Filed electronically with the Securities and Exchange Commission
on December 27, 2000
File No. 33-29371
File No. 811-5829
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. 15
-- / X /
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 16
-- / X /
KEMPER GLOBAL INCOME FUND
-------------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
--------------
Philip J. Collora, Vice President and Secretary
Kemper Global Income Fund
222 South Riverside Plaza
Chicago, Illinois 60606
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / 75 days after filing pursuant to paragraph (a) (2)
/ / On __________________ pursuant to paragraph (b)
/ X / On March 1, 2001 pursuant to paragraph (a) (1)
/ / On __________________ pursuant to paragraph (a) (2) of Rule 485.
If Appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
Kemper Global and International Funds
Kemper Asian Growth Fund
Kemper Global Income Fund
Kemper International Fund
SUPPLEMENT TO PROSPECTUS
DATED MARCH 1, 2001
CLASS I SHARES
--------------------------------------------------------------------------------
The above funds currently offer four classes of shares to provide investors with
different purchasing options. These are Class A, Class B and Class C shares,
which are described in the prospectus, and Class I shares, which are described
in the prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of Scudder
Kemper Investments, Inc. ("Scudder Kemper") and its affiliates and rollover
accounts from those plans; (2) the following investment advisory clients of
Scudder Kemper and its investment advisory affiliates that invest at least $1
million in a fund: unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and self-directed retirement
plans); unaffiliated banks and insurance companies purchasing for their own
accounts; and endowment funds of unaffiliated non-profit organizations; (3)
investment-only accounts for large qualified plans, with a least $50 million in
total plan assets or at least 1000 participants; (4) trust and fiduciary
accounts of trust companies and bank trust departments providing fee based
advisory services that invest at least $1 million in a fund on behalf of each
trust; (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a fund; and (6) investment
companies managed by Scudder Kemper that invest primarily in other investment
companies. Class I shares currently are available for purchase only from Kemper
Distributors, Inc. ("KDI"), principal underwriter for the funds, and, in the
case of category 4 above, selected dealers authorized by KDI. Share certificates
are not available for Class I shares.
<PAGE>
The following information supplements the indicated sections of the prospectus.
Past performance
The charts and tables contained in the accompanying prospectus provide some
indication of the risks of investing in the funds by illustrating how the funds
have performed from year to year, and comparing this information to a broad
measure of market performance. Of course, past performance is not necessarily an
indication of future performance. Additional performance and financial
information for Kemper International Fund which currently has Class I shares
outstanding is set forth below. No Class I shares are outstanding for the other
funds.
Average Annual Total Returns -- Class I shares
For periods ended Inception
December 31, 1999 One year Life of class of class
---------------------------------------------------------------------------
Kemper International Fund % % 7/3/95
---------------------------------------------------------------------------
MSCI EAFE Index % %* --
---------------------------------------------------------------------------
Index: MSCI EAFE Index (Morgan Stanley Capital International Europe,
Austral-Asia, Far East Index), a generally accepted benchmark for performance of
major overseas markets.
* Index comparison begins 6/30/95.
Fee and expense information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the funds.
Shareholder Fees, paid directly from your investment
Maximum sales Maximum
charge (load) deferred sales
imposed on charge (load)
purchases (as % (as % of
of offering redemption
price) proceeds)
----------------------------------------------------------------------------
Kemper Asian Growth Fund None None
----------------------------------------------------------------------------
Kemper Global Income Fund None None
----------------------------------------------------------------------------
Kemper International Fund None None
----------------------------------------------------------------------------
2
<PAGE>
Annual Operating Expenses; deducted from fund assets
Total Annual
Fund
Management Distribution Other Operating
Fee (12b-1) Fee Expenses* Expenses*
---------------------------------------------------------------------------
Kemper Asian
Growth Fund % None % %
---------------------------------------------------------------------------
Kemper
International
Fund % None % %
---------------------------------------------------------------------------
Kemper Global
Income Fund % None % %
---------------------------------------------------------------------------
* Estimated for Kemper Asian Growth Fund and Kemper Global Income Fund since
no Class I shares were issued as of their most recent fiscal year ends.
"Other Expenses" are restated for Kemper International Fund to reflect
changes in certain administrative and regulatory fees.
Example
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
Fees and expenses if you sold shares after:
1 year 3 years 5 years 10 years
---------------------------------------------------------------------------
Kemper Asian Growth Fund $ $ -- --
---------------------------------------------------------------------------
Kemper International Fund $ $ $ $
---------------------------------------------------------------------------
Kemper Global Income Fund $ $ -- --
---------------------------------------------------------------------------
3
<PAGE>
Financial Highlights
Kemper International Fund -- I shares
4
<PAGE>
Special Features
Shareholders of a fund's Class I shares may exchange their shares for (i) shares
of Zurich Money Funds -- Zurich Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper and its affiliates and (ii) Class I shares of
any other "Kemper Mutual Fund" listed under "Special Features -- Class A Shares
-- Combined Purchases" in the prospectus. Conversely, shareholders of Zurich
Money Funds -- Zurich Money Market Fund who have purchased shares because they
are participants in tax-exempt retirement plans of Scudder Kemper and its
affiliates may exchange their shares for Class I shares of "Kemper Mutual Funds"
to the extent that they are available through their plan. Exchanges will be made
at the relative net asset values of the shares. Exchanges are subject to the
limitations set forth in the prospectus under "How to Exchange or Sell Shares."
5
<PAGE>
March xx, 2001
<PAGE>
L O N G - T E R M
I N V E S T I N G
I N A
S H O R T - T E R M
W O R L D (SM)
March 1, 2001
Prospectus
--------------------------------------------------------------------------------
K E M P E R G L O B A L / I N T E R N A T I O N A L F U N D S
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
[LOGO] KEMPER FUNDS
<PAGE>
Contents
--------------------------------------------------------------------------------
How the Funds Work How to Invest in the Funds
4 Kemper Asian Growth Fund 46 Choosing a Share Class
8 Kemper Global Blue Chip Fund 51 How to Buy Shares
12 Kemper Global Discovery Fund 52 How to Exchange or Sell Shares
16 Kemper Global Income Fund 53 Policies You Should Know
About
20 Kemper International Fund
59 Understanding Distributions
24 Kemper International Research and Taxes
Fund
29 Kemper New Europe Fund
34 Other Policies and Risks
35 Who Manages and Oversees
the Fund
38 Financial Highlights
<PAGE>
How The Funds Work
These funds invest mainly in foreign securities. Six of the funds invest mainly
in stocks, the other mainly in bonds. Each fund focuses on a particular region
of the world or a particular investment theme, and follows its own investment
goal.
Remember that mutual funds are investments, not bank deposits. They're not
guaranteed or insured by the FDIC or any other government agency and you could
lose money by investing in them.
<PAGE>
--------------------------------------------------------------------------------
| Class A Class B Class C
|
ticker symbol | KANAX KANBX KANCX
fund number | 072 272 372
Kemper Asian Growth Fund
--------------------------------------------------------------------------------
The Fund's Investment Strategy
The fund seeks long-term capital growth. The fund invests at least 85% of total
assets in common stocks and other Asian equities (equities that are issued by
companies organized under the laws of an Asian country or traded mainly on Asian
markets and do more than half of their business in Asia). The fund generally
focuses on emerging Asian markets, such as China, Indonesia, Korea and Thailand.
In choosing stocks, the portfolio manager[s] use[s] a combination of three
analytical disciplines:
Bottom-up research. The managers look for individual companies with identifiable
market niches and sound balance sheets, among other factors.
Growth orientation. The managers generally look for companies that seem to offer
the potential for sustainable above-average growth of revenue or earnings
relative to each stock's own market.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, with an eye toward identifying countries,
industries and companies that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given country or industry.
--------------------------------------------------------------------------------
OTHER INVESTMENTS While most of the fund's equities are common stocks, some may
be other types of equities, such as convertible stocks or preferred stocks. The
fund may invest up to 15% of total assets in debt securities of any issuer or
credit quality, including junk bonds (i.e., grade BB and below) or in non-Asian
equities.
4 | Kemper Asian Growth Fund
<PAGE>
The Main Risks of Investing in the Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how Asian stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When Asian stock prices fall, you should
expect the value of your investment to fall as well. The fact that the fund
concentrates on a single geographical region could affect fund performance. For
example, Asian companies could be hurt by such factors as regional economic
downturns (some Asian economies are currently in recession), currency
devaluations, the inability of governments or banking systems to bring about
reforms or trade barriers on exports.
Emerging markets, a category that includes most Asian countries, tend to be more
volatile than developed markets, for reasons ranging from political and economic
uncertainties to poor regulation and liquidity to a higher risk that essential
information may be incomplete or wrong.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies. In addition, changing
currency rates could add to the fund's investment losses or reduce its
investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This fund is designed for investors interested in diversifying a growth
portfolio with exposure to emerging countries in Asia.
5 | Kemper Asian Growth Fund
<PAGE>
The Fund's Performance History
While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know.
The bar chart shows how the performance figures for the fund's Class A shares
have varied from year to year, which may give some idea of risk.
The table shows how these performance figures for the fund's Class A, B and C
shares compare with a broad-based market index (which, unlike the fund, has no
fees or expenses). The performance of both the fund and the index varies over
time. All figures on this page assume reinvestment of dividends and
distributions.
Kemper Asian Growth Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1997 -34.60
1998 -19.02
1999 71.97
2000
Best Quarter: 0.00%, Q0 0000 Worst Quarter: -0.00%, Q0 0000
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/2000
--------------------------------------------------------------------------------
Since 12/31/99 Since 10/21/96
1 Year Life of Fund
--------------------------------------------------------------------------------
Class A % %
--------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------------------
Class C
--------------------------------------------------------------------------------
Index
--------------------------------------------------------------------------------
Index: The Morgan Stanley Capital International All Country Asia Free Ex-Japan
Index is a capitalized weighted index that is representative of the equity
securities for the following countries: Hong Kong, Indonesia, Korea (at 20%),
Malaysia, Philippines free, Singapore free and Thailand.
* Index comparison begins 10/31/96.
In the chart, total returns from 1997 through 2000 would have been lower if
operating expenses hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 2000 would have been lower if operating expenses
hadn't been reduced.
6 | Kemper Asian Growth Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
fund shares.
--------------------------------------------------------------------------------
Fee Table Class A Class B Class C
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed 5.75% None None
on Purchases (as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of redemption proceeds) None* 4.00% 1.00%
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee % % %
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75% 0.75%
--------------------------------------------------------------------------------
Other Expenses** % % %
--------------------------------------------------------------------------------
Total Annual Operating Expenses % % %
--------------------------------------------------------------------------------
Expense Reimbursement % % %
--------------------------------------------------------------------------------
Net Annual Operating Expenses*** % % %
--------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
*** By contract, total annual operating expenses are capped at ___ through
___.
Based on the costs above (including one year of capped expenses in each period),
this example helps you compare the expenses of each share class to those of
other mutual funds. This example assumes the expenses above remain the same. It
also assumes 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
--------------------------------------------------------------------------------
7 | Kemper Asian Growth Fund
<PAGE>
--------------------------------------------------------------------------------
| Class A Class B Class C
|
ticker symbol | KGLAX KGLBX KGLCX
fund number | 092 292 392
Kemper Global Blue Chip Fund
--------------------------------------------------------------------------------
The Fund's Investment Strategy
The fund seeks long-term capital growth. The fund invests at least 65% of total
assets in common stocks and other equities of "blue chip" companies throughout
the world. These are large, well known companies that typically have an
established earnings and dividends history, easy access to credit, solid
positions in their industries and strong management. Although the fund may
invest in any country, it primarily focuses on countries with developed
economies (including the U.S.).
In choosing stocks, the portfolio managers look for those blue-chip companies
that appear likely to benefit from global economic trends or have promising new
technologies or products.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, when its fundamental factors have changed or when adjusting its
exposure to a given country or industry.
--------------------------------------------------------------------------------
OTHER INVESTMENTS While most of the fund's equities are common stocks, some may
be other types of equities, such as convertible stocks or preferred stocks.
While the fund invests mainly in developed countries, it may invest up to 15% of
total assets in emerging market debt or equity securities of emerging markets
(of which, 5% of net assets may be junk bonds, i.e., grade BB and below).
8 | Kemper Global Blue Chip Fund
<PAGE>
The Main Risks of Investing in the Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how U.S. and foreign stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When U.S. and foreign stock prices
fall, especially prices of large company stocks, you should expect the value of
your investment to fall as well. Foreign stocks tend to be more volatile than
their U.S. counterparts, for reasons ranging from political and economic
uncertainties to a higher risk that essential information may be incomplete or
wrong.
Large company stocks at times may not perform as well as stocks of smaller or
mid-size companies. Because a stock represents ownership in its issuer, stock
prices can be hurt by poor management, shrinking product demand and other
business risks. These may affect single companies as well as groups of
companies. In addition, changing currency rates could add to the fund's
investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This fund is designed for investors interested in large-cap stocks outside the
U.S. markets.
9 | Kemper Global Blue Chip Fund
<PAGE>
The Fund's Performance History
While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know.
The bar chart shows how the performance figures for the fund's Class A shares
have varied from year to year, which may give some idea of risk.
The table shows how these performance figures for the fund's Class A, B and C
shares compare with a broad-based market index (which, unlike the fund, has no
fees or expenses). The performance of both the fund and the index varies over
time. All figures on this page assume reinvestment of dividends and
distributions.
Kemper Global Blue Chip Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1998 13.79
1999 28.23
2000
Best Quarter: 0.00%, Q0 0000 Worst Quarter: -0.00%, Q0 0000
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/2000
--------------------------------------------------------------------------------
Since 12/31/99 Since 12/31/97
1 Year Life of Class
--------------------------------------------------------------------------------
Class A 0.00 0.00
--------------------------------------------------------------------------------
Class B 0.00 0.00
--------------------------------------------------------------------------------
Class C 0.00 0.00
--------------------------------------------------------------------------------
Index 0.00 0.00
--------------------------------------------------------------------------------
Index: The MSCI (Morgan Stanley Capital International) World Index measures
performance of a range of developed country general stock markets, including the
United States, Canada, Europe, Australia, New Zealand and the Far East.
In the chart, total returns from 1998 through 2000 would have been lower if
operating expenses hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 2000 would have been lower if operating expenses
hadn't been reduced.
10 | Kemper Global Blue Chip Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
fund shares.
--------------------------------------------------------------------------------
Fee Table Class A Class B Class C
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed 5.75% None None
on Purchases (as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of redemption proceeds) None* 4.00% 1.00%
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee % % %
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75% 0.75%
--------------------------------------------------------------------------------
Other Expenses** % % %
--------------------------------------------------------------------------------
Total Annual Operating Expenses % % %
--------------------------------------------------------------------------------
Expense Reimbursement % % %
--------------------------------------------------------------------------------
Net Annual Operating Expenses*** % % %
--------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
*** By contract, total annual operating expenses are capped at ___ through
___.
Based on the costs above (including one year of capped expenses in each period),
this example helps you compare the expenses of each share class to those of
other mutual funds. This example assumes the expenses above remain the same. It
also assumes 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
--------------------------------------------------------------------------------
11 | Kemper Global Blue Chip Fund
<PAGE>
--------------------------------------------------------------------------------
| Class A Class B Class C
|
ticker symbol | KGDAX KGDBX KGDCX
fund number | 083 283 383
Kemper Global Discovery Fund*
--------------------------------------------------------------------------------
The Fund's Investment Strategy
The fund seeks above-average long-term capital appreciation. The fund invests at
least 65% of total assets in common stocks and other equities of small companies
throughout the world (companies with market values similar to the smallest 20%
of the Salomon Brothers Broad Market Index). The fund generally focuses on
countries with developed economies (including the U.S.). As of December 31,
2000, companies in which the fund invests typically have a market capitalization
of between $__ million and $__ billion.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for companies that appear to have
effective management, strong competitive positioning, vigorous research and
development efforts and sound balance sheets.
Growth orientation. The managers generally look for companies that have
above-average potential for sustainable growth of revenue or earnings compared
to large companies, and whose market value appears reasonable in light of their
business prospects.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, seeking to identify stocks that may benefit
from them.
The managers may favor different securities at different times, while still
maintaining variety in terms of the countries and industries represented.
* Kemper Global Discovery Fund is properly known as Global Discovery
Fund.
--------------------------------------------------------------------------------
OTHER INVESTMENTS While most of the fund's equities are common stocks, some may
be other types of equities, such as convertible stocks or preferred stocks. The
fund may invest up to 35% of total assets in common stocks and other equities of
large companies or in debt securities (of which, 5% of net assets may be junk
bonds, i.e. grade BB and below).
12 | Kemper Global Discovery Fund*
<PAGE>
The fund will normally sell a stock when the managers believe its price is
unlikely to go much higher, its fundamentals have deteriorated, other
investments offer better opportunities or in the course of adjusting its
emphasis on a given country.
The Main Risks of Investing in the Fund
There are several factors that could hurt the fund's performance, cause you to
lose money or make the fund perform less well than other investments.
The most important factor with this fund is how U.S. and foreign stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When U.S. and foreign stock prices
fall, you should expect the value of your investment to fall as well. Foreign
stocks tend to be more volatile than their U.S. counterparts, for reasons
ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. These risks tend to be greater
in emerging markets.
Compared to large company stocks, small and mid-size stocks tend to be more
volatile, in part because these companies tend to be less established and the
valuation of their stocks often depends on future expectations. Because a stock
represents ownership in its issuer, stock prices can be hurt by poor management,
shrinking product demand and other business risks. These may affect single
companies as well as groups of companies. In addition, changing currency rates
could add to the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This fund is designed for long-term investors interested in diversifying a
large-cap or domestic portfolio of investments.
13 | Kemper Global Discovery Fund*
<PAGE>
The Fund's Performance History
While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know.
The bar chart shows the performance figures for the fund's first complete
calendar year, which may give some idea of risk.
The table shows how these performance figures for the fund's Class A, B and C
shares compare with a broad-based market index (which, unlike the fund, has no
fees or expenses). The performance of both the fund and the index varies over
time. All figures on this page assume reinvestment of dividends and
distributions.
The inception date for Class A, B and C is April 16, 1998. Performance figures
before that date are based on the historical performance of the fund's original
share class (Class S), adjusted to reflect the higher gross annual operating
expenses of the applicable class and the applicable sales charges of that class.
Kemper Global Discovery Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1999 64.15
2000
Best Quarter: 0.00%, Q0 0000 Worst Quarter: -0.00%, Q0 0000
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/2000
--------------------------------------------------------------------------------
Since 12/31/99 Since 4/16/98
1 Year Life of Fund
--------------------------------------------------------------------------------
Class A % %
--------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------------------
Class C
--------------------------------------------------------------------------------
Index
--------------------------------------------------------------------------------
Index: Salomon Brothers World Equity Extended Market Index, an unmanaged small
capitalization stock universe of 22 countries.
* Index comparison begins 4/30/98.
In the chart, total returns for 1999 and 2000 would have been lower if operating
expenses hadn't been reduced.
The table includes the effects of maximum sales loads. In the table, total
returns from inception through 2000 would have been lower if operating expenses
hadn't been reduced.
14 | Kemper Global Discovery Fund*
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
fund shares.
--------------------------------------------------------------------------------
Fee Table Class A Class B Class C
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed 5.75% None None
on Purchases (as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of redemption proceeds) None* 4.00% 1.00%
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee % % %
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75% 0.75%
--------------------------------------------------------------------------------
Other Expenses** % % %
--------------------------------------------------------------------------------
Total Annual Operating Expenses % % %
--------------------------------------------------------------------------------
Expense Reimbursement % % %
--------------------------------------------------------------------------------
Net Annual Operating Expenses*** % % %
--------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
*** By contract, total annual operating expenses are capped at ___ through
___.
Based on the costs above (including one year of capped expenses in each period),
this example helps you compare the expenses of each share class to those of
other mutual funds. This example assumes the expenses above remain the same. It
also assumes 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
--------------------------------------------------------------------------------
15 | Kemper Global Discovery Fund*
<PAGE>
--------------------------------------------------------------------------------
| Class A Class B Class C
|
ticker symbol | KGIAX KGIBX KGICX
fund number | 033 233 333
Kemper Global Income Fund
--------------------------------------------------------------------------------
The Fund's Investment Strategy
The fund seeks to provide high current income consistent with prudent total
return asset management. The fund invests at least 65% of total assets in
foreign and U.S. investment-grade bonds and other income-producing securities.
While the fund may invest in securities issued by any issuer and in any
currency, it generally focuses on issuers in developed markets, such as
Australia, Canada, Japan, New Zealand, the U.S. and Western Europe, and on
securities of other countries that are denominated in the currencies of these
countries or the euro.
In making their buy and sell decisions, the portfolio managers typically
consider a number of factors, including economic outlooks, interest rate
movements, inflation trends, security characteristics and changes in supply and
demand within global bond markets. In choosing individual bonds, the managers
use independent analysis to look for bonds that have attractive yields and good
credit. The managers may favor securities from different countries and issuers
at different times, while still maintaining variety in terms of countries and
issuers represented.
Although the managers may adjust the fund's duration (a measure of sensitivity
to interest rate movements), they generally intend to keep it between 4.0 and
6.0 years.
--------------------------------------------------------------------------------
OTHER INVESTMENTS This fund normally invests at least 65% of total assets in
investment-grade bonds, which are those in the top four credit grades (i.e., as
low as BBB/Baa). The fund may invest up to 35% of net assets in foreign or
domestic debt securities of any credit quality, including junk bonds (i.e.,
grade BB and below). Compared to investment-grade bonds, junk bonds may pay
higher yields and have higher volatility and risk of default.
16 | Kemper Global Income Fund
<PAGE>
The Main Risks of Investing in the Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
For this fund, the main factor is global interest rates. A rise in interest
rates generally means a fall in bond prices -- and, in turn, a fall in the value
of your investment. (As a general rule, a 1% rise in interest rates means a 1%
fall in value for every year of duration.)
Foreign markets tend to be more volatile than U.S. markets, for reasons ranging
from political and economic uncertainties to poor regulation to a higher risk
that essential information may be incomplete or wrong.
Another major factor is currency exchange rates. When the dollar value of a
foreign currency falls, so does the value of any investments the fund owns that
are denominated in that currency. This is separate from market risk, and may add
to market losses or reduce market gains.
The fact that the fund is not diversified and may invest in securities of
relatively few issuers increases its risk, because any factors affecting a given
company could affect performance. Similarly, if the fund emphasizes a given
market, such as Canada, or a given industry, factors affecting that market or
industry will affect performance.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, issuers, industries or other matters
o a bond could fall in credit quality or go into default; this risk is
greater for junk bonds
o some types of bonds could be paid off earlier than expected, which
would hurt the fund's performance
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This fund is designed for investors interested in a less aggressive approach to
international income investing.
17 | Kemper Global Income Fund
<PAGE>
The Fund's Performance History
While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know.
The bar chart shows how the performance figures for the fund's Class A shares
have varied from year to year, which may give some idea of risk.
The table shows how these performance figures for the fund's Class A, B and C
shares compare with a broad-based market index (which, unlike the fund, has no
fees or expenses). The performance of both the fund and the index varies over
time. All figures on this page assume reinvestment of dividends and
distributions.
The inception date for Class B and C is May 31, 1994. Performance figures before
that date are based on the historical performance of the fund's original share
class (Class A), adjusted to reflect the higher gross annual operating expenses
of the applicable class and the applicable sales charges of that class. Kemper
Global Income Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 11.13
1992 -1.90
1993 10.23
1994 -1.47
1995 19.89
1996 5.87
1997 1.80
1998 10.48
1999 -6.38
2000
Best Quarter: 0.00%, Q0 0000 Worst Quarter: -0.00%, Q0 0000
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/2000
--------------------------------------------------------------------------------
Since 5/31/94
Since 12/31/99 Since 12/31/95 Life of Class Since 12/31/90
1 Year 5 Years B/C 10 Years
--------------------------------------------------------------------------------
Class A % % -- %
--------------------------------------------------------------------------------
Class B % --
--------------------------------------------------------------------------------
Class C --
--------------------------------------------------------------------------------
Index
--------------------------------------------------------------------------------
Index: Salomon Brothers World Government Bond Index, an unmanaged index on a
U.S. dollar total return basis, with all dividends reinvested, and includes
government bonds from 14 countries. The minimum maturity is one year.
The table includes the effects of maximum sales loads.
18 | Kemper Global Income Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
fund shares.
--------------------------------------------------------------------------------
Fee Table Class A Class B Class C
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed 4.50% None None
on Purchases (as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of redemption proceeds) None* 4.00% 1.00%
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee % % %
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75% 0.75%
--------------------------------------------------------------------------------
Other Expenses** % % %
--------------------------------------------------------------------------------
Total Annual Operating Expenses % % %
--------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
Based on the costs above, this example helps you compare the expenses of each
share class to those of other mutual funds. This example assumes the expenses
above remain the same. It also assumes 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
--------------------------------------------------------------------------------
19 | Kemper Global Income Fund
<PAGE>
--------------------------------------------------------------------------------
| Class A Class B Class C
|
ticker symbol | KITAX KINBX KITCX
fund number | 019 219 319
Kemper International Fund
--------------------------------------------------------------------------------
The Fund's Investment Strategy
The fund seeks total return through a combination of capital growth and income.
The fund invests at least 80% of total assets in foreign securities (securities
issued by foreign-based issuers). The fund invests at least 65% of total assets
in common stocks of established foreign companies with the potential for capital
growth, income or both. The fund may invest more than 25% of total assets in any
given developed country that the manager believes poses no unique investment
risk.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies that have sound
financial strength, good business prospects and strong competitive positioning
and above-average earnings growth, among other factors.
Top-down analysis. The managers consider the economic outlooks for various
countries and geographical areas, favoring those they believe have sound
economic conditions and open markets.
Analysis of global themes. The managers look for significant changes in the
business environment, with an eye toward identifying industries that may benefit
from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
--------------------------------------------------------------------------------
OTHER INVESTMENTS While most of the fund's equities are common stocks, some may
be other types of equities, such as convertible stocks or preferred stocks. The
fund may invest up to 35% of net assets in foreign or domestic debt securities
of any credit quality, including junk bonds (i.e., grade BB and below). Compared
to investment-grade bonds, junk bonds may pay higher yields and have higher
volatility and risk of default.
20 | Kemper International Fund
<PAGE>
The fund will normally sell a stock when the managers believe it has reached its
fair value, its underlying investment theme has matured or the reasons for
originally investing no longer apply.
The Main Risks of Investing in the Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how foreign stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When foreign stock prices fall, you should
expect the value of your investment to fall as well.
Foreign stocks may at times be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies. In addition, changing
currency rates could add to the fund's investment losses or reduce its
investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o bond investments could be hurt by rising interest rates or declines in
credit quality
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This fund is designed for investors interested in a broadly diversified
international fund.
21 | Kemper International Fund
<PAGE>
The Fund's Performance History
While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know.
The bar chart shows how the performance figures for the fund's Class A shares
have varied from year to year, which may give some idea of risk.
The table shows how these performance figures for the fund's Class A, B and C
shares compare with a broad-based market index (which, unlike the fund, has no
fees or expenses). The performance of both the fund and the index varies over
time. All figures on this page assume reinvestment of dividends and
distributions.
The inception date for Class B and C is May 31, 1994. Performance figures before
that date are based on the historical performance of the fund's original share
class (Class A), adjusted to reflect the higher gross annual operating expenses
of the applicable class and the applicable sales charges of that class.
Kemper International Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 9.13
1992 -4.79
1993 35.65
1994 -4.00
1995 12.96
1996 17.05
1997 9.00
1998 7.88
1999 41.30
2000
Best Quarter: 0.00%, Q0 0000 Worst Quarter: -0.00%, Q0 0000
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/2000
--------------------------------------------------------------------------------
Since 5/31/94
Since 12/31/99 Since 12/31/95 Life of Since 12/31/90
1 Year 5 Years Class B/C 10 Years
--------------------------------------------------------------------------------
Class A % % -- %
--------------------------------------------------------------------------------
Class B % --
--------------------------------------------------------------------------------
Class C --
--------------------------------------------------------------------------------
Index
--------------------------------------------------------------------------------
Index: MSCI EAFE Index (Morgan Stanley Capital International Europe,
Austral-Asia, Far East Index), a generally accepted benchmark for performance of
major overseas markets.
The table includes the effects of maximum sales loads. In the table, total
returns for 1990 would have been lower if operating expenses hadn't been
reduced.
22 | Kemper International Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
fund shares.
--------------------------------------------------------------------------------
Fee Table Class A Class B Class C
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed 5.75% None None
on Purchases (as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of redemption proceeds) None* 4.00% 1.00%
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee % % %
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75% 0.75%
--------------------------------------------------------------------------------
Other Expenses** % % %
--------------------------------------------------------------------------------
Total Annual Operating Expenses % % %
--------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
Based on the costs above, this example helps you compare the expenses of each
share class to those of other mutual funds. This example assumes the expenses
above remain the same. It also assumes 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
--------------------------------------------------------------------------------
23 | Kemper International Fund
<PAGE>
--------------------------------------------------------------------------------
| Class A Class B Class C
|
ticker symbol | KIRAX KIRBX KIRCX
fund number | 117 217 317
Kemper International Research Fund
--------------------------------------------------------------------------------
The Fund's Investment Strategy
The fund seeks long-term capital appreciation. The fund normally invests at
least 65% of total assets in common stocks of large foreign companies (stocks
that are listed on foreign exchanges and are issued by foreign-based companies
that have a market capitalization of $1 billion or more). The fund expects that
its regional investment allocations will remain roughly similar to that of the
Morgan Stanley Capital International Europe, Austral-Asia, Far East plus
Emerging Markets Free Index (MSCI EAFE + EMF Index). As of the date of this
prospectus, most of the issuers included in this index are located in developed
markets.
The fund invests in securities based on the top research recommendations of the
investment advisor's industry research analysts and other investment
specialists. The portfolio managers use bottom-up research to identify stocks,
looking for individual companies that have strong balance sheets and effective
management, among other factors. These may be companies that appear to offer the
potential for sustainable above-average growth of earnings or revenues as well
as companies whose stock prices appear low in light of other measures of worth,
such as price-to-earnings ratios.
The managers also look for significant changes in the business environment, with
an eye toward identifying industries that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries,
industries and companies represented.
--------------------------------------------------------------------------------
OTHER INVESTMENTS While most of the fund's equities are common stocks, some may
be other types of equities, such as convertible stocks or preferred stocks. The
fund may also invest up to 35% of total assets in investment-grade debt
securities.
24 | Kemper International Research Fund
<PAGE>
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given industry or country.
The Main Risks of Investing in the Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how foreign stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When foreign stock prices fall, especially
prices of large company stocks, you should expect the value of your investment
to fall as well. To the extent that the fund emphasizes a given area, such as
Europe, or a given industry, factors affecting that market or industry will
affect performance.
Foreign stocks tend to be more volatile than their U.S. counterparts, for
reasons that include political and economic uncertainties, less liquid
securities markets and a higher risk that essential information may be
incomplete or wrong. In addition, changing currency rates could add to the
fund's investment losses or reduce its investment gains. Large company stocks at
times may not perform as well as stocks of smaller or mid-size companies.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o a bond could fall in credit quality, go into default or be paid off
earlier than expected, which could hurt the fund's performance
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This fund is designed for investors interested in a diversified international
fund whose strategy focuses on the advisor's top research recommendations.
25 | Kemper International Research Fund
<PAGE>
The Fund's Performance History
While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know. The bar chart shows how
the performance figures for the fund's Class A shares have varied from year to
year, which may give some idea of risk.
The table shows how these performance figures for the fund's Class A, B and C
shares compare with a broad-based market index (which, unlike the fund, has no
fees or expenses). The performance of both the fund and the index varies over
time. All figures on this page assume reinvestment of dividends and
distributions.
The inception date for Class B and C is May 31, 1994. Performance figures before
that date are based on the historical performance of the fund's original share
class (Class A), adjusted to reflect the higher gross annual operating expenses
of the applicable class and the applicable sales charges of that class.
On 4/6/2000, the fund changed from Growth Fund Of Spain, an open-end equity fund
that sought long-term capital appreciation by investing primarily in the equity
securities of Spanish companies, to its current strategy. The fund's performance
prior to that date would have been different had the current strategy been in
effect.
The performance of Class A shares in the bar chart and performance table
reflects performance from when the fund was a closed-end fund known as The
Growth Fund Of Spain, Inc. (through 12/11/98). Because the fund had no daily
sales or redemptions when it was a closed-end fund, its performance then may
have been different than if it had operated as an open-end fund.
Kemper International Research Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 15.82
1992 -23.48
1993 28.79
1994 2.26
1995 22.11
1996 31.12
1997 19.47
1998 49.85
1999 -5.24
2000
Best Quarter: 0.00%, Q0 0000 Worst Quarter: -0.00%, Q0 0000
26 | Kemper International Research Fund
<PAGE>
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/2000
--------------------------------------------------------------------------------
Since Since Since 2/14/90 Since 12/14/98
12/31/99 12/31/95 Life of Life of
1 Year 5 Years Class A* Class B/C*
--------------------------------------------------------------------------------
Class A 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------
Class B 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------
Class C 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------
Index 1 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------
Index 2 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------
Index 1: IBEX 35 Index, a capitalization-weighted index of the 35 most liquid
Spanish stocks traded on the continuous markets.
Index 2: MSCI EAFE + EMF Index, a generally accepted benchmark for performance
of major overseas markets, plus emerging markets.***
The table includes the effects of maximum sales loads.
* Inception date for Class A shares is 2/14/90. Inception date for Class
B and C shares is 12/14/98. Index comparisons begin on 2/28/90 for
Class A shares and 12/31/98 for Class B and C shares.
** The information provided is for The Growth Fund of Spain, Inc. through
12/11/98 and for the fund's Class A shares thereafter, and assumes
deduction of the Class A sales charge.
*** On 4/6/2000, the fund changed from a strategy of investing primarily in
the equity securities of Spanish companies to its current strategy. In
light of this change, the fund's investment advisor believes that it is
more appropriate to measure the fund's performance against the MSCI
EAFE + EMF Index than against the IBEX 35 Index.
27 | Kemper International Research Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
fund shares.
--------------------------------------------------------------------------------
Fee Table Class A Class B Class C
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed 5.75% None None
on Purchases (as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of redemption proceeds) None* 4.00% 1.00%
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee % % %
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75% 0.75%
--------------------------------------------------------------------------------
Other Expenses** % % %
--------------------------------------------------------------------------------
Total Annual Operating Expenses % % %
--------------------------------------------------------------------------------
Expense Reimbursement % % %
--------------------------------------------------------------------------------
Net Annual Operating Expenses*** % % %
--------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
*** By contract, total annual operating expenses are capped at ___ through
___.
Based on the costs above (including one year of capped expenses in each period),
this example helps you compare the expenses of each share class to those of
other mutual funds. This example assumes the expenses above remain the same. It
also assumes 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
--------------------------------------------------------------------------------
28 | Kemper International Research Fund
<PAGE>
--------------------------------------------------------------------------------
| Class A Class B Class C
|
ticker symbol | KNEAX KNEBX KNECX
fund number | 022 222 322
Kemper New Europe Fund
--------------------------------------------------------------------------------
The Fund's Investment Strategy
The fund seeks long-term capital appreciation. The fund invests at least 65% of
total assets in European common stocks and other equities (equities that are
traded mainly on European markets or are issued by companies that are based in
Europe or do more than half of their business there). The fund generally focuses
on common stocks of companies in the more established markets of Western and
Southern Europe such as Finland, Germany, France, Italy, Spain and Portugal.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with new or
dominant products or technologies, among other factors.
Growth orientation. The managers look for stocks that seem to offer the
potential for sustainable above-average growth of revenues or earnings relative
to each stock's own market and whose market prices are reasonable in light of
their potential growth.
Top-down analysis. The managers consider the outlook for economic, political,
industrial and demographic trends and how they may affect various countries,
sectors and industries.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when it has reached a target price, the
managers believe other investments offer better opportunities or when adjusting
its exposure to a given country or industry.
--------------------------------------------------------------------------------
OTHER INVESTMENTS While most of the fund's equities are common stocks, some may
be other types of equities, such as convertible stocks or preferred stocks. The
fund may invest up to 20% of total assets in European debt securities of any
credit quality, including junk bonds (i.e., grade BB and below). Compared to
investment-grade bonds, junk bonds may pay higher yields and have higher
volatility and risk of default.
29 | Kemper New Europe Fund
<PAGE>
The Main Risks of Investing in the Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how European stock markets perform
-- something that depends on a large number of factors, including economic,
political and demographic trends. When European stock prices fall, you should
expect the value of your investment to fall as well.
The fact that the fund focuses on a single geographical region could affect fund
performance. For example, European companies could be hurt by such factors as
regional economic downturns or difficulties with the European Economic and
Monetary Union (EMU). Eastern European companies can be very sensitive to
political and economic developments. The fact that the fund is not diversified
and may invest in relatively few companies increases its risk, because any
factors affecting a given company could affect performance.
European stocks may at times be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies. In addition, changing currency rates could add to
the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o bond investments could be hurt by rising interest rates or declines in
credit quality
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This fund is designed for investors interested in long-term growth through
exposure to Europe's established markets.
30 | Kemper New Europe Fund
<PAGE>
The Fund's Performance History
The bar chart shows how the total returns for the fund's Class M shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
The performance of Class M shares shown in the bar chart and performance table
reflects performance from when the fund was a closed-end fund (through
09/03/99). Because the fund had no daily sales and redemptions, its performance
as a closed-end fund may have been higher than if it had operated as an open-end
fund.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
Kemper New Europe Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class M shares
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 3.06
1992 -9.59
1993 25.62
1994 -0.27
1995 18.97
1996 34.38
1997 20.03
1998 34.39
1999 51.83
2000
Best Quarter: 0.00%, Q0 0000 Worst Quarter -0.00%, Q0 0000
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/2000
--------------------------------------------------------------------------------
Since 12/31/99 Since 12/31/95 Since 2/16/90
1 Year 5 Years Life of Class M
--------------------------------------------------------------------------------
Class M 0.00 0.00 0.00
--------------------------------------------------------------------------------
Index 0.00 0.00 0.00
--------------------------------------------------------------------------------
Index: The Morgan Stanley Capital International Europe Equity Index, an
unmanaged index that is generally representative of the equity securities of the
European markets.
* Index comparison begins 02/28/90.
Class A, B and C shares do not have a full calendar year of operations and their
performance is not shown above. The performance of Class M shares does not
reflect any sales charges. The performance of the other classes is subject to
sales charges and would be lower.
31 | Kemper New Europe Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
fund shares.
--------------------------------------------------------------------------------
Fee Table Class A Class B Class C Class M
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) 5.75% None None None
Imposed on Purchases
(as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as % of redemption
proceeds) None* 4.00% 1.00% None
--------------------------------------------------------------------------------
Redemption Fee (as % of amount
redeemed, if applicable) None None None 2.00%**
--------------------------------------------------------------------------------
Exchange Fee None None None 2.00%**
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee % % % %
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75% 0.75% None
--------------------------------------------------------------------------------
Other Expenses*** % % % %
--------------------------------------------------------------------------------
Total Annual Operating Expenses[ % % % %
--------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** A 2% redemption fee, which is retained by the fund, is imposed upon
redemptions or exchanges of shares held less than one year, with
limited exceptions (see "Policies You Should Know About -- Redemption
Fee).
*** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
+ The fund was reorganized from a closed-end fund to an open-end fund on
September 3, 1999. The fees and expenses of open-end funds are, in many
cases, different than those of closed-end funds. Accordingly, the
expense ratios shown above are estimated for the fund's current fiscal
year ending October 31, 2001, based on the fund's current fee schedule
and expenses incurred by the fund during its most recent fiscal year
adjusted for any open-end related expenses. By contract, total
operating expenses are capped at 1.80%, 2.70% and 2.70% for Class A,
Class B and Class C shares, respectively, through 2/28/2001.
32 | Kemper New Europe Fund
<PAGE>
Based on the figures on the previous page (including one year of capped expenses
in each period except for Class M shares), this example is designed to help you
compare the expenses of each share class to those of other funds. The example
assumes operating expenses remain the same and that you invested $10,000, earned
5% annual returns and reinvested all dividends and distributions. This is only
an example; actual expenses will be different.
--------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
--------------------------------------------------------------------------------
Class A shares $ $ $ $
--------------------------------------------------------------------------------
Class B shares
--------------------------------------------------------------------------------
Class C shares
--------------------------------------------------------------------------------
Class M shares
--------------------------------------------------------------------------------
Expenses, assuming you kept your shares
--------------------------------------------------------------------------------
Class A shares $ $ $ $
--------------------------------------------------------------------------------
Class B shares
--------------------------------------------------------------------------------
Class C shares
--------------------------------------------------------------------------------
Class M shares
--------------------------------------------------------------------------------
33 | Kemper New Europe Fund
<PAGE>
Other Policies and Risks
While the previous pages describe the main points of each fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, each fund's Board could change
that fund's investment goal without seeking shareholder approval.
o As a temporary defensive measure, any of these funds could shift up to 100% of
assets into investments such as money market securities. This could prevent
losses, but would mean that the fund would not be pursuing its goal.
o The advisor establishes a security's credit quality when it buys the security,
using independent ratings or, for unrated securities, its own credit
determination. When ratings don't agree, a fund may use the higher rating. If a
security's credit quality falls, the advisor will determine whether selling it
would be in the shareholders' best interests.
o The funds may trade securities more actively than many funds, which could mean
higher expenses (thus lowering return) and higher taxable distributions.
o Although the managers are permitted to use various types of derivatives
(contracts whose value is based on, for example, indices, currencies or
securities), the managers don't intend to use them as principal investments, and
might not use them at all. With derivatives there is a risk that they could
produce disproportionate losses.
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Euro conversion
Funds that invest in foreign securities could be affected by accounting
differences, changes in tax treatment or other issues related to the conversion
of certain European currencies into the euro, which is already underway. The
investment advisor is working to address euro-related issues as they occur and
has been notified that other key service providers are taking similar steps.
Still, there's some risk that this problem could materially affect a fund's
operation (including its ability to calculate net asset value and to handle
purchases and redemptions), its investments or securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
This prospectus doesn't tell you about every policy or risk of investing in a
fund. For more information, request a copy of the Statement of Additional
Information (see back cover).
34
<PAGE>
Who Manages and Oversees the Funds
The funds' investment advisor is Zurich Scudder Investments, Inc., 345 Park
Avenue, New York, NY. The advisor has more than 80 years of experience managing
mutual funds, and currently has more than $290 billion in assets under
management.
The investment advisor receives a management fee from each fund. Below are the
actual rates paid by each fund for the 12 months through the most recent fiscal
year end, as a percentage of each fund's average daily net assets.
Each fund has entered into a new investment management agreement with the
investment advisor. This table describes the new fee rates for each fund and the
effective date of these agreements.
[THE FOLLOWING TABLE IS A SAMPLE ONLY]
-------------------------------------------------------------------
Investment Management Fee
-------------------------------------------------------------------
Average Daily Net Assets Fee Rate
-------------------------------------------------------------------
[Fund Name]
-------------------------------------------------------------------
first $500 million %
-------------------------------------------------------------------
next $500 million %
-------------------------------------------------------------------
more than $1 billion %
-------------------------------------------------------------------
35
<PAGE>
The portfolio managers
Kemper Asian Growth Fund
Tien Yu Sieh Nicholas Bratt
Lead Portfolio Manager o Began investment career in
o Began investment career in 1990 1974
o Joined the advisor in 1996 o Joined the advisor in 1976
o Joined the fund team in 1999 o Joined the fund team in 2000
Elizabeth J. Allan Jennifer E. Bloomfield
o Began investment career in 1982 o Began investment career in
o Joined the advisor in 1987 1992
o Joined the fund team in 1998 o Joined the advisor in 1995
o Joined the fund team in 2000
Theresa Gusman
o Began investment career in
1983
o Joined the advisor in 1992
o Joined the fund team in 1998
Kemper Global Blue Chip Fund
William E. Holzer
Lead Portfolio Manager
o Began investment career in 1970
o Joined the advisor in 1980
o Joined the fund team in 1998
Kemper Global Discovery Fund
Gerald J. Moran Steven T. Stokes
Lead Portfolio Manager o Began investment career in
o Began investment career in 1968 1986
o Joined the advisor in 1968 o Joined the advisor in 1996
o Joined the fund team in 1991 o Joined the fund team in 1999
Kemper Global Income Fund
Jan C. Faller Jeremy L. Ragus
Co-Lead Portfolio Manager o Began investment career in
o Began investment career in 1988 1977
o Joined the advisor in 1999 o Joined the advisor
o Joined the fund team in 1999 in 1990
o Joined the fund team in 1999
Robert Stirling
Co-Lead Portfolio Manager
o Began investment career in 1984
o Joined the sub-advisor in 1995
o Joined the fund team in 1999
36
<PAGE>
Kemper International Fund
Irene Cheng Marc Slendebroek
Lead Portfolio Manager o Began investment career in
o Began investment career in 1985 1990
o Joined the advisor in 1993 o Joined the sub-advisor
o Joined the fund team in 1999 in 1994
o Joined the fund team in 1998
Nicholas Bratt
o Began investment career in 1974 Carol L. Franklin
o Joined the advisor in 1976 o Began investment career in
o Joined the fund team in 2000 1975
o Joined the advisor in 1981
o Joined the fund team in 2000
Kemper International Research Fund
Jennifer E. Bloomfield
Lead Portfolio Manager
o Began investment career in 1992
o Joined the advisor in 1995
o Joined the fund team in 2000
Kemper New Europe Fund
Carol L. Franklin Marc Slendebroek
Lead Portfolio Manager o Began investment career in
o Began investment career in 1975 1990
o Joined the advisor in 1981 o Joined the advisor in 1994
o Joined the fund team in 1990 o Joined the fund team in 1998
Nicholas Bratt
o Began investment career in 1974
o Joined the advisor in 1976
o Joined the fund team in 1999
37
<PAGE>
Financial Highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by Ernst & Young LLP (except Kemper Global Discovery Fund, which has been
audited by Pricewaterhouse-Coopers LLP), whose reports, along with each fund's
financial statements, are included in that fund's annual report (see
"Shareholder reports" on the back cover).
Kemper Asian Growth Fund
38
<PAGE>
Kemper Global Blue Chip Fund
39
<PAGE>
Kemper Global Discovery Fund
40
<PAGE>
Kemper Global Income Fund
41
<PAGE>
Kemper International Fund
42
<PAGE>
Kemper International Research Fund
43
<PAGE>
Kemper New Europe Fund
44
<PAGE>
How to Invest in the Funds
The following pages tell you about many of the services, choices and benefits of
being a shareholder. You'll also find information on how to check the status of
your account using the method that's most convenient for you.
You can find out more about the topics covered here by speaking with your
financial representative or a representative of your workplace retirement plan
or other investment provider.
<PAGE>
Choosing A Share Class
In this prospectus, there are three share classes for each fund. Each class has
its own fees and expenses, offering you a choice of cost structures.
For Kemper New Europe Fund, Class M shares represent the initial shares of the
fund and are no longer offered. Class M shares are not subject to a contingent
deferred sales charge or a Rule 12b-1 distribution fee. Class M shares are
subject to a 2% fee on all redemptions (including redemptions in kind) and
exchanges. Class M shares will automatically convert to Class A shares on
September 3, 2000.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Classes and features Points to help you compare
------------------------------------------------------------------------------------------------------
<S> <C>
Class A
o Sales charges of up to 5.75%, charged when o Some investors may be able to reduce or
you buy shares eliminate their sales charges; see page
48
o In most cases, no charges when you sell
shares o Total annual expenses are lower than
those for Class B or Class C
o No distribution fee
------------------------------------------------------------------------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate falls to
zero after six years
o Deferred sales charge of up to 4.00%,
charged when you sell shares you bought o Shares automatically convert to Class A
within the last six years six years after purchase, which means
lower annual expenses going forward
o 0.75% distribution fee
------------------------------------------------------------------------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is lower,
but your shares never convert to Class A,
o Deferred sales charge of 1.00%, charged so annual expenses remain higher
when you sell shares you bought within the
last year
o 0.75% distribution fee
------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
Class A shares
Class A shares have a sales charge that varies with the amount you invest:
All funds except Kemper Global Income Fund
Sales charge as a % Sales charge as a %
Your investment of offering price of your net investment
---------------------------------------------------------------------
Up to $50,000 5.75% 6.10%
---------------------------------------------------------------------
$50,000-$99,999 4.50 4.71
---------------------------------------------------------------------
$100,000-$249,999 3.50 3.63
---------------------------------------------------------------------
$250,000-$499,999 2.60 2.67
---------------------------------------------------------------------
$500,000-$999,999 2.00 2.04
---------------------------------------------------------------------
$1 million or more See page 48
----------------------------------------------------------------------
Kemper Global Income Fund
Sales charge as a % Sales charge as a %
Your investment of offering price of your net investment
---------------------------------------------------------------------
Up to $100,000 4.50% 4.71%
---------------------------------------------------------------------
$100,000-$249,999 3.50 3.63
---------------------------------------------------------------------
$250,000-$499,999 2.60 2.67
---------------------------------------------------------------------
$500,000-$999,999 2.00 2.04
---------------------------------------------------------------------
$1 million or more See page 48
----------------------------------------------------------------------
The offering price includes the sales charge.
You may be able to lower your Class A sales charges if:
o you plan to invest at least $50,000 ($100,000 for Kemper Global Income
Fund) over the next 24 months ("letter of intent")
o the amount of Kemper shares you already own (including shares in
certain other Kemper funds) plus the amount you're investing now is at
least $50,000 ($100,000 for Kemper Global Income Fund) ("cumulative
discount")
o you are investing a total of $50,000 ($100,000 for Kemper Global Income
Fund) or more in several Kemper funds at once ("combined purchases")
47
<PAGE>
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.
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.
48
<PAGE>
Class B shares
With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% is deducted
from fund assets each year. This means the annual expenses for Class B shares
are somewhat higher (and their performance correspondingly lower) compared to
Class A shares, which don't have a 12b-1 fee. After six years, Class B shares
automatically convert to Class A, which has the net effect of lowering the
annual expenses from the seventh year on.
Class B shares have a contingent deferred sales charge (CDSC). This charge
declines over the years you own shares, and disappears completely after six
years of ownership. But for any shares you sell within those six years, you may
be charged as follows:
Year after you bought shares CDSC on shares you sell
---------------------------------------------------------------------
First year 4.00%
---------------------------------------------------------------------
Second or third year 3.00
---------------------------------------------------------------------
Fourth or fifth year 2.00
---------------------------------------------------------------------
Sixth year 1.00
---------------------------------------------------------------------
Seventh year and later None (automatic conversion
to Class A)
---------------------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
Class B shares are designed for long-term investors who prefer to see all of
their investment go to work right away, and can accept somewhat higher annual
expenses.
49
<PAGE>
Class C shares
Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan under which a distribution fee of 0.75% is deducted from fund assets
each year. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a contingent deferred sales charge (CDSC), but only on
shares you sell within one year of buying them:
Year after you bought shares CDSC on shares you sell
---------------------------------------------------------------------
First year 1.00%
---------------------------------------------------------------------
Second year and later None
---------------------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
Class C shares may appeal to investors who plan to sell shares within six years
of buying them, or who aren't certain of their investment time horizon.
50
<PAGE>
How To Buy Shares
Once you've chosen a share class, use these instructions to make investments.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
First investment Additional investments
----------------------------------------------------------------------------------------------------------
<S> <C>
$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 the o Contact your representative using the method
method that's most convenient for you that's most convenient for you
----------------------------------------------------------------------------------------------------------
By mail or express mail (see below)
o Fill out and sign an application o Send a check made out to "Kemper Funds" and a
Kemper investment slip to us at the appropriate
o Send it to us at the appropriate address, address below
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 from a bank
checking account, call (800) 621-1048 (minimum
$50)
----------------------------------------------------------------------------------------------------------
On the Internet
-- o Go to www.kemper.com and register
o Follow the instructions for buying shares with
money from your bank account
----------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Regular mail:
Kemper Funds, PO Box 219153, Kansas City, MO 64121-9153
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)
51
<PAGE>
How to Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Exchanging into another fund Selling shares
--------------------------------------------------------------------------------------------------
<S> <C>
$1,000 or more to open a new account Some transactions, including most for
over $50,000, can only be ordered in
$100 or more for exchanges between existing writing with a signature guarantee; if
accounts you're in doubt, see page 54
--------------------------------------------------------------------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by the
method that's most convenient for you method that's most convenient 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
you're exchanging out of o the fund, class and account 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 account
o your name(s), signature(s) and address,
as they appear on your account o a daytime telephone number
o a daytime telephone number
--------------------------------------------------------------------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from a fund o To set up regular cash payments from a
account, call (800) 621-1048 fund account, call (800) 621-1048
--------------------------------------------------------------------------------------------------
On the internet
o Go to www.kemper.com and register
o Follow the instructions for making
on-line exchanges
--------------------------------------------------------------------------------------------------
</TABLE>
52
<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.
In order to reduce the amount of mail you receive and to help reduce fund
expenses, we generally send a single copy of any shareholder report and
prospectus to each household. If you do not want the mailing of these documents
to be combined with those for other members of your household, please call (800)
621-1048.
Policies about transactions
The funds are open for business each day the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange (typically 3 p.m. Central time, but sometimes
earlier, as in the case of scheduled half-day trading or unscheduled suspensions
of trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
53
<PAGE>
EXPRESS-Transfer lets you set up a link between a Kemper or Scudder 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 sell shares by phone or over the internet 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 transactions, 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 completed within 24 hours. The funds can only send or
accept wires of $1,000 or more.
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.
When you want to sell more than $50,000 worth of shares, 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.
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.
54
<PAGE>
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a 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. [CONFIRM: Such
withdrawals may be made at a maximum of 10% per year of the net asset
value of the account.]
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns
of excess contributions from retirement plans
o for Class A shares purchased through the Large Order NAV Purchase
Privilege, redemption of shares whose dealer of record at the time of
the investment notifies Kemper Distributors that the dealer waives the
applicable commission
o For Class C shares, redemption of shares purchased through a
dealer-sponsored asset allocation program maintained on an omnibus
record-keeping system, provided the dealer of record has waived the
advance of the first year administrative services and distribution fees
applicable to such shares and has agreed to receive such fees
quarterly.
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.
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.
55
<PAGE>
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take advantage of the "reinstatement feature." With
this feature, you can put your money back into the same class of a Scudder or
Kemper fund at its current NAV and for purposes of sales charges it will be
treated as if it had never left Scudder or 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 processed (not when it is received), 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.
56
<PAGE>
How the funds calculate share price
For each fund in this prospectus, the price at which you buy shares is as
follows:
Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")
Class B, Class C and Class M shares -- net asset value per share, or NAV
To calculate NAV, each share class of each fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
------------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
For each fund and share class in this prospectus, the price at which you sell
shares is also the NAV, although for Class B and Class C investors a contingent
deferred sales charge may be taken out of the proceeds (see "Choosing A Share
Class").
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
Because each fund invests in securities that are traded primarily in foreign
markets, the value of its holdings could change at a time when you aren't able
to buy or sell fund shares. This is because some foreign markets are open on
days when the fund doesn't price its shares.
57
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Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if you 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 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 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 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
o change, add or withdraw various services, fees and account policies (for
example, we may change or terminate the exchange privilege at any time)
58
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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 funds intend to pay dividends and distributions to their shareholders in
November or December, and if necessary may do so at other times as well.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
Because each shareholder's tax situation is unique, ask your tax professional
about the tax consequences of your investments, including any state and local
tax consequences.
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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
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o income dividends you receive from a fund
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o short-term capital gains distributions received from a fund
Generally taxed at capital gains rates
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o long-term capital gains from selling fund shares
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o long-term capital gains distributions received from a fund
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You may be able to claim a tax credit or deduction for your share of any foreign
taxes your fund pays.
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
Corporations may be able to take a dividends-received deduction for a portion of
income dividends they receive.
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To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. For more copies, call (800) 621-1048.
Statements of Additional Information (SAIs) -- These tell you more about each
fund's features and policies, including additional risk information. The SAIs
are incorporated by reference into this document (meaning that they are legally
part of this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC or request them electronically at [email protected].
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
www.sec.gov
Tel (202) 942-8090
Kemper Funds
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
Tel (800) 621-1048
--------------------------------------------------------------------------------
SEC File Numbers
Kemper Asian Growth Fund 811-7731
Kemper Emerging Markets Growth Fund 811-08395
Kemper Global Blue Chip Fund 811-08395
Global Discovery Fund 811-4670
Kemper Global Income Fund 811-5829
Kemper International Fund 811-3136
Kemper Latin America Fund 811-08395
Kemper New Europe Fund 811-5969
Kemper International Research 811-08395
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 Asian Growth Fund ( "Asian Fund")
Kemper Global Blue Chip Fund ("Global Blue Chip Fund")
Kemper Global Discovery Fund ("Global Discovery Fund")
Kemper Global Income Fund ("Global Income Fund")
Kemper International Fund ("International Fund")
Kemper International Research Fund ("International Research Fund")
Kemper New Europe Fund, Inc. ("New Europe Fund")
Class A, Class B and Class C
STATEMENT OF ADDITIONAL INFORMATION
March 1, 2001
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus for the Funds, as amended from time to time,
a copy of which may be obtained without charge by contacting Kemper
Distributors, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606,
1-800-621-1048, or from the firm from which this Statement of Additional
Information was obtained.
The Annual Report to Shareholders of each Fund accompanies this Statement of
Additional Information. They are incorporated by reference and are hereby deemed
to be part of this Statement of Additional Information.
This Statement of Additional Information is incorporated by reference into the
combined prospectus.
<PAGE>
TABLE OF CONTENTS
Page
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POLICIES AND TECHNIQUES....................................................... 1
ADDITIONAL INFORMATION ABOUT INVESTMENT TECHNIQUES............................10
INVESTMENT RESTRICTIONS.......................................................39
NET ASSET VALUE...............................................................42
Redemptions and Exchanges...................................................47
Special Features............................................................52
Additional Transaction Information..........................................56
DIVIDENDS.....................................................................57
PERFORMANCE INFORMATION.......................................................58
Average Annual Total Return.................................................58
Cumulative Total Return.....................................................59
Total Return................................................................60
Yield.......................................................................64
Comparison of Fund Performance..............................................65
FUND ORGANIZATION.............................................................67
Master/feeder structure.....................................................68
INVESTMENT MANAGER............................................................68
Code of Ethics..............................................................71
[Trustees/Directors] and Officers...........................................73
Officers And Directors......................................................77
Compensation of Officers and Directors......................................78
TAXES.........................................................................85
FINANCIAL STATEMENTS..........................................................90
APPENDIX -- RATINGS OF INVESTMENTS
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POLICIES AND TECHNIQUES
Kemper Asian Growth Fund. The objective of the Asian Fund is long-term capital
growth. The Fund seeks to achieve its objective by investing in a diversified
portfolio consisting primarily of equity securities of Asian companies ("Asian
Equity Securities"). Asian Equity Securities include common stocks, preferred
stocks, securities convertible into or exchangeable for common or preferred
stocks, equity investments in partnerships, joint ventures and other forms of
non-corporate investment and warrants, options and rights exercisable for equity
securities that are issued by Asian companies as defined below.
The Fund considers an issuer of securities to be an Asian company if: (i) it is
organized under the laws of an Asian country and has a principal office in an
Asian country; (ii) it derives 50% or more of its total revenues from business
in Asia; or (iii) its equity securities are traded principally on a stock
exchange in Asia. Under normal circumstances, the Fund will invest at least 85%
of its total assets in Asian Equity Securities and will invest at least 65% of
its total assets in Asian Equity Securities of issuers meeting at least one of
the first two criteria described in the preceding sentence. For purposes of the
foregoing policies, the Fund also considers Asian Equity Securities to include:
(i) shares of closed-end management investment companies, the assets of which
are invested primarily in Asian Equity Securities and (ii) depository receipts
(such as American Depository Receipts) where the underlying or deposited
securities are Asian Equity Securities.
Currently, the Fund invests principally in developing or "emerging" countries
(see "Special Risk Factors -- Emerging Markets" below). Some examples of
emerging countries in which the Fund may invest without limit include China,
Indonesia, Korea, Malaysia, Philippines, Thailand and Taiwan. The Fund may, in
the discretion of the Fund's investment manager, invest without limit in
developed Asian countries such as Hong Kong, Japan and Singapore; however, the
Fund will only invest in Japan when economic conditions warrant and then only in
limited amounts.
In pursuing its objective, the Fund invests primarily in Asian Equity Securities
believed to have potential for capital growth. However, there is no requirement
that the Fund invest exclusively in Asian Equity Securities. Subject to limits
described above, the Fund may invest in any other type of security including,
but not limited to, equity securities of non-Asian companies, bonds, notes and
other debt securities of domestic or foreign companies (including Asian-currency
instruments and securities) and obligations of domestic or foreign governments
and their political subdivisions. Currently, the Fund does not intend to invest
more than 5% of its net assets in debt securities (except for temporary
defensive investments described below).
The Fund makes investments in various Asian countries. Under normal
circumstances, business activities in not less than four different Asian
countries will be represented in the Fund's portfolio. The Fund may, from time
to time, have 40% or more of its assets invested in any major Asian industrial
or developed country which, in the view of the Fund's investment manager, poses
no unique investment risk. Investments may include securities issued by
enterprises that have undergone or are currently undergoing privatization.
In determining the appropriate distribution of investments among various Asian
countries and geographic regions, the Fund's investment manager ordinarily
considers such factors as prospects for relative economic growth among Asian
countries; expected levels of inflation; relative price levels of the various
capital markets; government policies influencing business conditions; the
outlook for currency relationships and the range of individual investment
opportunities available to investors in Asian companies.
Because the Asian Fund concentrates its investments in Asian companies, the
performance of the Asian Fund is closely tied to economic and political
conditions within Asia. The current economies and political structures of many
of the countries the Asian Fund may invest in do not compare favorably with the
United States or other mature economies in terms of wealth and stability. As a
result, such investments will be subject to more risk and erratic and abrupt
price movements; particularly in the emerging Asian countries. Concentration of
the Asian
<PAGE>
Fund's investments in Asian companies presents greater risk than investment in a
more diversified portfolio of foreign securities.
When the investment manager deems it appropriate to invest for temporary
defensive purposes, such as during periods of adverse market conditions, up to
100% of the Fund's assets may be invested in cash (including foreign currency)
or cash equivalent short-term obligations, either rated as high quality or
considered to be of comparable quality in the opinion of the investment manager,
including, but not limited to, certificates of deposit, commercial paper,
short-term notes, obligations issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities, and repurchase agreements secured thereby.
In particular, for temporary defensive purposes the Fund's assets may be
invested without limitation in U.S. Dollar-denominated obligations to reduce the
risks inherent in non-U.S. Dollar-denominated assets.
Generally, the Fund will not trade in securities for short-term profits but,
when circumstances warrant, securities may be sold without regard to the length
of time held.
The Fund may also engage in strategic transactions and make short sales
against-the-box. The Fund will not purchase illiquid securities, including
repurchase agreements maturing in more than seven days, if, as a result thereof,
more than 15% of the Fund's net assets valued at the time of the transaction
would be invested in such securities.
Kemper Global Blue Chip Fund. The Fund seeks long-term growth of capital through
a diversified worldwide portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt securities
convertible into common stocks. The Fund invests in equity securities of
companies which are incorporated in the U.S. and in foreign countries. The Fund
will invest primarily in developed markets, with a maximum of 15% of the Fund's
total assets invested in emerging markets. It also may invest in the debt
securities of U.S. and foreign issuers. Income is an incidental consideration.
In pursuing its objective, the Fund will emphasize investments in common stocks
of large, well known companies. Companies of this general type are often
referred to as "Blue Chip" companies. While specific investment and financial
criteria may vary from market to market, Blue Chip companies around the world
are generally identified by the Investment Manager as having substantial
capitalization, established financial history, ready access to credit, good
industry position and superior management structure. While these companies may
be among the largest in their local markets, they may be small by the standards
of U.S. stock market capitalization. Global Blue Chip companies are believed to
generally exhibit less investment risk and less price volatility, on average,
than companies lacking these characteristics, such as smaller, less-seasoned
companies. In addition, the large market of publicly held shares for such
companies and the generally higher trading volume in those shares generally
result in a relatively high degree of liquidity for such investments.
The Fund invests in companies that the Investment Manager believes will benefit
from global economic trends, promising technologies or products and specific
country opportunities resulting from changing geopolitical, currency or economic
relationships. The Fund's global framework allows it to take advantage of
investment opportunities created by the growing integration of economies around
the world. The Fund offers investors access to opportunities wherever they
arise, without being constrained by location of a company's headquarters or the
trading market for its shares. It is expected that investments will be spread
broadly around the world with an emphasis on developed economies and capital
markets. The Fund will usually be invested in securities of issuers located in
at least three countries, one of which may be the U.S. The Fund may be invested
100% in non-U.S. issues, and for temporary defensive purposes may be invested
100% in U.S. issues, although under normal circumstances it is expected that
both foreign and U.S. investments will be represented in the Fund's portfolio.
It is expected that investments will include securities of companies of varying
sizes, as measured by assets, sales, income or market capitalization.
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<PAGE>
The Fund generally invests in equity securities of established companies listed
on U.S. or foreign securities exchanges, but also may invest in securities
traded over-the-counter. It also may invest in debt securities convertible into
common stock, and convertible and non-convertible preferred stock, and
fixed-income securities of governments, governmental agencies, supranational
agencies and companies when the Investment Manager believes the potential for
appreciation will equal or exceed that available from investments in equity
securities. These debt and fixed-income securities will be predominantly
investment-grade securities, that is, those rated Aaa, Aa, A or Baa by Moody's
Investor Services, Inc. ("Moody's") or AAA, AA, A or BBB by Standard & Poor's
Corporation ("S&P") or those of equivalent quality as determined by the
Investment Manager. The Fund may not invest more than 5% of its total assets in
debt securities rated Baa or below by Moody's, or BBB or below by S&P or deemed
by the Investment Manager to be of comparable quality (commonly referred to as
"high yield" or "junk" bonds). The Fund may invest in closed-end investment
companies holding foreign securities, as well as shares of closed-end investment
companies that invest primarily in emerging market debt securities. In addition,
the Fund may engage in strategic transactions, which may include derivatives.
The Fund may also invest in zero coupon securities and REITs.
Fixed-income securities may be held without limit for temporary defensive
purposes when the Investment Manager believes market conditions so warrant and
for temporary investment. It is impossible to accurately predict how long such
alternative strategies may be utilized. Similarly, the Fund may invest in cash
equivalents (including domestic and foreign money market instruments, such as
bankers' acceptances, certificates of deposit, commercial paper, short-term
government and corporate obligations and repurchase agreements) for temporary
defensive purposes and for liquidity.
Global Discovery Fund. Global Discovery Fund seeks above-average capital
appreciation over the long term by investing primarily in the equity securities
of small companies located throughout the world. The Fund is designed for
investors looking for above-average appreciation potential (when compared with
the overall domestic stock market as reflected by Standard & Poor's 500
Corporation Composite Price Index) and the benefits of investing globally, but
who are willing to accept above-average stock market risk, the impact of
currency fluctuation and little or no current income.
In pursuit of its objective, the Fund generally invests in small, rapidly
growing companies which offer the potential for above-average returns relative
to larger companies, yet are frequently overlooked and thus undervalued by the
market. The Fund has the flexibility to invest in any region of the world. It
can invest in companies based in emerging markets, typically in the Far East,
Latin America and Eastern Europe, as well as in firms operating in developed
economies, such as those of the United States, Japan and Western Europe.
The Investment Manager invests the Fund's assets in companies it believes offer
above-average earnings, cash flow or asset growth potential. It also invests in
companies which may receive greater market recognition over time. The Investment
Manager believes that these factors offer significant opportunity for long-term
capital appreciation. The Investment Manager evaluates investments for the Fund
from both a macroeconomic and microeconomic perspective, using fundamental
analysis, including field research. The Investment Manager analyzes the growth
potential and relative value of possible investments. When evaluating an
individual company, the Investment Manager takes into consideration numerous
factors, including the depth and quality of management; a company's product
line, business strategy and competitive position; research and development
efforts; financial strength, including degree of leverage; cost structure;
revenue and earnings growth potential; price-earnings ratios and other stock
valuation measures. Secondarily, the Investment Manager weighs the
attractiveness of the country and region in which a company is located.
While the Fund's Investment Manager believes that smaller, lesser-known
companies can offer greater growth potential than larger, more established
firms, the former also involve greater risk and price volatility. To help reduce
risk, the Fund expects, under usual market conditions, to diversify its
portfolio widely by company,
3
<PAGE>
industry and country. Under normal circumstances, the Fund invests at least 65%
of its total assets in the equity securities of small companies. The Fund
intends to allocate investments among at least three countries at all times, one
of which may be the United States.
The Fund invests primarily in companies whose individual equity market
capitalization would place them in the same size range as companies in
approximately the lowest 20% of world market capitalization as represented by
the Salomon Brothers Broad Market Index, an index comprised of equity securities
of more than 6,500 small-, medium- and large-sized companies based in 22 markets
around the globe. As of December 31, 1999, companies in which the Fund typically
invests have a market capitalization of between $75 million and $5.7 billion.
The equity securities in which the Fund may invest consist of common stocks,
preferred stocks (either convertible or nonconvertible), rights and warrants.
These securities may be listed on the U.S. or foreign securities exchanges or
traded over-the-counter.
For capital appreciation purposes, the Fund may purchase notes, bonds,
debentures, government securities and zero coupon bonds (any of which may be
convertible or nonconvertible). The Fund may purchase "investment-grade" bonds,
which are those rated Aaa, Aa, A or Baa by Moody's Investors Service ("Moody's")
or AAA, AA, A or BBB by Standard & Poor's Ratings Services ("S&P"), a division
of The McGraw-Hill Companies, Inc. or, if unrated, judged to be of equivalent
quality as determined by the Investment Manager. The Fund may also invest up to
5% of its net assets in debt securities which are rated below investment-grade,
that is, rated below Baa by Moody's or below BBB by S&P and in unrated
securities of equivalent quality.
The Fund may invest in foreign securities and American Depositary Receipts which
may be sponsored or unsponsored. The Fund may also invest in closed-end
investment companies holding foreign securities, illiquid securities, REITs and
mortgage-backed securities, purchase securities on a "when-issued" or "forward
delivery" basis, enter into repurchase agreements and engage in strategic
transactions. It is the Fund's policy that illiquid securities (including
repurchase agreements of more than seven days duration, certain restricted
securities, and other securities which are not readily marketable) may not
constitute, at the time of purchase, more than 15% of the value of the Funds'
net assets.
For temporary defensive purposes, the Fund may, during periods in which
conditions in securities markets warrant, invest without limit in cash and cash
equivalents. It is impossible to predict how long such alternative strategies
will be utilized.
Kemper Global Income Fund. The objective of the Global Income Fund is to provide
high current income consistent with prudent total return asset management. In
seeking to achieve its objective, the Fund will invest primarily in investment
grade foreign and domestic fixed income securities. In managing the Fund's
portfolio to provide a high level of current income, the investment manager will
also be seeking to protect net asset value and to provide investors with a total
return, which is measured by changes in net asset value as well as income
earned. In so managing the Fund's portfolio in an effort to reduce volatility
and increase returns, the investment manager may, as is discussed more fully
below, adjust the Fund's portfolio across various global markets, maturity
ranges, quality ratings and issuers based upon its view of interest rates and
other market conditions prevailing throughout the world.
As a global fund, the Fund may invest in securities issued by any issuer and in
any currency and may hold foreign currency. Under normal market conditions, as a
non-fundamental policy, at least 65% of the Fund's assets will be invested in
the securities of issuers located in at least three countries, one of which may
be the United States. Securities of issuers within a given country may be
denominated in the currency of another country, or in multinational currency
units such as the European Currency Unit ("ECU"). Since the Fund invests in
foreign securities, the net asset value of the Fund will be affected by
fluctuations in currency exchange rates.
4
<PAGE>
The Fund may seek to capitalize on investment opportunities presented throughout
the world and in international financial markets influenced by the increasing
interdependence of economic cycles and currency exchange rates. Currently, more
than 50% of the value of the world's debt securities is represented by
securities denominated in currencies other than the U.S. Dollar. Over the past
ten years, debt securities offered by certain foreign governments provided
higher investment returns than U.S. Government debt securities. Such returns
reflect interest rates prevailing in those countries and the effect of gains and
losses in the denominated currencies, which have had a substantial impact on
investment in foreign fixed income securities. The relative performance of
various countries' fixed income markets historically has reflected wide
variations relating to the unique characteristics of each country's economy.
Year-to-year fluctuations in certain markets have been significant, and negative
returns have been experienced in various markets from time to time. The
investment manager believes that investment in a global portfolio can provide
investors with more opportunities for attractive returns than investment in a
portfolio comprised exclusively of U.S. debt securities. Also, the flexibility
to invest in fixed income markets around the world can reduce risk since, as
noted above, different world markets have often performed, at a given time, in
radically different ways.
The Fund will allocate its assets among securities of various issuers,
geographic regions, and currency denominations in a manner that is consistent
with its objective based upon relative interest rates among currencies, the
outlook for changes in these interest rates, and anticipated changes in
worldwide exchange rates. In considering these factors, a country's economic and
political state, including such factors as inflation rate, growth prospects,
global trade patterns and government policies, will be evaluated.
It is currently anticipated that the Fund's assets will be invested principally
within Australia, Canada, Japan, New Zealand, the United States and Western
Europe, and in securities denominated in the currencies of these countries or
denominated in multinational currency units such as the ECU. The Fund may also
acquire securities and currency in less developed countries and in developing
countries. While no specific limits apply, it is currently anticipated that less
than 25% of the total assets of the Fund will be invested in securities of
issuers located in emerging markets.
The Fund may invest in debt securities of supranational entities denominated in
any currency. A supranational entity is an entity designated or supported by the
national governments of two or more countries to promote economic reconstruction
or development. Examples of supranational entities include, among others, the
World Bank, the European Investment Bank and the Asian Development Bank. The
Fund may, in addition, invest in debt securities denominated in the ECU of an
issuer in any country (including supranational issuers). The Fund is further
authorized to invest in "semi-governmental securities," which are debt
securities issued by entities owned by either a national, state or equivalent
government or are obligations of such a government jurisdiction that are not
backed by its full faith and credit and general taxing powers.
The Fund is authorized to invest in the securities of any foreign or domestic
issuer. Investments by the Fund in fixed income securities may include
obligations issued or guaranteed by United States or foreign governments
(including foreign states, provinces and municipalities) or their agencies and
instrumentalities; obligations issued or guaranteed by supranational entities;
debt obligations of foreign and domestic corporations, banks and other business
organizations; and other foreign and domestic debt securities such as
convertible securities and preferred stocks, cash and cash equivalents and
repurchase agreements. Under normal market conditions, the Fund, as a
non-fundamental policy, will invest at least 65%, and may invest up to 100%, of
its total assets in fixed income securities. Some of the Fund's fixed income
securities may be convertible into common stock or be traded together with
warrants for the purchase of common stock, and the Fund may convert such
securities into equities and hold them as equity upon conversion. Investments
may include securities issued by enterprises that have undergone or are
currently undergoing privatization.
The securities in which the Fund invests are "investment grade" or below
investment grade. The Fund may purchase "investment-grade" bonds, which are
those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated, judged to be of equivalent quality as determined by the Investment
Manager. Bonds
5
<PAGE>
rated Baa or BBB may have speculative elements as well as investment-grade
characteristics. The Fund may also invest up to 35% of its net assets in debt
securities which are rated below investment-grade, that is, rated below Baa by
Moody's or below BBB by S&P (commonly referred to as "junk bonds") and in
unrated securities of equivalent quality.
The Fund may take full advantage of the entire range of maturities of fixed
income securities and may adjust the average maturity of its portfolio from time
to time, depending upon its assessment of relative yields on securities of
different maturities and its expectations of future changes in interest rates.
Thus, the average maturity of the Fund's portfolio may be relatively short
(under five years, for example) at some times and relatively long (over 10
years, for example) at other times. Generally, since shorter term debt
securities tend to be more stable than longer term debt securities, the
portfolio's average maturity will be shorter when interest rates are expected to
rise and longer when interest rates are expected to fall. Since in most foreign
markets debt securities generally are issued with maturities of ten years or
less, it is currently anticipated that the average maturity of the Fund's
portfolio will normally be in the intermediate range (four to six years).
The characteristics of the securities in the Fund's portfolio, such as the
maturity and the type of issuer, will affect yields and yield differentials,
which vary over time. The actual yield realized by the investor is subject,
among other things, to the Fund's expenses and the investor's transaction costs.
When the investment manager deems it appropriate to invest for temporary
defensive purposes, such as during periods of adverse market conditions, or when
relative yields in other securities are not deemed attractive, part or all of
the Fund's assets may be invested in cash (including foreign currency) or cash
equivalent short-term obligations, either rated as high quality or considered to
be of comparable quality in the opinion of the investment manager, including,
but not limited to, certificates of deposit, commercial paper, short-term notes,
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities, and repurchase agreements secured thereby. In particular,
for defensive purposes a larger portion of the Fund's assets may be invested in
U.S. Dollar-denominated obligations to reduce the risks inherent in non-U.S.
Dollar-denominated assets.
The Fund will not normally engage in the trading of securities for the purpose
of realizing short-term profits, but it will adjust its portfolio as considered
advisable in view of prevailing or anticipated market conditions and the Fund's
investment objective. Accordingly, the Fund may sell portfolio securities in
anticipation of a rise in interest rates and purchase securities for inclusion
in its portfolio in anticipation of a decline in interest rates.
The Fund may also engage in strategic transactions and make short sales
against-the-box. The Fund will not purchase illiquid securities, including
repurchase agreements maturing in more than seven days, if, as a result thereof,
more than 15% of the Fund's net assets valued at the time of the transaction
would be invested in such securities.
Kemper International Fund. The International Fund seeks a total return through a
combination of capital growth and income, principally through an internationally
diversified portfolio of equity securities. Investments may be made for capital
growth or for income or any combination thereof for the purpose of achieving a
high overall return. There is no limitation on the percentage or amount of the
Fund's assets that may be invested in growth or income, and therefore at any
particular time the investment emphasis may be placed solely or primarily on
growth of capital or on income. While the Fund invests principally in equity
securities of non-U.S. issuers, it may also invest in convertible and debt
securities and foreign currencies. The Fund invests primarily in non-U.S.
issuers, and under normal circumstances at least 80% of the Fund's total assets
will be invested in non-U.S. issuers. In determining whether the Fund will be
invested for capital growth or income, the investment manager analyzes the
international equity and fixed income markets and seeks to assess the degree of
risk and level of return that can be expected from each market. See "Special
Risk Factors."
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In pursuing its objective, the Fund invests primarily in common stocks of
established non-U.S. companies believed to have potential for capital growth,
income or both. However, there is no requirement that the Fund invest
exclusively in common stocks or other equity securities. The Fund may invest in
any other type of security including, but not limited to, convertible securities
(including warrants), preferred stocks, bonds, notes and other debt securities
of companies (including Euro-currency instruments and securities) or obligations
of domestic or foreign governments and their political subdivisions. When the
investment manager believes that the total return potential in debt securities
equals or exceeds the potential return on equity securities, the Fund may
substantially increase its holdings in such debt securities. The Fund may
establish and maintain reserves for defensive purposes or to enable it to take
advantage of buying opportunities. The Fund's reserves may be invested in
domestic as well as foreign short-term money market instruments including, but
not limited to, government obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term corporate debt
securities and repurchase agreements.
The Fund makes investments in various countries. Under normal circumstances,
business activities in not less than three different foreign countries will be
represented in the Fund's portfolio. The Fund may, from time to time, have more
than 25% of its assets invested in any major industrial or developed country
which in the view of the investment manager poses no unique investment risk. The
Fund may purchase securities of companies, wherever organized, that have their
principal activities and interests outside the United States. While no specific
limits apply, it is currently anticipated that less than 25% of the total assets
of the Fund will be invested in securities of issuers located in emerging
markets. Investments may include securities issued by enterprises that have
undergone or are currently undergoing privatization. Under exceptional economic
or market conditions abroad, the Fund may, for defensive purposes, invest all or
a major portion of its assets in U.S. Government obligations or securities of
companies incorporated in and having their principal activities in the United
States. The Fund may also invest its reserves in domestic short-term
money-market instruments as described above.
In determining the appropriate distribution of investments among various
countries and geographic regions, the investment manager ordinarily considers
such factors as prospects for relative economic growth among foreign countries;
expected levels of inflation; relative price levels of the various capital
markets; government policies influencing business conditions; the outlook for
currency relationships and the range of individual investment opportunities
available to the international investor.
Generally, the Fund will not trade in securities for short-term profits but,
when circumstances warrant, securities may be sold without regard to the length
of time held.
The Fund may also engage in strategic transactions. The Fund will not purchase
illiquid securities, including repurchase agreements maturing in more than seven
days, if, as a result thereof, more than 15% of the Fund's net assets valued at
the time of the transaction would be invested in such securities.
Kemper International Research Fund seeks long-term capital appreciation by
investing primarily in a diversified portfolio of securities issued by large
foreign companies. The Fund will invest in those foreign securities that the
investment manager, Zurich Scudder Investments, Inc. (the "Investment Manager"
or "Scudder") believes are its top research recommendations. Under normal market
conditions, the Fund will invest at least 65% of its total assets in common
stocks of large foreign companies (stocks that are listed on foreign exchanges
and are issued by foreign-based companies that have a market capitalization of
$1 billion or more).
The Fund will invest in securities based on the top research recommendations of
Scudder's research analysts and other investment specialists. These
recommendations will represent securities across various sectors and investment
disciplines (such as growth stocks and value stocks). The Fund expects that its
regional investment allocations will remain roughly similar to that of the
Morgan Stanley Capital International Europe, Austral-Asia, Far East plus
Emerging Markets Free Index (MSCI EAFE + EMF Index). As of April 10, 2000, most
of the issuers included in this index are located in developed markets. In
choosing securities to be purchased by
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the Fund, Scudder will focus on bottom-up research, looking for individual
companies that have sound financial strength, good business prospects and strong
competitive positioning and above-average earnings growth, among other factors.
Scudder will also look for significant changes in the business environment, with
an eye toward identifying industries that may benefit from these changes. The
Fund would be managed to seek long-term capital appreciation primarily through
appreciation of its common stock holdings and, to a lesser extent, through
dividend and interest income.
The Fund may invest in investment-grade debt securities that can be converted
into common stocks, also known as convertibles, and in debt securities,
preferred stocks, bonds, notes and other debt securities of companies. The Fund
may also use other investments and investment techniques that may impact fund
performance, including, but not limited to, options, futures contracts and other
derivatives (financial instruments that derive their value from other securities
or commodities, or that are based on indices).
In addition, the Fund may enter into repurchase agreements and reverse
repurchase agreements, may purchase securities on a when-issued or forward
delivery basis, may invest in warrants, indexed securities, synthetic
investments and illiquid securities, make short sales and engage in strategic
transactions. The Fund will not make a short sale if, after giving effect to
such sale, the market value of all securities sold short exceeds 25% of the
value of its total assets.
From time to time, the Fund may invest a portion of its assets in high-grade
debt securities, cash and cash equivalents for temporary defensive purposes.
Defensive investments may serve to lessen volatility in an adverse stock market,
although they also generate lower returns than stocks in most markets. Because
this defensive policy differs from the Fund's investment objective, the Fund may
not achieve its goals during a defensive period.
Kemper New Europe Fund, Inc. The investment objective of the New Europe Fund is
long-term capital appreciation, which it seeks to achieve by investing primarily
in equity securities of European companies.
The Fund will invest in both the industrialized nations of Western Europe and
the less wealthy or developed countries in Southern and Eastern Europe. The Fund
will invest in established markets and companies with large capitalizations as
well as newer markets and smaller companies, and the portion of the Fund's
assets invested in each will vary from time to time. The Fund seeks to benefit
from accelerating economic growth transformation and deregulation taking hold in
Europe. These developments involve, among other things, increased privatizations
and corporate restructurings, the reopening of equity markets and economies in
Eastern Europe, further broadening of the European Union, and the implementation
of economic policies to promote non-inflationary growth. The Fund invests in
companies it believes are well placed to benefit from these and other structural
and cyclical changes now underway in this region.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
The Fund will invest, under normal market conditions, at least 65% of its total
assets in the equity securities of European companies. The Fund defines a
European company as: (i) a company organized under the laws of a European
country and that has a principal office in a European country; or (ii) a
company, wherever organized, where at least 50% of the company's non-current
assets, capitalization, gross revenue or profit in its most recent fiscal year
represents (directly or indirectly through subsidiaries) assets or activities
located in Europe; or (iii) a company whose equity securities are traded
principally in European securities markets. The Fund's definition of European
companies may include companies that have characteristics and business
relationships common to companies in other regions. As a result, the value of
the securities of such companies may reflect economic and
8
<PAGE>
market forces applicable to other regions, as well as to Europe. The Fund
believes, however, that investment in such companies will be appropriate in
light of the Fund's investment objective, because the Investment Manager will
select among such companies only those which, in its view, have sufficiently
strong exposure to economic and market forces in Europe such that their value
will tend to reflect European developments to a greater extent than developments
in other regions. For example, the Investment Manager may invest in companies
organized and located in the U.S. or other countries outside of Europe,
including companies having their entire production facilities outside of Europe,
when such companies meet one or more elements of the Fund's definition of
European companies so long as the Investment Manager believes at the time of
investment that the value of the company's securities will reflect principally
conditions in Europe.
The Fund expects the majority of its equity assets to be invested in the more
established and liquid markets of Western and Southern Europe. These more
established Western and Southern European countries include: Austria, Belgium,
Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. To
enhance return potential, however, the Fund may pursue investment opportunities
in the less wealthy nations of Southern Europe, currently Greece, Portugal and
Turkey, and the former communist countries of Eastern Europe, including
countries once part of the Soviet Union. The Fund may invest in other countries
of Europe when their markets become sufficiently developed, in the opinion of
the Investment Manager.
The Fund intends to allocate its investments among at least three countries at
all times. The Fund's equity investments may consist of: common stock, preferred
stock (convertible or non-convertible), depositary receipts (sponsored or
unsponsored) and warrants. These may be illiquid securities. Equity securities
may also be purchased through rights. Securities may be listed on securities
exchanges, traded over-the-counter ("OTC")or have no organized market. In
addition, the Fund may engage in strategic transactions, including derivatives.
The Fund may invest up to 15% of its total net assets in illiquid securities.
The Fund may invest, under normal market conditions, up to 20% of its total
assets in European debt securities. Capital appreciation in debt securities may
arise from a favorable change in relative interest rate levels or in the
creditworthiness of issuers. Within this 20% limit, the Fund may invest in debt
securities which are unrated, rated, or the equivalent of those rated below
investment grade (commonly referred to as "junk bonds"); that is, rated below
Baa by Moody's Investor Service, Inc. ("Moody's") or below BBB by Standard &
Poor's Ratings Service ("S&P"). Such securities may be in default with respect
to payment of principal or interest.
The Fund may invest in when-issued securities, illiquid and restricted
securities and convertible securities, may make short sales against-the-box and
may enter into repurchase agreements and reverse repurchase agreements. The Fund
may also invest in closed-end investment companies that invest primarily in
Europe.
When, in the opinion of the Investment Manager, market conditions warrant, as a
temporary defensive measure, the Fund may invest without limit in foreign or
U.S. debt instruments as well as cash or cash equivalents, including foreign and
domestic money market instruments, short-term government and corporate
obligations, and repurchase agreements. In such a case, the Fund would not be
pursuing, and may not achieve, its investment objective. The Fund may also
invest up to 20% in these investments to maintain liquidity.
Foreign securities such as those purchased by the Fund may be subject to foreign
government taxes which could reduce the yield on such securities, although a
shareholder of the Fund may, subject to certain limitations, be entitled to
claim a credit or deduction for U.S. federal income tax purposes for his or her
proportionate share of such foreign taxes paid by the Fund.
From time to time, the Fund may be a purchaser of restricted debt or equity
securities (i.e., securities which may require registration under the Securities
Act of 1933, as amended (the "1933 Act"), or an exemption therefrom, in order to
be sold in the ordinary course of business) in a private placement. The Fund has
undertaken not to
9
<PAGE>
purchase or acquire any such securities if, solely as a result of such purchase
or acquisition, more than 15% of the value of the Fund's net assets would be
invested in illiquid securities.
To a lesser extent, the Fund may also invest in "Specialized Investments" which
consist of equity securities of: (i) privately-held European companies; (ii)
European companies that have recently made initial public offerings of their
shares; (iii) government-owned or -controlled companies that are being
privatized; (iv) smaller publicly-held European companies, i.e., any European
company having a market capitalization of less than $500 million (the Board of
Directors of the Fund may, in the future, reevaluate and increase or decrease
the maximum market capitalization for qualification as a smaller European
company); (v) companies and joint ventures based in Europe; (vi) private
placements and joint venture participations in European companies that may not
be readily marketable; (vii) pooled investment funds that invest principally in
securities in which the Fund may invest, which are considered investment
companies for purposes of the 1940 Act restrictions described below; and (viii)
European companies with private market values perceived by the Investment
Manager to be substantially in excess of their publicly-traded values.
ADDITIONAL INFORMATION ABOUT INVESTMENT TECHNIQUES
The following section includes disclosure about investment practices and
techniques which may be utilized by one or more funds described in this
Statement of Additional Information. The name of each fund authorized to utilize
the technique precedes its discussion. Specific limitations and policies
regarding the use of these techniques may be found in each fund's "Investment
Objective and Policies" section, as well as in "Investment Restrictions" below.
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Fund may engage or a financial
instrument which a Fund may purchase are meant to describe the spectrum of
investments that the Investment Manager, in its discretion, might, but is not
required to, use in managing a Fund's portfolio assets. The Investment Manager
may, in its discretion, at any time employ such practice, technique or
instrument for one or more funds but not for all funds advised by it.
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
a Fund but, to the extent employed, could from time to time have a material
impact on the Fund's performance.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper International Research Fund
Kemper New Europe Fund
Borrowing. The Fund will borrow only when the Investment Manager believes that
borrowing will benefit the Fund after taking into account considerations such as
the costs of the borrowing. Borrowing by the Fund will involve special risk
considerations. Although the principal of the Fund's borrowings will be fixed,
the Fund's assets may change in value during the time a borrowing is
outstanding, proportionately increasing exposure to capital risk.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Common Stocks. Common stock is issued by companies to raise cash for business
purposes and represents a proportionate interest in the issuing companies.
Therefore, the Fund participates in the success or failure of any company in
which it holds stock. The market values of common stock can fluctuate
significantly, reflecting the
10
<PAGE>
business performance of the issuing company, investor perception and general
economic and financial market movements. Despite the risk of price volatility,
however, common stocks have historically offered a greater potential for
long-term gain on investment, compared to other classes of financial assets such
as bonds or cash equivalents, although there can be no assurance that this will
be true in the future.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper International Research Fund
Kemper New Europe Fund
Convertible Securities. The Fund may invest in convertible securities, that is,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into common stock. Investments in convertible securities can provide
an opportunity for capital appreciation and/or income through interest and
dividend payments by virtue of their conversion or exchange features.
The convertible securities in which the Fund may invest are either fixed income
or zero coupon debt securities which may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common stock. The
exchange ratio for any particular convertible security may be adjusted from time
to time due to stock splits, dividends, spin-offs, other corporate distributions
or scheduled changes in the exchange ratio. Convertible debt securities and
convertible preferred stocks, until converted, have general characteristics
similar to both debt and equity securities. Although to a lesser extent than
with debt securities generally, the market value of convertible securities tends
to decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically changes as the
market value of the underlying common stocks changes, and, therefore, also tends
to follow movements in the general market for equity securities. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock, although typically not
as much as the underlying common stock. While no securities investments are
without risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which provide for a
stream of income (or in the case of zero coupon securities, accretion of income)
with generally higher yields than common stocks. Convertible securities
generally offer lower yields than non-convertible securities of similar quality
because of their conversion or exchange features.
Of course, like all debt securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may default
on their obligations.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities. Convertible securities may be issued as fixed income
obligations that pay current income or as zero coupon notes and bonds, including
Liquid Yield Option Notes ("LYONs"(TM)).
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Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Depositary Receipts. The Fund may invest in sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs"), International Depositary Receipts ("IDRs") and
other types of Depositary Receipts (which, together with ADRs, GDRs and IDRs are
hereinafter referred to as "Depositary Receipts"). Depositary receipts provide
indirect investment in securities of foreign issuers. Prices of unsponsored
Depositary Receipts may be more volatile than if they were sponsored by the
issuer of the underlying securities. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. In addition, the issuers of the stock of unsponsored
Depositary Receipts are not obligated to disclose material information in the
United States and, therefore, there may not be a correlation between such
information and the market value of the Depositary Receipts. ADRs are Depositary
Receipts which are bought and sold in the United States and are typically issued
by a U.S. bank or trust company which evidence ownership of underlying
securities by a foreign corporation. GDRs, IDRs and other types of Depositary
Receipts are typically issued by foreign banks or trust companies, although they
may also be issued by United States banks or trust companies, and evidence
ownership of underlying securities issued by either a foreign or a United States
corporation. Generally, Depositary Receipts in registered form are designed for
use in the United States securities markets and Depositary Receipts in bearer
form are designed for use in securities markets outside the United States. For
purposes of the Fund's investment policies, the Fund's investments in ADRs, GDRs
and other types of Depositary Receipts will be deemed to be investments in the
underlying securities. Depositary Receipts, including those denominated in U.S.
dollars will be subject to foreign currency exchange rate risk. However, by
investing in U.S. dollar-denominated ADRs rather than directly in foreign
issuers' stock, the Fund avoids currency risks during the settlement period. In
general, there is a large, liquid market in the United States for most ADRs.
However, certain Depositary Receipts may not be listed on an exchange and
therefore may be illiquid securities.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper New Europe Fund
Emerging Markets. The Fund's investments in foreign securities may be in
developed countries or in countries considered by the Fund's Investment Manager
to have developing or "emerging" markets, which involves exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. A developing or emerging
market country can be considered to be a country that is in the initial stages
of its industrialization cycle. Currently, emerging markets generally include
every country in the world other than the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
countries. Currently, investing in many emerging markets may not be desirable or
feasible because of the lack of adequate custody arrangements for the Fund's
assets, overly burdensome repatriation and similar restrictions, the lack of
organized and liquid securities markets, unacceptable political risks or other
reasons. As opportunities to invest in securities in emerging markets develop,
the Fund may expand and further broaden the group of emerging markets in which
it invests. In the past, markets of developing or emerging market countries have
been more volatile than the markets of developed countries; however, such
markets often have provided higher rates of return to investors. The Investment
Manager believes that these characteristics may be expected to continue in the
future.
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<PAGE>
Most emerging securities markets have substantially less volume and are subject
to less governmental supervision than U.S. securities markets. Securities of
many issuers in emerging markets may be less liquid and more volatile than
securities of comparable domestic issuers. In addition, there is less regulation
of securities exchanges, securities dealers, and listed and unlisted companies
in emerging markets than in the U.S.
Emerging markets also have different clearance and settlement procedures, and in
certain markets there have been times when settlements have not kept pace with
the volume of securities transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Fund is uninvested and no
return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, could result in possible liability to the
purchaser. Costs associated with transactions in foreign securities are
generally higher than costs associated with transactions in U.S. securities.
Such transactions also involve additional costs for the purchase or sale of
foreign currency.
Certain emerging markets require prior governmental approval of investments by
foreign persons, limit the amount of investment by foreign persons in a
particular company, limit the investment by foreign persons only to a specific
class of securities of a company that may have less advantageous rights than the
classes available for purchase by domiciliaries of the countries and/or impose
additional taxes on foreign investors. Certain emerging markets may also
restrict investment opportunities in issuers in industries deemed important to
national interest.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.
In the course of investment in emerging markets, the Fund will be exposed to the
direct or indirect consequences of political, social and economic changes in one
or more emerging markets. While the Fund will manage its assets in a manner that
will seek to minimize the exposure to such risks, there can be no assurance that
adverse political, social or economic changes will not cause the Fund to suffer
a loss of value in respect of the securities in the Fund's portfolio.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Fund's securities in such markets may
not be readily available. The Fund may suspend redemption of its shares for any
period during which an emergency exists, as determined by the Securities and
Exchange Commission. Accordingly if the Fund believes that appropriate
circumstances exist, it will promptly apply to the Securities and Exchange
Commission for a determination that an emergency is present. During the period
commencing from the Fund's identification of such condition until the date of
the Securities and Exchange Commission action, the Fund's securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Fund's Board.
Volume and liquidity in most foreign markets are less than in the U.S., and
securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Fixed commissions on foreign securities
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Fund endeavors to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of business and industry practices, securities exchanges, brokers,
dealers and listed companies than in the U.S. Mail service between the U.S. and
foreign countries may be slower or less
13
<PAGE>
reliable than within the U.S., thus increasing the risk of delayed settlements
of portfolio transactions or loss of certificates for certificated portfolio
securities. In addition, with respect to certain emerging markets, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect the Fund's
investments in those countries. Moreover, individual emerging market economies
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
The Fund may have limited legal recourse in the event of a default with respect
to certain debt obligations it holds. If the issuer of a fixed-income security
owned by the Fund defaults, the Fund may incur additional expenses to seek
recovery. Debt obligations issued by emerging market country governments differ
from debt obligations of private entities; remedies from defaults on debt
obligations issued by emerging market governments, unlike those on private debt,
must be pursued in the courts of the defaulting party itself. The Fund's ability
to enforce its rights against private issuers may be limited. The ability to
attach assets to enforce a judgment may be limited. Legal recourse is therefore
somewhat diminished. Bankruptcy, moratorium and other similar laws applicable to
private issuers of debt obligations may be substantially different from those of
other countries. The political context, expressed as an emerging market
governmental issuer's willingness to meet the terms of the debt obligation, for
example, is of considerable importance. In addition, no assurance can be given
that the holders of commercial bank debt may not contest payments to the holders
of debt obligations in the event of default under commercial bank loan
agreements.
Income from securities held by the Fund could be reduced by a withholding tax at
the source or other taxes imposed by the emerging market countries in which the
Fund makes its investments. The Fund's net asset value may also be affected by
changes in the rates or methods of taxation applicable to the Fund or to
entities in which the Fund has invested. The Investment Manager will consider
the cost of any taxes in determining whether to acquire any particular
investments, but can provide no assurance that the taxes will not be subject to
change.
Many emerging markets have experienced substantial, and, in some periods,
extremely high rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, wage and price controls have been
imposed in certain countries. Of these countries, some, in recent years, have
begun to control inflation through prudent economic policies.
Emerging market governmental issuers are among the largest debtors to commercial
banks, foreign governments, international financial organizations and other
financial institutions. Certain emerging market governmental issuers have not
been able to make payments of interest on or principal of debt obligations as
those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.
Governments of many emerging market countries have exercised and continue to
exercise substantial influence over many aspects of the private sector through
the ownership or control of many companies, including some of the largest in any
given country. As a result, government actions in the future could have a
significant effect on economic conditions in emerging markets, which in turn,
may adversely affect companies in the private sector, general market conditions
and prices and yields of certain of the securities in the Fund's portfolio.
Expropriation, confiscatory taxation, nationalization, political, economic or
social instability or other similar developments have occurred frequently over
the history of certain emerging markets and could adversely affect the Fund's
assets should these conditions recur.
The ability of emerging market country governmental issuers to make timely
payments on their obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance, and its access to
international credits and investments. An emerging market whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities.
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<PAGE>
Increased protectionism on the part of an emerging market's trading partners
could also adversely affect the country's exports and diminish its trade account
surplus, if any. To the extent that emerging markets receive payment for its
exports in currencies other than dollars or non-emerging market currencies, its
ability to make debt payments denominated in dollars or non-emerging market
currencies could be affected.
Another factor bearing on the ability of emerging market countries to repay debt
obligations is the level of international reserves of the country. Fluctuations
in the level of these reserves affect the amount of foreign exchange readily
available for external debt payments and thus could have a bearing on the
capacity of emerging market countries to make payments on these debt
obligations.
To the extent that an emerging market country cannot generate a trade surplus,
it must depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign governments
and inflows of foreign investment. The access of emerging markets to these forms
of external funding may not be certain, and a withdrawal of external funding
could adversely affect the capacity of emerging market country governmental
issuers to make payments on their obligations. In addition, the cost of
servicing emerging market debt obligations can be affected by a change in
international interest rates since the majority of these obligations carry
interest rates that are adjusted periodically based upon international rates.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Foreign Investment. While the Fund offers the potential for substantial
appreciation over time, it also involves above-average investment risk in
comparison to a mutual fund investing in a broad range of U.S. equity
securities. The Fund is designed as a long-term investment and not for
short-term trading purposes. The Fund should not be considered a complete
investment program, although it could serve as a core international holding for
an individual's portfolio. The Fund's net asset value, or price, can fluctuate
significantly with changes in stock market levels, political developments,
movements in currencies, global investment flows and other factors.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Foreign Currencies. Because investments in foreign securities usually will
involve currencies of foreign countries, and because the Fund may hold foreign
currencies and forward contracts, futures contracts and options on foreign
currencies and foreign currency futures contracts, the value of the assets of
the Fund as measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
the Fund may incur costs and experience conversion difficulties and
uncertainties in connection with conversions between various currencies.
Fluctuations in exchange rates may also affect the earning power and asset value
of the foreign entity issuing the security.
The strength or weakness of the U.S. dollar against these currencies is
responsible for part of the Fund's investment performance. If the dollar falls
in value relative to the Japanese yen, for example, the dollar value of
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a Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall. Many foreign
currencies have experienced significant devaluation relative to the dollar.
Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
options or forward or futures contracts to purchase or sell foreign currencies.
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper New Europe Fund
Foreign Fixed Income Securities. Since most foreign fixed income securities are
not rated, the Fund will invest in foreign fixed income securities based on the
Investment Manager's analysis without relying on published ratings. Since such
investments will be based upon the Investment Manager's analysis rather than
upon published ratings, achievement of the Fund's goals may depend more upon the
abilities of the Investment Manager than would otherwise be the case.
The value of the foreign fixed income securities held by the Fund, and thus the
net asset value of the Fund's shares, generally will fluctuate with (a) changes
in the perceived creditworthiness of the issuers of those securities, (b)
movements in interest rates, and (c) changes in the relative values of the
currencies in which the Fund's investments in fixed income securities are
denominated with respect to the U.S. Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of the Fund's
investments in foreign fixed income securities, and the extent to which the Fund
hedges its interest rate, credit and currency exchange rate risks. A longer
average maturity generally is associated with a higher level of volatility in
the market value of such securities in response to changes in market conditions.
Investments in sovereign debt, including Brady Bonds, involve special risks.
Brady Bonds are debt securities issued under a plan implemented to allow debtor
nations to restructure their outstanding commercial bank indebtedness. Foreign
governmental issuers of debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or pay
interest when due. In the event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Political conditions, especially a sovereign entity's
willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and the Fund may be unable to
collect all or any part of its investment in a particular issue. Foreign
investment in certain sovereign debt is restricted or controlled to varying
degrees, including requiring governmental approval for the repatriation of
income, capital or proceed of sales by foreign investors. These restrictions or
controls may at times limit or preclude foreign investment in certain sovereign
debt or increase the costs and expenses of the Fund. Sovereign debt may be
issued as part of debt restructuring and such debt is to be considered
speculative. There is a history of defaults with respect to commercial bank
loans by public and private entities issuing Brady Bonds. All or a portion of
the interest payments and/or principal repayment with respect to Brady Bonds may
be uncollateralized.
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Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Foreign Securities. Investing in foreign securities involves certain special
considerations, including those set forth below, which are not typically
associated with investing in U.S. securities and which may favorably or
unfavorably affect the Fund's performance. As foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond markets is less than in the U.S. and, at times, volatility of
price can be greater than in the U.S. Fixed commissions on some foreign
securities exchanges and bid to asked spreads in foreign bond markets are
generally higher than commissions or bid to asked spreads on U.S. markets,
although the Investment Manager will endeavor to achieve the most favorable net
results on its portfolio transactions. There is generally less governmental
supervision and regulation of securities exchanges, brokers and listed companies
in foreign countries than in the U.S. It may be more difficult for the Fund's
agents to keep currently informed about corporate actions in foreign countries
which may affect the prices of portfolio securities. Communications between the
U.S. and foreign countries may be less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Payment for securities without delivery
may be required in certain foreign markets. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. The
management of the Fund seeks to mitigate the risks associated with the foregoing
considerations through continuous professional management.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper New Europe Fund
High Yield/High Risk Bonds. The Fund may also purchase debt securities which are
rated below investment-grade (commonly referred to as "junk bonds"), that is,
rated below Baa by Moody's or below BBB by S&P and unrated securities judged to
be of equivalent quality as determined by the Investment Manager. These
securities usually entail greater risk (including the possibility of default or
bankruptcy of the issuers of such securities), generally involve greater
volatility of price and risk to principal and income, and may be less liquid,
than securities in the higher rating categories. The lower the ratings of such
debt securities, the more their risks render them like equity securities.
Securities rated D may be in default with respect to payment of principal or
interest. See the Appendix to this Statement of Additional Information for a
more complete description of the ratings assigned by ratings organizations and
their respective characteristics.
Issuers of such high yielding securities often are highly leveraged and may not
have available to them more traditional methods of financing. Therefore, the
risk associated with acquiring the securities of such issuers generally is
greater than is the case with higher rated securities. For example, during an
economic downturn or a
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sustained period of rising interest rates, highly leveraged issuers of high
yield securities may experience financial stress. During such periods, such
issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments, or the issuer's inability
to meet specific projected business forecasts, or the unavailability of
additional financing. The risk of loss from default by the issuer is
significantly greater for the holders of high yield securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuer. Prices and yields of high yield securities will fluctuate over
time and, during periods of economic uncertainty, volatility of high yield
securities may adversely affect the Fund's net asset value. In addition,
investments in high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and may be subject
to greater fluctuations in value due to changes in interest rates.
The Fund may have difficulty disposing of certain high yield (high risk)
securities because they may have a thin trading market. Because not all dealers
maintain markets in all high yield securities, the Fund anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market may have an adverse effect on
the market price and the Fund's ability to dispose of particular issues and may
also make it more difficult for the Fund to obtain accurate market quotations
for purposes of valuing the Fund's assets. Market quotations generally are
available on many high yield issues only from a limited number of dealers and
may not necessarily represent firm bids of such dealers or prices for actual
sales. Adverse publicity and investor perceptions may decrease the values and
liquidity of high yield securities. These securities may also involve special
registration responsibilities, liabilities and costs, and liquidity and
valuation difficulties.
Credit quality in the high-yield securities market can change suddenly and
unexpectedly, and even recently-issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it is
generally the policy of the Investment Manager not to rely exclusively on
ratings issued by established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit quality. The
achievement of the Fund's investment objective by investment in such securities
may be more dependent on the Investment Manager's credit analysis than is the
case for higher quality bonds. Should the rating of a portfolio security be
downgraded, the Investment Manager will determine whether it is in the best
interests of the Fund to retain or dispose of such security.
Prices for below investment-grade securities may be affected by legislative and
regulatory developments. Also, Congress has from time to time considered
legislation which would restrict or eliminate the corporate tax deduction for
interest payments in these securities and regulate corporate restructurings.
Such legislation may significantly depress the prices of outstanding securities
of this type.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Illiquid Securities and Restricted Securities. The Fund may purchase securities
that are subject to legal or contractual restrictions on resale ("restricted
securities"). Generally speaking, restricted securities may be sold (i) only to
qualified institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers; (iii) in limited quantities after they have been
held for a specified period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for which a
registration statement is in effect under the Securities Act of 1933, as
amended. Issuers of restricted securities may not be subject to the disclosure
and other investor protection requirements that would be applicable if their
securities were publicly traded.
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Restricted securities are often illiquid, but they may also be liquid. For
example, restricted securities that are eligible for resale under Rule 144A are
often deemed to be liquid. ).
[The Fund's Board has approved guidelines for use by the Investment Manager in
determining whether a security is liquid or illiquid. Among the factors the
Investment Manager may consider in reaching liquidity decisions relating to Rule
144A securities are: (1) the frequency of trades and quotes for the security;
(2) the number of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to make a market
in the security; and (4) the nature of the security and the nature of the market
for the security (i.e., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of the transfer]Issuers of restricted
securities may not be subject to the disclosure and other investor protection
requirement that would be applicable if their securities were publicly traded.
Where a registration statement is required for the resale of restricted
securities, the Fund may be required to bear all or part of the registration
expenses. The Fund may be deemed to be an "underwriter" for purposes of the
Securities Act of 1933, as amended when selling restricted securities to the
public and, in such event, the Fund may be liable to purchasers of such
securities if the registration statement prepared by the issuer is materially
inaccurate or misleading.
The Fund may also purchase securities that are not subject to legal or
contractual restrictions on resale, but that are deemed illiquid. Such
securities may be illiquid, for example, because there is a limited trading
market for them.
The Fund may be unable to sell a restricted or illiquid security. In addition,
it may be more difficult to determine a market value for restricted or illiquid
securities. Moreover, if adverse market conditions were to develop during the
period between the Fund's decision to sell a restricted or illiquid security and
the point at which the Fund is permitted or able to sell such security, the Fund
might obtain a price less favorable than the price that prevailed when it
decided to sell. This investment practice, therefore, could have the effect of
increasing the level of illiquidity of the Fund.
Kemper International Research Fund
Indexed Securities. The Fund may invest in indexed securities, the value of
which is linked to currencies, interest rates, commodities, indices or other
financial indicators ("reference instruments"). Most indexed securities have
maturities of three years or less.
Indexed securities differ from other types of debt securities in which the Fund
may invest in several respects. First, the interest rate or, unlike other debt
securities, the principal amount payable at maturity of an indexed security may
vary based on changes in one or more specified reference instruments, such as an
interest rate compared with a fixed interest rate or the currency exchange rates
between two currencies (neither of which need be the currency in which the
instrument is denominated). The reference instrument need not be related to the
terms of the indexed security. For example, the principal amount of a U.S.
dollar denominated indexed security may vary based on the exchange rate of two
foreign currencies. An indexed security may be positively or negatively indexed;
that is, its value may increase or decrease if the value of the reference
instrument increases. Further, the change in the principal amount payable or the
interest rate of an indexed security may be a multiple of the percentage change
(positive or negative) in the value of the underlying reference instrument(s).
Investment in indexed securities involves certain risks. In addition to the
credit risk of the security's issuer and the normal risks of price changes in
response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of reference
instruments. Further, in the case of certain indexed securities in which the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero, and any further declines in the value of the security may then
reduce the principal amount
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<PAGE>
payable on maturity. Finally, indexed securities may be more volatile than the
reference instruments underlying the indexed securities.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
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 is 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
may 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 may extend overnight,
but could have a maximum duration of seven days. Loans may 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), except that the Fund may engage in reverse repurchase
agreements and dollar rolls for any purpose.
[*Explanatory note: Depending on the non-fundamental borrowing policy of the
Fund[s] for which this SAI disclosure is made, the borrowing exceptions noted
for reverse repurchase agreements and dollar rolls may have to be revised.]
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
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
20
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index. The market prices of index-based investments will fluctuate in accordance
with both changes in the market value of their underlying portfolio securities
and due to supply and demand for the instruments on the exchanges on which they
are traded (which may result in their trading at a discount or premium to their
NAVs). Index-based investments may not replicate exactly the performance of
their specified index because of transaction costs and because of the temporary
unavailability of certain component securities of the index.
Examples of index-based investments include:
SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary Receipts," are
based on the S&P 500 Composite Stock Price Index. They are issued by the SPDR
Trust, a unit investment trust that holds shares of substantially all the
companies in the S&P 500 in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.
MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They are
issued by the MidCap SPDR Trust, a unit investment trust that holds a portfolio
of securities consisting of substantially all of the common stocks in the S&P
MidCap 400 Index in substantially the same weighting and seeks to closely track
the price performance and dividend yield of the Index.
Select Sector SPDRs(R): Select Sector SPDRs are based on a particular sector or
group of industries that are represented by a specified Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end management investment company with nine
portfolios that each seeks to closely track the price performance and dividend
yield of a particular Select Sector Index.
DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM). They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.
Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are
issued by the Nasdaq-100 Trust, a unit investment trust that holds a portfolio
consisting of substantially all of the securities, in substantially the same
weighting, as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.
WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are based on 17
country-specific Morgan Stanley Capital International Indexes. They are issued
by the WEBs Index Fund, Inc., an open-end management investment company that
seeks to generally correspond to the price and yield performance of a specific
Morgan Stanley Capital International Index.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Research Fund
Investment-Grade Bonds. The Fund may purchase "investment-grade" bonds, which
are those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated, judged to be of equivalent quality as determined by the Investment
Manager. Moody's considers bonds it rates Baa to have speculative elements as
well as investment-grade characteristics. To the extent that the Fund invests in
higher-grade securities, the Fund will not be able to avail itself of
opportunities for higher income which may be available at lower grades.
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Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Investment of Uninvested Cash Balances. The Fund may have cash balances that
have not been invested in portfolio securities ("Uninvested Cash"). Uninvested
Cash may result from a variety of sources, including dividends or interest
received from portfolio securities, unsettled securities transactions, reserves
held for investment strategy purposes, scheduled maturity of investments,
liquidation of investment securities to meet anticipated redemptions and
dividend payments, and new cash received from investors. Uninvested Cash may be
invested directly in money market instruments or other short-term debt
obligations. Pursuant to an Exemptive Order issued by the SEC, the Fund may use
Uninvested Cash to purchase shares of affiliated funds including money market
funds, short-term bond funds and Scudder Cash Management Investment Trust, or
one or more future entities for which Zurich Scudder Investments acts as trustee
or investment advisor that operate as cash management investment vehicles and
that are excluded from the definition of investment company pursuant to section
3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 (collectively, the
"Central Funds") in excess of the limitations of Section 12(d)(1) of the
Investment Company Act. Investment by the Fund in shares of the Central Funds
will be in accordance with the Fund's investment policies and restrictions as
set forth in its registration statement.
Certain of the Central Funds comply with rule 2a-7 under the Act. The other
Central Funds are or will be short-term bond funds that invest in fixed-income
securities and maintain a dollar weighted average maturity of three years or
less. Each of the Central Funds will be managed specifically to maintain a
highly liquid portfolio, and access to them will enhance the Fund's ability to
manage Uninvested Cash.
The Fund will invest Uninvested Cash in Central Funds only to the extent that
the Fund's aggregate investment in the Central Funds does not exceed 25% of its
total assets in shares of the Central Funds. Purchase and sales of shares of
Central Funds are made at net asset value.
Kemper Asian Growth Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper New Europe Fund
Lending of Portfolio Securities. The Fund may seek to increase its income by
lending portfolio securities. Such loans may be made to registered
broker/dealers or other financial institutions, and are required to be secured
continuously by collateral in cash or liquid assets, maintained on a current
basis at an amount at least equal to the market value and accrued interest of
the securities loaned. The Fund has the right to call a loan and obtain the
securities loaned on five days' notice or, in connection with securities trading
on foreign markets, within such longer period of time which coincides with the
normal settlement period for purchases and sales of such securities in such
foreign markets. During the existence of a loan, the Fund continues to receive
the equivalent of any distributions paid by the issuer on the securities loaned
and also receives compensation based on investment of the collateral. The risks
in lending securities, as with other extensions of secured credit, consist of a
possible delay in recovery and a loss of rights in the collateral should the
borrower of the securities fail financially. Loans may be made only to firms
deemed by the Investment Manager to be of good standing and will not be made
unless, in the judgment of the Investment Manager, the consideration to be
earned from such loans would justify the risk.
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<PAGE>
Kemper International Research Fund
Loan Participations and Assignments. The Fund may invest in fixed- and
floating-rate loans ("Loans") arranged through private negotiations between an
issuer of emerging market debt instruments and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in most
instances to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans ("Assignments") from third parties.
Participations typically will result in the Fund having a contractual
relationship only with the Lender and not with the borrower. The Fund will have
the right to receive payments of principal, interest and any fees to which it is
entitled only from the Lender selling the Participation and only upon receipt by
the Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund generally will have no right to enforce compliance by
the borrower with the terms of the loan agreement relating to the Loan, nor any
rights of set-off against the borrower, and the Fund may not directly benefit
from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Fund will assume the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Fund may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is determined by the Adviser
to be creditworthy.
When the Fund purchases Assignments from Lenders, it will acquire direct rights
against the borrower on the Loan. Because Assignments are arranged through
private negotiations between potential assignees and potential assignors,
however, the rights and obligations acquired by the Fund as the purchaser of an
Assignment may differ from, and may be more limited than, those held by the
assigning Lender.
The Fund may have difficulty disposing of Assignments and Participations.
Because no liquid market for these obligations typically exists, the Fund
anticipates that these obligations could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market will have an
adverse effect on the Fund's ability to dispose of particular Assignments or
Participations when necessary to meet the Fund's liquidity needs or in response
to a specific economic event, such as a deterioration in the creditworthiness of
the borrower. The lack of a liquid secondary market for Assignments and
Participations may also make it more difficult for the Fund to assign a value to
those securities for purposes of valuing the Fund's portfolio and calculating
its net asset value.
Kemper Global Discovery Fund
Mortgage-Backed Securities and Mortgage Pass-Through Securities. Mortgage-backed
securities are interests in pools of mortgage loans, including mortgage loans
made by savings and loan institutions, mortgage bankers, commercial banks and
others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations
as further described below. Underlying mortgages may be of a variety of types,
including adjustable rate, conventional 30-year, graduated payment and 15-year.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages, and may expose the Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by the
Fund, the prepayment right will tend to limit to some degree the increase in net
asset value of the Fund because the value of the mortgage-backed securities held
by the Fund may not appreciate as rapidly as the price of non-callable debt
securities. Mortgage-backed securities are subject to the risk of prepayment and
the risk that the underlying loans will not be repaid. Because principal may be
prepaid at any time, mortgage-backed securities may involve significantly
greater price and yield volatility than traditional debt securities.
When interest rates rise, mortgage prepayment rates tend to decline, thus
lengthening the life of a mortgage-related security and increasing the price
volatility of that security, affecting the price volatility of the Fund's
shares.
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<PAGE>
Interests in pools of mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. Instead,
these securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their mortgage loans, net
of any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by repayments of principal resulting from the sale of the
underlying property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-related securities (such as securities issued by the
Government National Mortgage Association ("GNMA")) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.
The principal governmental guarantor of mortgage-related securities is the GNMA.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of FHA-insured or VA-guaranteed mortgages. These guarantees, however, do
not apply to the market value or yield of mortgage-backed securities or to the
value of Fund shares. Also, GNMA securities often are purchased at a premium
over the maturity value of the underlying mortgages. This premium is not
guaranteed and will be lost if prepayment occurs.
Government-related guarantors (i.e., not backed by the full faith and credit of
the U.S. Government) include Fannie Mae and the Federal Home Loan Mortgage
Corporation ("FHLMC"). Fannie Mae is a government-sponsored corporation owned
entirely by private stockholders. It is subject to general regulation by the
Secretary of Housing and Urban Development. Fannie Mae purchases conventional
(i.e., not insured or guaranteed by any government agency) mortgages from a list
of approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by Fannie Mae are
guaranteed as to timely payment of principal and interest by Fannie Mae but are
not backed by the full faith and credit of the U.S. Government.
FHLMC is a corporate instrumentality of the U.S. Government and was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent
interests in conventional mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Fund's investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or guarantee
arrangements. The Fund may buy mortgage-related securities without insurance or
guarantees, if through an examination of the loan experience and practices of
the originators/servicers and poolers, the Investment Manager determines that
the securities meet the Fund's quality
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standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable.
Kemper Asian Growth Fund
Kemper Global Income Fund
Kemper International Fund
Kemper New Europe Fund
Privatized Enterprises. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. The Fund's investments in the
securities of privatized enterprises may include privately negotiated
investments in a government or state-owned or controlled company or enterprise
that has not yet conducted an initial equity offering, investments in the
initial offering of equity securities of a state enterprise or former state
enterprise and investments in the securities of a state enterprise following its
initial equity offering.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
In the case of the enterprises in which the Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization or management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as an enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which the Fund may
invest enjoy the protection of and receive preferential treatment from the
respective sovereigns that own or control them. After making an initial equity
offering, these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
operate effectively in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Real Estate Investment Trusts ("REITs"). REITs are sometimes informally
characterized as equity REITs, mortgage REITs and hybrid REITs. Investment in
REITs may subject the Fund to risks associated with the direct ownership of real
estate, such as decreases in real estate values, overbuilding, increased
competition and other risks related to local or general economic conditions,
increases in operating costs and property taxes, changes in zoning laws,
casualty or condemnation losses, possible environmental liabilities, regulatory
limitations on rent and fluctuations in rental income. Equity REITs generally
experience these risks directly through fee or leasehold interests, whereas
mortgage REITs generally experience these risks indirectly through
25
<PAGE>
mortgage interests, unless the mortgage REIT forecloses on the underlying real
estate. Changes in interest rates may also affect the value of the Fund's
investment in REITs. For instance, during periods of declining interest rates,
certain mortgage REITs may hold mortgages that the mortgagors elect to prepay,
which prepayment may diminish the yield on securities issued by those REITs.
Certain REITs have relatively small market capitalizations, which may tend to
increase the volatility of the market price of their securities. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in operating and
financing a limited number of projects. REITs are also subject to heavy cash
flow dependency, defaults by borrowers and the possibility of failing to qualify
for tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended, and to maintain exemption from the registration requirements of the
Investment Company Act of 1940, as amended. By investing in REITs indirectly
through the Fund, a shareholder will bear not only his or her proportionate
share of the expenses of the Fund, but also, indirectly, similar expenses of the
REITs. In addition, REITs depend generally on their ability to generate cash
flow to make distributions to shareholders.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Regional Investments -- Investing in Africa. Africa is a continent of roughly 50
countries with a total population of approximately 840 million people. Literacy
rates (the percentage of people who are over 15 years of age and who can read
and write) are relatively low, ranging from 20% to 60%. The primary industries
include crude oil, natural gas, manganese ore, phosphate, bauxite, copper, iron,
diamond, cotton, coffee, cocoa, timber, tobacco, sugar, tourism, and cattle.
Many African countries are fraught with political instability. However, there
has been a trend in recent years toward democratization. Many countries are
moving from a military style, Marxist, or single party government to a
multi-party system. Still, there remain many countries that do not have a stable
political process. Other countries have been enmeshed in civil wars and border
clashes.
Economically, the Northern Rim countries (including Morocco, Egypt, and Algeria)
and Nigeria, Zimbabwe and South Africa are the wealthier countries on the
continent. The market capitalization of these countries has been growing
recently as more international companies invest in Africa and as local companies
start to list on the exchanges. However, religious and ethnic strife has been a
significant source of instability.
On the other end of the economic spectrum are countries, such as Burkinafaso,
Madagascar, and Malawi, that are considered to be among the poorest or least
developed in the world. These countries are generally landlocked or have poor
natural resources. The economies of many African countries are heavily dependent
on international oil prices. Of all the African industries, oil has been the
most lucrative, accounting for 40% to 60% of many countries' GDP. However,
general decline in oil prices has had an adverse impact on many economies.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Regional Investments -- Investing in Europe. Most Eastern European nations,
including Hungary, Poland, Czechoslovakia, and Romania, have had centrally
planned, socialist economies since shortly after World War II. A number of their
governments, including those of Hungary, the Czech Republic, and Poland, are
currently implementing or considering reforms directed at political and economic
liberalization, including efforts to foster
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multi-party political systems, decentralize economic planning, and move toward
free market economies. At present, no Eastern European country has a developed
stock market, but Poland, Hungary, and the Czech Republic have small securities
markets in operation. Ethnic and civil conflict currently rage through the
former Yugoslavia. The outcome is uncertain.
Both the European Community (the "EC") and Japan, among others, have made
overtures to establish trading arrangements and assist in the economic
development of the Eastern European nations. A great deal of interest also
surrounds opportunities created by the reunification of East and West Germany.
Following reunification, the Federal Republic of Germany has remained a firm and
reliable member of the EC and numerous other international alliances and
organizations. To reduce inflation caused by the unification of East and West
Germany, Germany has adopted a tight monetary policy which has led to weakened
exports and a reduced domestic demand for goods and services. However, in the
long-term, reunification could prove to be an engine for domestic and
international growth.
The conditions that have given rise to these developments are changeable, and
there is no assurance that reforms will continue or that their goals will be
achieved.
Portugal is a genuinely emerging market which has experienced rapid growth since
the mid-1980s, except for a brief period of stagnation over 1990-91. Portugal's
government remains committed to privatization of the financial system away from
one dependent upon the banking system to a more balanced structure appropriate
for the requirements of a modern economy. Inflation continues to be about three
times the EC average.
Economic reforms launched in the 1980s continue to benefit Turkey in the 1990s.
Turkey's economy has grown steadily since the early 1980s, with real growth in
per capita Gross Domestic Product (the "GDP") increasing more than 6% annually.
Agriculture remains the most important economic sector, employing approximately
55% of the labor force, and accounting for nearly 20% of GDP and 20% of exports.
Inflation and interest rates remain high, and a large budget deficit will
continue to cause difficulties in Turkey's substantial transformation to a
dynamic free market economy.
Like many other Western economies, Greece suffered severely from the global oil
price hikes of the 1970s, with annual GDP growth plunging from 8% to 2% in the
1980s, and inflation, unemployment, and budget deficits rising sharply. The fall
of the socialist government in 1989 and the inability of the conservative
opposition to obtain a clear majority have led to business uncertainty and the
continued prospects for flat economic performance. Once Greece has sorted out
its political situation, it will have to face the challenges posed by the
steadily increasing integration of the EC, including the progressive lowering of
trade and investment barriers. Tourism continues as a major industry, providing
a vital offset to a sizable commodity trade deficit.
Securities traded in certain emerging European securities markets may be subject
to risks due to the inexperience of financial intermediaries, the lack of modern
technology and the lack of a sufficient capital base to expand business
operations. Additionally, former Communist regimes of a number of Eastern
European countries had expropriated a large amount of property, the claims of
which have not been entirely settled. There can be no assurance that the Fund's
investments in Eastern Europe would not also be expropriated, nationalized or
otherwise confiscated. Finally, any change in leadership or policies of Eastern
European countries, or countries that exercise a significant influence over
those countries, may halt the expansion of or reverse the liberalization of
foreign investment policies now occurring and adversely affect existing
investment opportunities.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
27
<PAGE>
Regional Investments -- Investing in Latin America. Investing in securities of
Latin American issuers may entail risks relating to the potential political and
economic instability of certain Latin American countries and the risks of
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment and on repatriation of capital invested. In the event of
expropriation, nationalization or other confiscation by any country, the Fund
could lose its entire investment in any such country.
The securities markets of Latin American countries are substantially smaller,
less developed, less liquid and more volatile than the major securities markets
in the U.S. Disclosure and regulatory standards are in many respects less
stringent than U.S. standards. Furthermore, there is a lower level of monitoring
and regulation of the markets and the activities of investors in such markets.
The limited size of many Latin American securities markets and limited trading
volume in the securities of Latin American issuers compared to volume of trading
in the securities of U.S. issuers could cause prices to be erratic for reasons
apart from factors that affect the soundness and competitiveness of the
securities issuers. For example, limited market size may cause prices to be
unduly influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on in-depth fundamental analysis,
may decrease the value and liquidity of portfolio securities.
Some Latin American countries also may have managed currencies, which are not
free floating against the U.S. dollar. In addition, there is risk that certain
Latin American countries may restrict the free conversion of their currencies
into other currencies. Further, certain Latin American currencies may not be
internationally traded. Certain of these currencies have experienced a steep
devaluation relative to the U.S. dollar. Any devaluations in the currencies in
which Fund investments are denominated may have a detrimental impact on the
Fund's net asset value.
The economies of individual Latin American countries may differ favorably or
unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Certain Latin American
countries have experienced high levels of inflation which can have a
debilitating effect on an economy, although some have begun to control inflation
in recent years through prudent economic policies. Furthermore, certain Latin
American countries may impose withholding taxes on dividends payable to a Fund
at a higher rate than those imposed by other foreign countries. This may reduce
the Fund's investment income available for distribution to shareholders.
Certain Latin American countries such as Argentina, Brazil and Mexico are among
the world's largest debtors to commercial banks and foreign governments. At
times, certain Latin American countries have declared moratoria on the payment
of principal and/or interest on outstanding debt.
Latin America is a region rich in natural resources such as oil, copper, tin,
silver, iron ore, forestry, fishing, livestock and agriculture. The region has a
large population (roughly 300 million) representing a large domestic market.
Economic growth was strong in the 1960s and 1970s, but slowed dramatically (and
in some instances was negative) in the 1980s as a result of poor economic
policies, higher international interest rates, and the denial of access to new
foreign capital. Although a number of Latin American countries are currently
experiencing lower rates of inflation and higher rates of real growth in gross
domestic product than they have in the past, other Latin American countries
continue to experience significant problems, including high inflation rates and
high interest rates. Capital flight has proven a persistent problem and external
debt has been forcibly restructured. Political turmoil, high inflation, capital
repatriation restrictions and nationalization have further exacerbated
conditions.
Governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector through
the ownership or control of many companies, including some of
28
<PAGE>
the largest in those countries. As a result, government actions in the future
could have a significant effect on economic conditions which may adversely
affect prices of certain portfolio securities. Expropriation, confiscatory
taxation, nationalization, political, economic or social instability or other
similar developments, such as military coups, have occurred in the past and
could also adversely affect a Fund's investments in this region.
Changes in political leadership, the implementation of market oriented economic
policies, such as privatization, trade reform and fiscal and monetary reform are
among the recent steps taken to renew economic growth. External debt is being
restructured and flight capital (domestic capital that has left home country)
has begun to return. Inflation control efforts have also been implemented. Free
Trade Zones are being discussed in various areas around the region, the most
notable being a free zone among Mexico, the U.S. and Canada and another zone
among four countries in the southernmost point of Latin America. Currencies are
typically weak, but most are now relatively free floating, and it is not unusual
for the currencies to undergo wide fluctuations in value over short periods of
time due to changes in the market.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Regional Investments -- Investing in the Pacific Basin. Economies of individual
Pacific Basin countries may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency, interest rate levels, and
balance of payments position. Of particular importance, most of the economies in
this region of the world are heavily dependent upon exports, particularly to
developed countries, and, accordingly, have been and may continue to be
adversely affected by trade barriers, managed adjustments in relative currency
values, and other protectionist measures imposed or negotiated by the U.S. and
other countries with which they trade. These economies also have been and may
continue to be negatively impacted by economic conditions in the U.S. and other
trading partners, which can lower the demand for goods produced in the Pacific
Basin.
With respect to the Peoples Republic of China and other markets in which the
Fund may participate, there is the possibility of nationalization, expropriation
or confiscatory taxation, political changes, government regulation, social
instability or diplomatic developments that could adversely impact a Pacific
Basin country including the Fund's investment in the debt of that country.
Foreign companies, including Pacific Basin companies, are not generally subject
to uniform accounting, auditing and financial reporting standards, practices and
disclosure requirements comparable to those applicable to U.S. companies.
Consequently, there may be less publicly available information about such
companies than about U.S. companies. Moreover, there is generally less
government supervision and regulation in the Pacific Basin than in the U.S.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Repurchase Agreements. The Fund may invest in repurchase agreements pursuant to
its investment guidelines. In a repurchase agreement, the Fund acquires
ownership of a security and simultaneously commits to resell that security to
the seller, typically a bank or broker/dealer.
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A repurchase agreement provides a means for the Fund to earn income on funds for
periods as short as overnight. It is an arrangement under which the purchaser
(i.e., the Fund) acquires a security ("Obligation") and the seller agrees, at
the time of sale, to repurchase the Obligation at a specified time and price.
Securities subject to a repurchase agreement are held in a segregated account
and, as described in more detail below, the value of such securities is kept at
least equal to the repurchase price on a daily basis. The repurchase price may
be higher than the purchase price, the difference being income to the Fund, or
the purchase and repurchase prices may be the same, with interest at a stated
rate due to the Fund together with the repurchase price upon repurchase. In
either case, the income to the Fund is unrelated to the interest rate on the
Obligation itself. Obligations will be held by the custodian or in the Federal
Reserve Book Entry System.
[It is not clear whether a court would consider the Obligation purchased by the
Fund subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller.] In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the Obligation before repurchase of the Obligation under a repurchase
agreement, the Fund may encounter delay and incur costs before being able to
sell the security. Delays may involve loss of interest or decline in price of
the Obligation. [If the court characterizes the transaction as a loan and the
Fund has not perfected a security interest in the Obligation, the Fund may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
risk of losing some or all of the principal and income involved in the
transaction.] As with any unsecured debt Obligation purchased for the Fund, the
Investment Manager seeks to reduce the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
Obligation, in which case the Fund may incur a loss if the proceeds to the Fund
of the sale to a third party are less than the repurchase price. However, if the
market value (including interest) of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), the Fund
will direct the seller of the Obligation to deliver additional securities so
that the market value (including interest) of all securities subject to the
repurchase agreement will equal or exceed the repurchase price.
Kemper Global Blue Chip Fund
Kemper International Research Fund
Reverse Repurchase Agreements. The Fund may enter into "reverse repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the securities, agrees to repurchase such securities at an agreed time and
price. The Fund maintains a segregated account in connection with outstanding
reverse repurchase agreements. The Fund will enter into reverse repurchase
agreements only when the Investment Manager believes that the interest income to
be earned from the investment of the proceeds of the transaction will be greater
than the interest expense of the transaction. Such transactions may increase
fluctuations in the market value of Fund assets and its yield.
Kemper Asian Growth Fund
Kemper Global Income Fund
Kemper International Research Fund
Kemper New Europe Fund
Short Sales Against the Box. The Fund may make short sales of common stocks if,
at all times when a short position is open, the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without payment
of further consideration, into the shares of common stock sold short. Short
sales of this kind are referred to as short sales "against the box." The
broker/dealer that executes a short sale generally invests cash proceeds of the
sale until they are paid to the Fund. Arrangements may be made with the
broker/dealer to obtain a portion of the interest earned by the broker on the
investment of short sale proceeds. The Fund will segregate the common stock or
convertible or exchangeable preferred stock or debt securities in a
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special account with the custodian. Uncertainty regarding the tax effects of
short sales of appreciated investments may limit the extent to which the Fund
may enter into short sales against the box.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper International Research Fund
Kemper New Europe Fund
Small Company Risk. The Investment Manager believes that many small companies
may have sales and earnings growth rates which exceed those of larger companies,
and that such growth rates may in turn be reflected in more rapid share price
appreciation over time. However, investing in smaller company stocks involves
greater risk than is customarily associated with investing in larger, more
established companies. For example, smaller companies can have limited product
lines, markets, or financial and managerial resources. Smaller companies may
also be dependent on one or a few key persons, and may be more susceptible to
losses and risks of bankruptcy. Also, the securities of smaller companies may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time). Transaction costs
in smaller company stocks may be higher than those of larger companies.
Kemper Asian Growth Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Research Fund
Kemper New Europe Fund
Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below for a variety of
purposes, such as hedging various market risks, managing the effective maturity
or duration of fixed-income securities in the Fund's portfolio, or enhancing
potential gain. These strategies may be executed through the use of derivative
contracts.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other instruments, purchase and sell futures
contracts and options thereon, enter into various transactions such as swaps,
caps, floors, collars, currency forward contracts, currency futures contracts,
currency swaps or options on currencies, or currency futures and various other
currency transactions (collectively, all the above are called "Strategic
Transactions"). In addition, strategic transactions may also include new
techniques, instruments or strategies that are permitted as regulatory changes
occur. Strategic Transactions may be used without limit (subject to certain
limitations imposed by the 1940 Act) to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
Fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a substitute for purchasing or selling particular
securities. Some Strategic Transactions may also be used to enhance potential
gain although no more than 5% of the Fund's assets will be committed to
Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions will not be used
to alter fundamental investment purposes and characteristics of the Fund, and
the
31
<PAGE>
Fund will segregate assets (or as provided by applicable regulations, enter
into certain offsetting positions) to cover its obligations under options,
futures and swaps to limit leveraging of the Fund.
Strategic Transactions, including derivative contracts, have risks associated
with them including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market movements
is incorrect, the risk that the use of such Strategic Transactions could result
in losses greater than if they had not been used. Use of put and call options
may result in losses to the Fund, force the sale or purchase of portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount of appreciation the Fund can realize on its investments or
cause the Fund to hold a security it might otherwise sell. The use of currency
transactions can result in the Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. For
instance, the Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such instrument at the option exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to buy,
and the seller the obligation to sell, the underlying instrument at the exercise
price. The Fund's purchase of a call option on a security, financial future,
index, currency or other instrument might be intended to protect the Fund
against an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. The Fund
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally settle
by physical delivery of the underlying security or currency, although in the
future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than
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taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an OCC
or exchange listed put or call option is dependent, in part, upon the liquidity
of the option market. Among the possible reasons for the absence of a liquid
option market on an exchange are: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or series of options or underlying securities including reaching daily
price limits; (iv) interruption of the normal operations of the OCC or an
exchange; (v) inadequacy of the facilities of an exchange or OCC to handle
current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with U.S.
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers" or broker/dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of A-1 from S&P or P-1 from
Moody's or an equivalent rating from any nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit quality by the Adviser. The staff of the
SEC currently takes the position that OTC options purchased by the Fund, and
portfolio securities "covering" the amount of the Fund's obligation pursuant to
an OTC option sold by it (the cost of the sell-back plus the in-the-money
amount, if any) are illiquid, and are subject to the Fund's limitation on
investing no more than 15% of its net assets in illiquid securities.
If the Fund sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including
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convertible securities) and Eurodollar instruments that are traded on U.S. and
foreign securities exchanges and in the over-the-counter markets, and on
securities indices, currencies and futures contracts. All calls sold by the Fund
must be "covered" (i.e., the Fund must own the securities or futures contract
subject to the call) or must meet the asset segregation requirements described
below as long as the call is outstanding. Even though the Fund will receive the
option premium to help protect it against loss, a call sold by the Fund exposes
the Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or
instrument and may require the Fund to hold a security or instrument which it
might otherwise have sold.
The Fund may purchase and sell put options on securities including U.S. Treasury
and agency securities, mortgage-backed securities, foreign sovereign debt,
corporate debt securities, equity securities (including convertible securities)
and Eurodollar instruments (whether or not it holds the above securities in its
portfolio), and on securities indices, currencies and futures contracts other
than futures on individual corporate debt and individual equity securities. The
Fund will not sell put options if, as a result, more than 50% of the Fund's
total assets would be required to be segregated to cover its potential
obligations under such put options other than those with respect to futures and
options thereon. In selling put options, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price above the
market price.
General Characteristics of Futures. The Fund may enter into futures contracts or
purchase or sell put and call options on such futures as a hedge against
anticipated interest rate, currency or equity market changes, and for duration
management, risk management and return enhancement purposes. Futures are
generally bought and sold on the commodities exchanges where they are listed
with payment of initial and variation margin as described below. The sale of a
futures contract creates a firm obligation by the Fund, as seller, to deliver to
the buyer the specific type of financial instrument called for in the contract
at a specific future time for a specified price (or, with respect to index
futures and Eurodollar instruments, the net cash amount). Options on futures
contracts are similar to options on securities except that an option on a
futures contract gives the purchaser the right in return for the premium paid to
assume a position in a futures contract and obligates the seller to deliver such
position.
The Fund's use of futures and options thereon will in all cases be consistent
with applicable regulatory requirements and in particular the rules and
regulations of the Commodity Futures Trading Commission and will be entered into
for bona fide hedging, risk management (including duration management) or other
portfolio and return enhancement management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.
The Fund will not enter into a futures contract or related option (except for
closing transactions) if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open futures contracts and options thereon would
exceed 5% of the Fund's total assets (taken at current value); however, in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
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Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. The Fund may engage in currency transactions with
Counterparties primarily in order to hedge, or manage the risk of the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
exchange listed currency futures, exchange listed and OTC options on currencies,
and currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
interest rate swap, which is described below. The Fund may enter into currency
transactions with Counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or (except
for OTC currency options) are determined to be of equivalent credit quality by
the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps generally
will be limited to hedging involving either specific transactions or portfolio
positions except as described below. Transaction hedging is entering into a
currency transaction with respect to specific assets or liabilities of the Fund,
which will generally arise in connection with the purchase or sale of its
portfolio securities or the receipt of income therefrom. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency.
The Fund generally will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Adviser considers
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that the Austrian schilling is correlated to the German deutsche mark (the
"D-mark"), the Fund holds securities denominated in schillings and the Adviser
believes that the value of schillings will decline against the U.S. dollar, the
Adviser may enter into a commitment or option to sell D-marks and buy dollars.
Currency hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to the Fund if the currency being hedged fluctuates in value to a degree
or in a direction that is not anticipated. Further, there is the risk that the
perceived correlation between various currencies may not be present or may not
be present during the particular time that the Fund is engaging in proxy
hedging. If the Fund enters into a currency hedging transaction, the Fund will
comply with the asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency, index and other swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
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The Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as the Fund will segregate
assets (or enter into offsetting positions) to cover its obligations under
swaps, the Adviser and the Fund believe such obligations do not constitute
senior securities under the 1940 Act and, accordingly, will not treat them as
being subject to its borrowing restrictions. The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from a NRSRO or is determined to be of equivalent credit quality by the
Adviser. If there is a default by the Counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid assets at least equal to
the current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by the Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by the Fund on an index will require the Fund to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or sale of
a security denominated in a particular currency, which requires no segregation,
a currency contract which obligates the Fund to buy or sell currency will
generally require the Fund to hold an amount of that currency or liquid assets
denominated in that currency equal to the Fund's obligations or to segregate
cash or liquid assets equal to the amount of the Fund's obligation.
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OTC options entered into by the Fund, including those on securities, currency,
financial instruments or indices and OCC issued and exchange listed index
options, will generally provide for cash settlement. As a result, when the Fund
sells these instruments it will only segregate an amount of cash or liquid
assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by the Fund, or the in-the-money amount
plus any sell-back formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC issued and exchange listed options sold by the Fund other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement and the Fund will segregate an
amount of cash or liquid assets equal to the full value of the option. OTC
options settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options settling
with physical delivery.
In the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
cash or liquid assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such liquid assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid assets having a value
equal to the accrued excess. Caps, floors and collars require segregation of
assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating cash or liquid assets if the
Fund held a futures or forward contract, it could purchase a put option on the
same futures or forward contract with a strike price as high or higher than the
price of the contract held. Other Strategic Transactions may also be offset in
combinations. If the offsetting transaction terminates at the time of or after
the primary transaction no segregation is required, but if it terminates prior
to such time, cash or liquid assets equal to any remaining obligation would need
to be segregated.
Kemper Global Blue Chip Fund
Kemper International Research Fund
Warrants. The holder of a warrant has the right, until the warrant expires, to
purchase a given number of shares of a particular issuer at a specified price.
Such investments can provide a greater potential for profit or loss than an
equivalent investment in the underlying security. Prices of warrants do not
necessarily move, however, in tandem with the prices of the underlying
securities and are, therefore, considered speculative investments. Warrants pay
no dividends and confer no rights other than a purchase option. Thus, if a
warrant held by the Fund were not exercised by the date of its expiration, the
Fund would lose the entire purchase price of the warrant.
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Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper International Research Fund
Kemper New Europe Fund
When-Issued Securities. The Fund may from time to time purchase equity and debt
securities on a "when-issued", "delayed delivery" or "forward delivery" basis.
The price of such securities, which may be expressed in yield terms, is fixed at
the time the commitment to purchase is made, but delivery and payment for the
securities takes place at a later date. During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest accrues
to the Fund. When the Fund purchases such securities, it immediately assumes the
risks of ownership, including the risk of price fluctuation. Failure to deliver
a security purchased on this basis may result in a loss or missed opportunity to
make an alternative investment.
To the extent that assets of the Fund are held in cash pending the settlement of
a purchase of securities, the Fund would earn no income. While such securities
may be sold prior to the settlement date, the Fund intends to purchase them with
the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a
security on this basis, it will record the transaction and reflect the value of
the security in determining its net asset value. The market value of the
securities may be more or less than the purchase price. The Fund will establish
a segregated account in which it will maintain cash and liquid securities equal
in value to commitments for such securities.
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Zero Coupon Securities. The Fund may invest in zero coupon securities which pay
no cash income and are sold at substantial discounts from their value at
maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. The effect of owning instruments which do not make
current interest payments is that a fixed yield is earned not only on the
original investment but also, in effect, on all discount accretion during the
life of the obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest distributions at a rate as high
as the implicit yield on the zero coupon bond, but at the same time eliminates
any opportunity to reinvest earnings at higher rates. For this reason, zero
coupon bonds are subject to substantially greater price fluctuations during
periods of changing market interest rates than those of comparable securities
that pay interest currently, which fluctuation is greater as the period to
maturity is longer. Zero coupon securities which are convertible into common
stock offer the opportunity for capital appreciation (or depreciation) as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks, as they usually are issued with maturities of 15 years
or less and are issued with options and/or redemption features exercisable by
the holder of the obligation entitling the holder to redeem the obligation and
receive a defined cash payment.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed with respect to a Fund without the
approval of a majority of the outstanding voting securities of such Fund which,
under the 1940 Act and the rules thereunder and as used in this Statement of
Additional Information, means the lesser of (i) 67% of the shares of such Fund
present at a meeting if the holders of more than 50% of the outstanding shares
of such Fund are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of such Fund.
Global Discovery Fund, Kemper Asian Growth Fund, Kemper Global Blue Chip Fund,
Kemper International Fund and Kemper International Research Fund have elected to
be classified as diversified series of open-end
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management investment companies. Kemper Global Income Fund and Kemper New Europe
Fund are non-diversified open-end investment management companies.
In addition, as a matter of fundamental policy, each Fund except Kemper
International Research Fund will not:
(1) borrow money, except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
(3) purchase physical commodities or contracts relating to physical
commodities;
(4) concentrate its investments in a particular industry, as that term
is used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time;
(5) engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio
securities;
(6) purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the Fund's ownership of securities; and
(7) make loans except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
As a matter of fundamental policy, Kemper International Research Fund will not:
(1) make loans except to the extent that the purchase of portfolio
securities consistent with the Fund's investment objective and
policies or the acquisition of securities subject to repurchase
agreements may be deemed to be loans;
(2) borrow money or issue senior securities, except as permitted under
the 1940 Act and as interpreted or modified by regulatory authority
having jurisdiction, from time to time;
(3) pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings or in connection with hedging
and risk management strategies as described under investment
Policies and Techniques herein;
(4) invest in companies for the purpose of exercising control or
participation in management;
(5) make short sales of securities or maintain a short position in any
security except as described under Investment Policies and
Techniques herein;
(6) (i) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests
therein, (ii) purchase or sell commodities or commodity contracts
except that the Fund may enter into foreign currency and stock index
futures
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contracts and options thereon and may buy or sell forward currency
contracts and options on foreign currencies, (iii) invest in
interests in oil, gas, or other mineral exploration or development
programs, except that it may purchase and sell securities of
companies which deal in oil, gas or other mineral exploration or
development programs, (iv) purchase securities on margin, except for
such short-term credits as may be necessary for the clearance of
transactions as described under the heading Investment Policies and
Techniques herein, and (v) act as an underwriter of securities,
except that the Fund may acquire securities in private placements in
circumstances in which, if such securities were sold, the Fund might
be deemed to be an underwriter within the meaning of the Securities
Act of 1933, as amended; and (g) invest in securities of other
investment companies, except as part of a merger, consolidation or
other acquisition, if more than 3% of the outstanding voting stock
of any such investment company would be held by the Fund, if more
than 5% of the total assets of the Fund would be invested in any
such investment company, or if the Fund would own, in the aggregate,
securities of investment companies representing more than 10% of its
total assets.
Each Fund has adopted the following non-fundamental restrictions, which may be
changed by the Board without shareholder approval. Each Fund may not:
(1) borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by engaging
in reverse repurchase agreements, dollar rolls, or other investments
or transactions described in the Fund's registration statement which
may be deemed to be borrowings;
(2) (for Kemper Asian Growth Fund, Kemper International Fund and Kemper
International Research Fund) enter into either of reverse repurchase
agreements or dollar rolls in an amount greater than 5% of its total
assets;
(3) purchase securities on margin or make short sales, except (i) short
sales against the box, (ii) in connection with arbitrage
transactions, (iii) for margin deposits in connection with futures
contracts, options or other permitted investments, (iv) that
transactions in futures contracts and options shall not be deemed to
constitute selling securities short, and (v) that the Fund may
obtain such short-term credits as may be necessary for the clearance
of securities transactions;
(4) purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of
the obligations underlying such put options would exceed 50% of its
total assets;
(5) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf
of the Fund and the premiums paid for such options on futures
contracts does not exceed 5% of the fair market value of the Fund's
total assets; provided that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be
excluded in computing the 5% limit;
(6) purchase warrants if as a result, such securities, taken at the
lower of cost or market value, would represent more than 5% of the
value of the Fund's total assets (for this purpose, warrants
acquired in units or attached to securities will be deemed to have
no value);
(7) (each Fund except Kemper International Research Fund) lend portfolio
securities in an amount greater than 5% (one third of total assets
for Kemper Asian Growth Fund and Kemper Global Income Fund)of its
total assets; and
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<PAGE>
(8) Invest more than 15% of net assets in illiquid securities (except
Global Discovery Fund, which limits investments in illiquid
securities according to the Investment Company Act of 1940)
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease beyond the specified limit resulting from a change in
values or net assets will not be considered a violation.
NET ASSET VALUE
The net asset value per share of a Fund is the value of one share and is
determined separately for each class by dividing the value of a Fund's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will generally be lower than that of the Class A shares of a Fund
because of the higher expenses borne by the Class B and Class C shares. The net
asset value of shares of [the/a] Fund is computed as of the close of regular
trading on the Exchange on each day the Exchange is open for trading (the "Value
Time"). The Exchange is scheduled to be closed on the following holidays: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on
the preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Net asset value per share is determined by
dividing the value of the total assets of [the/a] Fund, less all liabilities, by
the total number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale price on
the exchange it is traded as of the Value Time. 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") on such exchange as of the
Value Time. Lacking a Calculated Mean the security is valued at the most recent
bid quotation on such exchange as of the Value Time. An equity security which is
traded on the National Association of Securities Dealers Automated Quotation
("Nasdaq") system will be valued at its most recent sale price on such system as
of the Value Time. Lacking any sales, the security is valued at the most recent
bid quotation as of the Value Time. The value of an equity security not quoted
on the Nasdaq System, but traded in another over-the-counter market, is its most
recent sale price if there are any sales of such security on such market as of
the Value Time. Lacking any sales, the security is valued at the Calculated Mean
quotation for such security as of the Value Time. Lacking a Calculated Mean, the
security is valued at the most recent bid quotation as of the Value Time.
Debt securities, other than money market instruments, are valued at prices
supplied by a pricing agent(s) which reflect broker/dealer supplied valuations
and electronic data processing techniques. Money market instruments purchased
with an original maturity of sixty days or less maturing at par shall be valued
at amortized cost, which the Board believes approximates market value. If it is
not possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the investment manager of the particular
fund may calculate the price of that debt security, subject to limitations
established by the Board.
An exchange traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such exchange.
Lacking any sales, the options contract is valued at the Calculated Mean.
Lacking any Calculated Mean, the options contract is valued at the most recent
bid quotation in the case of a purchased options contract, or the most recent
asked quotation in the case of a written options contract. An options contract
on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate on the
valuation date..
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<PAGE>
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.
With respect to Funds with securities listed primarily on foreign exchanges,
such securities may trade on days when the Fund's net asset value is not
computed; and therefore, the net asset value of a Fund may be significantly
affected on days when the investor has no access to the Fund.
If, in the opinion of the Valuation Committee, 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/a] Fund is determined in a manner which, in the
discretion of the Valuation Committee most fairly reflects market value of the
property on the valuation date.
Following the valuations of securities or other 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.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, MA, 02110, a subsidiary of the Investment Manager,
is responsible for determining the daily net asset value per share of the
[Funds/Fund] and maintaining all accounting records related thereto. Currently,
Scudder Fund Accounting Corporation receives an annual fee of [confirm
individual fee arrangements].
Payments to Scudder Fund Accounting Corporation for the three most recent fiscal
periods are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Fund Fiscal Year/Period Fiscal Year/Period Fiscal Year/Period
Ended ____: Ended ____: Ended ____:
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper Asian Growth Fund
-------------------------------------------------------------------------------------------
Kemper Global Blue Chip Fund
-------------------------------------------------------------------------------------------
Kemper Global Discovery Fund
-------------------------------------------------------------------------------------------
Kemper Global Income Fund
-------------------------------------------------------------------------------------------
Kemper International Fund
-------------------------------------------------------------------------------------------
Kemper International
Research Fund
-------------------------------------------------------------------------------------------
Kemper New Europe Fund
-------------------------------------------------------------------------------------------
</TABLE>
[ADD FOOTNOTES FOR ANY EXPENSE REIMBURSEMENT]
The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing and may not be
available for certain types of account registrations. It is recommended that
investors not request share certificates unless needed for a specific purpose.
You cannot redeem shares by telephone or wire transfer or use the telephone
exchange privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond value of 2% or more of the certificate value is normally required).
43
<PAGE>
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.
Each Fund receives the entire net asset value of all its Class A shares sold.
Kemper Distributors, Inc. ("KDI"), the Funds' principal underwriter, retains the
sales charge on sales of Class A shares from which it allows discounts from the
applicable public offering price to investment dealers, which discounts are
uniform for all dealers in the United States and its territories. The normal
discount allowed to dealers is set forth in the above table. Upon notice to all
dealers with whom it has sales agreements, KDI may reallow 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 reallowances may be based
upon attainment of minimum sales levels. During periods when 90% or more of the
sales charge is reallowed, such dealers may be deemed to be underwriters as that
term is defined in the Securities Act of 1933.
Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such Fund or Kemper Mutual Funds
listed under "Special Features -- Class A Shares -- Combined Purchases" totals
at least $1,000,000 (the "Large Order NAV Purchase Privilege") including
purchases of Class A shares pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features described under "Special Features;"
or (b) a participant-directed qualified retirement plan described in Code
Section 401(a) or a participant-directed non-qualified deferred compensation
plan described in Code Section 457 or a participant-directed qualified
retirement plan described in Code Section 403(b)(7) which is not sponsored by a
K-12 school district, provided in each case that such plan has not less than 200
eligible employees (the "Large Order NAV Purchase Privilege"). Redemption within
two years of shares purchased under the Large Order NAV Purchase Privilege may
be subject to a contingent deferred sales charge. See "Purchase, Repurchase and
Redemption of Shares -- Contingent Deferred Sales Charge -- Large Order NAV
Purchase Privilege."
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of a Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer sponsored
employee benefit plans using the subaccount record keeping system made available
through KSvC. For purposes of determining the appropriate commission percentage
to be applied to a particular sale under [a/the Fund's] foregoing schedule, KDI
will consider the cumulative amount invested by the purchaser in a Fund and
other Kemper Mutual Funds listed under "Special Features -- Class A Shares --
Combined Purchases," including purchases pursuant to the "Combined Purchases,"
"Letter of Intent" and "Cumulative Discount" features referred to above and
including purchases of class R shares of certain Scudder funds. The privilege of
purchasing Class A shares of a Fund at net asset value under the Large Order NAV
Purchase Privilege is not available if another net asset value purchase
privilege also applies.
Class A shares of a Fund or any other Kemper Mutual Fund listed under "Special
Features -- Class A Shares -- Combined Purchases" may be purchased at net asset
value in any amount by members of the plaintiff class in the proceeding known as
Howard and Audrey Tabankin, et al. v. Kemper Short-Term Global Income Fund, et
al., Case No. 93 C 5231 (N.D. IL). This privilege is generally non-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
44
<PAGE>
proceeding. For sales of Fund shares at net asset value pursuant to this
privilege, KDI may at its discretion pay investment dealers and other financial
services firms a concession, payable quarterly, at an annual rate of up to 0.25%
of net assets attributable to such shares maintained and serviced by the firm. A
firm becomes eligible for the concession based upon assets in accounts
attributable to shares purchased under this privilege in the month after the
month of purchase and the concession continues until terminated by KDI. The
privilege of purchasing Class A shares of a Fund at net asset value under this
privilege is not available if another net asset value purchase privilege also
applies.
Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
a Fund, its Manager , its principal underwriter or certain affiliated companies,
for themselves or members of their families; (b) registered representatives and
employees of broker-dealers having selling group agreements with KDI and
officers, directors and employees of service agents of the Funds, for themselves
or their spouses or dependent children; (c) shareholders who owned shares of
Kemper Value Series, Inc. ("KVS") on September 8, 1995, and have continuously
owned shares of KVS (or a Kemper Fund acquired by exchange of KVS shares) since
that date, for themselves or members of their families; (d) any trust, pension,
profit-sharing or other benefit plan for only such persons; (e) persons who
purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm; and (f) persons who purchase shares of the Fund
through KDI as part of an automated billing and wage deduction program
administered by RewardsPlus of America for the benefit of employees of
participating employer groups. Class A shares may be sold at net asset value in
any amount to selected employees (including their spouses and dependent
children) of banks and other financial services firms that provide
administrative services related to order placement and payment to facilitate
transactions in shares of the Funds for their clients pursuant to an agreement
with KDI or one of its affiliates. Only those employees of such banks and other
firms who as part of their usual duties provide services related to transactions
in Fund shares may purchase a Fund's Class A shares at net asset value
hereunder. Class A shares may be sold at net asset value in any amount to unit
investment trusts sponsored by Ranson & Associates, Inc. In addition,
unitholders of unit investment trusts sponsored by Ranson & Associates, Inc. or
its predecessors may purchase a Fund's Class A shares at net asset value through
reinvestment programs described in the prospectuses of such trusts that have
such programs. Class A shares of a Fund may be sold at net asset value through
certain investment advisors registered under the Investment Advisors Act of 1940
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 advisor or other firm for portfolio
management and other services. Such shares are sold for investment purposes and
on the condition that they will not be resold except through redemption or
repurchase by the Funds. The Funds may also issue Class A shares at net asset
value in connection with the acquisition of the assets of or merger or
consolidation with another investment company, or to shareholders in connection
with the investment or reinvestment of income and capital gain dividends.
Class A shares of a Fund may be purchased at net asset value in any amount by
certain professionals who assist in the promotion of Kemper Funds pursuant to
personal services contracts with KDI, for themselves or members of their
families. KDI in its discretion may compensate financial services firms for
sales of Class A shares under this privilege at a commission rate of 0.50% of
the amount of Class A shares purchased.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
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<PAGE>
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 "Purchase, Repurchase and Redemption of Shares -- Contingent
Deferred Sales Charge -- Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of a Fund will automatically convert to Class A shares of the
same Fund six years after issuance on the basis of the relative net asset value
per share. The purpose of the conversion feature is to relieve holders of Class
B shares from the distribution services fee when they have been outstanding long
enough for KDI to have been compensated for distribution related expenses. For
purposes of conversion to Class A shares, shares purchased through the
reinvestment of dividends and other distributions paid with respect to Class B
shares in a shareholder's Fund account will be converted to Class A shares on a
pro rata basis.
Purchase of Class C Shares. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full amount
of the investor's purchase payment will be invested in Class C shares for his or
her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Purchase, Repurchase and Redemption of Shares -- Contingent Deferred Sales
Charge -- Class C Shares." KDI currently advances to firms the first year
distribution fee at a rate of 0.75% of the purchase price of such shares. For
periods after the first year, KDI currently intends to pay firms for sales of
Class C shares a distribution fee, payable quarterly, at an annual rate of 0.75%
of net assets attributable to Class C shares maintained and serviced by the
firm. KDI is compensated by each Fund for services as distributor and principal
underwriter for Class C shares. See "Investment Manager and Underwriter."
Purchase of Class I Shares. Class I shares are offered at net asset value
without an initial sales charge and are not subject to a contingent deferred
sales charge or a Rule 12b-1 distribution fee. Also, there is no administration
services fee charged to Class I shares. As a result of the relatively lower
expenses for Class I shares, the level of income dividends per share (as a
percentage of net asset value) and, therefore, the overall investment value,
will typically be higher for Class I shares than for Class A, Class B, or Class
C shares.
Class I shares are available for purchase exclusively by the following
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of the
Investment Manager and its affiliates and rollover accounts from those plans;
(2) the following investment advisory clients of the Investment Manager and its
investment advisory affiliates that invest at least $1 million in a Fund:
unaffiliated benefit plans, such as qualified retirement plans (other than
individual retirement accounts and self-directed retirement plans); unaffiliated
banks and insurance companies purchasing for their own accounts; and endowment
funds of unaffiliated non-profit organizations; (3) investment-only accounts for
large qualified plans, with at least $50 million in total plan assets or at
least 1000 participants; (4) trust and fiduciary accounts of trust companies and
bank trust departments providing fee based advisory services that invest at
least $1 million in a Fund on behalf of each trust; (5) policy holders under
Zurich-American Insurance Group's collateral investment program investing at
least $200,000 in a Fund; and (6) investment companies managed by the Investment
Manager that invest primarily in other investment companies. Class I shares
currently are available for purchase only from KDI, principal underwriter for
the Funds, and, in the case of category (4) above, selected dealers authorized
by KDI. Share certificates are not available for Class I shares.
46
<PAGE>
Which Arrangement is Better for You? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in a Fund or Kemper Mutual Funds listed
under "Special Features -- Class A Shares -- Combined Purchases" is in excess of
$5 million including purchases pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features described under "Special Features."
For more information about the three sales arrangements, consult your financial
representative or the Shareholder Service Agent. Financial services firms may
receive different compensation depending upon which class of shares they sell.
[ONLY Class I shares are available only to certain institutional investors.
General. Shares of a Fund are sold at their public offering price, which is the
net asset value per share 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 a Fund determines that it
has received payment of the proceeds of the check. The time required for such a
determination will vary and cannot be determined in advance. Upon receipt by the
Shareholder Service Agent of a request for redemption, shares of a Fund will be
redeemed by a Fund at the applicable net asset value per share of such Fund. The
amount received by a shareholder upon redemption or repurchase may be more or
less than the amount paid for such shares depending on the market value of a
Trust's portfolio securities at the time.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemption of Class B or Class C shares by certain classes of persons or through
certain types of transactions are provided because of anticipated economies in
sales and sales related efforts.
Tax Identification Number. Be sure to complete the Tax Identification Number
section of the Fund's application when you open an account. Federal tax law
requires each Fund to withhold 31% of taxable dividends, capital gains
distributions and redemption and exchange proceeds from accounts (other than
those of certain exempt payees) without a correct certified Social Security or
tax identification number and certain other certified information or upon
notification from the IRS or a broker that withholding is required. Each Fund
reserves the right to reject new account applications without a correct
certified Social Security or tax identification number. The Fund also reserves
the right, following 30 days' notice, to redeem all shares in accounts without a
correct certified Social Security or tax identification number. A shareholder
may avoid involuntary redemption by providing the applicable Fund with a tax
identification number during the 30-day notice period. Shareholders should
direct their inquiries to Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105-2005 or to the firm from which they received this Statement of
Additional Information.
Redemptions and Exchanges
A Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange ("Exchange") is closed
other than customary weekend and holiday closings or during any period in which
trading on the Exchange is restricted, (b) during any period when an emergency
exists as a result of which (i) disposal of a Fund's investments is not
reasonably practicable, or (ii) it
47
<PAGE>
is not reasonably practicable for a Fund to determine the value of its net
assets, or (c) for such other periods as the Securities and Exchange Commission
may by order permit for the protection of a Fund's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares and the assessment of the administrative services fee with
respect to each class does not result in a Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date.
The Fund has authorized certain members of the National Association of
Securities Dealers, Inc. ("NASD"), other than KDI to accept purchase and
redemption orders for a Fund's shares. Those brokers may also designate other
parties to accept purchase and redemption orders on a Fund's behalf. Orders for
purchase or redemption will be deemed to have been received by a Fund when such
brokers or their authorized designees accept the orders. Subject to the terms of
the contract between a Fund and the broker, ordinarily orders will be priced at
a Fund's net asset value next computed after acceptance by such brokers or their
authorized designees. Further, if purchases or redemptions of a Fund's shares
are arranged and settlement is made at an investor's election through any other
authorized NASD member, that member may, at its discretion, charge a fee for
that service. The Board of Trustees or Directors as the case may be ("Board") of
a Fund and KDI each has the right to limit the amount of purchases by, and to
refuse to sell to, any person. The Board and KDI may suspend or terminate the
offering of shares of a Fund at any time for any reason.
General. Any shareholder may require a Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Funds' transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When a Fund is asked to redeem shares for which it may not have yet received
good payment (i.e., purchases by check, EXPRESS-Transfer or Bank Direct
Deposit), it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which may be up to 10 days from receipt by a Fund of the purchase
amount. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase, Repurchase and Redemption 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
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purchase may be subject to a contingent deferred sales charge (see "Contingent
Deferred Sales Charge -- Class C Shares" below).
Because of the high cost of maintaining small accounts, the Funds may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. A Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless a Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephone instructions are genuine. The shareholder will bear the risk of loss,
including loss resulting from fraudulent or unauthorized transactions, as long
as the reasonable verification procedures are followed. The verification
procedures include recording instructions, requiring certain identifying
information before acting upon instructions and sending written confirmations.
Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodial account
holders, provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. The Funds reserve the right to terminate or modify
this privilege at any time.
Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which each Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the applicable 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.
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Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of a 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 a Fund for up to seven days if
the Fund or the Shareholder Servicing Agent deems it appropriate under then
current market conditions. Once authorization is on file, the Shareholder
Service Agent will honor requests by telephone at 1-800-621-1048 or in writing,
subject to the limitations on liability described under "General" above. The
Funds are not responsible for the efficiency of the federal wire system or the
account holder's financial services firm or bank. The Funds currently do not
charge the account holder for wire transfers. The account holder is responsible
for any charges imposed by the account holder's firm or bank. There is a $1,000
wire redemption minimum (including any contingent deferred sales charge). To
change the designated account to receive wire redemption proceeds, send a
written request to the Shareholder Service Agent with signatures guaranteed as
described above or contact the firm through which shares of a Fund were
purchased. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be redeemed by wire transfer until such shares have been owned
for at least 10 days. Account holders may not use this privilege to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Funds reserve the right to
terminate or modify this privilege at any time.
Contingent Deferred Sales Charge -- Large Order NAV Purchase Privilege. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if they
are redeemed during the second year following purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares whose
dealer of record at the time of the investment notifies KDI that the dealer
waives the commission applicable to such Large Order NAV Purchase.
Contingent Deferred Sales Charge -- Class B Shares. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed excluding amounts not subject to the charge.
Contingent Deferred
Year of Redemption After Purchase Sales Charge
--------------------------------- ------------
First 4%
Second 3%
Third 3%
Fourth 2%
Fifth 2%
Sixth 1%
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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) and (d) for redemptions made pursuant to
any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2; and (e)
for redemptions to satisfy required minimum distributions after age 70 1/2 from
an IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent: (a) redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent deferred
sales charge and the conversion privilege), (b) redemptions in connection with
retirement distributions (limited at any one time to 10% of the total value of
plan assets invested in a Fund), (c) redemptions in connection with
distributions qualifying under the hardship provisions of the Internal Revenue
Code and (d) redemptions representing returns of excess contributions to such
plans.
Contingent Deferred Sales Charge -- Class C Shares. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived in the event of: (a)
redemptions by a participant-directed qualified retirement plan described in
Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457; (b) redemptions by employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent; (c) redemption of shares of a
shareholder (including a registered joint owner) who has died; (d) redemption of
shares of a shareholder (including a registered joint owner) who after purchase
of the shares being redeemed becomes totally disabled (as evidenced by a
determination by the federal Social Security Administration); (e) redemptions
under a Fund's Systematic Withdrawal Plan at a maximum of 10% per year of the
net asset value of the account; (f) 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; (g) redemption of shares by an employer sponsored employee benefit plan
that offers funds in addition to Kemper Funds and whose dealer of record has
waived the advance of the first year administrative service and distribution
fees applicable to such shares and agrees to receive such fees quarterly; and
(h) redemption of shares purchased through a dealer-sponsored asset allocation
program maintained on an omnibus record-keeping system provided the dealer of
record has waived the advance of the first year administrative services and
distribution fees applicable to such shares and has agreed to receive such fees
quarterly.
Contingent Deferred Sales Charge -- General. The following example will
illustrate the operation of the contingent deferred sales charge. Assume that an
investor makes a single purchase of $10,000 of a Fund's Class B shares and that
16 months later the value of the shares has grown by $1,000 through reinvested
dividends and by an additional $1,000 of share appreciation to a total of
$12,000. If the investor were then to redeem the entire $12,000 in share value,
the contingent deferred sales charge would be payable only with respect to
$10,000 because neither the $1,000 of reinvested dividends nor the $1,000 of
share appreciation is subject to the charge. The charge would be at the rate of
3% ($300) because it was in the second year after the purchase was made.
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The rate of the contingent deferred sales charge under the schedule above 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. In the event no
specific order is requested when redeeming shares subject to a contingent
deferred sales charge, the redemption will be made first from shares
representing reinvested dividends and then from the earliest purchase of shares.
KDI receives any contingent deferred sales charge directly.
Reinvestment Privilege. A shareholder who has redeemed Class A shares of a Fund
or any Kemper Mutual Fund listed under "Special Features -- Class A Shares --
Combined Purchases" (other than shares of the Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
a Fund or of the listed Kemper Mutual Funds. A shareholder of a Fund or Kemper
Mutual Fund who redeems Class A shares purchased under the Large Order NAV
Purchase Privilege (see "Purchase, Repurchase and Redemption 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 Class
A shares, Class B shares or Class C shares, as the case may be, of a Fund or of
Kemper Mutual Funds. The amount of any contingent deferred sales charge also
will be reinvested. These reinvested shares will retain their original cost and
purchase date for purposes of the contingent deferred sales charge. Also, a
holder of Class B shares who has redeemed shares may reinvest up to the full
amount redeemed, less any applicable contingent deferred sales charge that may
have been imposed upon the redemption of such shares, at net asset value in
Class A shares of a Fund or of the Kemper Mutual Funds listed under "Special
Features -- Class A Shares -- Combined Purchases." Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Mutual
Funds available for sale in the shareholder's state of residence as listed under
"Special Features -- Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of a Funds'
shares, the reinvestment in the same Fund may be subject to the "wash sale"
rules if made within 30 days of the redemption, resulting in a postponement of
the recognition of such loss for federal income tax purposes. In addition, upon
a reinvestment, the shareholder may not be permitted to take into account sales
charges incurred on the original purchase of shares in computing their taxable
gain or loss. The reinvestment privilege may be terminated or modified at any
time.
Special Features
Class A Shares -- Combined Purchases. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following funds: Kemper Aggressive Growth Fund, Kemper Asian Growth Fund, Kemper
Blue Chip Fund, Kemper California Tax-Free Income Fund, Kemper Cash Reserves
Fund, Kemper Contrarian Fund, Kemper Florida Tax-Free Income Fund, Kemper Global
Blue Chip Fund, Kemper Global Income Fund, Kemper Growth Fund, Kemper High Yield
Fund, Kemper High Yield Fund II, Kemper High Yield Opportunity Fund, Kemper
Horizon 10+ Portfolio, Kemper Horizon 20+ Portfolio, Kemper Horizon 5 Portfolio,
Kemper Income and Capital Preservation Fund, Kemper Intermediate Municipal Bond
Fund, Kemper International Fund, Kemper International Research Fund, Kemper
Large Company Growth Fund (currently available only to employees of Zurich
Scudder Investments, Inc.; not available in all states), Kemper Municipal Bond
Fund, Kemper New Europe Fund, Kemper New York Tax-Free Income Fund, Kemper Ohio
Tax-Free Income Fund, Kemper Research Fund (currently available only to
employees of Zurich Scudder Investments, Inc.; not available in all states),
Kemper Retirement Fund -- Series II, Kemper Retirement Fund -- Series III,
Kemper Retirement Fund -- Series IV, Kemper Retirement Fund -- Series V, Kemper
Retirement Fund -- Series VI, Kemper Retirement Fund -- Series VII, Kemper S&P
500 Index Fund, Kemper Short-Term U.S. Government Fund, Kemper Small Cap Value
Fund, Kemper Small Cap Value+Growth Fund (currently available only to employees
of Zurich Scudder Investments, Inc.; not available in all states), Kemper Small
Capitalization Equity Fund, Kemper Strategic Income Fund, Kemper Target 2010
Fund, Kemper Technology Fund, Kemper Total
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Return Fund, Kemper U.S. Government Securities Fund, Kemper U.S. Growth and
Income Fund, Kemper U.S. Mortgage Fund, Kemper Value+Growth Fund, Kemper
Worldwide 2004 Fund, Kemper-Dreman Financial Services Fund, Kemper-Dreman High
Return Equity Fund ("Kemper Mutual Funds"). Except as noted below, there is no
combined purchase credit for direct purchases of shares of Zurich Money Funds,
Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account
Trust, Investors Municipal Cash Fund or Investors Cash Trust ("Money Market
Funds"), which are not considered "Kemper Mutual Funds" for purposes hereof. For
purposes of the Combined Purchases feature described above as well as for the
Letter of Intent and Cumulative Discount features described below, employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent or its affiliates may include:
(a) Money Market Funds as "Kemper Mutual Funds," (b) all classes of shares of
any Kemper Mutual Fund, and (c) the value of any other plan investments, such as
guaranteed investment contracts and employer stock, maintained on such
subaccount record keeping system.
Class A Shares -- Letter of Intent. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Mutual Funds listed above made by any
purchaser within a 24-month period under a written Letter of Intent ("Letter")
provided by KDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than actually
paid, the appropriate number of escrowed shares are redeemed and the proceeds
used toward satisfaction of the obligation to pay the increased sales charge.
The Letter for an employer sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Mutual Funds held of record as of the initial purchase date under
the Letter as an "accumulation credit" toward the completion of the Letter, but
no price adjustment will be made on such shares. Only investments in Class A
shares of a Fund are included for this privilege.
Class A Shares -- Cumulative Discount. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the above mentioned Kemper Mutual Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already owned
by the investor.
Class A Shares -- Availability of Quantity Discounts. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
Exchange Privilege. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of Kemper Mutual
Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features -- Class A Shares -- Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds and Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the Offering Period for such
series as described in the applicable prospectus. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Investors Municipal
Cash Fund and Investors Cash Trust are available on exchange but only through a
financial services firm having a services agreement with KDI.
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Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of any Kemper Mutual Fund or a Money Market
Fund under the exchange privilege described above without paying any contingent
deferred sales charge at the time of exchange. If the Class A shares received on
exchange are redeemed thereafter, a contingent deferred sales charge may be
imposed in accordance with the foregoing requirements provided that the shares
redeemed will retain their original cost and purchase date for purposes of the
contingent deferred sales charge.
Class B Shares. Class B shares of a Fund and Class B shares of any Kemper Mutual
Fund listed under "Special Features -- Class A Shares -- Combined Purchases" may
be exchanged for each other at their relative net asset values. Class B shares
may be exchanged without any contingent deferred sales charge being imposed at
the time of exchange. For purposes of the contingent deferred sales charge that
may be imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.
Class C Shares. Class C shares of a Fund and Class C shares of any Kemper Mutual
Fund listed under "Special Features -- Class A Shares -- Combined Purchases" may
be exchanged for each other at their relative net asset values. Class C shares
may be exchanged without a contingent deferred sales charge being imposed at the
time of exchange. For determining whether there is a contingent deferred sales
charge that may be imposed upon the redemption of the Class C shares received by
exchange, amounts exchanged retain their cost and purchase.
General. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged thereafter until
they have been owned for 15 days (the "15 Day Hold Policy"). The Fund reserves
the right to invoke the 15-Day Hold Policy of exchanges of $1,000,000 or less
if, in the Investment Manager's judgment, the exchange activity may have an
adverse effect on the fund. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to the Kemper fund and
therefore may be subject to the 15-Day Hold Policy. For purposes of determining
whether the 15 Day Hold Policy applies to a particular exchange, the value of
the shares to be exchanged shall be computed by aggregating the value of shares
being exchanged for all accounts under common control, direction, or advice,
including without limitation, accounts administered by a financial services firm
offering market timing, asset allocation or similar services. The total value of
shares being exchanged must at least equal the minimum investment requirement of
the Kemper Fund into which they are being exchanged. Exchanges are made based on
relative dollar values of the shares involved in the exchange. There is no
service fee for an exchange; however, dealers or other firms may charge for
their services in effecting exchange transactions. Exchanges will be effected by
redemption of shares of the fund held and purchase of shares of the other fund.
For federal income tax purposes, any such exchange constitutes a sale upon which
a gain or loss may be realized, depending upon whether the value of the shares
being exchanged is more or less than the shareholder's adjusted cost basis.
Shareholders interested in exercising the exchange privilege may obtain
prospectuses of the other funds from dealers, other firms or KDI. Exchanges may
be accomplished by a written request to KSvC, Attention: Exchange Department,
P.O. Box 419557, Kansas City, Missouri 64141-6557, or by telephone if the
shareholder has given authorization. Once the authorization is on file, the
Shareholder Service Agent will honor requests by telephone at 1-800-621-1048,
subject to the limitations on liability under "Purchase, Repurchase and
Redemption 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. Except as otherwise permitted by
applicable regulations, 60 days' prior written notice of any termination or
material change will be provided. Exchanges may only be made for Kemper Funds
that are eligible for sale in the shareholder's state of residence. Currently,
Tax-Exempt California Money Market Fund is available for sale only in California
and the portfolios of Investors Municipal Cash Fund are available for sale only
in certain states.
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Systematic Exchange Privilege. The owner of $1,000 or more of any class of the
shares of a Fund, a Kemper Mutual Fund or Money Market Fund may authorize the
automatic exchange of a specified amount ($100 minimum) of such shares for
shares of the same class of another Kemper Fund. If selected, exchanges will be
made automatically until the privilege is terminated by the shareholder or the
other Kemper Fund. Exchanges are subject to the terms and conditions described
above under "Exchange Privilege" except that the $1,000 minimum investment
requirement for the Kemper Fund acquired on exchange is not applicable. This
privilege may not be used for the exchange of shares held in certificated form.
EXPRESS-Transfer. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in a Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from any person to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Purchase, Repurchase and Redemption of Shares -- General." Once
enrolled in EXPRESS-Transfer, a shareholder can initiate a transaction by
calling Kemper Shareholder Services toll free at 1-800-621-1048 Monday through
Friday, 8:00 a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this
privilege by sending written notice to KSvC, P.O. Box 419415, Kansas City,
Missouri 64141-6415. Termination will become effective as soon as the
Shareholder Service Agent has had a reasonable time to act upon the request.
EXPRESS-Transfer cannot be used with passbook savings accounts or for
tax-deferred plans such as Individual Retirement Accounts ("IRAs").
Bank Direct Deposit. A shareholder may purchase additional shares of a Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan ("Bank Direct Deposit"), investments are made automatically (minimum $50
and maximum $50,000) from the shareholder's account at a bank, savings and loan
or credit union into the shareholder's Fund account. By enrolling in Bank Direct
Deposit, the shareholder authorizes the Fund and its agents to either draw
checks or initiate Automated Clearing House debits against the designated
account at a bank or other financial institution. This privilege may be selected
by completing the appropriate section on the Account Application or by
contacting the Shareholder Service Agent for appropriate forms. A shareholder
may terminate his or her Plan by sending written notice to KSvC, P.O. Box
419415, Kansas City, Missouri 64141-6415. Termination by a shareholder will
become effective within thirty days after the Shareholder Service Agent has
received the request. A Fund may immediately terminate a shareholder's Plan in
the event that any item is unpaid by the shareholder's financial institution.
The Funds may terminate or modify this privilege at any time.
Payroll Direct Deposit and Government Direct Deposit. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) A Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.
Systematic Withdrawal Plan. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount up to $50,000 to be paid to the owner or
a designated payee monthly, quarterly, semiannually or annually. The $5,000
minimum account size is not applicable to Individual Retirement Accounts. The
minimum periodic payment is $100. The maximum annual rate at which Class B
shares, Class A shares purchased under the Large Order NAV Purchase Privilege
and Class C shares in their first year following the purchase may be redeemed
under a systematic withdrawal plan is 10% of the net asset
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<PAGE>
value of the account. Shares are redeemed so that the payee will receive payment
approximately the first of the month. Any income and capital gain dividends will
be automatically reinvested at net asset value. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested and fluctuations in the net asset value
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, a Fund will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.
KDI will waive the contingent deferred sales charge on redemptions of Class A
shares purchased under the Large Order NAV Purchase Privilege, Class B shares
and Class C shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or the Funds.
Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
o Traditional, Roth and Education Individual Retirement Accounts ("IRAs").
This includes Savings Incentive Match Plan for Employees of Small
Employers ("SIMPLE"), IRA accounts and Simplified Employee Pension Plan
("SEP") IRA accounts and prototype documents.
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. The brochures for plans with the Fund's custodian describe the current
fees payable for its services as custodian. Investors should consult with their
own tax advisers before establishing a retirement plan.
Additional Transaction Information
General. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Fund for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers, as
described above. Banks or other financial services firms may be subject to
various federal and state laws regarding the services described above and may be
required to register as dealers pursuant to state law. If banking firms were
prohibited from acting in any capacity or providing any of the described
services, management would consider what action, if any, would be appropriate.
KDI does not believe that termination of a relationship with a bank would result
in any material adverse consequences to a Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of a Fund sold by the firm under the following conditions: (i) the
purchased shares are held in a Kemper IRA account, (ii) the shares are purchased
as a direct "roll over" of a distribution from a qualified retirement plan
account maintained on a participant subaccount record keeping system provided by
Kemper Service Company ("KSvC"), (iii) the registered representative placing the
trade is a member of ProStar, a group of persons designated by KDI in
56
<PAGE>
acknowledgment of their dedication to the employee benefit plan area and (iv)
the purchase is not otherwise subject to a commission.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash, to firms that sell shares of the Funds. In some
instances, such discounts, commissions or other incentives will be offered only
to certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Funds or other funds underwritten by
KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt 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 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"). 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."
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Funds' shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Funds' shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Funds through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Funds through the Shareholder Service Agent for
these services. This Statement of Additional Information should be read in
connection with such firms' material regarding their fees and services.
The Funds reserve the right to withdraw all or any part of the offering made by
this Statement of Additional Information and to reject purchase orders. Also,
from time to time, each Fund may temporarily suspend the offering of shares of
any Fund or class of a Fund to new investors. During the period of such
suspension, persons who are already shareholders of a class of a Fund normally
are permitted to continue to purchase additional shares of such class or Fund
and to have dividends reinvested.
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.
DIVIDENDS
Kemper Global Income Fund normally distributes monthly dividends of net
investment income, the Asian and International Funds normally distribute annual
dividends of net investment income and each Fund distributes any net realized
short-term and long-term capital gains at least annually.
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<PAGE>
Global Blue Chip Fund, Kemper New Europe Fund, Global Discovery Fund and Kemper
International Research Fund normally distribute annual dividends of net
investment income. Any net realized short-term and long-term capital gains for
the Funds are distributed at least annually. Distributions of net capital gains
realized during each fiscal year will be made at least annually before the end
of each Fund's fiscal year. Additional distributions, including distributions of
net short-term capital gains in excess of net long-term capital losses, may be
made, if necessary.
Each Fund may at any time vary its foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and
long-term capital gains as its Board determines appropriate under the then
current circumstances. In particular, and without limiting the foregoing,
[the/a] Fund may make additional distributions of net investment income or
capital gain net income in order to satisfy the minimum distribution
requirements contained in the Internal Revenue Code (the "Code").
Dividends paid by [the/a] Fund as to each class of its shares will be calculated
in the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same portion for
each class.
Income and capital gain dividends, if any, for [the/a] Fund will be credited to
shareholder accounts in full and fractional shares of the same class of the Fund
at net asset value except that, upon written request to the Shareholder Service
Agent, a shareholder may select one of the following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net
asset value; or
(2) To receive both income and capital gain dividends in cash.
Any dividends of [the/a] Fund that are reinvested normally will be reinvested in
shares of the same class of that same Fund. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have Fund dividends
invested in shares of the same class of another Kemper Fund at the net asset
value of such class of such other fund. See "Purchase, Repurchase, and
Redemption of Shares", "Special Features--Class A Shares--Combined Purchases",
for a list of such other Kemper Funds. To use this privilege of investing a
Fund's dividends in shares of another Kemper Fund, shareholders must maintain a
minimum account value of $1,000 in the Fund distributing the dividends. The
Funds will reinvest dividend checks (and future dividends) in shares of that
same Fund and class if checks are returned as undeliverable. Dividends and other
distributions of [the/a] Fund in the aggregate amount of $10 or less are
automatically reinvested in shares of the Fund unless the shareholder requests
that such policy not be applied to the shareholder's account.
PERFORMANCE INFORMATION
From time to time, quotations of [the/a] Fund's performance may be included in
advertisements, sales literature or reports to shareholders or prospective
investors. Performance information will be computed separately for each class.
Average Annual Total Return
Average annual total return is the average annual compound rate of return for
the periods of one year, five years and ten years (or such shorter periods as
may be applicable dating from the commencement of [the/a] Fund's operations),
all ended on the last day of a recent calendar quarter. Average annual total
return quotations reflect
58
<PAGE>
changes in the price of [the/a] Fund's shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by computing the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)^1/n - 1
Where:
T = Average Annual Total Return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.
Average Annual Total Returns for the Period Ended _______(FYE)_____________
1 Year 5 Years 10 Years Life of Fund
_____ Fund, Class ___ % % % %
[REPEAT FOR ADDITIONAL FUNDS AND CLASSES AS NEEDED]
[(1)INSERT FOOTNOTES AS NEEDED]
As described above, average annual total return is based on historical earnings
and is not intended to indicate future performance. Average annual total return
for [the/a] Fund or class will vary based on changes in market conditions and
the level of [the/a] Fund's and class' expenses.
In connection with communicating its average annual total return to current or
prospective shareholders, [the/a] Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of [the/a] Fund's shares and assume that
all dividends and capital gains distributions during the period were reinvested
in Fund shares. Cumulative total return is calculated by computing the
cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.
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<PAGE>
Cumulative Total Returns for the Period Ended _______(FYE)_____________
1 Year 5 Years 10 Years Life of Fund
_____ Fund, Class S % % % %
[REPEAT FOR ADDITIONAL FUNDS AND CLASSES AS NEEDED]
[(1)INSERT FOOTNOTES AS NEEDED]
Total Return
Total return is the rate of return on an investment for a specified period of
time calculated in the same manner as cumulative total return.
From time to time, in advertisements, sales literature, and reports to
shareholders or prospective investors, figures relating to the growth in the
total net assets of [the/a] Fund apart from capital appreciation will be cited,
as an update to the information in this section, including, but not limited to:
net cash flow, net subscriptions, gross subscriptions, net asset growth, net
account growth, and subscription rates. Capital appreciation generally will be
covered by marketing literature as part of [the/a] Fund's and classes'
performance data.
KEMPER INTERNATIONAL FUND
Performance figures for Class B and C shares of the Fund for the period May 31,
1994 to October 31, 2000 reflect the actual performance of these classes of
shares. Returns for Class B and C shares for the period May 21, 1981 to May 31,
1994 are derived from the historical performance of Class A shares, adjusted to
reflect the operating expenses applicable to Class B and C shares, which may be
higher or lower than those of Class A shares. The performance figures are also
adjusted to reflect the maximum sales charge of 5.75% for Class A shares and the
maximum current contingent deferred sales charge of 4% for Class B shares and 1%
for Class C shares.
The returns in the chart below assume reinvestment of distributions at net asset
value and represent both actual past performance figures and adjusted
performance figures of the Class A shares of the Fund as described above; they
do not guarantee future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
KEMPER INTERNATIONAL FUND -- AS OF OCTOBER 31, 2000*
AVERAGE ANNUAL Class A Class B Class C
TOTAL RETURNS Shares Shares Shares
------------- ------ ------ ------
Life of Class(+) % % %
Ten Years % % %
Five Years % % %
One Year % % %
(+) Since May 21, 1981 for Class A shares. Since May 31, 1994 for Class B and
Class C shares.
* Because Class B and C shares were not introduced until May 31, 1994, the total
return for Class B and C shares for the period prior to their introduction is
based upon the performance of Class A shares from the commencement of investment
operations, May 21, 1981 through May 31, 1994. Actual performance of Class B and
C shares is shown beginning May 31, 1994.
KEMPER GLOBAL DISCOVERY FUND
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<PAGE>
Performance figures for Class A, B and C shares for the period September 9, 1996
(Class A shares) and April 16, 1998 (Class B and C shares) to October 31, 2000
reflect the actual performance of these classes of shares. Returns for Class A,
B and C shares for the period September 9, 1996 to April 16, 1998 are derived
from the historical performance of Class S shares, adjusted to reflect the
operating expenses applicable to Class A, B and C shares, which may be higher or
lower than those of Class S shares. The performance figures are also adjusted to
reflect the maximum sales charge of 5.75% for Class A shares and the current
maximum contingent deferred sales charge of 4% for Class B shares and 1% for
Class C shares.
The returns in the chart below assume reinvestment of distributions at net asset
value and represent both actual past performance figures and adjusted
performance figures of the Class A, B and C shares of the Fund as described
above; they do not guarantee future results. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
Average Annual Total Return for the periods ended October 31, 2000
One Year Five Year Life of Class*
Class A % % %
Class B % % %
Class C % % %
* Because Class A, B and C shares were not introduced until April 16, 1998, the
total return for Class A, B and C shares for the period prior to their
introduction is based upon the performance of Class S shares from the
commencement of investment operations, September 9, 1996 through April 16, 1998.
Actual performance of Class B and C shares is shown beginning April 16, 1998.
KEMPER GLOBAL INCOME FUND
Performance figures for Class B and C shares of the Fund for the period May 31,
1994 to December 31, 2000 reflect the actual performance of these classes of
shares. Returns for Class B and C shares for the period October 1, 1989 to May
31, 1994 are derived from the historical performance of Class A shares, adjusted
to reflect the operating expenses applicable to Class B and C shares, which may
be higher or lower than those of Class A shares. The performance figures are
also adjusted to reflect the maximum sales charge of 5.75% for Class A shares
and the current maximum contingent deferred sales charge of 4% for Class B
shares and 1% for Class C shares.
The returns in the chart below assume reinvestment of distributions at net asset
value and represent both actual past performance figures and adjusted
performance figures of the Class A shares of the Fund as described above; they
do not guarantee future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
KEMPER GLOBAL INCOME FUND -- AS OF DECEMBER 31, 2000*
AVERAGE ANNUAL Class A Class B Class C
TOTAL RETURNS Shares Shares Shares
------------- ------ ------ ------
Life of Class(+) % % %
Ten Years % % %
FiveYears % % %
One Year % % %
(+) Since October 1, 1989 for Class A shares. Since May 31, 1994 for Class B and
Class C shares.
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<PAGE>
* Because Class B and C shares were not introduced until May 31, 1994, the total
return for Class B and C shares for the period prior to their introduction is
based upon the performance of Class A shares from the commencement of investment
operations, October 1, 1989 through May 31, 1994. Actual performance of Class B
and C shares is shown beginning May 31, 1994.
KEMPER INTERNATIONAL RESEARCH FUND
The Growth Fund of Spain, Inc. ("GSP") was reorganized as an open-end series of
the Corporation consisting of Class A, Class B, and Class C shares (the
"Reorganization"). GSP had only one class of shares, which were not subject to
Rule 12b-1 fees or sales charges; the shares of GSP outstanding as of December
11, 1998 were exchanged for Class A shares of the Fund, which class also has no
Rule 12b-1 fees but is subject to an administrative services fee. The
performance figures shown below reflect the performance of the Fund prior to the
Reorganization, restated in the case of standardized return, to reflect the
sales charge of the Fund's Class A shares. Different fees and expenses
applicable to each of the classes, including Rule 12b-1 fees applicable to the
Class B and C shares (shares of which did not exist as of the close of the
Fund's most recent fiscal year) and an administrative services fee applicable to
each class, will affect the performance of those classes.
For purposes of the performance computations for the Fund, it is assumed that
all dividends and capital gains distributions made by the Fund are reinvested at
net asset value in additional shares of the same class during the designated
period. In calculating the ending redeemable value for Class A shares and
assuming complete redemption at the end of the applicable period, the maximum
5.75% sales charge is deducted from the initial $1,000 payment (for Class B
shares and Class C shares, the applicable CDSC imposed upon redemption of Class
B shares or Class C shares held for the period would be deducted). Standardized
Return quotations for the Fund do not take into account any applicable
redemption fees or required payments for federal or state income taxes.
Standardized Return quotations are determined to the nearest 1/100 of 1%.
The Fund may, from time to time, include in advertisements, promotional
literature or reports to shareholders or prospective investors total return data
that are not calculated according to the formula set forth above
("Non-Standardized Return"). Initial sales charges, CDSCs and redemption fees
are not taken into account in calculating Non-Standardized Return; a sales
charge or redemption fee, if deducted, would reduce the return.
The following tables summarize the calculation of Standardized and
Non-Standardized Return for the Class A shares of the Fund based on performance
information of The Growth Fund of Spain, Inc. for the periods indicated. During
the periods covered by the tables, the Fund was subadvised by BSN Gestion. This
subadvisory relationship was discontinued in connection with the Reorganization.
On April 6, 2000, the Fund changed from Growth Fund of Spain, an open-end equity
fund that sought long-term capital appreciation by investing primarily in the
equity securities of Spanish companies, to its current strategy. The fund's
performance prior to that date would have been different had the current
strategy been in effect.
Performance figures for Class B and C shares of the Fund for the period May 31,
1994 to October 31, 2000 reflect the actual performance of this class of shares.
Returns for Class B and C shares for the period October 1, 1979 to May 31, 1994
are derived from the historical performance of Class A shares, adjusted to
reflect the operating expenses applicable to Class B and C shares, which may be
higher or lower than those of Class A shares. The performance figures are also
adjusted to reflect the maximum sales charge of 4.50% for Class A shares and the
current contingent deferred sales charge of 4% for Class B shares and 1% for
Class C shares.
The returns in the chart below assume reinvestment of distributions at net asset
value and represent both actual past performance figures and performance figures
of the Class A shares of the Fund, adjusted as described above; they do not
guarantee future results. Investment return and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
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<PAGE>
Average Annual Total Return for Period as of October 31, 2000(1)
One Year Five Year Life of Class
Class A % % %(2)
Class B -- -- (3)
Class C -- -- (3)
----------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%, but
does reflect any applicable redemption fees.
(2) Since February 14, 1990 (The Growth Fund of Spain, Inc.).
(3) Since December 14, 1998 (Growth Fund of Spain).
* Because Class A and C shares were not introduced until October 26, 1984 and
May 31, 1994, respectively, the total return for Class A and C shares for the
period prior to their introduction is based pon the performance of Class B
shares from the commencement of investment operations, October 26, 1984 through
May 31, 1994. Actual performance of Class A and C shares is shown beginning
January 10, 1992 and May 31, 1994, respectively.
KEMPER NEW EUROPE FUND
Performance figures for Class B and C shares of the Fund for the period May 31,
1994 to October 31, 1999 reflect the actual performance of this class of shares.
Returns for Class B and C shares for the period October 1, 1979 to May 31, 1994
are derived from the historical performance of Class A shares, adjusted to
reflect the operating expenses applicable to Class B and C shares, which may be
higher or lower than those of Class A shares. The performance figures are also
adjusted to reflect the maximum sales charge of 4.50% for Class A shares and the
current contingent deferred sales charge of 4% for Class B shares and 1% for
Class C shares.
The returns in the chart below assume reinvestment of distributions at net asset
value and represent both actual past performance figures and performance figures
of the Class A shares of the Fund, adjusted as described above; they do not
guarantee future results. Investment return and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
KEMPER NEW EUROPE FUND - AS OF OCTOBER 31, 2000
Average Annual Total Returns Class A Class B Class C Class M(1)
----------------------------- ------- ------- ------- -----------
One Year % % % %
Five Years % % % %
Since Inception(3) % % % %
----------
(1) The one year average annual total return reflects the imposition of a 2%
redemption fee.
(2) The Morgan Stanley Capital International Europe Index is an unmanaged
index that is generally representative of the equity securities of the
European markets. Index returns assume reinvestment of dividends and
unlike the Fund's returns, do not reflect any fees, expenses or sales
charges.
(3) Inception date for Class M Shares is February 16, 1990.
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<PAGE>
* Because Class B and C shares were not introduced until May 31, 1994, the total
return for Class B and C shares for the period prior to their introduction is
based upon the performance of Class A shares from the commencement of investment
operations, April 20, 1976 through May 31, 1994. Actual performance of Class B
and C shares is shown beginning May 31, 1994.
ASIAN FUND--NOVEMBER 30, 2000
Fund Fund Fund
AVERAGE ANNUAL Class A Class B Class C
TOTAL RETURN TABLE Shares Shares Shares
------------------ ------ ------ ------
Life of Class(+) % % %
Three Year % % %
One Year % % %
(+) Since October 21, 1996 for all classes.
KEMPER GLOBAL BLUE CHIP FUND - AS OF OCTOBER 31, 2000
Class A Class B Class C
Fund Shares Shares Shares
Global Blue Chip Fund
One Year 9.60% 12.10% 15.19%
Life of the Fund* 9.32% 10.32% 11.92%
* Since the Funds' commencement of operations on December 31, 1997.
Yield
Yield is the net annualized yield based on a specified 30-day (or one month)
period assuming semiannual compounding of income. Yield, sometimes referred to
as [the/a] Fund's "SEC yield," is calculated by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period according to the following formula:
YIELD = 2 [(a-b)/cd + 1)^6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
SEC 30-day yield for the period ended ______FYE_______.
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<PAGE>
_____________ Fund Class ________%
(REPEAT FOR ADDITIONAL FUNDS AS NEEDED)
Quotations of a Fund's performance are based on historical earnings, show the
performance of a hypothetical investment, and are not intended to indicate
future performance of that Fund. An investor's shares when redeemed may be worth
more or less than their original cost. Performance of a Fund will vary based on
changes in market conditions and the level of that Fund's expenses. In periods
of declining interest rates a Fund's quoted yield will tend to be somewhat
higher than prevailing market rates, and in periods of rising interest rates
that Fund's quoted yield will tend to be somewhat lower.
[The/A] Fund's performance figures are based upon historical results and are not
representative of future performance. [The/Each] Fund's Class A shares are sold
at net asset value plus a maximum sales charge. While the maximum sales charge
is normally reflected in the Fund's Class A performance figures, certain total
return calculations may not include such charge and those results would be
reduced if it were included. Class B shares and Class C shares are sold at net
asset value. Redemptions of Class B shares within the first six years after
purchase may be subject to a contingent deferred sales charge that ranges from
4% during the first year to 0% after six years. Redemption of Class C shares
within the first year after purchase may be subject to a 1% contingent deferred
sales charge. Average annual total return figures do, and total return figures
may, include the effect of the contingent deferred sales charge for the Class B
shares and Class C shares that may be imposed at the end of the period in
question. Performance figures for the Class B shares and Class C shares not
including the effect of the applicable contingent deferred sales charge would be
reduced if it were included. Any additional fees charged by a dealer or other
financial services firm would reduce the returns described in this section.
Additional information about [the/each] Fund's performance also appears in its
Annual Report to Shareholders, which is available without charge from the Fund.
If the Fund's fees or expenses are being waived or absorbed by the investment
Manager, the Fund may also advertise performance information before and after
the effect of the fee waiver or expense absorption.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of [the/a] Fund with performance quoted with respect to other
investment companies or types of investments.
In connection with communicating performance to current or prospective
shareholders, the [Fund / Funds] also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs.
Historical information on the value of the dollar versus foreign currencies may
be used from time to time in advertisements concerning the [Fund/Funds]. Such
historical information is not indicative of future fluctuations in the value of
the U.S. dollar against these currencies. In addition, marketing materials may
cite country and economic statistics and historical stock market performance for
any of the countries in which [the/a] Fund invests.
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<PAGE>
From time to time, in advertising and marketing literature, [the/a] Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations.
From time to time, in marketing and other Fund literature, members of the Board
and officers of [the/a] Fund, its Fund's portfolio manager, or members of the
portfolio management team may be depicted and quoted to give prospective and
current shareholders a better sense of the outlook and approach of those who
manage the Fund. In addition, the amount of assets that the Adviser has under
management in various geographical areas may be quoted in advertising and
marketing materials.
[The/A] Fund may depict the historical performance of the securities in which
the Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indexes of those investments or economic indicators. [The/A] Fund
may also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Fund.
Marketing and other Fund literature may include a description of the potential
risks and rewards associated with an investment in [the/a] Fund. The description
may include a "risk/return spectrum" which compares the Fund to other Scudder
funds or broad categories of funds, such as money market, bond or equity funds,
in terms of potential risks and returns. Money market funds are designed to
maintain a constant $1.00 share price and have a fluctuating yield. Share price,
yield and total return of a bond fund will fluctuate. The share price and return
of an equity fund also will fluctuate. The description may also compare the Fund
to bank products, such as certificates of deposit. Unlike mutual funds,
certificates of deposit are insured up to $100,000 by the U.S. government and
offer a fixed rate of return. Withdrawal of deposits prior to maturity will
normally be subject to a penalty. Rates offered by banks and other depository
institutions are subject to change at any time specified by the issuing
institution.
Because bank products guarantee the principal value of an investment and money
market funds seek stability of principal, these investments are considered to be
less risky than investments in either bond or equity funds, which may involve
the loss of principal. However, all long-term investments, including investments
in bank products, may be subject to inflation risk, which is the risk of erosion
of the value of an investment as prices increase over a long time period. The
risks/returns associated with an investment in bond or equity funds depend upon
many factors. For bond funds these factors include, but are not limited to, a
fund's overall investment objective, the average portfolio maturity, credit
quality of the securities held, and interest rate movements. For equity funds,
factors include a fund's overall investment objective, the types of equity
securities held and the financial position of the issuers of the securities. The
risks/returns associated with an investment in international bond or equity
funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment categories
in the following order: bank products, money market funds, bond funds and equity
funds. Shorter-term bond funds generally are considered less risky and offer the
potential for less return than longer-term bond funds. The same is true of
domestic bond funds relative to international bond funds, and bond funds that
purchase higher quality securities relative to bond funds that purchase lower
quality securities. Growth and income equity funds are generally considered to
be less risky and offer the potential for less return than growth funds. In
addition, international equity funds usually are considered more risky than
domestic equity funds but generally offer the potential for greater return.
Evaluation of Fund performance or other relevant statistical information made by
independent sources may also be used in advertisements concerning [the/a] Fund,
including reprints of, or selections from, editorials or articles about [the/a]
Fund.
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<PAGE>
FUND ORGANIZATION
The Growth Fund of Spain, Inc. ("GSP"), a predecessor of Kemper International
Research Fund, commenced investment operations in 1990 as a closed-end
management investment company organized as a Maryland corporation. At a meeting
of the shareholders of GSP held October 28, 1998, the shareholders voted to
approve the conversion of the Fund to an open-end investment company and the
reorganization of GSP as a new series of the Corporation. Pursuant to the
reorganization agreement between GSP and the Corporation, GSP transferred all of
its assets to the Fund in exchange for Class A shares of the Fund and the
assumption by the Fund of the liabilities of GSP on December 11, 1998. GSP then
distributed the Class A shares of the Fund received in the reorganization to its
shareholders. On April 6, 2000, GSP changed its name to Kemper International
Research Fund and changed its investment strategy. The Corporation may issue a
series or 600,000,000 shares of capital stock, all having $.001 par value, which
may be divided by the Board of Directors into classes of shares. 100,000,000
shares have been classified for each of the Corporation's six series. Currently,
each series offers three classes of shares. These are Class A, Class B and Class
C shares.
The Asian Fund was organized as a business trust under the laws of Massachusetts
on June 12, 1995. The Global Income Fund was organized as a business trust under
the laws of Massachusetts on August 3, 1988. The International Fund was
organized as a business trust under the laws of Massachusetts on October 24,
1985 and, effective January 31, 1986, that Fund pursuant to a reorganization
succeeded to the assets and liabilities of Kemper International Fund, Inc., a
Maryland corporation organized in 1980. The Asian Fund and the Global Income
Fund each may in the future seek to achieve its investment objective by pooling
its assets with assets of other mutual funds for investment in another
investment company having the same investment objective and substantially the
same investment policies and restrictions as such Fund. The purpose of such an
arrangement is to achieve greater operational efficiencies and to reduce costs.
It is expected that any such investment company will be managed by the
Investment Manager in substantially the same manner as the corresponding Fund.
Currently, each Fund offers four classes of shares of a single Portfolio. These
are Class A, Class B and Class C shares, as well as Class I shares.
Kemper Global Blue Chip Fund is a series of the Corporation, an open-end
management investment company registered under the 1940 Act. The Corporation was
organized as a corporation under the laws of Maryland on October 2, 1997. The
Corporation may issue an indefinite amount of shares of capital stock, all
having $.001 par value, which may be divided by the Board of Directors into
classes of shares. Initially, 100,000,000 shares were classified for each, at
that time, of the Corporation's five series. Currently, each Fund offers three
classes of shares. These are Class A, Class B and Class C shares.
Global Discovery Fund is a separate series of Global/International Fund, Inc., a
Maryland corporation organized on May 15, 1986. The name of the Corporation was
changed from Scudder Global Fund, Inc. on May 28, 1998. The name of the Fund was
changed, effective April 16, 1998, from Scudder Global Discovery Fund to Global
Discovery Fund. The Corporation's shares are currently divided into five series:
Global Discovery Fund, Scudder Global Fund, Scudder Emerging Markets Income
Fund, Scudder Global Bond Fund and Scudder International Bond Fund. The Fund's
shares are currently divided into four classes: the Scudder Shares, and Kemper
Global Discovery Fund Class A, B and C shares.
Kemper New Europe Fund was organized as a Maryland corporation on November 22,
1989. The Fund began operations on February 9, 1990 as a closed-end management
investment company. On July 20, 1999, the Fund's shareholders approved the
conversion of the Fund to an open-end investment company. As a result of the
conversion and the reorganization with Kemper Europe Fund, the Fund changed its
name to "Kemper New Europe Fund, Inc." and issued newly designated Class A,
Class B and Class C shares to the shareholders of Kemper Europe Fund and Class M
shares to its existing shareholders. Class M shares will automatically convert
to Class A shares on September 3, 2000. Currently, the Fund offers three classes
of shares. These are Class A, Class B and Class C shares, which have different
expenses, which may affect performance. Class M shares of the Fund are no longer
offered.
67
<PAGE>
The Board may authorize the issuance of additional classes and additional series
if deemed desirable, each with its own investment objectives, policies and
restrictions. Although shareholders of different classes of a Fund have interest
in the same portfolio of assets, shareholders of different classes may bear
different expenses in connection with different methods of distribution. Since
the [Trust/Corporation] may offer multiple Funds, each is known as a "series
company."
Shares of a Fund have equal noncumulative voting rights [FOR FUNDS OFFERING
CLASSES WITH Rule 12b-1 Plans: except that Class B and Class C shares have
separate and exclusive voting rights with respect to each such class' Rule 12b-1
Plan.] Shares of each class also have equal rights with respect to dividends,
assets and liquidation of such Fund subject to any preferences (such as
resulting from different Rule 12b-1 distribution fees), rights or privileges of
any classes of shares of the Fund. Shares of each Fund are fully paid and
nonassessable when issued, are transferable without restriction, have no
preemptive or conversion rights and are redeemable as described in this
Statement of Additional Information and in the prospectus. Each Fund's
activities are supervised by the [Trust's/Corporation's} Board of
[Trustees/Directors]. The [Trust/Corporation] is not required to hold and has no
current intention of holding annual shareholder meetings, although special
meetings may be called for purposes such as electing or removing
[Trustees/Directors], changing fundamental investment policies or approving an
investment management contract.
Shareholders will be assisted in communicating with other shareholders in
connection with removing a Director as if Section 16(c) of the 1940 Act were
applicable.
In the event of the liquidation or dissolution of the [Trust/Corporation],
shares of a Fund are entitled to receive the assets attributable to that Fund
that are available for distribution, and a proportionate distribution, based
upon the relative net assets of the Funds, of any general assets not
attributable to a Fund that are available for distribution.
Master/feeder structure
The Board has the discretion to retain the current distribution arrangement for
each Fund while investing in a master fund in a master/feeder structure fund as
described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or 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, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. 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 realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
INVESTMENT MANAGER
Zurich Scudder Investments, Inc. (the "Investment Manager"), 345 Park Avenue,
New York, NY, an investment counsel firm, acts as investment adviser to the
[Fund / Funds]. This organization, the predecessor of which is Scudder, Stevens
& Clark, Inc., is one of the most experienced investment counsel firms in the U.
S. It was established as a partnership in 1919 and pioneered the practice of
providing investment counsel to individual clients on a fee basis. In 1928 it
introduced the first no-load mutual fund to the public. In 1953 the Investment
Manager introduced Scudder International Fund, Inc., the first mutual fund
available in the U.S. investing internationally in securities of issuers in
several foreign countries. The predecessor firm reorganized from a
68
<PAGE>
partnership to a corporation on June 28, 1985. On December 31, 1997, Zurich
Insurance Company ("Zurich") acquired a majority interest in the Investment
Manager, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part
of the Investment Manager. The Investment Manager's name changed to Scudder
Kemper Investments, Inc. On September 7, 1998, the businesses of Zurich
(including Zurich's 70% interest in Scudder Kemper) and the financial services
businesses of B.A.T Industries p.l.c. ("B.A.T") were combined to form a new
global insurance and financial services company known as Zurich Financial
Services Group. By way of a dual holding company structure, former Zurich
shareholders initially owned approximately 57% of Zurich Financial Services
Group, with the balance initially owned by former B.A.T shareholders. On October
17, 2000, the dual-headed holding company structure of Zurich Financial Services
Group, comprised of Allied Zurich p.l.c. in the United Kingdom and Zurich Allied
in Switzerland, was unified into a single Swiss holding company, Zurich
Financial Services. On January 1, 2001, the Investment Manager's name changed to
Zurich Scudder Investments, Inc.
Founded in 1872, Zurich is a multinational, public corporation organized under
the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world.
The principal source of the Investment Manager's income is professional fees
received from providing continuous investment advice. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations as well as providing investment advice to over [XX] open and
closed-end mutual funds.
The Investment Manager maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. The Investment Manager receives
published reports and statistical compilations from issuers and other sources,
as well as analyses from brokers and dealers who may execute portfolio
transactions for the Investment Manager's clients. However, the Investment
Manager regards this information and material as an adjunct to its own research
activities. The Investment Manager's international investment management team
travels the world, researching hundreds of companies. In selecting the
securities in which the [Fund / Funds] may invest, the conclusions and
investment decisions of the Investment Manager with respect to the Funds are
based primarily on the analyses of its own research department.
Certain investments may be appropriate for a fund and also for other clients
advised by the Investment Manager. Investment decisions for a fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients on the same day. In
such event, such transactions will be allocated among the clients in a manner
believed by the Investment Manager to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by a fund. Purchase and sale orders for a fund may be combined
with those of other clients of the Investment Manager in the interest of
achieving the most favorable net results to that fund.
In certain cases, the investments for [the / a] fund are managed by the same
individuals who manage one or more other mutual funds advised by the Investment
Manager, that have similar names, objectives and investment styles. You should
be aware that the [Fund is / Funds are] likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the [Fund / Funds]can be expected to vary from those of these
other mutual funds.
69
<PAGE>
[INSERT FUND SPECIFIC INVESTMENT MANAGEMENT AGREEMENT LANGUAGE HERE]
The present investment management agreements [(the "Agreements") were / (the
"Agreement") was] approved by the [Directors / Trustees] on [August 10, 1998],
became effective [September 7, 1998], and [was / were] approved at a shareholder
meeting held on [December 15, 1998]. The [Agreement / Agreements] will continue
in effect [(Note: Agreements not always approved by shareholder meeting.) until
September 30, 1999 and from year to year thereafter] only if [their / its]
continuance is approved annually by the vote of a majority of those [Directors /
Trustees] who are not parties to such [Agreement / Agreements] or interested
persons of the Investment Manager or the [Trust / Corporation], cast in person
at a meeting called for the purpose of voting on such approval, and either by a
vote of the [Corporation's Directors / Trust's Trustees] or of a majority of the
outstanding voting securities of the [respective] Fund. The [Agreement /
Agreements] may be terminated at any time without payment of penalty by either
party on sixty days' written notice and automatically terminate in the event of
[its / their] assignment.
The Manager may serve as adviser to other funds with investment objectives and
policies similar to those of the Funds that may have different distribution
arrangements or expenses, which may affect performance.
Fund Sub-Adviser. Scudder Investments U.K., Limited ("Scudder UK"), 1 South
Place, London, U.K. EC42M 2ZS, an affiliate of the Investment Manager, is the
sub-adviser for the Global Income and International Funds. Scudder UK acts as
sub-adviser pursuant to the terms of the sub-advisory agreement between it and
the Investment Manager for each Fund. Scudder UK is subject to regulations by
the Investment Management Regulatory Organization (IMRO) in England as well as
the U.S. Securities and Exchange Commission.
Under the terms of the sub-advisory agreement for a Fund, Scudder UK renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to Scudder UK by the Investment Manager
from time to time for management, including services related to foreign
securities, foreign currency transactions and related investments. Scudder UK
may, under the terms of each sub-advisory agreement, render similar services to
others including other investment companies. For its services, Scudder UK will
receive from the Investment Manager a monthly fee at the annual rate of 0.30%
for the Global Income Fund and 0.35% for the International Funds of the portion
of the average daily net assets of each Fund allocated by the Investment Manager
to Scudder UK for management. Scudder UK permits any of its officers or
employees to serve without compensation as trustees or officers of the Fund if
elected to such positions.
Each sub-advisory agreement provides that Scudder UK will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the sub-advisory agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Scudder UK in the performance of its duties or from reckless disregard
by Scudder UK of its obligations and duties under the sub-advisory agreement.
Each sub-advisory agreement continues in effect from year to year so long as its
continuation is approved at least annually by a majority of the trustees who are
not parties to such agreement or interested persons of any such party except in
their capacity as trustees of the Fund and by the shareholders of the Fund
subject thereto or the Board of Trustees. Each sub-advisory agreement may be
terminated at any time for a Fund upon 60 days notice by the Investment Manger,
Scudder UK or the Board of Trustees, or by a majority vote of the outstanding
shares of the Fund subject thereto, and will terminate automatically upon
assignment or upon the termination of the Fund's investment management
agreement. If additional Funds become subject to a sub-advisory agreement, the
provisions concerning continuation, amendment and termination shall be on a
Fund-by-Fund basis. Additional Funds may be subject to a different agreement. No
sub-advisory fees were paid by the Investment Manager to Scudder UK for periods
prior to the 1997 fiscal year, although in such periods the Investment Manager
has paid Scudder UK for its services to the Investment Manager with respect to
foreign securities investments of the Funds.
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<PAGE>
The sub-advisory fees paid by each Fund for its last three fiscal years are
shown below.
Fund Fiscal 2000 Fiscal 1999 Fiscal 1998
---- ----------- ----------- -----------
Code of Ethics
The Funds, the Investment Manager and principal underwriter have each adopted
codes of ethics under rule 17j-1 of the Investment Company Act. Board members,
officers of the Funds and employees of the Investment Manager and principal
underwriter are permitted to make personal securities transactions, including
transactions in securities that may be purchased or held by the Funds, subject
to requirements and restrictions set forth in the applicable Code of Ethics. The
Investment Manager's Code of Ethics contains provisions and requirements
designed to identify and address certain conflicts of interest between personal
investment activities and the interests of the Funds. Among other things, the
Investment Manager's Code of Ethics 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 quarterly 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 Investment Manager's Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
Administrative Services. Administrative services are provided to [each/the] Fund
under an administrative services agreement ("administrative agreement") with
KDI. KDI bears all its expenses of providing services pursuant to the
administrative agreement between KDI and [a/the] Fund, including the payment of
service fees. For the services under the administrative agreement, [each/the]
Fund pays KDI an administrative services fee, payable monthly, at the annual
rate of up to 0.25% of average daily net assets of each class of the Fund.
KDI has entered 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 of [a/the] Fund. The
firms provide such office space and equipment, telephone facilities and
personnel as is necessary or beneficial for providing information and services
to their clients. Such services and assistance may include, but are not limited
to, establishing and maintaining accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding [a/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,
normally payable quarterly, at an annual rate of [INSERT SPECIFIC RATE AND
DETAILS].
Administrative services fees paid by [each/the] Fund are set forth below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Administrative Service Fees Paid by Fund
----------------------------------------
-------------------------------------------------------------------------------------------------------------------
Total Service Fees Service Fees Paid by
Fiscal Paid by KDI to KDI
Fund Year Class A Class B Class C KDI to Firms Affiliated Firms
---- ---- ------- ------- ------- ------------ ----------------
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kemper Asian Growth Fund 2000
-------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------------------------------
Kemper Global Blue Chip Fund 2000
-------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Administrative Service Fees Paid by Fund
----------------------------------------
-------------------------------------------------------------------------------------------------------------------
Total Service Fees Service Fees Paid by
Fiscal Paid by KDI to KDI
Fund Year Class A Class B Class C KDI to Firms Affiliated Firms
---- ---- ------- ------- ------- ------------ ----------------
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kemper Global Discovery Fund 2000
-------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------------------------------
Kemper Global Income Fund 2000
-------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------------------------------
Kemper International Fund 2000
-------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------------------------------
Kemper International Research
Fund 2000
-------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------------------------------
Kemper New Europe Fund 2000
-------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------------------------------
</TABLE>
[ADD FOOTNOTES FOR SHORTER PERIODS, EXPENSE REIMBURSEMENT & ETC.]
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for [a/the] Fund. The
administrative services fee payable to KDI [INSERT SPECIFIC RATE AND DETAILS].
The effective administrative services fee rate to be charged against all assets
of [a/the] Fund while this procedure is in effect will depend upon the
proportion of Fund assets that is in accounts for which a firm of record
provides administrative services, as well as, with respect to Class A shares
acquired prior to October 1, 1993, the date when shares representing such assets
were purchased. The Board of a Fund, in its discretion, may approve paying the
fee to KDI at [INSERT SPECIFIC RATE AND DETAILS].
Certain trustees or officers of the Funds are also directors or officers of the
Investment Manager or KDI as indicated under "Officers and Trustees."
[Confirm Custodian, Auditor and Legal Counsel for each fund:
Custodian, Transfer Agent And Shareholder Service Agent. [State Street Bank and
Trust Company ("SSB"), 225 Franklin Street, Boston, Massachusetts 02110], as
custodian, has custody of all securities and cash of [each/the] Fund. It attends
to the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by [each/the] Fund.
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<PAGE>
SSB is also [each/the] Fund's transfer agent and dividend-paying agent. Pursuant
to a services agreement with SSB, Kemper Service Company ("KSvC"), an affiliate
of the Investment Manager, serves as "Shareholder Service Agent" of [each/the]
Fund and, as such, performs all of SSB's duties as transfer agent and dividend
paying agent. SSB receives as transfer agent, and pays to KSvC as follows:
[INSERT SPECIFIC RATE AND DETAILS].
-------------------------------------------------------------------
Fund Fees SSB Paid to KSvC
-------------------------------------------------------------------
Kemper Asian Growth
Fund
-------------------------------------------------------------------
Kemper Global Blue
Chip Fund
-------------------------------------------------------------------
Kemper Global
Discovery Fund
-------------------------------------------------------------------
Kemper Global Income
Fund
-------------------------------------------------------------------
Kemper International
Fund
-------------------------------------------------------------------
Kemper International
Research Fund
-------------------------------------------------------------------
Kemper New Europe Fund
-------------------------------------------------------------------
[ADD FOOTNOTES FOR SHORTER PERIODS, EXPENSE REIMBURSEMENT & ETC.]
Independent Auditors And Reports To Shareholders. The [Funds'/Fund's]
independent auditors, [Ernst & Young LLP, 233 South Wacker Drive, Chicago,
Illinois 60606], audit and report on the [Funds'/Fund's] annual financial
statements, review certain regulatory reports and the [Funds'/Fund's] federal
income tax returns, and perform other professional accounting, auditing, tax and
advisory services when engaged to do so by the [Funds/Fund]. Shareholders will
receive annual audited financial statements and semi-annual unaudited financial
statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601], serves as legal counsel to the Funds .
[Trustees/Directors] and Officers
The officers and trustees of Kemper Asian Growth Fund, Kemper Global Blue Chip
Fund, Kemper Global Income Fund and Kemper International Fund, their birth
dates, their principal occupations and their affiliations, if any, with the
Investment Manager, Scudder UK, the sub-adviser of the Global and International
Funds, and KDI, principal underwriter, are listed below. All persons named as
trustees also serve in similar capacities for other funds advised by the
Investment Manager.
Trustees --
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
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<PAGE>
LINDA C. COUGHLIN (1/1/52), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Zurich Scudder Investments, Inc.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Blvd., Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Zurich Scudder Investments;
formerly, Head of Broker Dealer Division of an unaffiliated investment
management firm during 1997; prior thereto, President of Client Management
Services of an unaffiliated investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI International (research and
development); prior thereto, President and Chief Executive Officer, SRI
International; prior thereto, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) ; Director, PSI Inc., Evergreen Solar, Inc., and Litton Industries.
Officers -- All Funds
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Zurich Scudder Investments.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, Zurich Scudder Investments.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Zurich Scudder Investments.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Zurich Scudder Investments.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Zurich Scudder Investments.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Zurich Scudder Investments.
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<PAGE>
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Zurich Scudder Investments.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Zurich Scudder Investments.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Zurich Scudder Investments.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Zurich Scudder Investments.
Additional Officers for Global Income Fund only:
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Zurich Scudder Investments; formerly,
Executive Vice President and Chief Investment Officer with an unaffiliated
investment management firm from 1988 to June 1997.
JAN C. FALLER (8/18/66), Vice President*, Two International Place, Boston,
Massachusetts; Vice President, Zurich Scudder Investments.
Additional Officers for Asian Fund only:
THERESA GUSMAN (2/29/60), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Zurich Scudder Investments.
TIEN YU SIEH (9/26/69), Senior Vice President*, 345 Park Avenue, New York, New
York, Senior Vice President, Zurich Scudder Investments.
WILLIAM T. TRUSCOTT (9/14/60), Vice President*, 345 Park Avenue, New York, New
York, Managing Director, Zurich Scudder Investments.
Additional Officers for International Fund only:
IRENE CHENG (6/6/54),Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Zurich Scudder Investments.
WILLIAM T. TRUSCOTT (9/14/60), Vice President*, 345 Park Avenue, New York, New
York, Managing Director, Zurich Scudder Investments.
* Interested persons of the Fund as defined in the Investment Company Act of
1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The tables below shows amounts paid
or accrued to those trustees who are not designated "interested persons"
during each Fund's 1999 fiscal year except that the information in the last
column is for calendar year 1999.
75
<PAGE>
Trustees -- Asian, Global and International Funds
<TABLE>
<CAPTION>
Total Compensation
From Funds and
Aggregate Compensation From Funds Kemper Fund Complex
Name of Trustee Fund Name Paid To Trustees**
--------------- --------- ------------------
<S> <C> <C>
John W. Ballantine $ $
Lewis A. Burnham $ $
Donald L. Dunaway* $ $
Robert B. Hoffman $ $
Donald R. Jones $ $
Shirley D. Peterson $ $
William P. Sommers $ $
</TABLE>
* Pursuant to deferred compensation agreements with certain Kemper funds,
deferred amounts accrue interest monthly at a rate equal to the yield of
Zurich Money Funds -- Zurich Money Market Fund. Total deferred fees
(including interest thereon) payable from Asian, Global and International
Funds, respectively are $0, $14,400 and $17,000 to Mr. Dunaway for each
Fund's most recent fiscal year.
** Includes compensation for service on the boards of 26 Kemper funds with 48
fund portfolios. Each trustee currently serves as a trustee of 26 Kemper
Funds with 45 fund portfolios.
As of January 29, 2000, the trustees and officers as a group owned less
than 1% of the then outstanding shares of each Fund and no person owned of
record more than 5% of the outstanding shares of any class of either Fund,
except as shown below:
Kemper Asian Growth Fund
--------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Kemper Global Blue Chip Fund
--------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Kemper Global Discovery Fund
--------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Kemper Global Income Fund
--------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Kemper International Fund
--------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
76
<PAGE>
Kemper International Research Fund
--------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Kemper New Europe Fund
--------------------------------------------------------------------------------
NAME CLASS PERCENTAGE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Officers And Directors
The officers and directors of Kemper International Research Fund, their birth
dates, their principal occupations and their affiliations, if any, with the
Investment Manager, and KDI, the principal underwriter, are listed below. All
persons named as directors also serve in similar capacities for other funds
advised by the Investment Manager:
MARK S. CASADY (9/21/60)* President, Two International Place, Boston,
Massachusetts, Managing Director, Investment Manager; formerly, Institutional
Sales Manager of an unaffiliated mutual fund distributor.
JAMES E. AKINS (10/15/26) Director (15), 2904 Garfield Terrace, N.W.,
Washington, D.C.; Consultant on International, Political and Economic Affairs;
formerly a career United States Foreign Service Officer, Energy Investment
Manager for the White House and United States Ambassador to Saudi Arabia,
1973-76.
JAMES R. EDGAR (07/22/46) Director, 1927 County Road, 150E, Seymour, Illinois;
Distinguished Fellow, Institute of Government and Public Affairs, University of
Illinois; Director, Kemper Insurance Companies; formerly, Governor of the State
of Illinois, 1991-1999.
ARTHUR R. GOTTSCHALK (2/13/25) Director (15), 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) Director (15), 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 Funds.
THOMAS W. LITTAUER (4/26/55)* Vice President, Two International Place, Boston,
Massachusetts; Managing Director, Zurich Scudder Investments, Inc.
FRED B. RENWICK (2/1/30) Director (15), 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director,
TIFF Industrial Program, Inc., Director, the Wartburg Foundation; Chairman
Investment 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.
KATHRYN L. QUIRK (12/3/52)*, Director and Vice President, 345 Park Avenue, New
York, New York; Managing Director, Investment Manager
JOHN G. WEITHERS (8/8/33) Director (15), 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.
77
<PAGE>
PHILIP J. COLLORA (11/15/45)* Vice President and Secretary, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Assistant Secretary,
Investment Manager.
JOYCE E. CORNELL (3/26/44)* Vice President, Two International Place, Boston,
Massachusetts; Managing Director, Zurich Scudder Investments, Inc.
DIEGO ESPINOSA (6/30/62)* Vice President, Two International Place, Boston,
Massachusetts; Senior Vice President, Zurich Scudder Investments, Inc.
JOAN R. GREGORY (8/4/45)* Vice President, 345 Park Avenue, New York, New York;
Vice President, Zurich Scudder Investments, Inc.
TARA C. KENNEY (10/7/60)* Vice President, Two International Place, Boston,
Massachusetts; Senior Vice President, Zurich Scudder Investments, Inc.
ANN M. McCREARY (11/6/56)* Vice President, 345 Park Avenue, New York, New York;
Managing Director, Zurich Scudder Investments, Inc.
SHERIDAN P. REILLY (2/27/52)* Vice President, Two International Place, Boston,
Massachusetts; Senior Vice President, Zurich Scudder Investments, Inc.
M. ISABEL SALTZMAN (12/22/54)* Vice President, Two International Place, Boston,
Massachusetts; Managing Director, Zurich Scudder Investments, Inc.
WILLIAM F. TRUSCOTT (9/14/60)* Vice President, 345 Park Avenue, New York, New
York; Managing Director, Zurich Scudder Investments, Inc.
LINDA J. WONDRACK (9/12/64)* Vice President, Two International Place, Boston,
Massachusetts; Managing Director, Zurich Scudder Investments, Inc.
JOHN R. HEBBLE (6/27/58)*, Treasurer, Two International Place, Boston,
Massachusetts; Senior Vice President, Investment Manager.
BRENDA LYONS (2/21/63)*, Assistant Treasurer, Two International Place, Boston,
Massachusetts; Senior Vice President, Investment Manager.
MAUREEN E. KANE (2/14/62)*, Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Investment Manager; 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).
CAROLINE PEARSON (4/1/62)*, Assistant Secretary, Two International Place,
Boston, Massachusetts; Senior Vice President, Investment Manager; formerly,
Associate, Dechert Price & Rhoads
* Interested persons of the Corporation as defined in the 1940 Act.
Compensation of Officers and Directors
The Directors and Officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those Directors who are not designated "interested persons" by the
Corporation, during the 1999 fiscal year.
78
<PAGE>
<TABLE>
<CAPTION>
Aggregate
Compensation
From all Funds in the
Kemper Global/ Total
International Series, Compensation
Inc., From Kemper Fund
Except for Total Compensation from Complex Paid to
Name of Board Member International Research International Research Board Members(1)
-------------------- ---------------------- ---------------------- ----------------
<S> <C> <C> <C>
James E. Akins.............................. $ $ $
James R. Edgar(2) .......................... $ $ $
Arthur R. Gottschalk (3).................... $ $ $
Frederick T. Kelsey......................... $ $ $
Fred B. Renwick............................. $ $ $
John G. Weithers............................ $ $ $
</TABLE>
(1) Includes compensation for service on the boards of xx Kemper funds with xx
portfolios. Each board member currently serves as a board member of xx
Kemper Funds with xx fund portfolios.
(2) Appointed as director on May 27, 1999
(3) Includes deferred fees. Pursuant to deferred compensation agreements with
certain Kemper funds. deferred amounts accrue interest monthly at a rate
approximate to the yield of Zurich Money Funds -- Zurich Money Market
Fund. Total deferred amounts and interest accrued for the latest fiscal
year for Growth Fund of Spain amounted to $25,000 for Mr. Gottschalk.
The officers and directors of Global Discovery Fund, their birth dates, their
principal occupations and their affiliations, if any, with the Investment
Manager, and the principal underwriter, are listed below. All persons named as
directors also serve in similar capacities for other funds advised by the
Investment Manager:
<TABLE>
<CAPTION>
Position with
Underwriter,
Scudder Investor
Name, Age, and Address Position with Fund Principal Occupation** Services, Inc.
---------------------- ------------------ -------------------- --------------
<S> <C> <C> <C>
Henry P. Becton, Jr. (56) [Trustee/Director] President, WGBH Educational --
WGBH Foundation
125 Western Avenue
Allston, MA 02134
Linda C. Coughlin (48)+* [Trustee/Director] Managing Director of Scudder Senior Vice President
Kemper Investments, Inc.
Dawn-Marie Driscoll (53) [Trustee/Director] Executive Fellow, Center for --
4909 SW 9th Place Business Ethics, Bentley College;
Cape Coral, FL 33914 President, Driscoll Associates
Edgar R. Fiedler (70) [Trustee/Director] Senior Fellow and Economic --
50023 Brogden Counselor, The Conference Board,
Chapel Hill, NC Inc.
Keith R. Fox (45) [Trustee/Director] Private Equity Investor, --
10 East 53rd Street President, Exeter Capital
New York, NY 10022 Management Corporation
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
Position with
Underwriter,
Scudder Investor
Name, Age, and Address Position with Fund Principal Occupation** Services, Inc.
---------------------- ------------------ -------------------- --------------
<S> <C> <C> <C>
Joan E. Spero (55) [Trustee/Director] President, Doris Duke Charitable --
Doris Duke Charitable Foundation Foundation; Department of State -
650 Fifth Avenue Undersecretary of State for
New York, NY 10128 Economic, Business and
Agricultural Affairs (March 1993
to January 1997)
Jean Gleason Stromberg (56) [Trustee/Director] Consultant; Director, Financial --
3816 Military Road, NW Institutions Issues, U.S. General
Washington, D.C. Accounting Office (1996-1997);
Partner, Fulbright & Jaworski Law
Firm (1978-1996)
Jean C. Tempel (56) [Trustee/Director] Managing Director, First Light --
One Boston Place 23rd Floor Capital (venture capital firm)
Boston, MA 02108
Steven Zaleznick (45)* [Trustee/Director] President and CEO, AARP Services, --
601 E Street Inc.
Washington, D.C. 20004
Ann M. McCreary (43) ++ Vice President Managing Director of Scudder --
Kemper Investments, Inc.
John R. Hebble (42)+ Treasurer Senior Vice President of Scudder Assistant Treasurer
Kemper Investments, Inc.
Caroline Pearson (38)+ Assistant Secretary Senior Vice President of Scudder Clerk
Kemper Investments, Inc.;
Associate, Dechert Price & Rhoads
(law firm) 1989 - 1997
John Millette (37)+ Vice President and Vice President of Scudder Kemper --
Secretary Investments, Inc.
</TABLE>
[OTHER OFFICERS ON A PER-FUND BASIS]
* Ms. Coughlin and Mr. Zaleznick are considered by the [Funds/Fund] and
[their/its] counsel to be persons who are "interested persons" of the
Adviser or of the [Trust/Corporation], within the meaning of the
Investment Company Act of 1940, as amended.
** Unless otherwise stated, all of the [Trustee/Director] and officers have
been associated with their respective companies for more than five years,
but not necessarily in the same capacity.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
The [Trustee/Director] and officers of the [Funds/Fund] also serve in similar
capacities with other Scudder Funds.
80
<PAGE>
As of _______________, all [Trustee/Director] and officers of the [Funds/Fund]
as a group owned beneficially (as that term is defined is section 13(d) of the
Securities Exchange Act of 1934) less than 1% of [each/the] Fund.
The officers and directors of Kemper New Europe Fund, their birthdates, their
principal occupations, addresses, and their affiliations, if any, with the
Adviser and KDI are listed below. All persons named as directors also serve in
similar capacities for other funds managed by the Adviser.
James E. Akins (10/15/26), Director, 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, 1973-1976.
James R. Edgar (07/22/46) Director, 1927 County Road, 150E, Seymour, Illinois;
Distinguished Fellow, Institute of Government and Public Affairs, University of
Illinois; Director, Kemper Insurance Companies; formerly, Governor of the State
of Illinois, 1991- 1999.
Arthur R. Gottschalk (2/13/25), Director, 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. Donnelley Corp.; formerly, attorney.
Frederick T. Kelsey (4/25/27), Director, 738 York Court, Northbrook, 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 Funds.
*Thomas W. Littauer (4/26/55), Director and Vice President, Two International
Place, Boston, Massachusetts; Managing Director, Scudder Kemper; formerly, Head
of Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
Fred B. Renwick (2/1/30), Director, 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director;
TIFF Industrial Program, Inc.; Director, The Warburg Foundation; Chairman,
Investment 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 in America.
John G. Weithers (8/8/33), Director, 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.
Officers
*Mark S. Casady (9/21/60), President, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
*Philip J. Collora (11/15/45), Vice President and Secretary, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Scudder Kemper.
*Carol L. Franklin (12/3/52), Vice President, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper
*Ann M. McCreary (11/6/56), Vice President, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
81
<PAGE>
*Kathryn L. Quirk (12/3/52), Vice President, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
*Linda J. Wondrack (9/12/64), Vice President, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
*John R. Hebble (6/27/58), Treasurer, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
*Brenda Lyons (2/21/63), Assistant Treasurer, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
*William F. Truscott (9/14/60)* Vice President, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper Investments, Inc.
*Caroline Pearson (4/1/62), Assistant Secretary, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper.
*Maureen E. Kane (2/14/62), Assistant Secretary, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper.
* Interested persons of the Fund as defined in the 1940 Act.
The directors and officers who are "interested persons" as designated above
receive no compensation from the Fund. The tables below shows amounts estimated
to be paid or accrued to those directors who are not designated "interested
persons" during the Fund's first full fiscal year following its reorganization
to open-end status except that the information in the last column is for
calendar year 2000.
--------------------------------------------------------------------------------
Total Compensation From
Aggregate Kemper Fund Complex Paid
Compensation To Board
Name of Director From Fund Members(2)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) Includes deferred fees, Pursuant to deferred compensation agreements with
the Kemper Fund,. deferred amounts accrue interest monthly at a rate
approximate to the yield of Zurich Money Funds -- Zurich Money Market
Fund. Total deferred fees (including interest thereon) payable from the
Fund to Mr. Gottschalk during the Fund's most recent fiscal year was
$5,400.
(2) Includes compensation for service on the Boards of xx Kemper Funds with xx
fund portfolios. Each Director currently serves as a board member of xx
Kemper funds with xx fund portfolios.
As of January 1, 2000, the directors and officers as a group owned less than 1%
of the then outstanding shares of the Fund .
Principal Underwriter. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606, an affiliate of
the Investment Manager, is the principal underwriter and distributor for the
shares of each Fund and acts as agent of the Fund in the continuous offering of
its shares. KDI bears all of its expenses of providing services pursuant to the
distribution agreement, including the payment of any commissions. Each Fund pays
the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI
82
<PAGE>
pays for the printing and distribution of copies thereof used in connection with
the offering of shares to prospective investors. KDI also pays for supplementary
sales literature and advertising costs.
Each distribution agreement continues in effect from year to year so long as
such continuance is approved for each class at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to a
class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
Investment Company Act of 1940. The agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.
Class A Shares. KDI receives no compensation from the Funds as principal
underwriter for Class A shares and pays all expenses of distribution of each
Fund's Class A shares under the distribution agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of each Fund's shares. The
following information concerns the underwriting commissions paid in connection
with the distribution of each Fund's Class A shares for the fiscal years noted.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Commissions Commissions Commissions Paid
Fiscal Retained By Underwriter Paid To Kemper
Fund Year Underwriter To All Firms Affiliated Firms
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Asian Growth Fund 2000 $ $ --
---------------------------------------------------------------------------------------------
1999 $ $ --
---------------------------------------------------------------------------------------------
1998 $ $ --
---------------------------------------------------------------------------------------------
Kemper Global Blue Chip Fund 2000 $ $ --
---------------------------------------------------------------------------------------------
1999 $ $ --
---------------------------------------------------------------------------------------------
1998 $ $ --
---------------------------------------------------------------------------------------------
Kemper Global Discovery Fund 2000 $ $ --
---------------------------------------------------------------------------------------------
1999 $ $ --
---------------------------------------------------------------------------------------------
1998 $ $ --
---------------------------------------------------------------------------------------------
Kemper Global Income Fund 2000 $ $ --
---------------------------------------------------------------------------------------------
1999 $ $ --
---------------------------------------------------------------------------------------------
1998 $ $ --
---------------------------------------------------------------------------------------------
Kemper International Fund 2000 $ $ --
---------------------------------------------------------------------------------------------
1999 $ $ --
---------------------------------------------------------------------------------------------
1998 $ $ --
---------------------------------------------------------------------------------------------
Kemper International 2000 $ $ --
Research Fund
---------------------------------------------------------------------------------------------
1999 $ $ --
---------------------------------------------------------------------------------------------
1998 $ $ --
---------------------------------------------------------------------------------------------
Kemper New Europe Fund 2000 $ $ --
---------------------------------------------------------------------------------------------
1999 $ $ --
---------------------------------------------------------------------------------------------
1998 $ $ --
---------------------------------------------------------------------------------------------
</TABLE>
Class B Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund under a Rule 12b-1 Plan, payable monthly, at the annual
rate of 0.75% of average daily net assets of each Fund attributable to Class B
shares. This fee is accrued daily as an expense of Class B shares. KDI also
receives any contingent deferred sales charges. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales
83
<PAGE>
Charge -- Class B Shares." KDI currently compensates firms for sales of Class B
shares at a commission rate of 3.75%.
Class C Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund under a Rule 12b-1 Plan, payable monthly, at the annual
rate of 0.75% of average daily net assets of each Fund attributable to Class C
shares. This fee is accrued daily as an expense of Class C shares. KDI currently
advances to firms the first year distribution fee at a rate of 0.75% of the
purchase price of Class C shares. For periods after the first year, KDI
currently pays firms for sales of Class C shares a distribution fee, payable
quarterly, at an annual rate of 0.75% of net assets attributable to Class C
shares maintained and serviced by the firm and the fee continues until
terminated by KDI or a Fund. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charges--Class C Shares".
Class B Shares And Class C Shares. Each Fund has adopted a plan under Rule 12b-1
that provides for fees payable as an expense of the Class B shares and Class C
shares that are used by KDI to pay for distribution and services for those
classes. Because 12b-1 fees are paid out of fund assets on an ongoing basis,
they will, over time, increase the cost of an investment and cost more than
other types of sales charges.
Expenses of the Funds and of KDI, in connection with the Rule 12b-1 Plans for
the Class B and Class C shares are set forth below. A portion of the marketing,
sales and operating expenses shown below could be considered overhead expense.
Other Distribution Expenses Paid By Underwriter -- Class B Share
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Total Commissions
Distribution Contingent Commissions Paid By
Fees Paid By Deferred Paid By Underwriter Advertising Marketing Misc. Interest
Fund Class Fiscal Fund To Sales Charges Underwriter To Affiliated and Prospectus and Sales Operating Fund
B Shares Year Underwriter To Underwriter To Firms Firms Literature Printing Expenses Expenses Expenses
-------- ---- ----------- ----------- -------- ----- ---------- -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asian 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Blue Chip 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Discovery 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Income 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Int'l 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Research 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
New Europe 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
84
<PAGE>
Other Distribution Expenses Paid By Underwriter -- Class C Share
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Total Commissions
Distribution Contingent Commissions Paid By
Fees Paid By Deferred Paid By Underwriter Advertising Marketing Misc. Interest
Fund Class Fiscal Fund To Sales Charges Underwriter To Affiliated and Prospectus and Sales Operating Fund
C Shares Year Underwriter To Underwriter To Firms Firms Literature Printing Expenses Expenses Expenses
-------- ---- ----------- ----------- -------- ----- ---------- -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asian 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Blue Chip 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Discovery 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Income 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Int'l 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
Research 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
New Europe 2000 $ $ $ 0 $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1999 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
1998 $ $ $ -- $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
If a Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of a Fund to make payments to KDI pursuant to the Plan will cease
and the Fund will not be required to make any payments past the termination
date. Thus, there is no legal obligation for the Fund to pay any expenses
incurred by KDI in excess of its fees under a Plan, if for any reason the Plan
is terminated in accordance with its terms. Future fees under a Plan may or may
not be sufficient to reimburse KDI for its expenses incurred.
In order to reduce the amount of mail you receive and to help reduce fund
expenses, we generally send a single copy of any shareholder report and
prospectus to each household. If you do not want the mailing of these documents
to be combined with those for other members of your household, please call
1-800-621-1048.
TAXES
Taxes. Each Fund intends to continue 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, each 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 gains in
excess of net long-term capital losses).
If for any taxable year a Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of a Fund's
earnings and profits, and would be eligible for the dividends-received deduction
in the case of corporate shareholders.
Each 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
85
<PAGE>
representing at least 98% of the Fund's ordinary income for each 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 a Fund.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income.
If any net realized long-term capital gains in excess of net realized short-term
capital losses are retained by a Fund for reinvestment, requiring federal income
taxes to be paid thereon by 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 long-term capital gains , will be
able to claim a relative share of federal income taxes paid by a 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 such reported gains and the individual tax credit.
Dividends from domestic corporations may comprise some part of the gross income
of the Funds. To the extent that such dividends constitute a portion of a 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 a 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 are taxable to shareholders as long-term
capital gains , regardless of the length of time the shares of a 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.
If shares are held in a tax-deferred account, such as a retirement plan, income
and gain will not be taxable each year. Instead, the taxable portion of amounts
held in a tax-deferred account generally will be subject to tax as ordinary
income only when distributed from that account.
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.
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Distributions by a Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Dividend and interest income received by a Fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Each Fund may qualify for and make the election permitted under Section 853 of
the Code so that shareholders may (subject to limitations) be able to claim a
credit or deduction on their federal income tax return form and may be required
to treat as part of the amounts distributed to them, their pro rata portion of
qualified taxes paid by the Fund to foreign countries (which taxes related
primarily to investment income) Each Fund may make an election under Section 853
of the Code, provided that more than 50% of the value of the total assets of the
Fund at the close of the taxable year consists of securities as foreign
corporations. The foreign tax credit available to shareholders is subject to
certain limitations imposed by the Code, except in the case of certain electing
individual taxpayers who have limited creditable foreign taxes and no foreign
source income other than passive investment-type income. Furthermore, the
foreign tax credit is eliminated with respect to foreign taxes withheld on
dividends if the dividend-paying shares or the shares of the Fund are held by
the Fund or the shareholders, as the case may be, for less than 16 days. (46
days in the case of preferred shares) during the 30-day period (90-day period
for preferred shares) beginning 15 days (45 days for preferred shares) before
the shares become ex-dividend. In addition, if a Fund fails to satisfy these
holding period requirements, it cannot elect under Section 853 to pass through
to shareholders the ability to claim a deduction for the related foreign taxes.
Each Fund may invest in shares of certain foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). If
a Fund receives a so-called "excess distribution" with respect to PFIC stock,
the Fund itself may be subject to a tax on a portion of the excess distribution.
Certain distributions from a PFIC as well as gains from the sale of the PFIC
shares are treated as "excess distributions." In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which a Fund held the PFIC shares. Each Fund will be subject to
tax on the portion, if any, of an excess distribution that is allocated to prior
Fund taxable years and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Excess distributions allocated
to the current taxable year are characterized as ordinary income even though,
absent application of the PFIC rules, certain excess distributions might have
been classified as capital gain.
A Fund may make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U.S. federal income taxation.
At the end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign company's stock exceeds the Fund's adjusted basis in these shares; any
mark to market losses and any loss from an actual disposition of shares would be
deductible as ordinary loss to the extent of any net mark to market gains
included in income in prior years. The effect of the election would be to treat
excess distributions and gain on dispositions as ordinary income which is not
subject to a fund level tax when distributed to shareholders as a dividend.
Alternatively, 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.
Equity options (including covered call options on portfolio stock) written or
purchased by a Fund will be subject to tax under Section 1234 of the Code. In
general, no loss is recognized by a Fund upon payment of a
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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 a Fund's holding period
for the option and, in the case of an exercise of the option, on a 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 a Fund's portfolio. If a 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 a Fund is not a taxable transaction for
a Fund.
Many futures and forward contracts entered into by a Fund and all listed
nonequity options written or purchased by a 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 a 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., treated as if such positions were closed out at their
closing price on such day), with any resulting gain or loss recognized as 60%
long-term and 40% short-term. Under Section 988 of the Code, discussed below,
foreign currency gain or loss from foreign currency-related forward contracts,
certain futures and options and similar financial instruments entered into or
acquired by a Fund will be treated as ordinary income or loss. 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 a
Fund's portfolio.
Positions of a 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 a Fund's risk of loss with respect to such stock could be treated as
a "straddle" which is governed by Section 1092 of the Code, the operation of
which may cause deferral of losses, adjustments in the holding periods of stock
or securities and conversion of short-term capital losses into long-term capital
losses. An exception to these straddle rules exists for any "qualified covered
call options" on stock written by a Fund.
Positions of a 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 a Fund's risk of loss
with respect to such other position will be treated as a "mixed straddle."
Although mixed straddles are subject to the straddle rules of Section 1092 of
the Code, certain tax elections exist for them which reduce or eliminate the
operation of these rules. A 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 a 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 a Fund's taxable year, if certain
conditions are met.
Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
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Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency and the time a 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 options
contracts, gains or losses attributable to fluctuations in the value of 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 a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income.
If a 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 a
Fund each year, even though a 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 a Fund which must be
distributed to shareholders in order to maintain the qualification of a Fund as
a regulated investment company and to avoid federal income tax at a Fund level.
In addition, if a Fund invest 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 deduction for dividends
received by corporations. In such an event, properly designated dividends of
investment company taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of the accrued original
issue discount, may be eligible for the deduction received by corporations.
Each 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 a
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 sale or exchange of shares is a taxable event that may result in gain or loss
that will be a capital gain or loss held by the shareholder as a capital asset,
and may be long-term or short-term depending upon the shareholder's holding
period for the shares. A shareholder who has redeemed shares of a Fund or any
other Kemper Mutual Fund (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. If redeemed shares were held less than 91 days, then the lesser of
(a) the sales charge waived on the reinvested shares, or (b) the sales charge
incurred on the redeemed shares, is included in the basis of the reinvested
shares and is not included in the basis of the redeemed shares. If a shareholder
realizes a loss on the redemption or exchange of a Fund's shares and reinvests
in shares of the same Fund within 30 days before or after the redemption or
exchange, the transactions may be subject to the wash sale rules resulting in a
postponement of the recognition of such loss for federal income tax purposes. An
exchange of a Fund's shares for shares of another fund is treated as a
redemption and reinvestment for federal income tax purposes upon which gain or
loss may be recognized.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends and periodic
investment and redemption programs. Information for income tax purposes will be
provided after the end of the calendar year. Shareholders are encouraged to
retain copies of their account confirmation
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statements or year-end statements for tax reporting purposes. However, those who
have incomplete records may obtain historical account transaction information at
a reasonable fee.
When more than one shareholder resides at the same address, certain reports and
communications to be delivered to such shareholders may be combined in the same
mailing package, and certain duplicate reports and communications may be
eliminated. Similarly, account statements to be sent to such shareholders may be
combined in the same mailing package or consolidated into a single statement.
However, a shareholder may request that the foregoing policies not be applied to
the shareholder's account. In January of each year a Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of a 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.
Shareholders of a Fund may be subject to state, local and foreign taxes on Fund
distributions and disposition of Fund shares. Shareholders should consult their
tax advisers about the application of the provisions of tax law in light of
their particular tax situations.
FINANCIAL STATEMENTS
The financial statements appearing in each Fund's Annual Report to Shareholders
are incorporated herein by reference. Each Fund's Annual Report accompanies this
Statement of Additional Information.
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APPENDIX -- RATINGS OF INVESTMENTS
Standard & Poor's Corporation Bond Ratings
AAA. Debt rated AAA had the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC and C. Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Moody's Investors Service, Inc., Bond Ratings
AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
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Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Fitch Long-Term Debt Ratings
AAA. Highest credit quality. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA. Very high credit quality. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A. High credit quality. 'A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB. Good credit quality. 'BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
BB. Speculative. 'BB' ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B. Highly speculative. 'B' ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C. High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A 'CC' rating indicates that default of some
kind appears probable. 'C' ratings signal imminent default.
DDD, DD, D. Default. The ratings of obligations in this category are based on
their prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines.
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'DDD' obligations have the highest potential for recovery, around 90%-100% of
outstanding amounts and accrued interest. 'DD' indicates potential recoveries in
the range of 50%-90%, and 'D' the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated 'DDD' have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated 'DD' and 'D' are generally undergoing a formal
reorganization or liquidation process; those rated 'DD' are likely to satisfy a
higher portion of their outstanding obligations, while entities rated 'D' have a
poor prospect for repaying all obligations.
Fitch Short-Term Debt Ratings
F1. Highest credit quality. Indicates the Best capacity for timely payment of
financial commitments; may have an added "+" to denote any exceptionally strong
credit feature.
F2. Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3. Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
B. Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C. High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D. Default. Denotes actual or imminent payment default.
Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Ratings Services ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is rated A-1 or A-2.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. ("Moody's"). Among the factors
considered by it in assigning ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or 2.
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Municipal Notes
Moody's: The highest ratings for state and municipal short-term obligations are
"MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3" in the case of
an issue having a variable rate demand feature). Notes rated "MIG 1" or "VMIG 1"
are judged to be of the "best quality". Notes rated "MIG 2" or "VMIG 2" are of
"high quality," with margins or protection "ample although not as large as in
the preceding group". Notes rated "MIG 3" or "VMIG 3" are of "favorable
quality," with all security elements accounted for but lacking the strength of
the preceding grades.
S&P: The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest". Notes issued with "overwhelming safety characteristics"
will be rated "SP-1+". The "SP-2" rating reflects a "satisfactory capacity" to
pay principal and interest.
Fitch: The highest ratings for state and municipal short-term obligations are
"F-1+," "F-1," and "F-2".
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KEMPER GLOBAL INCOME FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
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<S> <C> <C> <C>
(a) (1) Amended and Restated Agreement and Declaration of Trust
(Incorporated by reference to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 28, 1995)
(b) By-laws
(Incorporated by reference to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 27, 1996)
(c) (1) Text of Share Certificate
(Incorporated by reference to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 28, 1995)
(c) (2) Amended and Restated Written Instrument Establishing and Designating
Separate Classes of Shares
(Incorporated by reference to Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 21, 1997)
(d) (1) Investment Management Agreement
(Incorporated by reference to Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 26, 1998)
(d) (2) Investment Management Agreement between the Registrant and Scudder Kemper
Investments, Inc., dated September 7, 1998
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998)
(d) (3) Sub-Advisory Agreement
(Incorporated by reference to Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 26, 1998)
(d) (4) Sub-Advisory Agreement between Scudder Kemper Investments, Inc., on behalf
of Kemper Global Income Fund, and Scudder Investments (U.K.) Limited, dated
May 21, 1998
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998)
(d) (5) Sub-Advisory Agreement between Scudder Kemper Investments, Inc., on behalf
of Kemper Global Income Fund, and Scudder Investments
Part C - Page 1
<PAGE>
(U.K.) Limited, dated September 7, 1998
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998.)
(e) (1) Underwriting and Distribution Services Agreement
(Incorporated by reference to Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 26, 1998)
(e) (2) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc., dated August 1, 1998
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998)
(e) (3) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc., dated September 7, 1998
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998)
(e) (4) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc., dated October 1, 1999.
(Incorporated by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
March 1, 2000.)
(e) (5) Selling Group Agreement
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998)
(f) Inapplicable.
(g) (1) Custody Agreement (Form 1)
(Incorporated by reference to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 27, 1996)
(g) (2) Foreign Custody Agreement (Form 2)
(Incorporated by reference to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 28, 1995)
(g) (3) Custody Agreement between the Registrant and The Chase Manhattan Bank dated
November 17, 1999.
(Incorporated by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
March 1, 2000.)
(h) (1) Agency Agreement
Part C - Page 2
<PAGE>
(Incorporated by reference to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 28, 1995)
(h) (2) Supplement to Agency Agreement
(Incorporated by reference to Post-Effective Amendment No. 12, filed with
the SEC on February 26, 1999)
(h) (3) Administrative Services Agreement
(Incorporated by reference to Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 26, 1998)
(h) (4) Amended Fee Schedule for Administrative Services Agreement dated January 1,
2000.
(Incorporated by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
March 1, 2000.)
(h) (5) Fund Accounting Agreement
(Incorporated by reference to Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 26, 1998)
(i) Opinion of Counsel
To be filed by amendment.
(j) Report and Consent of Independent Auditors
To be filed by amendment.
(k) Inapplicable.
(l) Inapplicable.
(m) (1) Amended and Restated 12b-1 Plan (Class B Shares) between the Registrant and
Kemper Distributors, Inc., dated August 1, 1998
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998)
(m) (2) Amended and Restated 12b-1 Plan (Class C Shares) between the Registrant and
Kemper Distributors, Inc., dated August 1, 1998
(Incorporated by reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
December 29, 1998)
(n) Multi-Distribution System Plan
(Incorporated by reference to Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on Form N-1A; filed with the SEC on
February 21, 1997)
</TABLE>
Part C - Page 3
<PAGE>
Item 24. Persons Controlled by or under Common Control with Fund.
-------- --------------------------------------------------------
None
Item 25. Indemnification.
-------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Item 26. Business and Other Connections of Investment Adviser
-------- ----------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Name Business and Other Connections of Board of Directors of Registrant's Adviser
---- ----------------------------------------------------------------------------
Part C - Page 4
<PAGE>
<S> <C>
Stephen R. Beckwith Treasurer, Scudder Kemper Investments, Inc.**
Director, Kemper Service Company
Director, Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director and Treasurer, 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**
Director and Chairman, Scudder Threadneedle International Ltd.
Director, Scudder Kemper Holdings (UK) Ltd. oo
Director and President, Scudder Realty Holdings Corporation *
Director, Scudder, Stevens & Clark Overseas Corporation o
Director and Treasurer, Zurich Investment Management, Inc. xx
Director and Treasurer, Zurich Kemper Investments, Inc.
Lynn S. Birdsong Director, Vice President and Chief Investment Officer, Scudder Kemper Investments, Inc. **
Director and Chairman, Scudder Investments (Luxembourg) S.A. #
Director, Scudder Investments (U.K.) Ltd. oo
Director and Chairman of the Board, Scudder Investments Asia, Ltd. ooo
Director and Chairman, Scudder Investments Japan, Inc. +
Senior Vice President, Scudder Investor Services, Inc.
Director and Chairman, Scudder Trust (Cayman) Ltd. @@@
Director, Scudder, Stevens & Clark Australia x
Director and Vice President, Zurich Investment Management, Inc. xx
Director and President, Scudder, Stevens & Clark Corporation **
Director and President, Scudder , Stevens & Clark Overseas Corporation o
Director, Scudder Threadneedle International Ltd.
Director, Korea Bond Fund Management Co., Ltd. @@
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company xxx
Nicholas Bratt Director and Vice President, Scudder Kemper Investments, Inc.**
Vice President, Scudder MAXXUM Company***
Vice President, Scudder, Stevens & Clark Corporation**
Vice President, Scudder, Stevens & Clark Overseas Corporation 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 xxx
Director, ZKI Holding Corporation xx
Part C - Page 5
<PAGE>
Harold D. Kahn Chief Financial Officer, Scudder Kemper Investments, Inc.**
Kathryn L. Quirk Director and Secretary, Scudder, Stevens & Clark Overseas Corporation o
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, Chief Legal Officer and Secretary, Scudder Financial Services,
Inc.*
Director, Korea Bond Fund Management Co., Ltd. @@
Director, Scudder Threadneedle International Ltd.
Director, Chairman of the Board and Secretary, Scudder Investments Canada, Ltd.
Director, Scudder Investments Japan, Inc. +
Director and Secretary, Scudder Kemper Holdings (UK) Ltd. oo
Director and Secretary, Zurich Investment Management, Inc. xx
Director, Secretary, Chief Legal Officer and Vice President, Kemper Distributors, 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 o
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc. @
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
Director, Scudder Threadneedle International Ltd. oo
Director, Scudder Investments Japan, Inc. +
Director, Scudder Kemper Holdings (UK) Ltd. oo
President and Director, Zurich Investment Management, Inc. xx
Director and Deputy Chairman, Scudder Investment Holdings, Ltd.
</TABLE>
* Two International Place, Boston, MA
@ 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
@@@ Grand Cayman, Cayman Islands, British West Indies
o 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
xxx 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
oo 1 South Place 5th floor, London EC2M 2ZS England
ooo One Exchange Square 29th Floor, Hong Kong
+ Kamiyachyo Mori Building, 12F1, 4-3-20, Toranomon,
Minato-ku, Tokyo 105-0001
x Level 3, 5 Blue Street North Sydney, NSW 2060
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.
Part C - Page 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)
Name Positions and Offices with Positions and
---- Kemper Distributors, Inc. Offices with Registrant
------------------------- -----------------------
<S> <C> <C>
Thomas V. Bruns President None
Linda C. Coughlin Director and Vice Chairman None
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer and Vice President
James J. McGovern Chief Financial Officer and Treasurer None
Linda J. Wondrack Vice President and Chief Compliance Officer Vice President
Paula Gaccione Vice President None
Michael E. Harrington Managing Director None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and Secretary
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director and Chairman President
Terrence S. McBride Vice President None
Robert Froelich Managing Director None
C. Perry Moore Senior Vice President and Managing Director None
Lorie O'Malley Managing Director None
William F. Glavin Managing Director None
Gary N. Kocher Managing Director None
Susan K. Crenshaw Vice President None
Johnston A. Norris Managing Director and Senior Vice President None
John H. Robison, Jr. Managing Director and Senior Vice President None
Robert J. Guerin Vice President None
Part C - Page 7
<PAGE>
Kimberly S. Nassar Vice President None
Scott B. David Vice President None
Richard A. Bodem Vice President None
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
-------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of the Registrant's investment adviser, Scudder
Kemper Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at
the offices of the Registrant's principal underwriter, Kemper Distributors,
Inc., 222 South Riverside Plaza, Chicago, Illinois 60606; or, in the case of
records concerning shareholder services functions, at the offices of the
shareholder service agent, Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105; or, in the case of records concerning custodial functions, at
the offices of the custodian, Brown Brothers Harriman & Co., 40 Water Street,
Boston, Massachusetts 02109.
Item 29. Management Services.
-------- --------------------
Inapplicable.
Item 30. Undertakings.
-------- -------------
Inapplicable.
Part C - Page 8
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant pursuant to Rule 485(a) under the
Securities Act of 1933 has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston and Commonwealth of Massachusetts, on the 26th day of December, 2000.
KEMPER GLOBAL INCOME FUND
By /s/Mark S. Casady
-----------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on December 26, 2000 on behalf of
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/John W. Ballantine
--------------------------------------
John W Ballantine* Trustee December 26, 2000
/s/Lewis A. Burnham
--------------------------------------
Lewis A. Burnham* Trustee December 26, 2000
/s/Linda C. Coughlin
--------------------------------------
Linda C. Coughlin** Trustee December 26, 2000
/s/Donald L. Dunaway
--------------------------------------
Donald L. Dunaway* Trustee December 26, 2000
/s/Robert B. Hoffman
--------------------------------------
Robert B. Hoffman* Trustee December 26, 2000
/s/Donald R. Jones
--------------------------------------
Donald R. Jones* Trustee December 26, 2000
/s/Thomas W. Littauer
--------------------------------------
Thomas W. Littauer* Trustee December 26, 2000
/s/ Shirley D. Peterson
--------------------------------------
Shirley D. Peterson* Trustee December 26, 2000
/s/ William P. Sommers
--------------------------------------
William P. Sommers* Trustee December 26, 2000
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/John R. Hebble
--------------------------------------
John R. Hebble Treasurer (Principal Financial December 26, 2000
and Accounting Officer)
</TABLE>
By: /s/Philip J. Collora
--------------------
Philip J. Collora
* Philip J. Collora signs this document pursuant to powers of attorney
contained in Post-Effective Amendment No. 10 to the Registration
Statement, filed February 26, 1998, and Post-Effective Amendment No. 13,
filed December 26, 1999.
** Philip J. Collora signs this document pursuant to powers of attorney
contained in Post-Effective Amendment No. 14 to the Registration
Statement, filed March 1, 2000.
2
<PAGE>
File No. 33-29371
File No. 811-5829
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 15
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 16
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
KEMPER GLOBAL INCOME FUND
Part C - Page 1
<PAGE>
KEMPER GLOBAL INCOME FUND
EXHIBIT INDEX
To be filed by amendment.
Part C - Page 2
