub-Adviser may not terminate the Sub-Advisory
Agreement prior to ______________. Thereafter, the Sub-Adviser may terminate the
Sub-Advisory Agreement upon 90 days' notice to the Adviser.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Adviser, is
the principal underwriter and distributor for the shares of KFT and acts as
agent of KFT in the continuous offering of its shares. KDI bears all of its
expenses of providing services pursuant to the distribution agreement, including
the payment of any commissions. KFT pays the cost for the prospectus and
shareholder reports to be set in type and printed for existing shareholders, and
KDI, as principal underwriter, pays for the printing and distribution of copies
thereof used in connection with the offering of shares to prospective investors.
KDI also pays for supplementary sales literature and advertising costs.
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 agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of Class A shares and
pays out a portion of this sales charge or allows concessions or discounts to
firms for the sale of the Fund's Class A shares.
CLASS B AND C SHARES. Since the 12b-1 Plan provides for fees payable as an
expense of each of the Class B shares and the Class C shares that are used by
KDI to pay for distribution services for those classes, each agreement is
approved and reviewed separately for the Class B shares and the Class C shares
in accordance with Rule 12b-1 under the 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.
For its services under the 12b-1 Plan, KDI receives a fee from the Fund, payable
monthly, at the 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%.
For its services under the 12b-1 Plan, KDI receives a fee from the Fund, payable
monthly, at the 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 Class C shares. For periods after
the first year, KDI currently pays firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm and the fee
continues until terminated by KDI or the Fund. KDI also receives any contingent
deferred sales charges. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charges--Class C Shares."
RULE 12B-1 PLAN. If a 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 such Plan will cease and the Fund will not be required to make any
payments past the termination date. Thus, there is no legal obligation for the
Fund to pay any expenses incurred by KDI in excess of its fees under a Plan, if
for any reason the Plan is terminated in accordance with its terms. Future fees
under a Plan may or may not be sufficient to reimburse KDI for its expenses
incurred.
The distribution agreement and Rule 12b-1 Plan continues in effect from year to
year so long as such continuance is approved for each class at least annually by
a vote of the Board of Trustees of KFT, including the Trustees who are not
interested persons of KFT and who have no direct or indirect financial interest
in the agreement. The agreement automatically terminates in the event of its
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assignment and may be terminated for a class at any time without penalty by the
Fund for that Fund or by KDI upon 60 days' notice. Termination by the Fund with
respect to a class may be by vote of a majority of the Board of Trustees, or a
majority of the Trustees who are not interested persons of KFT and who have no
direct or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
1940 Act. The 12b-1 Plan may not be amended for a class to increase the fee to
be paid by the Fund with respect to such class without approval by a majority of
the outstanding voting securities of such class of the Fund and all material
amendments must in any event be approved by the Board of Trustees in the manner
described above with respect to the continuation of the agreement.
ADMINISTRATIVE SERVICES. Administrative services are provided to KFT under an
administrative services agreement ("administrative agreement") with KDI. KDI
bears all of its expenses of providing services pursuant to the administrative
agreement between KDI and KFT, including the payment of service fees. KFT pays
KDI an administrative services fee, payable monthly, at an annual rate of up to
0.25% of average daily net assets of each of the Class A, B and C shares of the
Fund.
KDI enters into related arrangements with various broker-dealer firms and other
service or administrative firms ("firms") that provide services and facilities
for their customers or clients who are investors in KFT. The firms provide such
office space and equipment, telephone facilities and personnel as is necessary
or beneficial for providing information and services to their clients. Such
services and assistance may include, but are not limited to, establishing and
maintaining accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding the Fund, assistance to
clients in changing dividend and investment options, account designations and
addresses and such other administrative services as may be agreed upon from time
to time and permitted by applicable statute, rule or regulation. With respect to
Class A shares, KDI pays each firm a service fee, payable quarterly, at an
annual rate of up to 0.25% of the net assets in the Fund's accounts that it
maintains and services attributable to Class A shares, commencing with the month
after investment. With respect to Class B and Class C shares, KDI currently
advances to firms the first-year service fee at a rate of up to 0.25% of the
purchase price of such shares. For periods after the first year, KDI currently
intends to pay firms a service fee at a rate of up to 0.25% (calculated monthly
and normally paid quarterly) of the net assets attributable to Class B and C
shares maintained and serviced by the firm. After the first year, a firm becomes
eligible for the quarterly service fee and the fee continues until terminated by
KDI or KFT. Firms to which service fees may be paid may include affiliates of
KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which a firm provides administrative services and it is intended
that KDI will pay all the administrative services fee that it receives from KFT
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 the Fund's assets that is in accounts
for which a firm of record provides administrative services.
Certain trustees or officers of KFT are also directors or officers of the
Adviser or KDI as indicated under "Officers and Trustees."
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 of 0.025% on the first $150 million of average net assets on an
annual basis, 0.0075% on the next $850 million, and 0.0045% over $1 billion
pursuant to the fund accounting agreement.
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. It attends to the collection of
principal and income, and payment for and collection of proceeds of securities
bought and sold by KFT. Kemper Service Company ("KSvC"), an affiliate of the
Adviser, serves as transfer agent and dividend-paying agent and "Shareholder
Service Agent" of the Fund. KSvC receives as transfer agent as follows: annual
account fees of $10.00 ($18.00 for retirement accounts) plus set up charges,
annual fees associated with the contingent deferred sales charges (Class B
only), an asset-based fee of 0.08% and out-of-pocket reimbursement.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Fund's independent
auditors, Ernst & Young, LLP, 223 South Wacker Drive, Chicago, Illinois, audit
and report on the Fund's annual financial statements, review certain regulatory
reports and the Fund's federal income tax returns, and perform other
professional accounting, auditing, tax and advisory services
14
<PAGE>
when engaged to do so by the Fund. Shareholders will receive annual audited
financial statements and semi-annual unaudited financial statements.
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of the Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase, and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.
The primary distinctions among the classes of the Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average
Sales Charge daily net assets) Other Information
------------ ----------------- -----------------
<S> <C> <C> <C>
Class A Maximum initial sales charge None Initial sales charge
of 4.50% of the public offering waived or reduced for certain
price purchases
Class B Maximum contingent deferred 0.75% Shares convert to Class A
sales charge of 4% of shares six years after
redemption proceeds; declines issuance
to zero after six years
Class C Contingent deferred sales 0.75% No conversion feature
charge of 1% of redemption proceeds
for redemptions made during
first year after purchase
</TABLE>
- -------------------
(1) 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.
The minimum initial investment for each class of the Fund is $1,000 and the
minimum subsequent investment is $100. The minimum initial investment for an
Individual Retirement Account is $250 and the minimum subsequent investment is
$50. Under an automatic investment plan, such as Bank Direct Deposit, Payroll
Direct Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing and may not be
available for certain types of account registrations. It is recommended that
investors not request share certificates unless needed for a specific purpose.
You cannot redeem shares by telephone or wire transfer or use the telephone
exchange privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond worth 2% or more of the certificate value is normally required).
INITIAL SALES CHARGE ALTERNATIVE--Class A Shares. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
Sales Charge
------------
Allowed to Dealers
As a Percentage As a Percentage of as a Percentage of
Amount of Purchase of Offering Price Net Asset Value* Offering Price
------------------------------------- ------------------ -------------------- ---------------------
15
<PAGE>
<S> <C> <C> <C>
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 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 to dealers up to the full applicable sales charge,
as shown in the above table, during periods and for transactions specified in
such notice and such re-allowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is re-allowed, 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 investment manager does not serve as investment
manager and KDI does not serve as Distributor ("non-Kemper Fund") provided that:
(a) the investor has previously paid either an initial sales charge in
connection with the purchase of the non-Kemper Fund shares redeemed or a
contingent deferred sales charge in connection with the redemption of the
non-Kemper Fund shares, and (b) the purchase of Fund shares is made within 90
days after the date of such redemption. To make such a purchase at net asset
value, the investor or the investor's dealer must, at the time of purchase,
submit a request that the purchase be processed at net asset value pursuant to
this privilege. KDI may in its discretion compensate firms for sales of Class A
shares under this privilege at a commission rate of 0.50% of the amount of Class
A shares purchased. The redemption of the shares of the non-Kemper Fund is, for
Federal income tax purposes, a sale upon which a gain or loss may be realized.
Class A shares of the Fund may be purchased at net asset value by: (a) any
purchaser, provided that the amount invested in such Fund or other Kemper Fund
listed under "Special Features--Class A Shares--Combined Purchases" totals at
least $1,000,000 including purchases of Class A shares pursuant to the "Combined
Purchases," "Letter of Intent" and "Cumulative Discount" features described
under "Special Features"; or (b) a participant-directed qualified retirement
plan described in Code Section 401(a), a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district, provided in each
case that such plan has not less than 200 eligible employees (the "Large Order
NAV Purchase Privilege"). Redemption within two years of the purchase of shares
purchased under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Large Order NAV Purchase Privilege."
KDI may at its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of 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 recordkeeping system made available
through Kemper Service Company. For purposes of determining the appropriate
commission percentage to be applied to a particular sale, KDI will consider the
cumulative amount invested by the purchaser in the Fund and other Kemper Fund
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 also
applies.
16
<PAGE>
Class A shares of the Fund or of any other Kemper Fund listed under "Special
Features--Class A Shares--Combined Purchases" may be purchased at net asset
value in any amount by members of the plaintiff class in the proceeding known as
Howard and Audrey Tabankin, et al. v. Kemper Short-Term Global Income Fund, et
al., Case No. 93 C 5231 (N.D. IL). This privilege is generally non-transferable
and continues for the lifetime of individual class members and for a ten year
period for non-individual class members. To make a purchase at net asset value
under this privilege, the investor must, at the time of purchase, submit a
written request that the purchase be processed at net asset value pursuant to
this privilege specifically identifying the purchaser as a member of the
"Tabankin Class." Shares purchased under this privilege will be maintained in a
separate account that includes only shares purchased under this privilege. For
more details concerning this privilege, class members should refer to the Notice
of (1) Proposed Settlement with Defendants; and (2) Hearing to Determine
Fairness of Proposed Settlement, dated August 31, 1995, issued in connection
with the aforementioned court proceeding. For sales of Fund shares at net asset
value pursuant to this privilege, KDI may in its discretion pay investment
dealers and other financial services firms a concession, payable quarterly, at
an annual rate of up to 0.25% of net assets attributable to such shares
maintained and serviced by the firm. A firm becomes eligible for the concession
based upon assets in accounts attributable to shares purchased under this
privilege in the month after the month of purchase and the concession continues
until terminated by KDI. The privilege of purchasing Class A shares of the Fund
at net asset value under this privilege is not available if another net asset
value purchase privilege also applies.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.
Class A shares of 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.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase shares of the Fund through KDI as part of an automated billing and wage
deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.
Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, 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) any trust, pension,
profit-sharing or other benefit plan for only such persons; (d) persons who
purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm; and (e) persons who purchase shares of the Fund
through KDI as part of an automated billing and wage deduction program
administered by RewardsPlus of America for the benefit of employees of
participating employer groups. Class A shares may be sold at net asset value in
any amount to selected employees (including their spouses and dependent
children) of banks and other financial services firms that provide
administrative services related to order placement and payment to facilitate
transactions in shares of the Fund for their clients pursuant to an agreement
with KDI or one of its affiliates. Only those employees of such banks and other
firms who as part of their usual duties provide services related to transactions
in Fund 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 of such trusts that have such programs. Class A shares of the Fund may
be sold at net asset value through certain investment advisers registered under
the 1940 Act and other financial services firms that adhere to certain standards
established by KDI, including a requirement that such shares be sold for the
benefit of their clients participating in an investment advisory program under
which such clients pay a fee to the investment adviser or other firm for
portfolio management and other services. Such shares are sold for investment
purposes and on the condition that they will not be resold except through
redemption or repurchase by the Fund. The Fund may also issue Class A shares at
net asset value in connection with the acquisition of the assets of or merger or
consolidation with another investment company, or to shareholders in connection
with the investment or reinvestment of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or
17
<PAGE>
an organization exempt from federal income tax under Section 501(c)(3) or (13)
of the Code; or a pension, profit-sharing or other employee benefit plan whether
or not qualified under Section 401 of the Code; or other organized group of
persons whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount. In
order to qualify for a lower sales charge, all orders from an organized group
will have to be placed through a single investment dealer or other firm and
identified as originating from a qualifying purchaser.
DEFERRED SALES CHARGE ALTERNATIVE--Class B Shares. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of the Fund will automatically convert to Class A shares of the
Fund six years after issuance on the basis of the relative net asset value per
share of the Class B shares. The purpose of the conversion feature is to relieve
holders of Class B shares from the distribution services fee when they have been
outstanding long enough for KDI to have been compensated for distribution
related expenses. For purposes of conversion to Class A shares, shares purchased
through the reinvestment of dividends and other distributions paid with respect
to Class B shares in a shareholder's Fund account will be converted to Class A
shares on a pro rata basis.
PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of
the Fund is the next determined net asset value. No initial sales charge is
imposed. Since Class C shares are sold without an initial sales charge, the full
amount of the investor's purchase payment will be invested in Class C shares for
his or her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at a
rate of 0.75% of the purchase price of such shares. For periods after the first
year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."
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 are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
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 under the following conditions: (i) the purchased
shares are held in a Kemper IRA account, (ii) the shares are purchased as a
direct "roll over" of a distribution from a qualified retirement plan account
maintained on a participant subaccount record keeping system provided by Kemper
Service Company, (iii) the registered representative placing the trade is a
member of ProStar, a group of persons designated by KDI in acknowledgment of
their dedication to the employee benefit plan area; and (iv) the purchase is not
otherwise subject to a commission.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of the Fund. Non cash compensation includes luxury merchandise and trips to
luxury resorts. In some instances, such discounts, commissions or other
18
<PAGE>
incentives will be offered only to certain firms that sell during specified time
periods certain minimum amounts of shares of the Fund, or other Fund
underwritten by KDI.
Orders for the purchase of shares of the Fund will be confirmed at a price based
on the net asset value of the Fund next determined after receipt in good order
by KDI of the order accompanied by payment. However, orders received by dealers
or other financial services firms prior to the determination of net asset value
(see "Net Asset Value") and received in good order by KDI prior to the close of
its business day will be confirmed at a price based on the net asset value
effective on that day ("trade date"). 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 the Fund's shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Fund's 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 the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Fund through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Fund through the Shareholder Service Agent for
these services.
The Fund reserves the right to withdraw all or any part of the offering made
herein 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 such Fund normally are permitted to continue to
purchase additional shares of such class and to have dividends reinvested.
Tax identification number. Be sure to complete the Tax Identification Number
section of the Fund's application when you open an account. Federal tax law
requires 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 applicable Fund with a tax
identification number during the 30-day notice period.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this Statement of Additional Information.
Shares of the Fund are sold at their public offering price, which is the net
asset value per share of each class of the Fund next determined after an order
is received in proper form plus, with respect to Class A shares, an initial
sales charge. The minimum initial investment is $1,000 and the minimum
subsequent investment is $100 but such minimum amounts may be changed at any
time. An order for the purchase of shares that is accompanied by a check drawn
on a foreign bank (other than a check drawn on a Canadian bank in U.S. Dollars)
will not be considered in proper form and will not be processed unless and until
KFT determines that it has received payment of the proceeds of the check. The
time required for such a determination will vary and cannot be determined in
advance.
19
<PAGE>
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of the Fund will be redeemed by KFT at the applicable net asset value per
share of such Fund as described herein.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B shares or Class C shares by certain classes of persons or
through certain types of transactions as described herein are provided because
of anticipated economies of scale in sales and sales-related efforts.
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"), the redemption of Class B shares within
six years may be subject to a contingent deferred sales charge (see "Contingent
Deferred Sales Charge--Class B Shares" below), and the redemption of Class C
shares within the first year following purchase may be subject to a contingent
deferred sales charge (see "Contingent Deferred Sales Charge--Class C Shares"
below).
Because of the high cost of maintaining small accounts, the Fund may assess a
quarterly fee of $9 on any account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer-sponsored employee benefit plans
using the subaccount record-keeping system made available through the
Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. The Fund or its agents may be liable for
any losses, expenses or costs arising out of 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
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<PAGE>
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. The 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 of the Fund next determined after receipt of a
request by KDI. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of KDI's business day will be confirmed at
the net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of 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 of the Fund
effective on that day and normally the proceeds will be sent to the designated
account the following business day. Delivery of the proceeds of a wire
redemption of $250,000 or more may be delayed by the Fund for up to seven days
if the Fund or the Shareholder Service Agent deems it appropriate under
then-current market conditions. Once authorization is on file, the Shareholder
Service Agent will honor requests by telephone at 1-800-621-1048 or in writing,
subject to the limitations on liability described under "General" above. The
Fund is not responsible for the efficiency of the federal wire system or the
account holder's financial services firm or bank. The Fund currently does not
charge the account holder for wire transfers. The account holder is responsible
for any charges imposed by the account holder's firm or bank. There is a $1,000
wire redemption minimum (including any contingent deferred sales charge). To
change the designated account to receive wire redemption proceeds, send a
written request to the Shareholder Service Agent with signatures guaranteed as
described above or contact the firm through which shares of the Fund were
purchased. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be redeemed by wire transfer until such shares have been owned
for at least 10 days. Account holders may not use this privilege to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege, although investors can still
redeem by mail. 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 after purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed, excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a), a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer-sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under the Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the
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<PAGE>
net asset value of the account; and (f) redemptions of shares whose dealer of
record at the time of the investment notifies KDI that the dealer waives the
discretionary commission applicable to such Large Order NAV Purchase.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed, excluding amounts not subject to the charge.
<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 Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to satisfy required minimum distributions after age 70 1/2 from an
IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent: (a) redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent deferred
sales charge and the conversion privilege), (b) redemptions in connection with
retirement distributions (limited at any one time to 10% of the total value of
plan assets invested in the Fund), (c) redemptions in connection with
distributions qualifying under the hardship provisions of the Internal Revenue
Code and (d) redemptions representing returns of excess contributions to such
plans.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed, excluding amounts not subject to the
charge. The contingent deferred sales charge will be waived: (a) in the event of
the total disability (as evidenced by a determination by the federal Social
Security Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (limited to 10% of the
net asset value of the account during the first year, see "Special
Features--Systematic Withdrawal Plan"), (d) for redemptions made pursuant to any
IRA systematic withdrawal based on the shareholder's life expectancy including,
but not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts), (f) for any participant-directed redemption
of shares held by employer-sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent, and (g) 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 of share appreciation to a total of
$12,000. If the investor were then to redeem the entire $12,000 in share value,
the contingent deferred sales
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<PAGE>
charge would be payable only with respect to $10,000 because neither the $1,000
of reinvested dividends nor the $1,000 of share appreciation is subject to the
charge. The charge would be at the rate of 3% ($300) because it was in the
second year after the purchase was made.
The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in March
1998 will be eligible for the second year's charge if redeemed on or after March
1, 1999. In the event no specific order is requested when redeeming shares
subject to a contingent deferred sales charge, the redemption will be made first
from shares representing reinvested dividends and then from the earliest
purchase of shares. KDI receives any contingent deferred sales charge directly.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of the
Fund or any other Kemper Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of the Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
the Fund or of the other listed Kemper Funds. A shareholder of the Fund or other
Kemper Funds who redeems Class A shares purchased under the Large Order NAV
Purchase Privilege (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares") or Class B shares or Class C shares and incurs a
contingent deferred sales charge may reinvest up to the full amount redeemed at
net asset value at the time of the reinvestment, in the same class of shares as
the case may be, of 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 shares of the Fund, 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 Securities and Exchange Commission, taking such
securities at the same value used to determine net asset value, and selecting
the securities in such manner as the Board of Trustees may deem fair and
equitable. If such a distribution occurred, shareholders receiving securities
and selling them could receive less than the redemption value of such securities
and in addition would incur certain transaction costs. Such a redemption would
not be as liquid as a redemption entirely in cash.
SPECIAL FEATURES
CLASS A SHARES--COMBINED PURCHASES. The Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following Funds: Kemper 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 Value
Series, Inc., Kemper International Fund, Kemper State Tax-Free Income Series,
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+Growth Fund, Kemper Horizon
Fund, Kemper Europe Fund, Kemper Asian Growth Fund, Kemper Global/International
Series, Inc., Kemper Equity Trust, Kemper Securities Trust, Kemper Income Trust,
Kemper Funds Trust, and Kemper Aggressive Growth Fund ("Kemper Funds"). Except
as noted below, there is no combined purchase credit for direct purchases of
shares of Zurich Money Funds, Cash Equivalent Fund, Tax-Exempt California Money
Market Fund, Cash Account Trust, Investor's Municipal Cash Fund or Investors
Cash Trust ("Money Market Funds"), which are not considered a "Kemper Fund" for
purposes hereof. For purposes of the Combined Purchases feature described above
as well as for the Letter of
23
<PAGE>
Intent and Cumulative Discount features described below, employer sponsored
employee benefit plans using the subaccount record keeping system made available
through the Shareholder Service Agent may include: (a) Money Market Funds as
"Kemper Funds", (b) all classes of shares of any Kemper Fund and (c) the value
of any other plan investment, such as guaranteed investment contracts and
employer stock, maintained on such subaccount record keeping system.
CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Funds listed above made by any purchaser
within a 24-month period under a written Letter of Intent ("Letter") provided by
KDI. The Letter, which imposes no obligation to purchase or sell additional
Class A shares, provides for a price adjustment depending upon the actual amount
purchased within such period. The Letter provides that the first purchase
following execution of the Letter must be at least 5% of the amount of the
intended purchase, and that 5% of the amount of the intended purchase normally
will be held in escrow in the form of shares pending completion of the intended
purchase. If the total investments under the Letter are less than the intended
amount and thereby qualify only for a higher sales charge than actually paid,
the appropriate number of escrowed shares are redeemed and the proceeds used
toward satisfaction of the obligation to pay the increased sales charge. The
Letter for an employer-sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Funds held of record as of the initial purchase date under the
Letter as an "accumulation credit" toward the completion of the Letter, but no
price adjustment will be made on such shares. Only investments in Class A shares
are included for this privilege.
CLASS A SHARES--CUMULATIVE DISCOUNT. Class A shares of the Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of the Fund being purchased, the value of all Class A shares
of the above mentioned Kemper Funds (computed at the maximum offering price at
the time of the purchase for which the discount is applicable) already owned by
the investor.
CLASS A SHARES--AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Funds in accordance with the provisions below.
CLASS A SHARES. Class A shares of the Kemper Funds and shares of the Money
Market Funds listed under "Special Features--Class A Shares--Combined Purchases"
above may be exchanged for each other at their relative net asset values. Shares
of Money Market Funds and the Kemper Cash Reserves Fund that were acquired by
purchase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. Series of Kemper Target Equity Fund are
available on exchange only during the Offering Period for such series as
described in the applicable prospectus. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI.
Class A shares of the Fund purchased under the Large Order NAV Purchase
Privilege may be exchanged for Class A shares of another Kemper Fund or a Money
Market Fund under the exchange privilege described above without paying any
contingent deferred sales charge at the time of exchange. If the Class A shares
received on exchange are redeemed thereafter, a contingent deferred sales charge
may be imposed in accordance with the foregoing requirements provided that the
shares redeemed will retain their original cost and purchase date for purposes
of calculating the contingent deferred sales charge.
CLASS B SHARES. Class B shares of the Fund and Class B shares of any other
Kemper Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class B
shares may be exchanged without a contingent deferred sales charge being imposed
at the time of exchange. For purposes of calculating the contingent deferred
sales charge that may be imposed upon the redemption of the Class B shares
received on exchange, amounts exchanged retain their original cost and purchase
date.
24
<PAGE>
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 purposes of determining whether there is a
contingent deferred sales charge that may be imposed upon the redemption of the
Class C shares received by exchange, they retain the cost and purchase date of
the shares that were originally purchased and exchanged.
GENERAL. Shares of a Kemper Fund with a value in excess of $1,000,000 (except
Kemper Cash Reserves Fund) acquired by exchange through another Kemper Fund, or
from a Money Market Fund, may not be exchanged thereafter until they have been
owned for 15 days (the "15-Day Hold Policy"). For purposes of determining
whether the 15-Day Hold Policy applies to a particular exchange, the value of
the shares to be exchanged shall be computed by aggregating the value of shares
being exchanged for all accounts under common control, discretion or advice,
including, without limitation, accounts administered by a financial services
firm offering market timing, asset allocation or similar services. The total
value of shares being exchanged must at least equal the minimum investment
requirement of the Kemper Fund into which they are being exchanged. Exchanges
are made based on relative dollar values of the shares involved in the exchange.
There is no service fee for an exchange; however, dealers or other firms may
charge for their services in effecting exchange transactions. Exchanges will be
effected by redemption of shares of the fund held and purchase of shares of the
other fund. For federal income tax purposes, any such exchange constitutes a
sale upon which a gain or loss may be realized, depending upon whether the value
of the shares being exchanged is more or less than the shareholder's adjusted
cost basis of such shares. Shareholders interested in exercising the exchange
privilege may obtain prospectuses of the other Funds from dealers, other firms
or KDI. Exchanges may be accomplished by a written request to Kemper Service
Company, Attention: Exchange Department, P.O. Box 419557, Kansas City, Missouri
64141-6557, or by telephone if the shareholder has given authorization. Once the
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048, subject to the limitations on liability under
"Redemption or Repurchase of Shares--General." Any share certificates must be
deposited prior to any exchange of such shares. During periods when it is
difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to use the telephone exchange privilege. The exchange privilege is not
a right and may be suspended, terminated or modified at any time. Exchanges may
only be made for Funds that are available for sale in the shareholder's state of
residence. Currently, Tax-Exempt California Money Market Fund is available for
sale only in California and Investors Municipal Cash Fund is available for sale
only in 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 Kemper
Fund. Exchanges are subject to the terms and conditions described above under
"Exchange Privilege," except that the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange is not applicable. This privilege may not
be used for the exchange of shares held in certificated form.
EXPRESS-Transfer. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from any person to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares--General." Once enrolled in
EXPRESS-Transfer, a shareholder can initiate a transaction by calling Kemper
Shareholder Services toll free at 1-800-621-1048, Monday through Friday, 8:00
a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege by
sending written notice to Kemper Service Company, P.O. Box 419415, Kansas City,
Missouri 64141-6415. Termination will become effective as soon as the
Shareholder Service Agent has had a reasonable amount of time to act upon the
request. EXPRESS-Transfer cannot be used with passbook savings accounts or for
tax-deferred plans such as Individual Retirement Accounts ("IRAs").
BANK DIRECT DEPOSIT. A shareholder may purchase additional shares of the Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan ("Bank Direct Deposit"), investments are made automatically (maximum
$50,000) from the shareholder's account at a bank, savings and loan or credit
union into the shareholder's Fund account. By enrolling in Bank Direct
25
<PAGE>
Deposit, the shareholder authorizes the Fund and its agents to either draw
checks or initiate Automated Clearing House debits against the designated
account at a bank or other financial institution. This privilege may be selected
by completing the appropriate section on the Account Application or by
contacting the Shareholder Service Agent for appropriate forms. A shareholder
may terminate his or her Plan by sending written notice to Kemper Service
Company, P.O. Box 419415, Kansas City, Missouri 64141-6415. Termination by a
shareholder will become effective within thirty days after the Shareholder
Service Agent has received the request. A Fund may immediately terminate a
shareholder's Plan in the event that any item is unpaid by the shareholder's
financial institution. The 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 the Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) The Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of the Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. The minimum periodic
payment is $100. The maximum annual rate at which Class B shares may be redeemed
(and Class A shares purchased under the Large Order NAV Purchase Privilege and
Class C shares in their first year following the purchase) under a systematic
withdrawal plan is 10% of the net asset value of the account. Shares are
redeemed so that the payee will receive payment approximately the first of the
month. Any income and capital gain dividends will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested and fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, 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 redemptions
of Class A shares purchased under the Large Order NAV Purchase Privilege, Class
B shares and Class C shares made pursuant to a systematic withdrawal plan. The
right is reserved to amend the systematic withdrawal plan on 30 days' notice.
The plan may be terminated at any time by the investor or the 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:
o Traditional, Roth and Education Individual Retirement Accounts ("IRAs").
This includes Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE"), Simplified Employee Pension Plan ("SEP") IRA accounts and
prototype documents.
o 403(b)(7) Custodial Accounts. This type of plan is available to employees
of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans, simple 401(k) plans and materials
for establishing them are available from the Shareholder Service Agent upon
request. Investors should consult with their own tax advisors before
establishing a retirement plan.
KFT may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Fund's investments is
26
<PAGE>
not reasonably practicable, or (ii) it is not reasonably practicable for KFT to
determine the value of the Fund's net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
KFT's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will
satisfy the redemption request in whole or in part by a distribution of
portfolio securities in lieu of cash, in conformity with the applicable rules of
the 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.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel or ruling by the Internal
Revenue Service or other assurance acceptable to KFT to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares and the assessment of the administrative services fee with
respect to each Class does not result in KFT's dividends constituting
"preferential dividends" under the Code, and (b) that the conversion of Class B
shares to Class A shares does not constitute a taxable event under the Code. The
conversion of Class B shares to Class A shares may be suspended if such
assurance is not available. In that event, no further conversions of Class B
shares would occur, and shares might continue to be subject to the distribution
services fee for an indefinite period that may extend beyond the proposed
conversion date as described herein.
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 each of 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.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Market ("Nasdaq") is
valued at its most recent sale price. Lacking any sales, the security is valued
at the most recent bid quotation. The value of an equity security not quoted on
Nasdaq, but traded in another over-the-counter market, is its most recent sale
price. Lacking any sales, the security is valued at the Calculated Mean. Lacking
a Calculated Mean, the security is valued at the most recent bid quotation.
Debt securities are valued at prices supplied by the Fund's pricing agent(s)
which reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board believes approximates market value. If it is not possible to value a
particular debt security pursuant to these valuation methods, the value of such
security is the most recent bid quotation supplied by a bona fide marketmaker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment manager may calculate the price of that debt security,
subject to limitations established by the Board.
An exchange-traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such exchange.
Lacking any sales, the options contract is valued at the Calculated Mean.
Lacking any Calculated Mean, the options contract is valued at the most recent
bid quotation in the case of a purchased options contract, or the most recent
asked quotation in the case of a written options contract. An options contract
on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
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If a security is traded on more than one exchange, or upon one or more exchanges
and in the over-the-counter market, quotations are taken from the market in
which the security is traded most extensively.
If, in the opinion of the Valuation Committee of the Board of Trustees, the
value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in terms of the
currency in which the market quotation used is expressed ("Local Currency"), the
value of these portfolio assets in terms of U.S. dollars is calculated by
converting the Local Currency into U.S. dollars at the prevailing currency
exchange rate on the valuation date.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS. The Fund intends to follow the practice of distributing substantially
all of its investment company taxable income which includes any excess of net
realized short-term capital gains over net realized long-term capital losses.
The Fund may follow the practice of distributing the entire excess of net
realized long-term capital gains over net realized short-term capital losses.
However, the Fund may retain all or part of such gain for reinvestment, after
paying the related federal taxes for which shareholders may then be able to
claim a credit against their federal tax liability. If the Fund does not
distribute the amount of capital gain and/or net investment income required to
be distributed by an excise tax provision of the Code, the Fund may be subject
to that excise tax. In certain circumstances, the Fund may determine that it is
in the interest of shareholders to distribute less than the required amount.
(See "TAXES.")
The Fund normally distributes semi-annually dividends of net investment income.
The Fund distributes 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. Distributions of net capital gains
realized during each fiscal year will be made at least annually in December.
Additional distributions, including distributions of net short-term capital
gains in excess of net long-term capital losses, may be made, if necessary.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
TAXES. The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code and, if so qualified, generally will not be liable for
federal income taxes to the extent its earnings are distributed. To so qualify,
the Fund must satisfy certain income and asset diversification requirements, and
must distribute to its shareholders at least 90% of its investment company
taxable income (including net short-term capital gain). Distributions of
investment company taxable income are taxable to shareholders as ordinary
income.
The Fund is subject to a 4% nondeductible excise tax on amounts required to be
but not distributed under a prescribed formula. The formula requires payment to
shareholders during a calendar year of distributions representing at least 98%
of the Fund's ordinary income for the calendar year, at least 98% of the excess
of its capital gains over capital losses (adjusted for certain ordinary losses)
realized during the one-year period ending October 31 during such year, and all
ordinary income and capital gains for prior years that were not previously
distributed.
Investment company taxable income includes dividends, interest and net
short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Fund.
If any net realized long-term capital gains in excess of net realized short-term
capital losses are retained by the Fund for reinvestment, requiring federal
income taxes to be paid thereon by the Fund, the Fund intends to elect to treat
such capital gains as having been distributed to shareholders. As a result, each
shareholder will report such capital gains as capital gains taxable to
individuals at
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a maximum 20% or 28% capital gains rate (depending on the Fund's holding period
for the assets giving rise to the gain), will be able to claim a relative share
of federal income taxes paid by the Fund on such gains as a credit against
personal federal income tax liability, and will be entitled to increase the
adjusted tax basis on Fund shares by the difference between a pro rata share of
such gains owned and the individual tax credit.
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 income distributions of the
Fund may be eligible for the deduction for dividends received by corporations.
Shareholders will be informed of the portion of dividends which so qualify. The
dividends received deduction is reduced to the extent the shares of the Fund
with respect to which the dividends are received are treated as debt-financed
under federal income tax law, and is eliminated if either those shares or the
shares of the Fund are deemed to have been held by the Fund or the shareholder,
as the case may be, for less than 46 days during the 90-day period beginning 45
days before the shares become ex-dividend.
Properly designated distributions of the excess of net long-term capital gain
over net short-term capital loss, which the Fund designates as capital gain
dividends, are taxable to individual shareholders at a maximum 20% or 28%
capital gains rate (depending on the Fund's holding period for the assets giving
rise to the gain), regardless of the length of time the shares of the Fund have
been held by such shareholders. Such distributions are not eligible for the
dividends received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Kemper Fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
Distributions by the Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Equity options (including covered call options on portfolio stock) written or
purchased by the Fund will be subject to tax under Section 1234 of the Code. In
general, no loss is recognized by the Fund upon payment of a premium in
connection with the purchase of a put or call option. The character of any gain
or loss recognized (i.e., long-term or short-term) will generally depend, in the
case of a lapse or sale of the option, on the Fund's holding period for the
option and, in the case of an exercise of the option, on the Fund's holding
period for the underlying security. The purchase of a put option may constitute
a short sale for federal income tax purposes, causing an adjustment in the
holding period of the underlying security or substantially identical security in
the Fund's portfolio. If the Fund writes a call option, no gain is recognized
upon its receipt of a premium. If the option lapses or is closed out, any gain
or loss is treated as a short-term capital gain or loss. If a call option is
exercised, any resulting gain or loss is short-term or long-term capital gain or
loss depending on the holding period of the underlying security. The exercise of
a put option written by the Fund is not a taxable transaction for the Fund.
Many futures and forward contracts entered into by the Fund and all listed
nonequity options written or purchased by the Fund (including covered call
options written on debt securities and options purchased or written on futures
contracts) will be governed by Section 1256 of the Code. Absent a tax election
to the contrary, gain or loss attributable to the lapse, exercise or closing out
of any such position will be treated as 60% long-term and 40% short-term, and on
the last trading day of the Fund's fiscal year (and generally, on October 31 for
purposes of the 4% excise tax), all outstanding Section 1256 positions will be
marked-to-market (i.e.,
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treated as if such positions were closed out at their closing price on such
day), with any resulting gain or loss recognized as 60% long-term and 40%
short-term. Under certain circumstances, entry into a futures contract to sell a
security may constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying security or a substantially
identical security in the Fund's portfolio. Under Section 988 of the Code,
discussed below, foreign currency gain or loss from foreign currency-related
forward contracts, certain futures and similar financial instruments entered
into by the Fund will be treated as ordinary income or loss.
Positions of the Fund consisting of at least one stock and at least one stock
option or other position with respect to a related security which substantially
diminishes the Fund's risk of loss with respect to such stock could be treated
as a "straddle" which is governed by Section 1092 of the Code, the operation of
which may cause deferral of losses, adjustments in the holding periods of stock
or securities and conversion of short-term capital losses into long-term capital
losses. An exception to these straddle rules exists for any "qualified covered
call options" on stock written by the Fund.
Positions of the Fund consisting of at least one position not governed by
Section 1256 and at least one future, forward, or nonequity option contract
which is governed by Section 1256 which substantially diminishes the Fund's risk
of loss with respect to such other position will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. The Fund will monitor its transactions in options
and futures and may make certain tax elections in connection with these
investments.
Notwithstanding any of the foregoing, recent tax law changes may require the
Fund to recognize gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short sale,
offsetting notional principal contract, futures or forward contract transaction
with respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.
Similarly, if the Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, and on disposition of certain futures, forward or option
contracts, gains or losses attributable to fluctuations in the value of a
foreign currency between the date of acquisition of the security or contracts
and the date of disposition are also treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses may
increase or decrease the amount of the Fund's investment company taxable income
to be distributed to its shareholders as ordinary income.
If the Fund invests in stock of certain foreign investment companies, the Fund
may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income rate in effect for such year, and the tax would be further
increased by an interest change to reflect the value of the tax deferral deemed
to have resulted from the ownership if the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
The Fund may make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U..S. federal income taxation.
At the end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign investment company's stock exceeds the Fund's adjusted basis in these
shares; any mark to market losses and any loss from an actual disposition of
stock would be deductible as ordinary losses to the extent of any net mark to
market gains included in income in prior years. The effect of the election would
be to treat excess distributions and gain
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on dispositions as ordinary income which is not subject to a fund level tax when
distributed to shareholders as a dividend. Alternatively, the Fund may elect to
include as income and gain its share of the ordinary earnings and net capital
gain of certain foreign investment companies in lieu of being taxed in the
manner described above.
If the Fund holds zero coupon securities or other securities which are issued at
a discount a portion of the difference between the issue price and the face
value of such securities ("original issue discount") will be treated as income
to the Fund each year, even though the Fund will not receive cash interest
payments from these securities. This original issue discount (imputed income)
will comprise a part of the investment company taxable income of the Fund which
must be distributed to shareholders in order to maintain the qualification of
the Fund as a regulated investment company and to avoid federal income tax at
the Fund level. In addition if the Fund invests in certain high yield original
issue discount obligations issued by corporations, a portion of the original
issue discount accruing on the obligation may be eligible for the deductions for
dividends received by corporations. In such an event, dividends of investment
company taxable income received from the Fund by its corporate shareholders to
the extent attributable to such portion of accrued original issue discount may
be eligible for this deduction for dividends received by a corporation if so
designated by the Fund in a written notice to shareholders. If the Fund acquires
a debt instrument at a market discount, a portion of the gain recognized (if
any) on disposition of such instrument may be treated as ordinary income.
The Fund will be required to report to the Internal Revenue Service ("IRS") all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
A shareholder who redeems shares of the Fund that are held as a capital asset
will recognize capital gain or loss for federal income tax purposes measured by
the difference between the value of the shares redeemed and the adjusted cost
basis of the shares. Any loss recognized on the redemption of Fund shares held
six months or less will be treated as long-term capital loss to the extent that
the shareholder has received any long-term capital gain dividends on such
shares. A shareholder who has redeemed shares of the Fund or any other Kemper
Fund listed under "Special Features--Class A Shares--Combined Purchases" (other
than shares of Kemper Cash Reserves Fund not acquired by exchange from another
Kemper Mutual Fund) may reinvest the amount redeemed at net asset value at the
time of the reinvestment in shares of the Fund or in shares of the other Kemper
Mutual Funds within six months of the redemption as described under "Redemption
or Repurchase of Shares--Reinvestment Privilege." If redeemed shares were held
less than 91 days, then the lesser of (a) the sales charge waived on the
reinvested shares, or (b) the sales charge incurred on the redeemed shares, is
included in the basis of the reinvested shares and is not included in the basis
of the redeemed shares. If a shareholder realizes a loss on the redemption or
exchange of the Fund's shares and reinvests in shares of the same Fund within 30
days before or after the redemption or exchange, the transactions may be subject
to the wash sale rules resulting in a postponement of the recognition of such
loss for federal income tax purposes. An exchange of the Fund's shares for
shares of another fund is treated as a redemption and reinvestment for federal
income tax purposes upon which gain or loss may be recognized.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The Fund is organized as a Massachusetts business trust and is not liable for
any income or franchise tax in the Commonwealth of Massachusetts, provided that
the Fund continues to be treated as a regulated investment company under
Subchapter M of the Code.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the
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U.S. and foreign tax consequences of ownership of shares of the Fund, including
the possibility that such a shareholder may be subject to a U.S. withholding tax
at a rate of 30% (or at a lower rate under an applicable income tax treaty) on
amounts constituting ordinary income received by him or her, where such amounts
are treated as income from U.S. sources under the Code.
Dividend and interest income received by the Fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Shareholders should consult their tax advisers about the application of the
provisions of tax law in light of their particular tax situations.
PERFORMANCE
The Fund's historical performance or return for a class of shares may be shown
in the form of "average annual total return" and "total return" figures. These
various measures of performance are described below. Performance information
will be computed separately for each class.
The Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the SEC. The average annual total
return for the Fund for a specific period is found by first taking a
hypothetical $1,000 investment ("initial investment") in the Fund's shares on
the first day of the period, adjusting to deduct the maximum sales charge (in
the case of Class A shares), and computing the "redeemable value" of that
investment at the end of the period. The redeemable value in the case of Class B
and Class C shares may or may not include the effect of the applicable
contingent deferred sales charge that may be imposed at the end of the period.
The redeemable value is then divided by the initial investment, and this
quotient is taken to the Nth root (N representing the number of years in the
period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Average annual total return may also be calculated
without adjusting to deduct the maximum sales charge.
Calculation of the Fund's total return is not subject to a standardized formula,
except when calculated for purposes of the "Financial Highlights" table in the
Fund's financial statements and prospectus. Total return performance for a
specific period is calculated by first taking a hypothetical investment
("initial investment") in the Fund's shares on the first day of the period,
either adjusting or not adjusting to deduct the maximum sales charge (in the
case of Class A shares), and computing the "ending value" of that investment at
the end of the period. The total return percentage is then determined by
subtracting the initial investment from the ending value and dividing the
remainder by the initial investment and expressing the result as a percentage.
The ending value in the case of Class B shares and Class C shares may or may not
include the effect of the applicable contingent deferred sales charge that may
be imposed at the end of the period. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Total return may also be shown as
the increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B shares and Class C
shares would be reduced if such charge were included.
Because some of the Fund's investments are denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the Fund's investment performance. Historical information on
the value of the dollar versus foreign currencies may be used from time to time
in advertisements concerning the Fund. Such historical information is not
indicative of future fluctuations in the value of the U.S. dollar against these
currencies. In addition, marketing materials may cite country and economic
statistics and historical stock market performance for any of the countries in
which the Fund invests, including, but not limited to, the following: population
growth, gross domestic product, inflation rate, average stock market
price-earnings ratios and the total value of stock markets. Sources for such
statistics may include official publications of various foreign governments and
exchanges.
The Fund's performance figures are based upon historical results and are not
representative of future performance. The Fund's Class A shares are sold at net
asset value plus a maximum sales charge of 4.5% of the offering price. Class B
shares and Class C shares are sold at net asset value. Redemptions of Class B
shares may be subject to a contingent deferred sales charge that is 4% in the
first year following the purchase, declines by a specified percentage each year
thereafter and becomes zero after six years. Redemption of Class
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C shares may be subject to a 1% contingent deferred sales charge in the first
year following the purchase. Returns and net asset value will fluctuate. Factors
affecting the Fund's performance include general market conditions, operating
expenses and investment management. Any additional fees charged by a dealer or
other financial services firm would reduce the returns described in this
section. Shares of the Fund are redeemable at the then current net asset value,
which may be more or less than original cost. The Fund's performance may be
compared to that of the Consumer Price Index or various unmanaged indices
including, but not limited to, the Dow Jones Industrial Average, the Standard &
Poor's Financial Services Index, the Standard & Poor's 500 Composite Stock Price
Index, the Russell 1000(R) Index, the Russell 1000(R) Growth Index, the Wilshire
Large Company Growth Index, the Wilshire 750 Mid Cap Company Growth Index, the
Standard & Poor's/Barra Value Index, the Standard & Poor's/Barra Growth Index,
the Russell 1000(R) Value Index, the Europe/Australia/Far East Index,
International Finance Corporation's Latin America Investable Return Index, the
Morgan Stanley Capital International World Index, the J.P. Morgan Global Traded
Bond Index, and the Salomon Brothers World Government Bond Index. The
performance of the Fund may also be compared to the performance of other mutual
funds or mutual fund indices with similar objectives and policies as reported by
independent mutual fund reporting services such as Lipper Analytical Services,
Inc. ("Lipper"). Lipper performance calculations are based upon changes in net
asset value with all dividends reinvested and do not include the effect of any
sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market fund and U.S. Treasury
obligations. Information regarding bank products may be based upon, among other
things, the BANK RATE MONITOR National Index(TM) for certificates of deposit,
which is an unmanaged index and is based on stated rates and the annual
effective yields of certificates of deposit in the ten largest banking markets
in the United States, or the CDA Investment Technologies, Inc. Certificate of
Deposit Index, which is an unmanaged index based on the average monthly yields
of certificates of deposit.
Investors also may want to compare the performance of the Fund to that of U.S.
Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on the average monthly yield of
treasury bills maturing in six months. Due to their short maturities, Treasury
bills generally experience very low market value volatility.
Investors may want to compare the performance of the Fund to that of money
market funds. Money market funds seek to maintain a stable net asset value and
yield fluctuates. Information regarding the performance of money market funds
may be based upon, among other things, IBC Financial Data Inc.'s Money Fund
Report (All Taxable). As reported by IBC, all investment results represent total
return (annualized results for the period net of management fees and expenses)
and one year investment results are effective annual yields assuming
reinvestment of dividends.
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI are listed
below:
JAMES E. AKINS (10/15/26), Trustee, 2904 Garfield Terrace, N.W., Washington,
D.C.; Consultant on International, Political and Economic Affairs; formerly, a
career United States Foreign Service Officer, Energy Adviser for the White
House; United States Ambassador to Saudi Arabia, 1973-76.
JAMES R. EDGAR ( 7/22/46), Trustee, 1927 County Road 150 E, Seymour, IL;
Distinguished Fellow, University of Illinois Institute of Government and Public
Affairs; formerly, Governor of the State of Illinois, 1991-1998; Illinois
Secretary of State, 1981-1990; Director of Legislative Affairs, Office of the
Governor of Illinois, 1979-1980; Representative in Illinois General Assembly,
1976-1979.
33
<PAGE>
ARTHUR R. GOTTSCHALK (2/13/25), Trustee, 10642 Brookridge Drive, Frankfort,
Illinois, Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; formerly, Illinois State Senator;
formerly, Vice President, The Reuben H. Donnelly Corp.; formerly, attorney.
FREDERICK T. KELSEY (4/25/27), Trustee, 4010 Arbor Lane, Unit 102, Northfield,
Illinois; Retired; formerly, consultant to Goldman, Sachs & Co.; formerly,
President, Treasurer and Trustee of Institutional Liquid Assets and its
affiliated mutual funds; Trustee of the Northern Institutional Funds; formerly,
Trustee of the Pilot Fund.
THOMAS W. LITTAUER (4/26/55), Trustee, Chairman, and Vice President*, Two
International Place, Boston, Massachusetts; Managing Director, Adviser; Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
KATHRYN L. QUIRK (12/3/52), Trustee and Vice President*, 345 Park Avenue, New
York, New York; Managing Director, Adviser.
FRED B. RENWICK (2/1/30), Trustee, 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director,
TIFF Investment Program, Inc.; Director, the Wartburg Foundation; Chairman,
Committee of Morehouse College Board of Trustees; Chairman, American Bible
Society Investment Committee; formerly, member of the Investment Committee of
Atlanta University Board of Trustees; formerly, Director of Board of Pensions,
Evangelical Lutheran Church of America.
CORNELIA M. SMALL (7/28/44), Trustee and Vice President*, 345 Park Avenue, New
York, New York, Managing Director, Adviser.
JOHN G. WEITHERS (8/8/33), Trustee, 311 Spring Lake, Hinsdale, Illinois;
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company, President of the
Members of the Corporation and Trustee, DePaul University.
MARK S. CASADY (9/21/60), President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Institutional Sales Manager
of an unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Assistant Secretary, Scudder
Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63) Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
VALERIE F. MALTER (7/25/58), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
ELIZABETH D. SMITH (10/27/46), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.
34
<PAGE>
WILLIAM F. TRUSCOTT (9/14/60), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
ROBERT D. TYMOCZKO (2/3/70), Vice President*, 101 California Street, San
Francisco, California; Assistant Vice President, Adviser.
* "Interested persons" as defined in the 1940 Act.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows estimated amounts
to be paid or accrued to those trustees who are not designated "interested
persons" during the Trust's current fiscal year except that the information in
the last column is for calendar year 1999.
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation Kemper Funds Paid
Name of Board Member From Kemper Funds Trust* to Board Members(3)
- -------------------- ------------------------ -------------------
<S> <C> <C>
James E. Akins $ $
James R. Edgar (1) $ $
Arthur R. Gottschalk(2) $ $
Frederick T. Kelsey $ $
Fred B. Renwick $ $
John G. Weithers $ $
</TABLE>
* Estimated
(1) Elected trustee on May 27, 1999
(2) Includes deferred fees. Pursuant to deferred compensation agreements
with the Funds, deferred amounts accrue interest monthly at a rate
approximate to the yield of Zurich Money Funds -- Zurich Money Market
Fund. The total deferred fees (including interest thereon) accrued for
the eight month fiscal period ending August 31, 1999, payable from the
Funds to Mr. Gottschalk was $2,5000.
(3) Includes compensation for service on the Boards of 13 Kemper funds,
with 36 fund portfolios. Each trustee currently serves as a board
member of 15 Kemper Funds with 51 fund portfolios.
SHAREHOLDER RIGHTS
The Fund is a series of Kemper Funds Trust, an open-end Massachusetts business
trust established under an Agreement and Declaration of Trust of the Trust (the
"Declaration of Trust") dated _______________, 1998.
The Fund generally is not required to hold meetings of its shareholders. Under
the Declaration of Trust, however, shareholder meetings will be held in
connection with the following matters: (a) the election or removal of trustees
if a meeting is called for such purpose; (b) the adoption of any contract for
which approval by shareholders is required by the 1940 Act; (c) any termination
of the Fund or a class to the extent and as provided in the Declaration of
Trust; (d) any amendment of the Declaration of Trust (other than amendments
changing the name of the Fund, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); and (e) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of KFT, or any registration of the Fund with
the SEC or any state, or as the trustees may consider necessary or desirable.
The shareholders also would vote upon changes in fundamental policies or
restrictions.
Any matter shall be deemed to have been effectively acted upon with respect to
the Fund if acted upon as provided in Rule 18f-2 under the 1940 Act, or any
successor rule, and in the Trust's Declaration of Trust. As used in this
Statement of Additional Information, the term "majority," when referring to the
approvals to be obtained from shareholders in connection with general matters
affecting the Fund and all additional portfolios (e.g., election of trustees),
means the vote of the lesser of (i) 67% of the Trust's shares represented at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy, or (ii) more than 50% of the Trust's outstanding shares. The
term "majority," when referring to the approvals to be obtained from
shareholders in
35
<PAGE>
connection with matters affecting only the Fund or any other single portfolio
(e.g., annual approval of investment management contracts), means the vote of
the lesser of (i) 67% of the shares of the portfolio represented at a meeting if
the holders of more than 50% of the outstanding shares of the portfolio are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the portfolio.
Each Trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Any of the Trustees may be removed (provided the aggregate number of Trustees
after such removal shall not be less than one) with cause, by the action of
two-thirds of the remaining Trustees. Any Trustee may be removed at any meeting
of shareholders by vote of two-thirds of the Outstanding Shares. The Trustees
shall promptly call a meeting of the shareholders for the purpose of voting upon
the question of removal of any such Trustee or Trustees when requested in
writing to do so by the holders of not less than ten percent of the Outstanding
Shares, and in that connection, the Trustees will assist shareholder
communications to the extent provided for in Section 16(c) under the 1940 Act. A
majority of the Trustees shall be present in person at any regular or special
meeting of the Trustees in order to constitute a quorum for the transaction of
business at such meeting and, except as otherwise required by law, the act of a
majority of the Trustees present at any such meetings, at which a quorum is
present, shall be the act of the Trustees.
The Trust's Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Fund or any class by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
The assets of the Trust received for the issue or sale of the shares of each
series and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account and are to be charged with the
liabilities in respect to such series and with a proportionate share of the
general liabilities of the Trust. If a series were unable to meet its
obligations, the assets of all other series may in some circumstances be
available to creditors for that purpose, in which case the assets of such other
series could be used to meet liabilities which are not otherwise properly
chargeable to them. Expenses with respect to any two or more series are to be
allocated in proportion to the asset value of the respective series except where
allocations of direct expenses can otherwise be fairly made. The officers of the
Trust, subject to the general supervision of the Trustees, have the power to
determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the underlying assets of such shares
available for distribution to shareholders.
ADDITIONAL INFORMATION
Other Information
The CUSIP number of the Class A shares of the Fund is _________.
The CUSIP number of the Class B shares of the Fund is __________.
The CUSIP number of the Class C shares of the Fund is __________.
36
<PAGE>
The Fund has a fiscal year ending __________.
Many of the investment changes in the Fund will be made at prices different from
those prevailing at the time they may be reflected in a regular report to
shareholders of the Fund. These transactions will reflect investment decisions
made by the Sub-Adviser in light of the Fund's investment objectives and
policies, its other portfolio holdings and tax considerations, and should not be
construed as recommendations for similar action by other investors.
Costs of $__________ incurred by the Fund, in conjunction with its organization,
are amortized over the five-year period beginning _________, 2000.
Portfolio securities of the Fund are held separately pursuant to a custodian
agreement, by the Fund's custodian, State Street Bank and Trust Company.
The law firm of Dechert Price & Rhoads is counsel to the Fund.
The name "Kemper Funds Trust" is the designation of the Trust for the time being
under a Declaration of Trust dated __________, 1998, as amended from time to
time, and all persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents, shareholders nor other series of the Trust assume
any personal liability for obligations entered into on behalf of the Fund. No
other series of the Trust assumes any liabilities for obligations entered into
on behalf of the Fund. Upon the initial purchase of shares, the shareholder
agrees to be bound by the Trust's Declaration of Trust, as amended from time to
time. The Declaration of Trust is on file at the Massachusetts Secretary of
State's Office in Boston, Massachusetts.
The Fund's prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement and its amendments which the
Fund has filed with the SEC under the Securities Act of 1933 and reference is
hereby made to the Registration Statement for further information with respect
to the Fund and the securities offered hereby. The Registration Statement and
its amendments, are available for inspection by the public at the SEC in
Washington, D.C.
<PAGE>
PART C
------
OTHER INFORMATION
-----------------
<TABLE>
<CAPTION>
Item 23 Exhibits
- ------- --------
<S> <C> <C> <C>
(a) Declaration of Trust, dated October 14, 1998, is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement.
(b) By-Laws, dated October 14, 1998, is incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration Statement.
(c) (1) Establishment and Designation of Series of Beneficial Interest,
dated October 14, 1998, is incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration Statement.
(2) Establishment and Designation of Series of Beneficial Interest,
dated March __, 2000.
(To be filed by amendment.)
(d) (1) Investment Management Agreement between the Registrant, on behalf
of Kemper Large Company Growth Fund, and Scudder Kemper
Investments, dated December 28, 1998, is incorporated by reference
to Pre-Effective Amendment No. 1 to the Registration Statement.
(2) Investment Management Agreement between the Registrant, on behalf
of Kemper Research Fund, and Scudder Kemper Investments, dated
December 28, 1998, is incorporated by reference to Pre-Effective
Amendment No. 1 to the Registration Statement.
(3) Investment Management Agreement between the Registrant, on behalf
of Kemper Small Cap Value+Growth Fund, and Scudder Kemper
Investments, dated December 28, 1998, is incorporated by reference
to Pre-Effective Amendment No. 1 to the Registration Statement.
(4) Investment Management Agreement between the Registrant, on behalf
of Kemper S&P 500 Index Fund, and Scudder Kemper Investments, dated
March __, 2000.
(To be filed by amendment.)
(e) Underwriting and Distribution Services Agreement between the
Registrant and Kemper Distributors, Inc., dated December 28, 1998
is incorporated by reference to Pre-Effective Amendment No. 1 to
the Registration Statement.
(f) Underwriting and Distribution Services Agreement between the
Registrant and Kemper Distributors, Inc., dated October 1, 1999.
(To be filed by amendment.)
(g) Inapplicable.
(h) Custody Agreement between the Registrant and State Street Bank and
Trust Company is incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement, as filed on October
2
<PAGE>
15, 1999.
(i) Custody Agreement between the Registrant and State Street Bank and
Trust Company, as amended October 1, 1999.
(To be filed by amendment.)
(j) (1) Agency Agreement dated December 28, 1998 is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement.
(1)(a) Amendment No. 1 the Agency Agreement dated July 15, 1999 is
incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement, as filed on October 15, 1999.
(2) Administrative Services Agreement, dated December 28, 1998, is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
(3) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Large Company Growth Fund, and Scudder Fund
Accounting Corp., dated December 28, 1998, is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement.
(4) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Research Fund, and Scudder Fund Accounting Corp.,
dated December 28, 1998, is incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration Statement.
(5) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Small Cap Value+Growth Fund, and Scudder Fund
Accounting Corp., dated December 28, 1998, is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement.
(6) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper S&P 500 Index Fund, and Scudder Fund Accounting
Corp., dated March __, 2000.
(To be filed by amendment.)
(k) Opinion and Consent of Legal Counsel.
(To be filed by amendment.)
(l) Consent of Independent Accountants.
(To be filed by amendment.)
(m) Inapplicable.
(n) Inapplicable.
(o) (1) 12b-1 Plan between Kemper Large Company Growth Fund (Class B
shares) and Kemper Distributors, Inc., dated December 28, 1998, is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
(2) 12b-1 Plan between Kemper Large Company Growth Fund (Class C
3
<PAGE>
shares) and Kemper Distributors, Inc., dated December 28, 1998, is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
(3) 12b-1 Plan between Kemper Research Fund (Class B shares)and Kemper
Distributors, Inc., dated December 28, 1998, is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement.
(4) 12b-1 Plan between Kemper Research Fund (Class C shares) and Kemper
Distributors, Inc., dated December 28, 1998, is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement.
(5) 12b-1 Plan between Kemper Small Cap Value+Growth Fund (Class B
shares) and Kemper Distributors, Inc., dated December 28, 1998, is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
(6) 12b-1 Plan between Kemper Small Cap Value+Growth Fund (Class C
shares) and Kemper Distributors, Inc., dated December 28, 1998, is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
(7) 12b-1 Plan between Kemper S&P 500 Index Fund (Class B shares) and
Kemper Distributors, Inc., dated March __, 2000.
(To be filed by amendment.)
(8) 12b-1 Plan between Kemper S&P 500 Index Fund (Class C shares) and
Kemper Distributors, Inc., dated March __, 2000.
(To be filed by amendment.)
(p) Inapplicable
(q) Multi-Distribution System Plan, dated December 28, 1998, is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
</TABLE>
Item 24. Persons Controlled or under Common Control with Fund.
- -------- -----------------------------------------------------
None
Item 25. Indemnification
- -------- ---------------
As permitted by Sections 17(h) and 17(i) of the Investment
Company Act of 1940, as amended (the "1940 Act"), pursuant to
Article IV of the Registrant's By-Laws (filed as Exhibit No. 2
to the Registration Statement), officers, directors, employees
and representatives of the Funds may be indemnified against
certain liabilities in connection with the Funds, and pursuant
to Section 12 of the Underwriting Agreement dated May 6, 1998
(filed as Exhibit No. 6(c) to the Registration Statement),
Scudder Investor Services, Inc. (formerly "Scudder Fund
Distributors, Inc."), as principal underwriter of the
Registrant, may be indemnified against certain liabilities
that it may incur. Said Article IV of the By-Laws and Section
12 of the Underwriting Agreement are hereby incorporated by
reference in their entirety.
4
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be
permitted to directors, officers and controlling persons of
the Registrant and the principal underwriter pursuant to the
foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or
controlling person of the Registrant and the principal
underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant
by such director, officer or controlling person or the
principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Item 26. Business or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO, Member Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
5
<PAGE>
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Financial Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director, Vice President and Chief Information Officer, Scudder Kemper Investments,
Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman,
British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
Item 27. Principal Underwriters
- -------- ----------------------
(a) Kemper Distributors, Inc. acts as principal underwriter of
the Registrant's shares and acts as principal underwriter of the Kemper
Funds.
6
<PAGE>
(b) Information on the officers and directors of Kemper
Distributors, Inc., principal underwriter for the Registrant is set
forth below. The principal business address is 222 South Riverside
Plaza, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None
Thomas W. Littauer Director, Chief Executive Officer and Trustee and Vice President
Vice Chairman
Kathryn L. Quirk Director, Secretary, Chief Legal Trustee and Vice
Officer & Vice President President
James J. McGovern Chief Financial Officer & Treasurer None
Linda J. Wondrack Vice President & Chief Compliance Vice President
Officer
Paula Gaccione Vice President None
Herbert A. Christiansen Vice President None
Robert A. Rudell Vice President None
Michael E. Harrington Managing Director None
William M. Thomas Managing Director None
Robert Froehlich Managing Director None
Michael Curran Managing Director None
C. Perry Moore Managing Director None
Lorie O'Malley Managing Director None
David Swanson Managing Director None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and
Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director, Chairman President
Stephen R. Beckwith Director None
</TABLE>
7
<PAGE>
(c) Not applicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of the
Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, State Street
Bank and Trust Company, 225 Franklin Street, Boston, MA or, in the case of
records concerning transfer agency and shareholder service agent functions,
Kemper Service Company, 811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services
- -------- -------------------
Not applicable.
Item 30. Undertakings
- -------- ------------
Not applicable.
8
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 12th day of January, 2000.
KEMPER FUNDS TRUST
By /s/Mark S. Casady
-----------------
Mark S. Casady
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/James E. Akins
- --------------------------------------
James E. Akins* Trustee January 12, 2000
/s/James R. Edgar
- --------------------------------------
James R. Edgar* Trustee January 12, 2000
/s/Arthur R. Gottschalk
- --------------------------------------
Arthur R. Gottschalk* Trustee January 12, 2000
/s/Frederick T. Kelsey
- --------------------------------------
Frederick T. Kelsey* Trustee January 12, 2000
/s/Thomas W. Littauer
- --------------------------------------
Thomas W. Littauer* Chairman, Trustee and Vice President January 12, 2000
/s/Kathryn L. Quirk
- --------------------------------------
Kathryn L. Quirk* Trustee and Vice President January 12, 2000
/s/Fred B. Renwick
- --------------------------------------
Fred B. Renwick* Trustee January 12, 2000
/s/John G. Weithers
- --------------------------------------
John G. Weithers* Trustee January 12, 2000
/s/John R. Hebble
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and January 12, 2000
Accounting Officer)
</TABLE>
*By: /s/Philip J. Collora
--------------------
Philip J. Collora
Attorney-in-fact pursuant to powers of attorney for James E. Akins, Arthur R.
Gottschalk, Frederick T. Kelsey, Thomas W. Littauer, Kathryn L. Quirk, Fred B.
Renwick, and John G. Weithers contained in Post-Effective Amendment No. 5 to the
Registration Statement.
Attorney-in-fact pursuant to power of attorney for James R. Edgar contained in
Post-Effective Amendment No. 6 to the Registration Statement.
<PAGE>
File No. 333-65661
File No. 811-09057
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 7
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 8
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
KEMPER FUNDS TRUST
9
<PAGE>
KEMPER FUNDS TRUST
EXHIBIT INDEX
To be filed by amendment
10
