<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1995.
1933 ACT REGISTRATION NO. 33-30876
1940 ACT REGISTRATION NO. 811-5896
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 21 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 23 /X/
</TABLE>
(Check appropriate box or boxes)
------------------
KEMPER TARGET EQUITY FUND
(Exact name of Registrant as Specified in Charter)
120 South LaSalle Street, Chicago, Illinois 60603
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 781-1121
<TABLE>
<S> <C>
Philip J. Collora With a copy to:
Vice President and Secretary Charles F. Custer
Kemper Target Equity Fund Vedder, Price, Kaufman & Kammholz
120 South LaSalle Street 222 North LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60601
(Name and Address of Agent for Service)
</TABLE>
Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Rule 24f-2 Notice for Registrant's fiscal year ended June 30, 1995
was filed on or about August 22, 1995.
It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on October 25, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) 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> 2
EXPLANATORY NOTE
Kemper Target Equity Fund ("Registrant") is a series fund with seven series
currently established: Kemper Retirement Fund Series I, 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 and Kemper
Worldwide 2004 Fund. Shares of Kemper Retirement Fund Series I-V are no longer
offered and sold to the public. Shares of Kemper Retirement Fund Series VI and
Kemper Worldwide 2004 Fund are currently offered and sold to the public. The
purpose of this Amendment to the Registration Statement of Registrant on Form
N-1A is (a) to amend the Registrant Statement of Registrant with respect to all
series pursuant to Rule 8b-16 of the Investment Company Act of 1940 and (b) to
amend the Registration Statement of Registrant with respect to Kemper Retirement
Fund Series VI and Kemper Worldwide 2004 Fund to bring the contents thereof into
compliance with Section 10(a)(3) of the Securities Act of 1933.
<PAGE> 3
KEMPER RETIREMENT FUND SERIES I ("SERIES I")
KEMPER RETIREMENT FUND SERIES II ("SERIES II")
KEMPER RETIREMENT FUND SERIES III ("SERIES III")
KEMPER RETIREMENT FUND SERIES IV ("SERIES IV")
KEMPER RETIREMENT FUND SERIES V ("SERIES V")
PART A:
INFORMATION REQUIRED IN A PROSPECTUS
ITEM 1. COVER PAGE
Inapplicable.
ITEM 2. SYNOPSIS
Inapplicable.
ITEM 3. CONDENSED FINANCIAL INFORMATION
Inapplicable.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
Reference is made to the sections entitled "Summary," "Investment
Objectives, Policies and Risk Factors" and "Capital Structure" in the Kemper
Retirement Fund Series VI prospectus filed herewith, except that the Maturity
Date for Series I is November 15, 1999, for Series II is August 15, 2000, for
Series III is February 15, 2002, for Series IV is February 15, 2003, for Series
V is November 15, 2004 and shares of Series I, Series II, Series III, Series IV
and Series V are no longer available for purchase.
ITEM 5. MANAGEMENT OF THE FUND
Reference is made to the sections entitled "Summary" and "Investment
Manager and Underwriter" in the Kemper Retirement Fund Series V prospectus filed
herewith except that shares were sold to the public during Offering Periods that
ended on or about the dates indicated: Series I - August 29, 1990, Series II -
March 9, 1992, Series III - January 15, 1993, Series IV - November 15, 1993 and
Series V - April 30, 1995.
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Inapplicable.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
Reference is made to the sections entitled "Summary," "Investment
Objectives, Policies and Risk Factors," "Dividends and Taxes," "Net Asset
Value," "Purchase of Shares" and "Capital Structure" in the Kemper Retirement
Fund Series VI prospectus filed herewith, except that the shares of Series I,
Series II, Series III, Series IV and Series V are no longer available for
purchase.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
Reference is made to the sections entitled "Summary," "Purchase of Shares,"
"Investment Manager and Underwriter" and "Special Features" in the Kemper
Retirement Fund Series VI prospectus filed herewith, except that shares of
Series I, Series II, Series III, Series IV and Series V are no longer available
for purchase.
ITEM 8. REDEMPTION OR REPURCHASE
Reference is made to the sections entitled "Summary" and "Redemption or
Repurchase of Shares" in the Kemper Retirement Fund Series VI prospectus filed
herewith, except that shares of Series I, Series II, Series III, Series IV and
Series V are no longer available for purchase.
ITEM 9. PENDING LEGAL PROCEEDINGS
Inapplicable.
A-1
<PAGE> 4
PART B:
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE
Reference is made to the Cover Page in the Kemper Retirement Fund Series VI
Statement of Additional Information filed herewith.
ITEM 11. TABLE OF CONTENTS
Reference is made to the section entitled "Table of Contents" in the Kemper
Retirement Fund Series VI Statement of Additional Information filed herewith.
ITEM 12. GENERAL INFORMATION AND HISTORY
Inapplicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES
Reference is made to the sections entitled "Investment Restrictions" and
"Investment Policies and Techniques" in the Kemper Retirement Fund Series VI
Statement of Additional Information filed herewith. In addition, neither Series
I, Series II, Series III, Series IV nor Series V borrowed as permitted by
investment restriction number four during the latest fiscal year.
ITEM 14. MANAGEMENT OF THE FUND
Reference is made to the sections entitled "Investment Manager and
Underwriter" and "Officers and Trustees" in the Kemper Retirement Fund Series VI
Statement of Additional Information filed herewith, except for the following:
a. The table below shows amounts paid to those trustees who are not
designated "interested persons" during the Series' 1995 fiscal year
except that the information in the last column is for calendar year
1994.
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT BENEFITS KEMPER FUNDS
COMPENSATION ACCRUED AS PART OF PAID TO
NAME OF TRUSTEE FROM SERIES I-V(3) FUND EXPENSES TRUSTEES(2)
- ----------------------------------------------- ------------------ ------------------- ------------
<S> <C> <C> <C>
James B. Akins................................. $ 15,000 $ 0 $ 66,600
Arthur R. Gottschalk(1)........................ $ 19,200 $ 0 $ 72,000
Frederick T. Kelsey(1)......................... $ 19,900 $ 0 $ 73,800
Fred B. Renwick................................ $ 15,000 $ 0 $ 66,600
John B. Tingleff............................... $ 17,000 $ 0 $ 70,500
John G. Weithers............................... $ 17,000 $ 0 $ 70,100
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Market Fund--Money
Market Portfolio. Total deferred amounts and interest accrued through June
30, 1995 are $28,800 and $39,000 for Messrs. Gottschalk and Kelsey,
respectively.
(2) Includes estimated compensation for service for calendar year 1994 on the
boards of 11 Kemper funds with 25 fund portfolios and amounts for new funds
as if the fund had existed at the beginning of the year and, for Kemper
Dreman Fund, Inc., as if it had been affiliated with the Kemper funds in
1994 and the Board Members had been such for all the Kemper funds during the
period.
(3) Estimated compensation that assumes all Board Members served on Board for
all of 1995 fiscal year.
B-1
<PAGE> 5
b. As of September 29, 1995, the trustees and officers of Registrant as a
group owned less than 1% of the then outstanding shares of each series
of Registrant.
c. As of September 29, 1995, no person owned of record more than 5% of the
shares of Series I, Series II, Series III, Series IV or Series V except
as noted below:
<TABLE>
<CAPTION>
NAME & ADDRESS PERCENTAGE SERIES
---------------------------------------------------------------- ---------- -----------
<S> <C> <C>
EVEREN Clearing Corp............................................ (7.90%) Series I
77 W Wacker Drive (5.30%) Series II
Chicago, IL (5.30%) Series IV
Donaldson Lufkin Jenrette....................................... (5.89%) Series III
P.O. Box 2052 (5.64%) Series V
Jersey City, NJ
National Financial Svcs Corp.................................... (5.16%) Series IV
One World Financial Center (7.41%) Series V
200 Liberty Street
New York, NY
</TABLE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Reference is made to the section entitled "Officers and Trustees" in the
Kemper Retirement Fund Series VI Statement of Additional Information filed
herewith, except that no person owned of record more than 5% of the outstanding
shares of any series.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
Reference is made to the section entitled "Investment Manager and
Underwriter" in the Kemper Retirement Fund Series VI Statement of Additional
Information filed herewith, except for the following:
a. During the fiscal years ended June 30, 1995, 1994 and 1993, KFS received
management fees from Series I aggregating $514,000, $593,000 and
$605,000, respectively.
b. During the fiscal years ended June 30, 1995, 1994 and and 1993, KFS
received management fees from Series II aggregating $848,000, $984,000
and $987,000, respectively.
c. During the fiscal years ended June 30, 1995, 1994 and 1993 and the
fiscal period from March, KFS received management fees from Series III
aggregating $604,000, $703,000 and $588,000 and $50,000 respectively.
d. During the fiscal years ended June 30, 1995 and 1994 and the fiscal
period from January 15, 1993 to June 30, 1993, KFS received management
fees from Series IV aggregating $731,000, $730,000 and $68,000,
respectively.
e. During the fiscal year ended June 30, 1995 and the fiscal period from
November 15, 1993 to June 30, 1994, KFS received management fees from
Series V aggregating $514,000 and $117,000, respectively.
f. During the fiscal year ended June 30, 1995, KDI (or its predecessor)
received administrative service fees from Series I, Series II, Series
III, Series IV and Series V aggregating $1,567,000 and paid service fees
to firms in the amount of $1,567,000, including $239,000 paid to firms
affiliated with KFS.
g. During the fiscal year ended June 30, 1995, Series I, Series II, Series
III, Series IV and Series V incurred custodian and transfer agent fees
aggregating $845,000 to Investors Fiduciary Trust Company ("IFTC") and
IFTC remitted shareholder service fees in the amount of $698,000 to
Kemper Service Company as Shareholder Service Agent.
B-2
<PAGE> 6
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
Reference is made to the section entitled "Portfolio Transactions" in the
Kemper Retirement Fund Series VI Statement of Additional Information filed
herewith, except for the following:
a. During the fiscal year ended June 30, 1995, Series I paid total
portfolio brokerage commissions of $197,000 and, and of this amount, 85%
was allocated to broker-dealers on the basis of research information or
sales of Kemper Mutual Fund shares and during the fiscal years ended
June 30, 1994 and 1993, Series I paid portfolio brokerage commissions of
$223,000 and $257,000, respectively.
b. During the fiscal year ended June 30, 1995, Series II paid total
portfolio brokerage commissions of $236,000 and, and of this amount, 84%
was allocated to broker-dealers on the basis of research information or
sales of Kemper Mutual Fund shares and during the fiscal years ended
June 30, 1994 and 1993, Series II paid portfolio brokerage commissions
of $285,000 and $322,000, respectively.
c. During the fiscal year ended June 30, 1995, Series III paid total
portfolio brokerage commissions of $188,000 and, and of this amount, 84%
was allocated to broker-dealers on the basis of research information or
sales of Kemper Mutual Fund shares and during the fiscal years ended
June 30, 1994 and 1993, Series III paid portfolio brokerage commissions
of $209,000 and $243,000, respectively.
d. During the fiscal year ended June 30, 1995, Series IV paid total
portfolio brokerage commissions of $196,000 and of this amount 84% was
allocated to broker-dealers on the basis of research information or
sales of Kemper Mutual Fund shares and during the fiscal year ended June
30, 1994 and the fiscal period from January 15, 1993 to June 30, 1993,
Series IV paid portfolio brokerage commissions of $218,000 and $45,000,
respectively.
e. During the fiscal year ended June 30, 1995, Series V paid total
portfolio brokerage commissions of $159,000 and of this amount 83% was
allocated to broker-dealers on the basis of research information or
sales of Kemper Mutual Fund shares and during the fiscal period from
November 15, 1993 to June 30, 1994, Series V paid portfolio brokerage
commissions of $53,000.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
Reference is made to the sections entitled "Dividends and Taxes" and
"Shareholder Rights" in the Kemper Retirement Fund Series VI Statement of
Additional Information filed herewith.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
Reference is made to the section entitled "Purchase and Redemption of
Shares" in the Kemper Retirement Fund Series VI Statement of Additional
Information filed herewith, except that shares of Series I, Series II, Series
III, Series IV and Series V are no longer available for purchase.
ITEM 20. TAX STATUS
Reference is made to the section entitled "Dividends and Taxes" in the
Kemper Retirement Fund Series VI Statement of Additional Information filed
herewith.
ITEM 21. UNDERWRITERS
Reference is made to the section entitled "Investment Manager and
Underwriter" in the Kemper Retirement Fund Series VI Statement of Additional
Information filed herewith, except for the following:
a. During the period from July 1, 1992 to January 15, 1993, KFS (as
predecessor to KDI) retained underwriting commissions with respect to
Series III of $317,000 and $316,000, respectively, after allowing
$2,894,000 and $2,676,000, respectively, as commissions to firms,
including $478,000 and $609,000, respectively, paid to firms affiliated
with KFS.
b. During the period from January 15, 1993 to June 30, 1993 and the period
from July 1, 1993 to November 15, 1993, KFS (as predecessor to KDI)
retained underwriting commissions with respect to
B-3
<PAGE> 7
Series IV of $314,000 and $72,000, respectively, after allowing
$2,557,000 and $5,623,000, respectively, as commissions to firms,
including $341,000 and $1,076,000, respectively, paid to firms
affiliated with KFS.
c. During the period from November 15, 1993 to June 30, 1994 and the fiscal
year ended June 30, 1995, KDI (as successor to KFS) retained
underwriting commissions with respect to Series V of $344,000 and
$300,00, respectively, after allowing $2,933,000 and $2,993,000,
respectively, as commissions to firms, of which $381,000 and $434,000,
respectively, were paid to firms affiliated with KDI.
ITEM 22. CALCULATION OF PERFORMANCE DATA
Inapplicable.
ITEM 23. FINANCIAL STATEMENTS
Attached.
B-4
<PAGE> 8
KEMPER TARGET EQUITY FUND
KEMPER RETIREMENT FUND SERIES VI
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
------------ ----------------------
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Synopsis............................... Summary; Summary of Expenses
3. Condensed Financial Information........ Performance; Financial Highlights
4. General Description of Registrant...... Summary; Investment Objectives, Policies and
Risk Factors; Capital Structure
5. Management of the Fund................. Summary; Investment Manager and Underwriter
5A. Management's Discussion of
Fund Performance....................... Inapplicable
6. Capital Stock and Other Securities..... Summary; Investment Objectives, Policies and
Risk Factors; Dividends and Taxes; Net Asset
Value; Purchase of Shares; Capital Structure
7. Purchase of Securities Being Offered... Summary; Investment Manager and Underwriter;
Net Asset Value; Purchase of Shares; Special
Features
8. Redemption or Repurchase............... Summary; Redemption or Repurchase of Shares
9. Pending Legal Proceedings.............. Inapplicable
</TABLE>
<PAGE> 9
TABLE OF CONTENTS
- ---------------------------------------------------------
<TABLE>
<S> <C>
Summary 1
- ------------------------------------------------
Summary of Expenses 2
- ------------------------------------------------
Financial Highlights 3
- ------------------------------------------------
Investment Objectives, Policies and Risk 3
Factors
- ------------------------------------------------
Investment Manager and Underwriter 10
- ------------------------------------------------
Dividends and Taxes 12
- ------------------------------------------------
Net Asset Value 14
- ------------------------------------------------
Purchase of Shares 14
- ------------------------------------------------
Redemption or Repurchase of Shares 18
- ------------------------------------------------
Special Features 20
- ------------------------------------------------
Performance 22
- ------------------------------------------------
Capital Structure 23
- ------------------------------------------------
</TABLE>
This prospectus contains information about the Fund that you should know before
investing and should be retained for future reference. A Statement of Additional
Information dated October 25, 1995, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. It is available
upon request without charge from the Fund at the address or telephone number on
this cover or the firm from which this prospectus was received.
Fund shares are not deposits or obligations of, or guaranteed or endorsed by,
any bank, nor are they federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. Investment in Fund
shares involves risk, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[KEMPER LOGO]
KEMPER
RETIREMENT
FUND
SERIES VI
PROSPECTUS OCTOBER 25, 1995
KEMPER RETIREMENT FUND SERIES VI
120 South LaSalle Street, Chicago, Illinois 60603 1-800-621-1048. The objectives
of Kemper Retirement Fund Series VI (the "Fund") are to provide a guaranteed
return of investment on the Maturity Date (May 15, 2006) to investors who
reinvest all dividends and hold their shares to the Maturity Date, and to
provide long-term growth of capital. The Fund pursues its objectives by
investing a portion of its assets in "zero coupon" U.S. Treasury obligations and
the balance of its assets primarily in common stocks. The Fund is intended for
long-term investors and is not appropriate for investors seeking current income.
The assurance that investors who reinvest dividends and hold their shares until
the Maturity Date will receive on the Maturity Date at least their original
investment is provided by the par value of the zero coupon U.S. Treasury
obligations in the Fund's portfolio on that date as well as by a guarantee from
Kemper Financial Services, Inc., the Fund's investment manager. There is no
assurance that the Fund's objective of long-term growth of capital will be
achieved. The Fund's shares are not guaranteed by the U.S. Government. The Fund
is a series of Kemper Target Equity Fund.
<PAGE> 10
KEMPER RETIREMENT FUND SERIES VI
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVES; PERMITTED INVESTMENTS. Kemper Retirement Fund Series VI
(the "Fund") is a diversified series of Kemper Target Equity Fund (the "Trust"),
which is an open-end, management investment company that may issue shares in one
or more series. The Fund's investment objectives are to provide a guaranteed
return of investment on the Maturity Date (May 15, 2006) to investors who
reinvest all dividends and hold their shares to the Maturity Date, and to
provide long-term growth of capital. The Fund pursues its objectives by
investing a portion of its assets in "zero coupon" U.S. Treasury Obligations
("Zero Coupon Treasuries") and the balance of its assets primarily in common
stocks. The assurance that investors who reinvest all dividends and hold their
shares until the Maturity Date will receive on the Maturity Date at least their
original investment is provided by the par value of the Zero Coupon Treasuries
as well as by a guarantee from Kemper Financial Services, Inc., the Fund's
investment manager. The Fund's returns will fluctuate and there is no assurance
that the Fund will achieve its objective of long-term capital growth. The Zero
Coupon Treasuries are normally purchased at a substantial discount and represent
the right to receive par value at a fixed date from the U.S. Government. The
amount invested in common stocks provides appreciation potential. See
"Investment Objectives, Policies and Risk Factors."
SPECIAL RISK FACTORS. The Fund is intended for long-term investors and is not
appropriate for investors seeking current income. The Fund is designed so that
shareholders who reinvest all dividends and hold their shares until the Maturity
Date will receive on the Maturity Date an amount at least equal to their
investment, including any sales charge ("Investment Protection"), even if the
value of the investments of the Fund other than the Zero Coupon Treasuries were
to decrease to zero, which the Fund's investment manager considers highly
unlikely. The Fund does not seek to provide a specific return on investors'
capital or to protect principal on an after-tax or present value basis. An
investor who reinvested all dividends and who, upon redemption at the Maturity
Date, received only the principal amount invested, would have received a zero
rate of return on such investment. Investors who do not reinvest all dividends
or who redeem all or part of their shares in the Fund prior to the Maturity Date
will not benefit from the Fund's Investment Protection, and upon redemption may
receive more or less than their original investment; provided, however, in the
event of a partial redemption, the Fund's Investment Protection will continue as
to that part of the original investment that remains invested (with all
dividends thereon reinvested) until the Maturity Date. The government guarantee
of the Zero Coupon Treasuries in the Fund's portfolio does not guarantee the
market value of the Zero Coupon Treasuries or the shares of the Fund, whose net
asset value will fluctuate. Zero Coupon Treasuries normally are subject to
substantially greater price fluctuations during periods of changing interest
rates than are securities of comparable quality that make regular interest
payments. Investors subject to tax should be aware that any portion of the
amount returned to them upon redemption of shares that constitutes accretion of
interest on the Zero Coupon Treasuries will have been taxable as ordinary income
over the period that the shares were held. The Fund may invest a small portion
of its assets in options and foreign securities and may engage in financial
futures and foreign currency transactions. See "Investment Objectives, Policies
and Risk Factors" and "Dividends and Taxes."
INVESTMENT MANAGER AND UNDERWRITER. Kemper Financial Services, Inc. ("KFS") is
the Fund's investment manager. KFS is paid an investment management fee at the
annual rate of .50 of 1% of average daily net assets of the Fund. Kemper
Distributors, Inc. ("KDI"), a wholly owned subsidiary of KFS, is the Fund's
principal underwriter and administrator. Administrative services are provided to
shareholders under an administrative services agreement with KDI. The Fund pays
an administrative services fee at the annual rate of up to .25 of 1% of average
daily net assets of the Fund, which KDI pays to financial services firms. See
"Investment Manager and Underwriter."
PURCHASES AND REDEMPTIONS. Investors may purchase the Fund's shares only during
a limited offering period (the "Offering Period"). Purchases may be made at net
asset value plus a maximum sales charge of 5.0% of the offering price. Reduced
sales charges apply to purchases of $100,000 or more. The minimum initial
investment is $1,000 and the minimum subsequent investment is $100. The minimum
initial investment for an employee benefit plan or
1
<PAGE> 11
Individual Retirement Account is $250 and the minimum subsequent investment is
$50. It is anticipated that the Offering Period will continue until May 15, 1996
but the period may be shortened or extended at the option of the Fund.
Shareholders will still be permitted to reinvest dividends in shares of the Fund
after the end of the Offering Period. Shares may be redeemed without charge or
penalty at net asset value, which may be more or less than original cost. The
redemption within one year of shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a 1% contingent deferred
sales charge. See "Purchase of Shares" and "Redemption or Repurchase of Shares."
INVESTORS IN THE FUND. The Fund is designed for long-term investors who seek
principal protection as well as the opportunity for capital growth, such as
investors who want to provide for future health care costs, fund college
education costs or fund IRAs or other tax-qualified retirement plans. Through a
single investment in shares of the Fund, investors receive the benefits of
diversification, professional management and liquidity, and relief from
administrative details such as accounting for distributions and the safekeeping
of securities.
DIVIDENDS. The Fund normally distributes annual dividends of net investment
income and any net realized short-term and long-term capital gains. Investors
may have income and capital gain dividends automatically reinvested in the Fund
without a sales charge and must do so in order to receive the benefit of the
Fund's Investment Protection. See "Dividends and Taxes."
GENERAL INFORMATION AND CAPITAL. The Trust is organized as a business trust
under the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest in one or more series, one of such series being the Fund.
Shares are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Trust is not
required to hold annual shareholder meetings; but it will hold special meetings
as required or deemed desirable for such purposes as electing trustees, changing
fundamental policies or approving an investment management agreement. See
"Capital Structure."
SUMMARY OF EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge on Purchases (as a percentage of offering price)................... 5.0%
Maximum Sales Charge on Reinvested Dividends............................................ None
Deferred Sales Charge................................................................... None(2)
Redemption Fees......................................................................... None
Exchange Fee............................................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees......................................................................... .50%
12b-1 Fees.............................................................................. None
Other Expenses (estimated).............................................................. .59%
----
Total Operating Expenses................................................................ 1.09%
====
</TABLE>
- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details. Reduced sales charges apply to purchases of $100,000
or more. See "Purchase of Shares."
(2) The redemption within one year of shares purchased at net asset value under
the Large Order NAV Purchase Privilege may be subject to a 1% contingent
deferred sales charge. See "Purchase of Shares."
EXAMPLE
<TABLE>
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming 1 YEAR 3 YEARS
(1) 5% annual return and (2) redemption at the end of each time period: $61 $83
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Example assumes a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission. This hypothetical rate
of return is not intended to be representative of past or future performance of
the Fund. "Other Expenses" is an estimate for the current fiscal year. The
Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
2
<PAGE> 12
FINANCIAL HIGHLIGHTS
The table below shows financial information expressed in terms of one share
outstanding throughout the period. The information in the table is covered by
the report of the Fund's independent auditors. The report is contained in the
Trust's Registration Statement and is available from the Fund. The financial
statements contained in the Fund's 1995 Annual Report to Shareholders are
incorporated herein by reference and may be obtained by writing or calling the
Fund.
<TABLE>
<CAPTION>
MAY 1, 1995
TO JUNE 30,
1995
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.00
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .06
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain .20
- ---------------------------------------------------------------------------------------------------
Total from investment operations .26
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.26
===================================================================================================
TOTAL RETURN (%): 2.89
===================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.09
- ---------------------------------------------------------------------------------------------------
Net investment income 3.91
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 7,189
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) --
===================================================================================================
</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of sales charges. Per share data was
determined based on average shares outstanding. The Fund was organized as the
seventh series of the Trust, which is a business trust under the laws of
Massachusetts. No significant transactions were effected prior to May 1, 1995.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
OBJECTIVES. The objectives of the Fund are to provide a guaranteed return of
investment on the Maturity Date (May 15, 2006) to investors who reinvest all
dividends and hold their shares to the Maturity Date and to provide long-term
growth of capital. As a fundamental policy, the Fund pursues its objectives by
investing a portion of its assets in "zero coupon" U.S. Treasury obligations
("Zero Coupon Treasuries") and the balance of its assets primarily in common
stocks ("Equity Securities").
The Fund is intended for long-term investors who seek principal protection as
well as the opportunity for capital growth, such as investors who want to
provide for future health care costs, fund college education costs or fund IRAs
or other tax-qualified retirement plans. The Fund is designed so that
shareholders who reinvest all dividends and hold their investment until the
Maturity Date will receive on the Maturity Date an amount at least equal to
their original investment, including any sales charge ("Investment Protection").
This will occur even if the value of the investments of the Fund other than the
Zero Coupon Treasuries were to decrease to zero, which the investment manager
considers highly unlikely. The assurance that investors who reinvest all
dividends and hold their shares until the Maturity Date will receive on the
Maturity Date at least their original investment is provided by the par
3
<PAGE> 13
value of the Zero Coupon Treasuries in the Fund's portfolio as well as by a
guarantee from Kemper Financial Services, Inc. ("KFS"), the Fund's investment
manager. See "How the Fund Works" below. Investors who do not reinvest all
dividends or who redeem part or all of their investment in the Fund other than
on the Maturity Date will not receive the benefit of the Fund's Investment
Protection, and upon the redemption may receive more or less than the amount of
their original investment; provided, however, in the event of a partial
redemption, the Fund's Investment Protection will continue as to that part of
the original investment that remains invested (with all dividends thereon
reinvested) until the Maturity Date. The Fund may not be appropriate for
investors who expect to redeem their investment in the Fund prior to the
Maturity Date or who will require cash distributions from the Fund. Since the
benefit of Investment Protection is an inherent characteristic of the Fund's
shares, it continues in the event of a transfer of the shares by gift, under a
will or otherwise, provided dividends on the shares continue to be reinvested
and the shares continue to be held until the Maturity Date.
The opportunity for capital growth for an investor arises to the extent that the
value of the Fund's assets, including Equity Securities, is greater than the par
value of the Zero Coupon Treasuries on the Maturity Date. Thus, the Fund in
effect will have two major portfolio segments: one consisting of Zero Coupon
Treasuries to pursue Investment Protection and the other consisting of Equity
Securities to pursue long-term capital growth. The Fund's returns and net asset
value will fluctuate. There is no assurance that the Fund will achieve its
objective of long-term capital growth.
HOW THE FUND WORKS. As noted above, the Fund will invest in Zero Coupon
Treasuries and Equity Securities in pursuing its objectives. Zero Coupon
Treasuries evidence the right to receive a fixed payment at a specific future
date from the U.S. Government. The Fund will offer its shares during a limited
offering period (the "Offering Period") at net asset value plus the applicable
sales charge. See "Purchase of Shares." The Zero Coupon Treasuries that the Fund
acquires with the proceeds of the sale of its shares during the Offering Period
will be selected so as to mature at a specific par value on or about the
Maturity Date. The Fund's investment manager will continuously adjust the
proportion of the Fund's assets that are invested in Zero Coupon Treasuries so
that the value of the Zero Coupon Treasuries on the Maturity Date (i.e., the
aggregate par value of the Zero Coupon Treasuries in the portfolio) will be
sufficient to enable investors who reinvest all dividends and hold their
investment in the Fund until the Maturity Date to receive on the Maturity Date
the full amount of such investment, including any sales charge. Thus, the
minimum par value of Zero Coupon Treasuries per Fund share necessary to provide
for the Fund's Investment Protection will be continuously determined and
maintained.
In order to provide further assurance that the Fund's Investment Protection will
be maintained, KFS has entered into a Guaranty Agreement. Under the Guaranty
Agreement, KFS has agreed to make sufficient payments on the Maturity Date to
enable shareholders who have reinvested all dividends and held their investment
in the Fund until the Maturity Date to receive on the Maturity Date an aggregate
amount of redemption proceeds and payments under the Guaranty Agreement equal to
the amount of their original investment, including any sales charge.
The portion of the Fund's assets that will be allocated to the purchase of Zero
Coupon Treasuries will fluctuate during the Offering Period. This is because the
value of the Zero Coupon Treasuries and Equity Securities, and therefore the
offering price of the Fund's shares, will fluctuate with changes in interest
rates and other market value fluctuations. If the offering price of the Fund's
shares increases during the Offering Period, the minimum par value of Zero
Coupon Treasuries per Fund share necessary to provide for the Fund's Investment
Protection will increase and this amount will be fixed by the highest offering
price during the Offering Period. The Fund may hold Zero Coupon Treasuries in an
amount in excess of the amount necessary to provide for the Fund's Investment
Protection in the discretion of the Fund's investment manager. During the first
year of operations, under normal market conditions, the proportion of the Fund's
portfolio invested in Zero Coupon Treasuries may be expected to range from 50%
to 65%; but a greater or lesser percentage is possible.
As the percentage of Zero Coupon Treasuries in the Fund's portfolio increases,
the percentage of Equity Securities in the portfolio will necessarily decrease.
This will result in less potential for capital growth from equity securities. In
order to help ensure at least a minimum level of exposure to the equity markets
for shareholders, the Fund will
4
<PAGE> 14
cease offering its shares if their continued offering would cause more than 70%
of its assets to be allocated to Zero Coupon Treasuries. After the Offering
Period is over, no additional assets will be allocated to the purchase of Zero
Coupon Treasuries. However, since the values of the Zero Coupon Treasuries and
Equity Securities are often affected in different ways by changes in interest
rates and other market conditions and will often fluctuate independently, the
percentage of the Fund's net asset value represented by Zero Coupon Treasuries
will continue to fluctuate after the end of the Offering Period. Zero Coupon
Treasuries may be liquidated before the Maturity Date to meet redemptions and
pay cash dividends, provided that the minimum amount necessary to provide for
the Fund's Investment Protection is maintained.
Shareholders who elect to receive dividends in cash are in effect withdrawing a
portion of the accreted income on the Zero Coupon Treasuries that are held to
protect their original principal investment at the Maturity Date. These
shareholders will receive the same net asset value per share for any Fund shares
redeemed at the Maturity Date as shareholders who reinvest dividends, but they
will have fewer shares to redeem than shareholders similarly situated who had
reinvested all dividends. Shareholders who redeem some or all of their shares
before the Maturity Date lose the benefit of Investment Protection with respect
to those shares redeemed. Thus, investors are encouraged to reinvest all
dividends and to evaluate their need to receive some or all of their investment
prior to the Maturity Date before making an investment in the Fund.
ZERO COUPON TREASURIES. The Zero Coupon Treasuries held by the Fund will
consist of U.S. Treasury notes or bonds that have been stripped of their
unmatured interest coupons or will consist of unmatured interest coupons from
U.S. Treasury notes or bonds. The Zero Coupon Treasuries evidence the right to
receive a fixed payment at a future date (i.e., the Maturity Date) from the U.S.
Government, and are backed by the full faith and credit of the U.S. Government.
The guarantee of the U.S. Government does not apply to the market value of the
Zero Coupon Treasuries owned by the Fund or to the shares of the Fund. The
market value of Zero Coupon Treasuries generally will fluctuate inversely with
changes in interest rates. As interest rates rise, the value of the Zero Coupon
Treasuries will tend to decline and as interest rates fall the value of the Zero
Coupon Treasuries will tend to increase. Zero Coupon Treasuries are purchased at
a deep discount because the buyer obtains only the right to a fixed payment at a
fixed date in the future and does not receive any periodic interest payments.
The effect of owning deep discount bonds that do not make current interest
payments (such as the Zero Coupon Treasuries) is that a fixed yield is earned
not only on the original investment but also, in effect, on all earnings during
the life of the discount obligation. This implicit reinvestment of earnings at
the same rate eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest at higher rates
in the future. For this reason, the Zero Coupon Treasuries normally are subject
to substantially greater price fluctuations during periods of changing interest
rates than are securities of comparable quality that make regular interest
payments. As the maturity of the Zero Coupon Treasuries becomes shorter (i.e.,
as the period to the Maturity Date is shorter), the degree of price fluctuation
will become less. Additional information concerning Zero Coupon Treasuries
appears in the Statement of Additional Information of the Fund under "Investment
Policies and Techniques."
EQUITY SECURITIES. With respect to Fund assets not invested in Zero Coupon
Treasuries, the Fund will seek long-term capital growth through professional
management and diversification of investments in securities the Fund's
investment manager believes to have possibilities for capital growth. In seeking
to achieve capital growth, it will be the Fund's policy to invest assets not
otherwise invested in Zero Coupon Treasuries primarily in securities that the
Fund's investment manager believes offer the potential for increasing the Fund's
total asset value. While it is anticipated that most investments will be in
common stocks of companies with above-average growth prospects, investments may
also be made to a limited degree in other common stocks, warrants and in
convertible securities, such as bonds and preferred stocks. Factors that the
Fund's investment manager may consider in making its equity investments are
patterns of growth in sales and earnings, the development of new or improved
products or services, a favorable outlook for growth in the industry, the
probability of increased operating efficiencies, emphasis on research and
development, cyclical conditions, and other signs that a company is expected to
show greater than average capital growth and earnings growth. The Fund's
investment policy with respect to these assets may involve
5
<PAGE> 15
a somewhat greater risk than is inherent in some other investment securities.
Also, any income received from such securities will be incidental.
In seeking to obtain capital growth, the Fund may trade to some degree in
securities for the short-term. To this extent, the Fund will be engaged in
trading operations based on short-term market considerations as distinct from
long-term investment based upon fundamental valuation of securities.
The Fund may also purchase options on securities and index options, may purchase
and sell financial futures contracts and options on financial futures contracts,
may purchase foreign securities and engage in related foreign currency
transactions and may at times lend its portfolio securities. There may also be
times when a significant portion of the Fund's assets not invested in Zero
Coupon Treasuries may be held temporarily in cash or defensive type securities
such as high-grade debt securities, securities of the U.S. Government and its
agencies and high quality money market instruments, including repurchase
agreements, depending upon the investment manager's analysis of business and
economic conditions and the outlook for security prices.
SPECIAL RISK FACTORS. The value of the Zero Coupon Treasuries and the Equity
Securities in the Fund's portfolio will fluctuate prior to the Maturity Date and
the value of the Zero Coupon Treasuries will equal their par value on the
Maturity Date. As noted previously (see "Zero Coupon Treasuries"), the value of
the Zero Coupon Treasuries may be expected to experience more volatility than
U.S. Government securities that have similar yields and maturities but that make
current distributions of interest. Thus, the net asset value of the Fund's
shares will fluctuate with changes in interest rates and other market conditions
prior to the Maturity Date. As an open-end investment company, the Fund will
redeem its shares at the request of a shareholder at the net asset value per
share next determined after a request is received in proper form. Thus,
shareholders who redeem their shares prior to the Maturity Date may receive more
or less than their acquisition cost, including any sales charge, whether or not
they reinvest their dividends. Such shares, therefore, would not receive the
benefit of the Fund's Investment Protection. Any shares not redeemed prior to
the Maturity Date by a shareholder would continue to receive the benefit of the
Fund's Investment Protection provided that all dividends with respect to such
shares are reinvested. Accordingly, the Fund may not be appropriate for
investors who expect to redeem their investment in the Fund prior to the
Maturity Date.
Each year the Fund will be required to accrue an increasing amount of income on
its Zero Coupon Treasuries utilizing the effective interest method. However, to
maintain its tax status as a pass-through entity under Subchapter M of the
Internal Revenue Code and also to avoid imposition of excise taxes, the Fund
will be required to distribute dividends equal to substantially all of its net
investment income, including the accrued income on its Zero Coupon Treasuries
for which it receives no payments in cash prior to their maturity. Dividends of
the Fund's investment income and short-term capital gains will be taxable to
shareholders as ordinary income for federal income tax purposes, whether
received in cash or reinvested in additional shares. See "Dividends and Taxes."
However, shareholders who elect to receive dividends in cash, instead of
reinvesting these amounts in additional shares of the Fund, may realize an
amount upon redemption of their investment on the Maturity Date that is less or
greater than their acquisition cost and, therefore, will not receive the benefit
of the Fund's Investment Protection. Accordingly, the Fund may not be
appropriate for investors who will require cash distributions from the Fund in
order to meet current tax obligations resulting from their investment or for
other needs.
As noted previously, the Fund will maintain a minimum par value of Zero Coupon
Treasuries per share in order to provide for the Fund's Investment Protection.
In order to generate sufficient cash to meet dividend requirements and other
operational needs and to redeem Fund shares on request, the Fund may be required
to limit reinvestment of capital on the disposition of Equity Securities and may
be required to liquidate Equity Securities at a time when it is otherwise
disadvantageous to do so, which may result in the realization of losses on the
disposition of such securities, and may also be required to borrow money to
satisfy dividend and redemption requirements. The liquidation of Equity
Securities and the expenses of borrowing money in such circumstances could
impair the ability of the Fund to meet its objective of long-term capital
growth.
The Fund provides Investment Protection to investors who reinvest all dividends
and do not redeem their shares before the Maturity Date. In addition, as noted
above, dividends from the Fund will be taxable to shareholders
6
<PAGE> 16
whether received in cash or reinvested in additional shares. Thus, the Fund does
not provide a specific return on investors' capital or protect principal on an
after-tax or present value basis. An investor who reinvested all dividends and
who, upon redemption at the Maturity Date, received only the original amount
invested including any sales charge, would have received a zero rate of return
on such investment. This could only happen if the value of the Fund's
investments other than Zero Coupon Treasuries were to decrease to zero, an event
that the Fund's investment manager considers highly unlikely. The present value
of $1,000 on the Maturity Date discounted for inflation assumed to be at an
annual rate of 4% is approximately $661 on the date of this prospectus.
Investors subject to tax should be aware that any portion of the amount returned
to them upon redemption of shares that constitutes accretion of interest on the
Zero Coupon Treasuries will have been taxable each year as ordinary income over
the period during which shares were held. See "Dividends and Taxes."
The Fund may purchase options on securities and index options, may purchase and
sell financial futures contracts and options on financial futures contracts, may
purchase foreign securities and engage in related foreign currency transactions
and may at times lend its portfolio securities. See "Additional Investment
Information" below for a discussion of these investment techniques and the
related risks.
MATURITY DATE. The Board of Trustees of the Trust may in its sole discretion
elect, without shareholder approval, to continue the operation of the Fund after
the Maturity Date with a new maturity date ("New Maturity Date"). Such a
decision may be made to provide shareholders with the opportunity of continuing
their investment in the Fund for a new term without recognizing any taxable
capital gains as a result of a redemption. In that event, shareholders of the
Fund may either continue as such or redeem their shares in the Fund.
Shareholders who reinvest all dividends and hold their shares to the Maturity
Date will be entitled to the benefit of the Fund's Investment Protection on the
Maturity Date whether they continue as shareholders or redeem their shares. If
this alternative were to be elected, the Fund would at the Maturity Date collect
the proceeds of the Zero Coupon Treasuries that mature on such date and, after
allowing for any redemption requests by shareholders, reinvest such proceeds in
Zero Coupon Treasuries and Equity Securities as necessary to provide for the
Fund's Investment Protection benefit on the New Maturity Date. For such
purposes, the principal investment of shareholders then in the Fund would be
deemed to be the net asset value of their investment in the Fund at the current
Maturity Date. Thus, in effect, the total value of such shareholders' investment
in the Fund on the current Maturity Date will be treated as an investment for
the new term and will benefit from the Fund's Investment Protection for the new
term if they reinvest all dividends and maintain their investment in the Fund
until the New Maturity Date. If the Board of Trustees elects to continue the
Fund, shareholders will be given 60 days' prior notice of such election and the
New Maturity Date. In that event, it is anticipated that the offering of the
Fund's shares would commence again after the Maturity Date with a new prospectus
for such period as the Board of Trustees shall determine.
On the Maturity Date, the Fund may also be terminated at the election of the
Board of Trustees of the Trust in its sole discretion and without approval by
shareholders, upon 60 days' prior notice to shareholders. In such event, the
proceeds of the Zero Coupon Treasuries maturing on such date shall be collected
and the Equity Securities and other assets then owned by the Fund shall be sold
or otherwise reduced to cash, the liabilities of the Fund will be discharged or
otherwise provided for, the Fund's outstanding shares will be mandatorily
redeemed at the net asset value per share determined on the Maturity Date and,
within seven days thereafter, the Fund's net assets will be distributed to
shareholders and the Fund shall be thereafter terminated. Termination of the
Fund may require the disposition of the Equity Securities at a time when it is
otherwise disadvantageous to do so and may involve selling securities at a
substantial loss. The estimated expenses of liquidation and termination of the
Fund, however, are not expected to affect materially the ability of the Fund to
provide for its Investment Protection benefit. In the event of termination of
the Fund as noted above, the redemption of shares effected in connection with
such termination would for current federal income tax purposes constitute a sale
upon which a gain or loss may be realized depending upon whether the value of
the shares being redeemed is more or less than the shareholder's adjusted cost
basis of such shares.
7
<PAGE> 17
Subject to shareholder approval, other alternatives may be pursued by the Fund
after the Maturity Date. For instance, the Board of Trustees may consider the
possibility of a tax-free reorganization between the Fund and another registered
open-end management investment company or any other series of the Trust. The
Board of Trustees has not considered any possibilities regarding the operation
of the Fund after the Maturity Date.
ADDITIONAL INVESTMENT INFORMATION. The annual turnover rate of the Fund's
portfolio may vary from year to year, and may also be affected by cash
requirements for redemptions and repurchases of Fund shares, and by the
necessity of maintaining the Fund as a regulated investment company under the
Internal Revenue Code in order to receive certain favorable tax treatment. The
Fund's portfolio turnover rate is listed under "Financial Highlights."
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities or other assets. If, for any reason, the
current value of the Fund's total assets falls below an amount equal to three
times the amount of its indebtedness from money borrowed, the Fund will, within
three days (not including Sundays and holidays), reduce its indebtedness to the
extent necessary. The Fund will not borrow for leverage purposes. The Fund may
pledge up to 15% of its total assets to secure any such borrowings. The Fund
will not purchase illiquid securities, including repurchase agreements maturing
in more than seven days, if, as a result thereof, more than 10% of the Fund's
net assets, valued at the time of the transaction, would be invested in such
securities.
The Trust has adopted for the Fund certain fundamental investment restrictions
which are presented in the Statement of Additional Information and which,
together with its investment objectives and any policies of the Fund
specifically designated in this prospectus as fundamental, cannot be changed
without approval by holders of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, this means the lesser of the vote
of (a) 67% of the shares of the Fund present at a meeting where more than 50% of
the outstanding shares are present in person or by proxy; or (b) more than 50%
of the outstanding shares of the Fund. Policies of the Fund that are neither
designated as fundamental nor incorporated into any of the fundamental
investment restrictions referred to above may be changed by the Board of
Trustees of the Fund without shareholder approval. Notwithstanding the
foregoing, the Board of Trustees may, in its discretion and without shareholder
approval, determine that the Fund should be terminated on the Maturity Date or
continued thereafter with a New Maturity Date as more fully described under
"Maturity Date" above.
Options and Financial Futures Transactions. The Fund may invest up to five
percent of its net assets in put and call options on securities. A put option
gives the holder (buyer) the right to sell a security at a specified price (the
exercise price) at any time until a certain date (the expiration date). A call
option gives the holder (buyer) the right to purchase a security or other asset
at a specified price (the exercise price) at any time until a certain date (the
expiration date). The Fund will only invest in options that are traded on
securities exchanges and for which it pays a premium (cost of option). As part
of its options transactions, the Fund may also purchase options on securities
indices in an attempt to hedge against market conditions affecting the values of
securities that the Fund owns or intends to purchase, and not for speculation.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option. In
connection with its foreign securities investments, the Fund may also purchase
foreign currency options. The Fund may enter into closing transactions, exercise
its options or permit them to expire.
The Fund may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or the cash value of a securities index during a specified future
period at a specified price. The Fund will "cover" futures contracts sold by the
Fund and maintain in a segregated account certain liquid assets in connection
with futures contracts purchased by the Fund as described under "Investment
Policies and Techniques" in the
8
<PAGE> 18
Statement of Additional Information. In connection with its foreign securities
investments, the Fund may also engage in foreign currency financial futures
transactions. The Fund will not enter into any futures contracts or options on
futures contracts if the aggregate of the contract value of the outstanding
futures contracts of the Fund and futures contracts subject to outstanding
options written by the Fund would exceed 50% of the total assets of the Fund.
The Fund may engage in financial futures transactions as an attempt to hedge
against market risks. For example, when the near-term market view is bearish but
the portfolio composition is judged satisfactory for the longer term, exposure
to temporary declines in the market may be reduced by entering into futures
contracts to sell securities or the cash value of a securities index.
Conversely, where the near-term view is bullish, but the Fund is believed to be
well positioned for the longer term with a high cash position, the Fund can
hedge against market increases by entering into futures contracts to buy
securities or the cash value of a securities index. In either case, the use of
futures contracts would tend to reduce portfolio turnover and facilitate the
Fund's pursuit of its investment objectives.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. For example, if
participants in the futures market elect to close out their contracts rather
than meet margin requirements, distortions in the normal relationship between
the underlying assets and futures markets could result. Price distortions also
could result if investors in futures contracts decide to make or take delivery
of underlying securities or other assets rather than engage in closing
transactions because of the resultant reduction in the liquidity of the futures
market. In addition, because, from the point of view of speculators, margin
requirements in the futures market are less onerous than margin requirements in
the cash market, increased participation by speculators in the futures market
could cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities or other assets and movements in
the prices of futures contracts, a correct forecast of market trends by the
investment manager still may not result in a successful hedging transaction. If
any of these events should occur, the Fund could lose money on the financial
futures contracts and also on the value of its portfolio assets. The costs
incurred in connection with futures transactions could reduce the Fund's return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by the
Fund may expire worthless, in which case the Fund would lose the premium paid
therefor.
The Fund may engage in futures transactions only on commodities exchanges or
boards of trade. The Fund will not engage in transactions in financial futures
contracts or related options for speculation, but only as an attempt to hedge
against changes in market conditions affecting the values of securities that the
Fund owns or intends to purchase.
Derivatives. In addition to options and financial futures, consistent with its
objective, the Fund may invest in a broad array of financial instruments and
securities in which the value of the instrument or security is "derived" from
the performance of an underlying asset or a "benchmark" such as a security
index, an interest rate or a currency ("derivatives"). Derivatives are most
often used to manage investment risk, to increase or decrease exposure to an
asset class or benchmark (as a hedge or to enhance return), or to create an
investment position indirectly (often because it is more efficient or less
costly than direct investment). The types of derivatives used by the Fund and
the techniques employed by the investment manager may change over time as new
derivatives and strategies are developed or regulatory changes occur.
Risk Factors. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures and other derivatives transactions. See "Investment Policies and
Techniques" in the Statement of Additional Information. The principal risks are:
(a) possible imperfect correlation
9
<PAGE> 19
between movements in the prices of options, futures or other derivatives
contracts and movements in the prices of the securities or currencies hedged,
used for cover or that the derivatives intended to replicate; (b) lack of
assurance that a liquid secondary market will exist for any particular option,
futures or other derivatives contract at any particular time; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; (d) losses on futures contracts resulting from market movements not
anticipated by the investment manager; (e) the possible need to defer closing
out certain options, futures or other derivatives contracts in order to continue
to qualify for beneficial tax treatment afforded "regulated investment
companies" under the Internal Revenue Code; and (f) the possible non-performance
of the counter-party to the derivatives contract.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities (principally to
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by segregated collateral (cash or U.S. Government
securities) equal to no less than the market value, determined daily, of the
securities loaned. The Fund will receive amounts equal to dividends or interest
on the securities loaned. It will also earn income for having made the loan. Any
cash collateral pursuant to these loans will be invested in short-term money
market instruments. As with other extensions of credit, there are risks of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Fund's investment manager to be of good standing, and when the
Fund's investment manager believes the potential earnings to justify the
attendant risk. Management will limit such lending to not more than one-third of
the value of the Fund's total assets.
Foreign Securities. Although the Fund will invest primarily in securities that
are publicly traded in the United States, it has the discretion to invest a
portion of its assets in foreign securities that are traded principally in
securities markets outside the United States. The Fund currently limits
investment in foreign securities not publicly traded in the United States to
less than 10% of its total assets. The Fund may also invest in U.S. Dollar
denominated American Depository Receipts ("ADRs"), which are bought and sold in
the United States and are not subject to the preceding limitation. Foreign
securities present certain risks in addition to those presented by domestic
securities, including risks associated with currency fluctuations, possible
imposition of foreign governmental regulations or taxes adversely affecting
portfolio securities and generally different degrees of liquidity, market
volatility and availability of information. However, the Fund intends to invest
in foreign securities only when the potential benefits to it are deemed by the
Fund's investment manager to outweigh those risks. The Fund may make investments
in developing countries that are in the initial stages of their
industrialization cycle. In the past, markets of developing countries have been
more volatile than the markets of developed countries; however such markets
often have provided higher rates of return to investors. Investments in foreign
securities may include securities issued by enterprises that have undergone or
are currently undergoing privatization. In connection with its foreign
securities investments, the Fund may, to a limited extent, engage in foreign
currency exchange transactions, purchase foreign currency options and purchase
and sell foreign currency futures contracts. More complete information
concerning foreign securities and related techniques is contained under
"Investment Policies and Techniques--Foreign Securities and Foreign Currency
Transactions" in the Statement of Additional Information.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of the Fund and
provides the Fund with continuous professional investment supervision. KFS is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-five years. KFS and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, the Kemper insurance companies, Kemper Corporation and other
corporate, pension, profit-sharing and individual accounts representing
approximately $60 billion under management. KFS acts as investment manager for
26 open-end and seven closed-end investment companies, with 64 separate
investment portfolios, representing more than 3 million shareholder accounts.
KFS is a wholly-owned subsidiary of Kemper Financial Companies, Inc., which is a
financial services holding company that is more than 99% owned by Kemper
Corporation ("Kemper"), a diversified insurance and financial services holding
company.
10
<PAGE> 20
Kemper has entered into a definitive agreement with an investor group led by
Zurich Insurance Company ("Zurich") pursuant to which Kemper would be acquired
by the investor group in a merger transaction. As part of the transaction,
Zurich or an affiliate would purchase KFS. The Kemper and Zurich boards have
approved the transaction. In addition, because the transaction would constitute
an assignment of the Fund's investment management agreement with KFS under the
Investment Company Act of 1940, and therefore a termination of such agreement,
KFS has received approval of a new agreement from the Trust's board and the
shareholders of the Fund. Consummation of the transaction is subject to
remaining contingencies, including approval by the stockholders of Kemper and
state insurance department regulatory approvals. The investor group has informed
Kemper that it expects the transaction to close early in 1996.
Responsibility for overall management of the Fund rests with the Board of
Trustees and officers of the Trust. Professional investment supervision is
provided by KFS. The investment management agreement provides that KFS shall act
as the Fund's investment adviser, manage its investments and provide it with
various services and facilities. KFS will utilize the services of Kemper
Investment Management Company Limited, 1 Fleet Place, London EC4M 7RQ, a wholly
owned subsidiary of KFS, with respect to foreign securities investments of the
Fund, including analysis, research, execution and trading services.
Tracy McCormick Chester is the portfolio manager of the Fund. She has served in
this capacity since 1994. Ms. McCormick Chester joined KFS in September 1994.
She is a vice president of the Trust and senior vice president of KFS. Prior to
coming to KFS, she was a senior vice president and portfolio manager of an
investment management company and prior thereto, she managed private accounts.
She received a B.A. and a M.B.A. in Finance from Michigan State University, East
Lansing, Michigan.
KFS has an Equity Investment Committee that determines overall investment
strategy for equity portfolios managed by KFS. The Equity Investment Committee
is currently comprised of the following members: Daniel J. Bukowski, Tracy
McCormick Chester, James H. Coxon, Richard A. Goers, Karen A. Hussey, Frank D.
Korth, Gary A. Langbaum, Maura J. Murrihy, Thomas M. Regner, Steven H. Reynolds
and Stephen B. Timbers. The portfolio manager works with the Equity Investment
Committee and various equity analysts and equity traders to manage the Fund's
investments. Equity analysts--through research, analysis and evaluation--work to
develop investment ideas appropriate for the Fund. These ideas are studied and
debated by the Equity Investment Committee and, if approved, are added to a list
of eligible investments. The portfolio manager uses the list of eligible
investments to help structure the Fund's portfolio in a manner consistent with
the Fund's objective. The KFS International Equity Investments area, directed by
Mr. Dennis H. Ferro, provides research and analysis regarding foreign
investments to the portfolio manager. After investment decisions are made,
equity traders execute the portfolio manager's instructions through various
broker-dealer firms.
The Fund pays KFS an investment management fee, payable monthly, at the annual
rate of .50 of 1% of average daily net assets of the Fund. The investment
management agreement provides that the Fund shall pay the charges and expenses
of its operations, including the fees and expenses of the trustees (except those
affiliated with KFS), independent auditors, counsel, custodian and transfer
agent and the cost of share certificates, reports and notices to shareholders,
brokerage commissions or transaction costs, costs of calculating net asset
value, taxes and membership dues.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting agreement, Kemper
Distributors, Inc. ("KDI"), a wholly owned subsidiary of KFS, is the principal
underwriter of the Fund's shares and acts as agent of the Fund in the sale of
its shares. KDI receives no compensation from the Fund as principal underwriter
and pays all expenses of distribution of the Fund's shares under the
underwriting agreement not otherwise paid by dealers or other financial services
firms. The Fund bears the expense of registration of its shares with the
Securities and Exchange Commission, while KDI, as underwriter, pays the cost of
qualifying and maintaining the qualification of the Fund's shares for sale under
the securities laws of the various states. 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 Fund shares.
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<PAGE> 21
ADMINISTRATOR. KDI also provides information and administrative services for
Fund shareholders pursuant to an administrative services agreement
("administrative agreement"). KDI enters into related arrangements with various
financial services firms, such as broker-dealer firms or banks ("firms"), that
provide services and facilities for their customers or clients who are
shareholders of the Fund. Such administrative services and assistance may
include, but are not limited to, establishing and maintaining shareholder
accounts and records, processing purchase and redemption transactions, answering
routine inquiries regarding the Fund and its special features, and such other
services as may be agreed upon from time to time and permitted by applicable
statute, rule or regulation. KDI bears all its expenses of providing services
pursuant to the administrative agreement, including the payment of any service
fees. For services under the administrative agreement, the Fund pays KDI a fee,
payable monthly, at the annual rate of up to .25 of 1% of average daily net
assets of the Fund. KDI then pays each firm a service fee at an annual rate of
up to .25 of 1% of net assets of those accounts in the Fund that it maintains
and services. Firms to which service fees may be paid include broker-dealers
affiliated with KDI. A firm becomes eligible for the service fee based on assets
in the accounts in the month following the month of purchase and the fee
continues until terminated by KDI or the Fund. The fees are calculated monthly
and paid quarterly.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fees that it receives
from the Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of the Fund while this
procedure is in effect would depend upon the proportion of Fund assets that is
in accounts for which there is a firm of record.
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of the Fund
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of the Fund held outside the United States. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Fund. IFTC also is the Fund's transfer
agent and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company, an affiliate of KFS, serves as "Shareholder Service
Agent" of the Fund and, as such, performs all of IFTC's duties as transfer agent
and dividend paying agent. For a description of transfer agent and shareholder
service agent fees payable to IFTC and the Shareholder Service Agent, see
"Investment Manager and Underwriter" in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS. KFS places all orders for purchases and sales of the
Fund's securities. Subject to seeking best execution of orders, KFS may consider
sales of shares of the Fund and other funds managed by KFS or its affiliates as
a factor in selecting broker-dealers. See "Portfolio Transactions" in the
Statement of Additional Information.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund will normally distribute annual dividends of net investment
income and any net realized short-term and long-term capital gains.
Income dividends and capital gain dividends, if any, will be credited to
shareholder accounts in full and fractional Fund shares at net asset value on
the reinvestment date without sales charge 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 at net asset value; or
(2) To receive income and capital gain dividends in cash.
12
<PAGE> 22
Any dividends that are reinvested will be reinvested in shares of the Fund. Upon
written request by a shareholder to the Shareholder Service Agent, a share
certificate will be issued for any or all full shares credited to the
shareholder's account. As noted previously (see "Investment Objectives, Policies
and Risk Factors--How the Fund Works and Special Risk Factors"), only
shareholders who reinvest all their dividends in the Fund and hold their shares
until the Maturity Date will receive the benefit of the Fund's Investment
Protection.
TAXES. The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code") and, if so qualified,
will not be liable for federal income taxes to the extent its earnings are
distributed. Dividends derived from net investment income and net short-term
capital gains are taxable to shareholders as ordinary income and long-term
capital gain dividends are taxable to shareholders as long-term capital gain
regardless of how long the shares have been held and whether received in cash or
shares. Long-term capital gain dividends received by individual shareholders are
taxed at a maximum rate of 28%. Dividends declared in October, November or
December to shareholders of record as of a date in one of those months and paid
during the following January are treated as paid on December 31 of the calendar
year declared. It is anticipated that a portion of the ordinary income dividends
paid by the Fund will qualify for the dividends received deduction available to
corporate shareholders.
The Zero Coupon Treasuries will be treated as bonds that were issued to the Fund
at an original issue discount. Original issue discount is treated as interest
for federal income tax purposes and the amount of original issue discount
generally will be the difference between the bond's purchase price and its
stated redemption price at maturity. The Fund will be required to include in
gross income for each taxable year the daily portions of original issue discount
attributable to the Zero Coupon Treasuries held by the Fund as such original
issue discount accrues. Dividends derived from such original issue discount that
accrues for such year will be taxable to shareholders as ordinary income. In
general, original issue discount accrues daily under a constant interest rate
method which takes into account the semi-annual compounding of accrued interest.
In the case of the Zero Coupon Treasuries, this method will generally result in
an increasing amount of income to the Fund each year.
A dividend received by a shareholder shortly after the purchase of shares
reduces the net asset value of the shares by the amount of the dividend and,
although in effect a return of capital, will be taxable to the shareholder. If
the net asset value of shares were reduced below the shareholder's cost by
dividends representing gains realized on sales of securities, such dividends
would be a return of investment though taxable as stated above.
Fund dividends that are derived from interest on the Zero Coupon Treasuries and
other direct obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states. In
other states, arguments can be made that such distributions should be exempt
from state and local taxes based on federal law, 31 U.S.C. Section 3124, and the
U.S. Supreme Court's interpretation of that provision in American Bank and Trust
Co. v. Dallas County, 463 U.S. 855 (1983). The Fund currently intends to advise
shareholders of the proportion of its dividends that consists of such interest.
Shareholders should consult their tax advisers regarding the possible exclusion
of such portion of their dividends for state and local income tax purposes.
The Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
("IRAs") or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for dividend reinvestment and periodic investment and redemption
programs. Information for income tax purposes will be provided after the end of
the calendar year. Shareholders are encouraged to retain copies of their account
confirmation statements or year-end statements for tax reporting purposes.
However, those who have incomplete records may obtain historical account
transaction information at a reasonable fee.
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<PAGE> 23
NET ASSET VALUE
The net asset value per share is determined by calculating the total value of
the Fund's assets, which will normally be composed chiefly of investment
securities, deducting total liabilities and dividing the result by the number of
shares outstanding. Fixed income securities, including Zero Coupon Treasuries,
are valued by using market quotations, or independent pricing services that use
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
Portfolio securities that are traded on a domestic securities exchange or
securities listed on the NASDAQ National Market are valued at the last sale
price on the exchange or market where primarily traded or listed or, if there is
no recent last sale price available, at the last current bid quotation.
Portfolio securities that are primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on their
respective exchanges where primarily traded. Securities not so traded or listed
are valued at the last current bid quotation if market quotations are available.
Equity options are valued at the last sale price unless the bid price is higher
or the asked price is lower, in which event such bid or asked price is used.
Financial futures and options thereon are valued at the settlement price
established each day by the board of trade or exchange on which they are traded.
Other securities and assets are valued at fair value as determined in good faith
by the Board of Trustees. For purposes of determining the Fund's net asset
value, all assets and liabilities initially expressed in foreign currency values
will be converted into U.S. Dollar values at the mean between the bid and
offered quotations of such currencies against U.S. Dollars as last quoted by a
recognized dealer. If an event were to occur after the value of a security was
so established but before the net asset value per share was determined, which
was likely to materially change the net asset value, then that security would be
valued using fair value considerations by the Board of Trustees or its
delegates. On each day the New York Stock Exchange (the "Exchange") is open for
trading, the net asset value is determined as of the earlier of 3:00 p.m.
Chicago time or the close of the Exchange.
PURCHASE OF SHARES
Shares of the Fund may be purchased from investment dealers during the Offering
Period described below at the public offering price, which is the net asset
value next determined plus a sales charge that is a percentage of the public
offering price and varies as shown below. The minimum initial investment is
$1,000 and the minimum subsequent investment is $100. The minimum initial
investment for an Individual Retirement Account or employee benefit plan account
is $250 and the minimum subsequent investment is $50. These minimum amounts may
be changed at any time in management's discretion.
<TABLE>
<CAPTION>
Sales Charge
------------------------------------------------------------
Allowed to
Dealers as a
As a Percentage As a Percentage Percentage of
Amount of Purchase of Offering Price of Net Asset Value* Offering Price
------------------ ----------------- ------------------- --------------
<S> <C> <C> <C>
Less than $100,000............................... 5.00% 5.26% 4.50%
$100,000 but less than $250,000.................. 4.00 4.17 3.60
$250,000 but less than $500,000.................. 3.00 3.09 2.70
$500,000 but less than $1 million................ 2.00 2.04 1.80
$1 million and over.............................. 0.00** 0.00** ***
</TABLE>
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
***Commission is payable by KDI as discussed below.
Shares will only be offered to the public during the Offering Period, which is
expected to end on May 1, 1996. The Fund may at its option extend or shorten the
Offering Period. The offering of shares of the Fund shall be subject to
suspension or termination as provided under "Investment Objectives, Policies and
Risk Factors--How the Fund Works." In addition, the offering of Fund shares may
be suspended from time to time during the Offering Period in
14
<PAGE> 24
the discretion of KDI. During any period in which the public offering of shares
is suspended or terminated, shareholders will still be permitted to reinvest
dividends in shares of the Fund.
Share certificates will not be issued unless requested in writing. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).
The Fund receives the entire net asset value of all shares sold. KDI, the Fund's
principal underwriter, retains the sales charge 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 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.
Banks and other financial services firms may provide administrative services
related to order placement and payment to facilitate transactions in shares of
the Fund for their clients, and KDI may pay them a transaction fee up to the
level of the discount or other concession allowable to dealers as described
above. Banks currently are prohibited under the Glass-Steagall Act from
providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. Management does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts or promotional incentives, in the
form of cash or other compensation, to firms that sell shares of the Fund.
Non-cash compensation includes luxury merchandise and trips to luxury resorts.
In some instances, such discounts or other incentives will be offered only to
certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Fund, or other funds underwritten by
KDI.
Shares of the Fund may be purchased at net asset value to the extent that the
amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which neither KFS nor Dreman Value Advisors, Inc. serve as
investment manager ("non-Kemper fund") provided that: (a) the investor has
previously paid either an initial sales charge in connection with the purchase
of the non-Kemper fund shares redeemed or a contingent deferred sales charge in
connection with the redemption of the non-Kemper fund shares, and (b) the
purchase of Fund shares is made within 90 days after the date of such
redemption. To make such a purchase at net asset value, the investor or the
investor's dealer must, at the time of purchase, submit a request that the
purchase be processed at net asset value pursuant to this privilege. The
redemption of the shares of the non-Kemper fund is, for federal income tax
purposes, a sale upon which a gain or loss may be realized.
Shares of the Fund may be purchased at net asset value by: (a) any purchaser
provided that the amount invested in the Fund or other Kemper Mutual Funds
described under "Special Features--Combined Purchases" totals at least
$1,000,000 including purchases 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 provided in either case that such plan has
not less than 200 eligible employees (the "Large Order NAV Purchase Privilege").
15
<PAGE> 25
A contingent deferred sales charge of 1% may be imposed upon redemption of
shares of the Fund that are purchased under the Large Order NAV Purchase
Privilege 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); and
(e) redemptions under the Fund's Systematic Withdrawal Plan at a maximum of 10%
per year of the net asset value of the account.
Shares of the Fund purchased under the Large Order NAV Purchase Privilege may be
exchanged for shares of another Kemper Mutual Fund or a Money Market Fund under
the exchange privilege described under "Special Features--Exchange Privilege"
without paying any contingent deferred sales charge at the time of exchange. If
the 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.
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of shares of the Fund to employer
sponsored employee benefit plans using the subaccount recordkeeping system made
available through the Shareholder Service Agent 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 in any
calendar year, .50% on the next $5 million and .25% on amounts over $10 million
in such calendar year. KDI may in its discretion compensate investment dealers
or other financial services firms in connection with the sale of shares of the
Fund to other purchasers 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 $3 million, .50% on the next $2 million and .25%
on amounts over $5 million. For purposes of determining the appropriate
commission percentage to be applied to a particular sale under the foregoing
schedule, KDI will consider the cumulative amount invested by the purchaser in
the Fund and other Kemper Mutual Funds listed under "Special Features--Combined
Purchases," including purchases pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features referred to above. The privilege of
purchasing shares of the Fund at net asset value under the Large Order NAV
Purchase Privilege is not available if another net asset value purchase
privilege is also applicable.
Shares may be sold at net asset value in any amount to: (a) officers, trustees,
directors, employees (including retirees) and sales representatives of the Fund,
its investment manager, its principal underwriter or certain affiliated
companies, for themselves or members of their families; (b) registered
representatives and employees of broker-dealers having selling group agreements
with KDI and officers, directors and employees of service agents of the Fund,
for themselves or their spouses or dependent children; (c) shareholders who
owned shares of Kemper-Dreman Fund, Inc. ("KDF") on September 8, 1995, and have
continuously owned shares of KDF (or a Kemper Fund acquired by exchange of KDF
shares) since that date, for themselves or members of their families; and (d)
any trust, pension, profit-sharing or other benefit plan for only such persons.
Shares may be sold at net asset value in any amount to selected employees
(including their spouses and dependent children) of banks and other financial
services firms that provide administrative services related to order placement
and payment to facilitate transactions in shares of the Fund for their clients
pursuant to an agreement with KDI or one of its affiliates. Only those employees
of such banks and other firms who as part of their usual duties provide services
related to transactions in Fund shares may purchase Fund shares at net asset
value hereunder. Shares may be sold at net asset value in any amount to unit
investment trusts sponsored by Everen Securities, Inc. In addition, unitholders
of unit investment trusts sponsored by Everen Securities, Inc. may purchase Fund
shares at net asset value through reinvestment
16
<PAGE> 26
programs described in the prospectuses of such trusts which have such programs.
Shares of the Fund may be sold at net asset value through certain investment
advisers registered under the Investment Advisers 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 a "wrap account" or similar program under which such
clients pay a fee to the investment adviser or other firm. Such shares are sold
for investment purposes and on the condition that they will not be resold except
through redemption or repurchase by the Fund. The Fund may also issue shares at
net asset value in connection with the acquisition of the assets of or merger or
consolidation with another investment company, or to shareholders in connection
with the investment or reinvestment of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes an individual, or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no information
with respect to or control over accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Fund through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Fund through the Shareholder Service Agent for
these services. This prospectus should be read in connection with such firms'
material regarding their fees and services.
Orders for the purchase of shares of the Fund will be confirmed at a price based
on the net asset value next determined after receipt by KDI of the order
accompanied by payment. However, orders received by dealers or other firms prior
to the determination of net asset value (see "Net Asset Value") and received 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. The Fund reserves the right to
determine the net asset value more frequently than once a day if deemed
desirable. Dealers and other financial services firms are obligated to transmit
orders promptly. Collection may take significantly longer for a check drawn on a
foreign bank than for a check drawn on a domestic bank. Therefore, if an order
is accompanied by a check drawn on a foreign bank, funds must normally be
collected before shares will be purchased. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.
The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.
17
<PAGE> 27
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem them by making 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. As noted previously (see "Investment Objectives, Policies
and Risk Factors-- How the Fund Works and Special Risk Factors"), only
shareholders who hold their shares in the Fund until the Maturity Date and
reinvest their dividends in the Fund will necessarily receive the benefit of the
Fund's Investment Protection.
The redemption price will be the net asset value next determined following
receipt by the Shareholder Service Agent of a properly executed request with any
required documents as described above. Payment for shares redeemed will be made
in cash as promptly as practicable but in no event later than seven days after
receipt of a properly executed request accompanied by any outstanding share
certificates in proper form for transfer. When the Fund is requested to redeem
shares for which it may not have yet received good payment, it may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 15 days
from receipt by the Fund of the purchase amount. The redemption within one year
of shares purchased at net asset value under the Large Order NAV Purchase
Privilege may be subject to a 1% contingent deferred sales charge (see "Purchase
of Shares").
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. The Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agent
reasonably believes, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The SHAREHOLDER WILL BEAR THE RISK OF LOSS,
including loss resulting from fraudulent or unauthorized transactions, 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 are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional 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 may not be
redeemed under this
18
<PAGE> 28
privilege of redeeming shares by telephone request until such shares have been
owned for at least 15 days. This privilege of redeeming shares by telephone
request or by written request without a signature guarantee may not be used to
redeem shares held in certificated form and may not be used if the shareholder's
account has had an address change within 30 days of the redemption request.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the telephone redemption privilege,
although investors can still redeem by mail. The Fund reserves the right to
terminate or modify this privilege at any time.
REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which the Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value next determined after receipt of a request by KDI.
However, requests for repurchases received by dealers or other firms prior to
the determination of net asset value (see "Net Asset Value") and received by KDI
prior to the close of KDI's business day will be confirmed at the net asset
value effective on that day. The offer to repurchase may be suspended at any
time. Requirements as to stock powers, certificates, payments and delay of
payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by federal wire transfer
to a single previously designated account. Requests received by the Shareholder
Service Agent prior to the determination of net asset value will result in
shares being redeemed that day at the net asset value effective on that day and
normally the proceeds will be sent to the designated account the following
business day. Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by the Fund for up to seven days if KFS deems it
appropriate under then current market conditions. Once authorization is on file,
the Shareholder Service Agent will honor requests by telephone at 1-800-621-1048
or in writing, subject to the limitations on liability described under "General"
above. The Fund is not responsible for the efficiency of the federal wire system
or the account holder's financial services firm or bank. The Fund currently does
not charge the account holder for wire transfers. The account holder is
responsible for any charges imposed by the account holder's firm or bank. There
is a $1,000 wire redemption minimum. To change the designated account to receive
wire redemption proceeds, send a written request to the Shareholder Service
Agent with signatures guaranteed as described above or contact the firm through
which shares of the Fund were purchased. Shares purchased by check or through
EXPRESS-Transfer may not be redeemed by wire transfer until such shares have
been owned for at least 15 days. Account holders may not use this procedure 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 redemption privilege. The Fund reserves the right to terminate or
modify this privilege at any time.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed shares of the Fund or
any other Kemper Mutual Fund listed under "Special Features--Combined Purchases"
may reinvest up to the full amount redeemed at net asset value at the time of
the reinvestment in shares of the Fund or in shares of the other listed Kemper
Mutual Funds. A shareholder of the Fund or any other Kemper Mutual Fund who
redeems shares purchased under the Large Order NAV Purchase Privilege (see
"Purchase of 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 shares of the Fund or shares of other 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 of
another Kemper Mutual Fund who has redeemed shares of that fund 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 the Fund or in Class A shares of the other Kemper Mutual Funds
listed under "Special Features--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 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
19
<PAGE> 29
months of the redemption. If a loss is realized on the redemption of Fund
shares, the reinvestment may be subject to the "wash sale" rules if made within
30 days of the redemption, resulting in the postponement of the recognition of
such loss for federal income tax purposes. The reinvestment privilege may be
terminated or modified at any time and is subject to the limited Offering Period
of the Fund.
SPECIAL FEATURES
COMBINED PURCHASES. The Fund's shares may be purchased at the rate applicable to
the discount bracket attained by combining concurrent investments in Class A
shares (or the equivalent) of any of the following funds: Kemper Technology
Fund, Kemper Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization
Equity Fund, Kemper Income and Capital Preservation Fund, Kemper Municipal Bond
Fund, Kemper Diversified Income Fund, Kemper High Yield Fund, Kemper U.S.
Government Securities Fund, Kemper International Fund, Kemper State Tax-Free
Income Series, Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip
Fund, Kemper Global Income Fund, Kemper Target Equity Fund (series are subject
to a limited offering period) Kemper Intermediate Municipal Bond Fund, Kemper
Cash Reserves Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate
Government Fund, Kemper-Dreman Fund, Inc. and Kemper Value+Growth Fund ("Kemper
Mutual Funds"). Except as noted below, there is no combined purchase credit for
direct purchases of shares of Kemper Money Market Fund, Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market 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 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 investment, such as guaranteed investment contracts and
employer stock, maintained on such subaccount record keeping system.
LETTER OF INTENT. The same reduced sales charges, 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. As noted under "Purchase of
Shares," the Offering Period for the purchase of shares of the Fund is limited.
However, shares of other Kemper Mutual Funds noted above would be available
beyond that period. The Letter, which imposes no obligation to purchase or sell
additional 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 will be 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.
CUMULATIVE DISCOUNT. The Fund's shares also may be purchased at the rate
applicable to the discount bracket attained by adding to the cost of Fund shares
being purchased the value of all 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.
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
20
<PAGE> 30
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. Subject to the following limitations, shares of the Kemper
Mutual Funds and Money Market Funds listed under "Special Features--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. Shares purchased by check or through
EXPRESS-Transfer may not be exchanged until they have been owned for at least 15
days. In addition, shares of a Kemper Mutual 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. A series of Kemper Target
Equity Fund will be 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, Tax-Exempt New York
Money Market Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with KDI.
Exchanges may only be made for funds that are available for sale in the
shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and Tax-Exempt New York Money
Market Fund is available for sale only in New York, Connecticut, New Jersey and
Pennsylvania.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, dealers or other
firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis of such shares. Shareholders interested in
exercising the exchange privilege may obtain prospectuses of the other funds
from dealers, other firms or KDI. Exchanges may be accomplished by a written
request to Kemper Mutual Funds, 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 or in writing, subject to the
limitations on liability under "Redemption or Repurchase of Shares--General."
Any share certificates must be deposited prior to any exchange of such shares.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the telephone exchange privilege. The
exchange privilege is not a right and may be suspended, terminated or modified
at any time. Except as otherwise permitted by applicable regulations, 60 days'
prior written notice of any termination or material change will be provided.
EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $2,500) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $500 and maximum
$2,500) from their Fund account and transfer the proceeds to their bank, savings
and loan, or credit union checking account. By enrolling in EXPRESS-Transfer,
the shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to transfer the specified amounts between the
shareholder's Fund account and the predesignated bank, savings and loan or
credit union account, subject to the limitations on liability under "Redemption
or Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a
shareholder can initiate a transaction by calling Kemper Shareholder Services
toll free at 1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m.
Chicago time. Shareholders may terminate this privilege by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable 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").
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of the Fund's shares at
the offering price (net asset value plus the sales charge) may provide for the
payment from the owner's account of any requested dollar amount to be paid to
the owner or a designated payee monthly, quarterly, semiannually or annually.
The $5,000 minimum
21
<PAGE> 31
account size is not applicable to Individual Retirement Accounts. The minimum
periodic payment is $100. 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 shares while participating in a systematic withdrawal plan
ordinarily will be disadvantageous to the investor because the investor will be
paying a sales charge on the purchase of shares at the same time that the
investor is redeeming shares upon which a sales charge may already have been
paid. Therefore, the Fund will not knowingly permit additional investments of
less than $2,000 if the investor is at the same time making systematic
withdrawals. (See "Purchase of Shares" regarding the limited Offering Period for
the Fund's shares.) The right is reserved to amend the systematic withdrawal
plan on 30 days' notice. The plan may be terminated at any time by the investor
or the Fund. As noted previously (see "Investment Objectives, Policies and Risk
Factors--How the Fund Works and Special Risk Factors"), only shareholders who
hold their shares in the Fund until the Maturity Date and reinvest their
dividends in the Fund will necessarily receive the benefit of the Fund's
Investment Protection.
TAX-SHELTERED RETIREMENT PLANS. KFS provides retirement plan services and
documents and KDI can establish investor accounts in any of the following types
of retirement plans:
- - Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.
- - 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from KDI upon request. The brochures for plans trusteed by
IFTC describe the current fees payable to IFTC for its services as trustee.
Investors should consult with their own tax advisers before establishing a
retirement plan. In view of the limited Offering Period of the Fund (see
"Purchase of Shares"), the Fund may not be appropriate for periodic contribution
plans.
PERFORMANCE
The Fund may advertise several types of performance information, including
"average annual total return" and "total return." Each of these figures is based
upon historical results and is not representative of the future performance of
the Fund.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in the Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in the Fund
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund). Average annual total return figures
represent the average annual percentage change over the period in question.
Total return figures represent the aggregate percentage or dollar value change
over the period in question.
The Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged indexes including the Standard & Poor's 500 Stock Index, the
Russell 1000(R) Growth Index and the Wilshire 750 Mid-Cap Growth Index. The
Fund's performance may also be compared to the performance of other mutual funds
or mutual fund indexes as reported by independent mutual fund reporting services
such as Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations are based upon changes in net asset value with all dividends
reinvested and do not include the effect of any sales charges.
22
<PAGE> 32
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue Money Fund Report(R) or Money Market Insight(R), reporting services
on money market funds. Performance of U.S. Treasury obligations may be based
upon, among other things, various U.S. Treasury bill indexes. Certain of these
alternative investments may offer fixed rates of return and guaranteed principal
and may be insured.
The Fund may depict the historical performance of the securities in which the
Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indexes of those investments or economic indicators. The Fund may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Fund.
The Fund's shares are sold at net asset value plus a maximum sales charge of
5.0% of the offering price. While the maximum sales charge is normally reflected
in the Fund's performance figures, certain total return calculations may not
include such charge and those results would be reduced if it were included. The
Fund's returns and net asset value will fluctuate. Shares of the Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Additional information concerning the Fund's
performance and concerning the historical performance of various types of
investments that may be used to provide for retirement needs appears in the
Statement of Additional Information. Additional information about the Fund's
performance also appears in its Annual Report to Shareholders, which is
available without charge from the Fund.
CAPITAL STRUCTURE
The Trust is an open-end, management investment company, organized as a business
trust under the laws of Massachusetts on August 3, 1988. Effective May 1, 1994,
the Trust changed its name from Kemper Retirement Fund to Kemper Target Equity
Fund. The Trust may issue an unlimited number of shares of beneficial interest
in one or more series, all having no par value. The Trust has established seven
series of shares: Kemper Retirement Fund Series I, Series II, Series III, Series
IV and Series V, which are no longer offered, Kemper Retirement Fund Series VI,
which is the Fund, and Kemper Worldwide 2004 Fund. The Board of Trustees may
authorize the issuance of additional series if deemed desirable, each with its
own investment objective, policies and restrictions. Since the Trust may offer
multiple series, it is known as a "series company." Shares of a series have
equal noncumulative voting rights and equal rights with respect to dividends,
assets and liquidation of such series. Shares are fully paid and nonassessable
when issued, are transferable without restriction and have no preemptive or
conversion rights. The Trust is not required to hold annual shareholders'
meetings and does not intend to do so. However, it will hold special meetings as
required or deemed desirable for such purposes as electing trustees, changing
fundamental policies or approving an investment management agreement. Subject to
the Agreement and Declaration of Trust of the Trust, shareholders may remove
trustees. Shareholders will vote by series and not in the aggregate except when
voting in the aggregate is required under the Investment Company Act of 1940,
such as for the election of trustees. Any series of the Trust, including the
Fund, may be divided by the Board of Trustees into classes of shares, subject to
compliance with the Securities and Exchange Commission regulations permitting
the creation of separate classes of shares. The Trust's shares currently are not
divided into classes. Shares of a series would be subject to any preferences,
rights or privileges of any classes of shares of the series. Generally each
class of shares issued by a particular series of the Trust would differ as to
the allocation of certain expenses of the series such as distribution and
administrative expenses permitting, among other things, different levels of
service or methods of distribution among various classes.
23
<PAGE> 33
[KEMPER LOGO]
INVESTMENT MANAGER
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
1-800-621-1048
KRF-1 10/95 (LOGO)printed on recycled paper
KEMPER
RETIREMENT
FUND
SERIES VI
PROSPECTUS
OCTOBER 25, 1995
[KEMPER LOGO]
KEMPER
<PAGE> 34
KEMPER TARGET EQUITY FUND
KEMPER WORLDWIDE 2004 FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
--------------------------------------- -------------------------------------------
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Synopsis............................... Summary; Summary of Expenses
3. Condensed Financial Information........ Financial Highlights; Performance
4. General Description of Registrant...... Summary; Investment Objectives, Policies and
Risk Factors; Capital Structure
5. Management of the Fund................. Summary; Investment Manager and Underwriter
5A. Management's Discussion of
Fund Performance....................... Inapplicable
6. Capital Stock and Other Securities..... Summary; Investment Objectives, Policies and
Risk Factors; Dividends and Taxes; Net Asset
Value; Purchase of Shares; Capital Structure
7. Purchase of Securities Being Offered... Summary; Investment Manager and Underwriter;
Net Asset Value; Purchase of Shares; Special
Features
8. Redemption or Repurchase............... Summary; Redemption or Repurchase of Shares
9. Pending Legal Proceedings.............. Inapplicable
</TABLE>
<PAGE> 35
TABLE OF CONTENTS
- ---------------------------------------------------------
<TABLE>
<S> <C>
Summary 1
- ------------------------------------------------
Summary of Expenses 3
- ------------------------------------------------
Financial Highlights 4
- ------------------------------------------------
Investment Objectives, Policies and Risk
Factors 4
- ------------------------------------------------
Investment Manager and Underwriter 14
- ------------------------------------------------
Dividends and Taxes 16
- ------------------------------------------------
Net Asset Value 18
- ------------------------------------------------
Purchase of Shares 18
- ------------------------------------------------
Redemption or Repurchase of Shares 22
- ------------------------------------------------
Special Features 24
- ------------------------------------------------
Performance 27
- ------------------------------------------------
Capital Structure 28
- ------------------------------------------------
</TABLE>
This prospectus contains information about the Fund that you should know before
investing and should be retained for future reference. A Statement of Additional
Information dated October 25, 1994, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. It is available
upon request without charge from the Fund at the address or telephone number on
this cover or the firm from which this prospectus was received.
Fund shares are not deposits or obligations of, or guaranteed or endorsed by,
any bank, nor are they federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. Investment in Fund
shares involves risk, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[KEMPER LOGO]
KEMPER
WORLDWIDE
2004 FUND
PROSPECTUS OCTOBER 25, 1994
KEMPER WORLDWIDE 2004 FUND
120 South LaSalle Street, Chicago, Illinois 60603 1-800-621-1048. The objectives
of Kemper Worldwide 2004 Fund (the "Fund") are to provide a guaranteed return of
investment on the Maturity Date (November 15, 2004) to investors who reinvest
all dividends and hold their shares to the Maturity Date, and to provide a total
return, a combination of capital growth and income. The Fund pursues its
objectives by investing a portion of its assets in "zero coupon" U.S. Treasury
obligations and the balance of its assets primarily in an internationally
diversified portfolio of foreign securities. The Fund is intended for long-term
investors and is not appropriate for investors seeking current income. The
assurance that investors who reinvest dividends and hold their shares until the
Maturity Date will receive on the Maturity Date at least their original
investment is provided by the par value of the zero coupon U.S. Treasury
obligations in the Fund's portfolio on that date as well as by a guarantee from
Kemper Financial Services, Inc., the Fund's investment manager. There is no
assurance that the Fund's objective of total return will be achieved. The Fund's
shares are not guaranteed by the U.S. Government. The Fund is a series of Kemper
Target Equity Fund.
<PAGE> 36
KEMPER WORLDWIDE 2004 FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVES; PERMITTED INVESTMENTS. Kemper Worldwide 2004 Fund (the
"Fund") is a diversified series of Kemper Target Equity Fund (the "Trust"),
which is an open-end, management investment company that may issue shares in one
or more series. The Fund's investment objectives are to provide a guaranteed
return of investment on the Maturity Date (November 15, 2004) to investors who
reinvest all dividends and hold their shares to the Maturity Date, and to
provide a total return, a combination of capital growth and income. The Fund
pursues its objectives by investing a portion of its assets in "zero coupon"
U.S. Treasury Obligations ("Zero Coupon Treasuries") and the balance of its
assets primarily in an internationally diversified portfolio of foreign
securities ("Foreign Securities"). The Fund's investments in Foreign Securities
will primarily be common stocks of established non-U.S. companies. The assurance
that investors who reinvest all dividends and hold their shares until the
Maturity Date will receive on the Maturity Date at least their original
investment is provided by the par value of the Zero Coupon Treasuries as well as
by a guarantee from Kemper Financial Services, Inc., the Fund's investment
manager. The Fund's returns will fluctuate and there is no assurance that the
Fund will achieve its objective of total return. The Zero Coupon Treasuries are
normally purchased at a substantial discount and represent the right to receive
par value at a fixed date from the U.S. Government. The amount invested in
Foreign Securities provides total return potential. The Fund may engage in
options, financial futures and foreign currency transactions and may lend its
securities. See "Investment Objectives, Policies and Risk Factors."
SPECIAL RISK FACTORS. The Fund is intended for long-term investors and is not
appropriate for investors seeking current income. The Fund is designed so that
shareholders who reinvest all dividends and hold their shares until the Maturity
Date will receive on the Maturity Date an amount at least equal to their
investment, including any sales charge ("Investment Protection"), even if the
value of the investments of the Fund other than the Zero Coupon Treasuries were
to decrease to zero, which the investment manager considers highly unlikely. The
Fund does not seek to provide a specific return on investors' capital or to
protect principal on an after-tax or present value basis. An investor who
reinvested all dividends and who, upon redemption at the Maturity Date, received
only the principal amount invested, would have received a zero rate of return on
such investment. Investors who do not reinvest all dividends or who redeem all
or part of their shares in the Fund prior to the Maturity Date will not benefit
from the Fund's Investment Protection, and upon redemption may receive more or
less than their original investment; provided, however, in the event of a
partial redemption, the Fund's Investment Protection will continue as to that
part of the original investment that remains invested (with all dividends
thereon reinvested) until the Maturity Date. The government guarantee of the
Zero Coupon Treasuries in the Fund's portfolio does not guarantee the market
value of the Zero Coupon Treasuries or the shares of the Fund, whose net asset
value will fluctuate. Zero Coupon Treasuries normally are subject to
substantially greater price fluctuations during periods of changing interest
rates than are securities of comparable quality that make regular interest
payments. Investors subject to tax should be aware that any portion of the
amount returned to them upon redemption of shares that constitutes accretion of
interest on the Zero Coupon Treasuries will have been taxable as ordinary income
over the period that the shares were held. Foreign Securities investments
involve risk and opportunity considerations not typically associated with
investing in United States companies. The U.S. Dollar value of a Foreign
Security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Thus, the U.S. Dollar
value of Foreign Securities in the Fund's portfolio, and the Fund's net asset
value, may change in response to changes in currency exchange rates even though
the value of the Foreign Securities in local currency terms may not have
changed. While the Fund's investments in Foreign Securities will principally be
in developed countries, the Fund may invest a portion of its assets in
developing or "emerging" markets, which involve exposure to economic structures
that are generally less diverse and mature than in the United States, and to
political systems that may be less stable. There are special risks associated
with options, financial futures and foreign currency transactions and there is
no
1
<PAGE> 37
assurance that the use of these investment techniques will be successful. See
"Investment Objectives, Policies and Risk Factors" and "Dividends and Taxes."
INVESTMENT MANAGER AND UNDERWRITER. Kemper Financial Services, Inc. ("KFS") is
the Fund's investment manager. KFS is paid an investment management fee at the
annual rate of .60 of 1% of average daily net assets of the Fund. Kemper
Distributors, Inc. ("KDI"), a wholly owned subsidiary of KFS, is the Fund's
principal underwriter and administrator. Administrative services are provided to
shareholders under an administrative services agreement with KDI. The Fund pays
an administrative services fee at the annual rate of up to .25 of 1% of average
daily net assets of the Fund, which KDI pays to financial services firms. See
"Investment Manager and Underwriter."
PURCHASES AND REDEMPTIONS. Investors may purchase the Fund's shares only during
a limited offering period (the "Offering Period"). Purchases may be made at net
asset value plus a maximum sales charge of 5.0% of the offering price. Reduced
sales charges apply to purchases of $100,000 or more. The minimum initial
investment is $1,000 and the minimum subsequent investment is $100. The minimum
initial investment for an employee benefit plan or Individual Retirement Account
is $250 and the minimum subsequent investment is $50. It is anticipated that the
Offering Period will continue until December 31, 1995 but the period may be
shortened or extended at the option of the Fund. Shareholders will still be
permitted to reinvest dividends in shares of the Fund after the end of the
Offering Period. Shares may be redeemed without charge or penalty at net asset
value, which may be more or less than original cost. The redemption within one
year of shares purchased at net asset value under the Large Order NAV Purchase
Privilege may be subject to a 1% contingent deferred sales charge. See "Purchase
of Shares" and "Redemption or Repurchase of Shares."
INVESTORS IN THE FUND. The Fund is designed for long-term investors who seek
protection of their original investment as well as the opportunity for total
return. Through a single investment in shares of the Fund, investors receive the
benefits of diversification, professional management and liquidity, and relief
from administrative details such as accounting for distributions and the
safekeeping of securities. However, since Foreign Securities present special
risks, investment in the Fund should not be considered a complete investment
program.
DIVIDENDS. The Fund normally distributes annual dividends of net investment
income and any net realized short-term and long-term capital gains. Investors
may have income and capital gain dividends automatically reinvested in the Fund
without a sales charge and must do so in order to receive the benefit of the
Fund's Investment Protection. See "Dividends and Taxes."
GENERAL INFORMATION AND CAPITAL. The Trust is organized as a business trust
under the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest in one or more series, one of such series being the Fund.
Shares are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Trust is not
required to hold annual shareholder meetings; but it will hold special meetings
as required or deemed desirable for such purposes as electing trustees, changing
fundamental policies or approving an investment management agreement. See
"Capital Structure."
2
<PAGE> 38
SUMMARY OF EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge on Purchases (as a percentage of offering price)................... 5.0 %
Maximum Sales Charge on Reinvested Dividends............................................ None
Deferred Sales Charge................................................................... None (2)
Redemption Fees......................................................................... None
Exchange Fee............................................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees......................................................................... .60 %
12b-1 Fees.............................................................................. None
Other Expenses.......................................................................... .69 %
----
Total Operating Expenses................................................................ 1.29 %
====
</TABLE>
- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details. Reduced sales charges apply to purchases of $100,000
or more. See "Purchase of Shares."
(2) The redemption within one year of shares purchased at net asset value under
the Large Order NAV Purchase Privilege may be subject to a 1% contingent
deferred sales charge. See "Purchase of Shares."
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, 10
assuming (1) 5% annual return and (2) redemption at the 1 YEAR 3 YEARS 5 YEARS YEARS
end of each time period: $62 $89 $117 $198
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Example assumes a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission. This hypothetical rate
of return is not intended to be representative of past or future performance of
the Fund. The Example should not be considered to be a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
3
<PAGE> 39
FINANCIAL HIGHLIGHTS
The table below shows financial information expressed in terms of one share
outstanding throughout the period. The information in the table is covered by
the report of the Fund's independent auditors. The report is contained in the
Trust's Registration Statement and is available from the Fund. The financial
statements contained in the Fund's 1995 Annual Report to Shareholders are
incorporated herein by reference and may be obtained by writing or calling the
Fund.
<TABLE>
<CAPTION>
MAY 3,
YEAR ENDED 1994 TO
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.02 9.00
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .27 .02
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .79 --
- ---------------------------------------------------------------------------------------------------------
Total from investment operations 1.06 .02
- ---------------------------------------------------------------------------------------------------------
Less distribution from net investment income .12 --
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.96 9.02
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 11.91 .22
- ---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.29 1.32
- ---------------------------------------------------------------------------------------------------------
Net investment income 3.77 2.59
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $30,699 5,900
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 75 --
=========================================================================================================
</TABLE>
NOTES:
Ratios have been determined on an annualized basis. Total, return is not
annualized and does not reflect the effect of any sales charges.
The Fund was organized as the sixth series of the Trust, which is a business
trust under the laws of Massachusetts. No significant transactions were effected
prior to May 3, 1994.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
OBJECTIVES. The objectives of the Fund are to provide a guaranteed return of
investment on the Maturity Date (November 15, 2004) to investors who reinvest
all dividends and hold their shares to the Maturity Date and to provide a total
return, a combination of capital growth and income. As a fundamental policy, the
Fund pursues its objectives by investing a portion of its assets in "zero
coupon" U.S. Treasury obligations ("Zero Coupon Treasuries") and the balance of
its assets primarily in an internationally diversified portfolio of foreign
securities. ("Foreign Securities"). Under normal market conditions, as a
non-fundamental policy, at least 65% of the Fund's total assets will be invested
in the securities of issuers located in at least three countries, one of which
may be the United States.
4
<PAGE> 40
The Fund is intended for long-term investors who seek protection of their
original investment as well as the opportunity for total return. The Fund is
designed so that shareholders who reinvest all dividends and hold their
investment until the Maturity Date will receive on the Maturity Date an amount
at least equal to their original investment, including any sales charge
("Investment Protection"). This will occur even if the value of the investments
of the Fund other than the Zero Coupon Treasuries were to decrease to zero,
which the investment manager considers highly unlikely. The assurance that
investors who reinvest all dividends and hold their shares until the Maturity
Date will receive on the Maturity Date at least their original investment is
provided by the par value of the Zero Coupon Treasuries in the Fund's portfolio
as well as by a guarantee from Kemper Financial Services, Inc. ("KFS"), the
Fund's investment manager. See "How the Fund Works" below. Investors who do not
reinvest all dividends or who redeem part or all of their investment in the Fund
other than on the Maturity Date will not receive the benefit of the Fund's
Investment Protection, and upon the redemption may receive more or less than the
amount of their original investment; provided, however, in the event of a
partial redemption, the Fund's Investment Protection will continue as to that
part of the original investment that remains invested (with all dividends
thereon reinvested) until the Maturity Date. The Fund may not be appropriate for
investors who expect to redeem their investment in the Fund prior to the
Maturity Date or who will require cash distributions from the Fund. Since the
benefit of Investment Protection is an inherent characteristic of the Fund's
shares, it continues in the event of a transfer of the shares by gift, under a
will or otherwise, provided dividends on the shares continue to be reinvested
and the shares continue to be held until the Maturity Date.
The opportunity for total return for an investor arises to the extent that the
value of the Fund's assets, including Foreign Securities, is greater than the
par value of the Zero Coupon Treasuries on the Maturity Date. Thus, the Fund in
effect will have two major portfolio segments: one consisting of Zero Coupon
Treasuries to pursue Investment Protection and the other consisting of Foreign
Securities to pursue total return. The Fund's returns and net asset value will
fluctuate. There is no assurance that the Fund will achieve its objective of
total return. Since Foreign Securities present special risks, investment in the
Fund should not be considered a complete investment program.
HOW THE FUND WORKS. As noted above, the Fund will invest in Zero Coupon
Treasuries and Foreign Securities in pursuing its objectives. Zero Coupon
Treasuries evidence the right to receive a fixed payment at a specific future
date from the U.S. Government. The Fund will offer its shares during a limited
offering period (the "Offering Period") at net asset value plus the applicable
sales charge. See "Purchase of Shares." The Zero Coupon Treasuries that the Fund
acquires with the proceeds of the sale of its shares during the Offering Period
will be selected so as to mature at a specific par value on or about the
Maturity Date. The Fund's investment manager will continuously adjust the
proportion of the Fund's assets that are invested in Zero Coupon Treasuries so
that the value of the Zero Coupon Treasuries on the Maturity Date (i.e., the
aggregate par value of the Zero Coupon Treasuries in the portfolio) will be at
least sufficient to enable investors who reinvest all dividends and hold their
investment in the Fund until the Maturity Date to receive on the Maturity Date
the full amount of such investment, including any sales charge. Thus, the
minimum par value of Zero Coupon Treasuries per Fund share necessary to provide
for the Fund's Investment Protection will be continuously determined and
maintained.
In order to provide further assurance that the Fund's Investment Protection will
be maintained, KFS has entered into a Guaranty Agreement. Under the Guaranty
Agreement, KFS has agreed to make sufficient payments on the Maturity Date to
enable shareholders who have reinvested all dividends and held their investment
in the Fund until the Maturity Date to receive on the Maturity Date an aggregate
amount of redemption proceeds and payments under the Guaranty Agreement equal to
the amount of their original investment, including any sales charge.
The portion of the Fund's assets that will be allocated to the purchase of Zero
Coupon Treasuries will fluctuate during the Offering Period. This is because the
value of the Zero Coupon Treasuries and Foreign Securities, and therefore the
offering price of the Fund's shares, will fluctuate with changes in interest
rates and other market value fluctuations. If the offering price of the Fund's
shares increases during the Offering Period, the minimum par value of Zero
Coupon Treasuries per Fund share necessary to provide for the Fund's Investment
Protection will increase and this amount will be fixed by the highest offering
price during the Offering Period. The Fund may hold Zero Coupon Treasuries in an
amount in excess of the amount necessary to provide for the Fund's Investment
Protection in the
5
<PAGE> 41
discretion of the Fund's investment manager. During the first year of
operations, under normal market conditions, the proportion of the Fund's
portfolio invested in Zero Coupon Treasuries may be expected to range from 50%
to 65%; but a greater or lesser percentage is possible.
As the percentage of Zero Coupon Treasuries in the Fund's portfolio increases,
the percentage of Foreign Securities in the portfolio will necessarily decrease.
This will result in less potential for total return from Foreign Securities. In
order to help ensure at least a minimum level of exposure to the foreign markets
for shareholders, the Fund will cease offering its shares if their continued
offering would cause more than 70% of its assets to be allocated to Zero Coupon
Treasuries. After the Offering Period is over, no additional assets will be
allocated to the purchase of Zero Coupon Treasuries. However, since the values
of the Zero Coupon Treasuries and Foreign Securities are often affected in
different ways by changes in interest rates and other market conditions and will
often fluctuate independently, the percentage of the Fund's net asset value
represented by Zero Coupon Treasuries will continue to fluctuate after the end
of the Offering Period. Zero Coupon Treasuries may be liquidated before the
Maturity Date to meet redemptions and pay cash dividends, provided that the
minimum amount necessary to provide for the Fund's Investment Protection is
maintained.
Shareholders who elect to receive dividends in cash are in effect withdrawing a
portion of the accreted income on the Zero Coupon Treasuries that are held to
protect their original principal investment at the Maturity Date. These
shareholders will receive the same net asset value per share for any Fund shares
redeemed at the Maturity Date as shareholders who reinvest dividends, but they
will have fewer shares to redeem than shareholders similarly situated who had
reinvested all dividends. Shareholders who redeem some or all of their shares
before the Maturity Date lose the benefit of Investment Protection with respect
to those shares redeemed. Thus, investors are encouraged to reinvest dividends
and to evaluate their need to receive some or all of their investment prior to
the Maturity Date before making an investment in the Fund.
ZERO COUPON TREASURIES. The Zero Coupon Treasuries held by the Fund will
consist of U.S. Treasury notes or bonds that have been stripped of their
unmatured interest coupons or will consist of unmatured interest coupons from
U.S. Treasury notes or bonds. The Zero Coupon Treasuries evidence the right to
receive a fixed payment at a future date (i.e., the Maturity Date) from the U.S.
Government, and are backed by the full faith and credit of the U.S. Government.
The guarantee of the U.S. Government does not apply to the market value of the
Zero Coupon Treasuries owned by the Fund or to the shares of the Fund. The
market value of Zero Coupon Treasuries generally will fluctuate inversely with
changes in interest rates. As interest rates rise, the value of the Zero Coupon
Treasuries will tend to decline and as interest rates fall the value of the Zero
Coupon Treasuries will tend to increase. Zero Coupon Treasuries are purchased at
a deep discount because the buyer obtains only the right to a fixed payment at a
fixed date in the future and does not receive any periodic interest payments.
The effect of owning deep discount bonds that do not make current interest
payments (such as the Zero Coupon Treasuries) is that a fixed yield is earned
not only on the original investment but also, in effect, on all earnings during
the life of the discount obligation. This implicit reinvestment of earnings at
the same rate eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest at higher rates
in the future. For this reason, the Zero Coupon Treasuries normally are subject
to substantially greater price fluctuations during periods of changing interest
rates than are securities of comparable quality that make regular interest
payments. As the maturity of the Zero Coupon Treasuries becomes shorter (i.e.,
as the period to the Maturity Date is shorter), the degree of price fluctuation
will become less. Additional information concerning Zero Coupon Treasuries
appears in the Statement of Additional Information of the Fund under "Investment
Policies and Techniques."
FOREIGN SECURITIES. With respect to Fund assets not invested in Zero Coupon
Treasuries, the Fund will seek a total return, a combination of capital growth
and income. In seeking to achieve a total return, it will be the Fund's policy
to invest assets not otherwise invested in Zero Coupon Treasuries primarily in
an internationally diversified portfolio of foreign securities ("Foreign
Securities"). Investments in Foreign Securities will be made primarily for
capital growth and secondarily for income for the purpose of achieving a high
overall return. While there is no specific limitation on the percentage or
amount of the Fund's Foreign Securities that may be invested for growth or
income,
6
<PAGE> 42
the investment emphasis for Foreign Securities normally will be primarily on
growth of capital and only secondarily on income. While the Fund's Foreign
Securities will principally be equity securities of non-U.S. issuers, the Fund
may also invest in convertible and debt securities. Under normal circumstances,
more than 80% of the Fund's assets not invested in Zero Coupon Treasuries will
be invested in securities of non-U.S. issuers. In determining to what extent the
Fund's Foreign Securities will be invested for capital growth or income, the
Fund's 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.
In pursuing its objective of total return, the Fund invests primarily in common
stocks of established non-U.S. companies believed to have potential primarily
for capital growth and secondarily for income. However, there is no requirement
that the Fund's Foreign Securities be exclusively 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 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 increase its Foreign Securities holdings in such debt
securities. However, with respect to Fund assets not invested in Zero Coupon
Treasuries, under normal circumstances, it is currently intended that no more
than 5% of the Fund's net assets will be invested (and, therefore, at risk) in
fixed income obligations. Additional information concerning foreign fixed income
securities appears under "Investment Policies and Techniques--Foreign Debt
Securities" in the Statement of Additional Information.
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 of Foreign Securities. The Fund may, from
time to time, have more than 25% of its Foreign Securities investments 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. Investments in Foreign Securities may
include securities issued by enterprises that have undergone or are currently
undergoing privatization. However, it is currently intended that no more than 5%
of the Fund's net assets will be invested (and, therefore, at risk) in
securities of enterprises recently privatized (within one year of initial public
offering). Additional information concerning privatized enterprises appears
under "Investment Policies and Techniques--Privatized Enterprises" in the
Statement of Additional Information.
In determining the appropriate distribution of investments in Foreign Securities
among various countries and geographic regions, the Fund's 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. Currently,
more than 60% of the world market capitalization of equity securities are
represented by securities in currencies other than the U.S. Dollar.
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 purchase and write options on securities and foreign
currencies and index options, may purchase and sell financial futures contracts
and options on financial futures contracts and may engage in foreign currency
transactions as a hedge and not for speculation and may at times lend its
portfolio securities. See "Additional Investment Information" below. When the
investment manager deems it appropriate to invest for temporary defensive
purposes, such as during periods of adverse market conditions, a significant
portion of the Fund's assets not invested in Zero Coupon Treasuries may be held
temporarily in cash (including foreign currency) or foreign or domestic cash
equivalent short-term obligations, either rated as high quality or considered to
be of comparable quality in the opinion of the Fund's investment manager,
including, but not limited to, certificates of deposit, time deposits, bankers'
acceptances, commercial paper, short-term notes, obligations issued or
guaranteed
7
<PAGE> 43
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 not invested in Zero Coupon Treasuries may
be invested in U.S. Dollar-denominated obligations to reduce the risks inherent
in non-U.S. Dollar-denominated assets.
SPECIAL RISK FACTORS. The value of the Zero Coupon Treasuries and the Foreign
Securities in the Fund's portfolio will fluctuate prior to the Maturity Date and
the value of the Zero Coupon Treasuries will equal their par value on the
Maturity Date. As noted previously (see "Zero Coupon Treasuries"), the value of
the Zero Coupon Treasuries may be expected to experience more volatility than
U.S. Government securities that have similar yields and maturities but that make
current distributions of interest. Thus, the net asset value of the Fund's
shares will fluctuate with changes in interest rates and other market conditions
prior to the Maturity Date. As an open-end investment company, the Fund will
redeem its shares at the request of a shareholder at the net asset value per
share next determined after a request is received in proper form. Thus,
shareholders who redeem their shares prior to the Maturity Date may receive more
or less than their acquisition cost, including any sales charge, whether or not
they reinvest their dividends. Such shares, therefore, would not receive the
benefit of the Fund's Investment Protection. Any shares not redeemed prior to
the Maturity Date by a shareholder would continue to receive the benefit of the
Fund's Investment Protection provided that all dividends with respect to such
shares are reinvested. Accordingly, the Fund may not be appropriate for
investors who expect to redeem their investment in the Fund prior to the
Maturity Date.
Each year the Fund will be required to accrue an increasing amount of income on
its Zero Coupon Treasuries utilizing the effective interest method. However, to
maintain its tax status as a pass-through entity under Subchapter M of the
Internal Revenue Code and also to avoid imposition of excise taxes, the Fund
will be required to distribute dividends equal to substantially all of its net
investment income, including the accrued income on its Zero Coupon Treasuries
for which it receives no payments in cash prior to their maturity. Dividends of
the Fund's investment income and short-term capital gains will be taxable to
shareholders as ordinary income for federal income tax purposes, whether
received in cash or reinvested in additional shares. See "Dividends and Taxes."
However, shareholders who elect to receive dividends in cash, instead of
reinvesting these amounts in additional shares of the Fund, may realize an
amount upon redemption of their investment on the Maturity Date that is less or
greater than their acquisition cost and, therefore, will not receive the benefit
of the Fund's Investment Protection. Accordingly, the Fund may not be
appropriate for investors who will require cash distributions from the Fund in
order to meet current tax obligations resulting from their investment or for
other needs.
As noted previously, the Fund will maintain a minimum par value of Zero Coupon
Treasuries per share in order to provide for the Fund's Investment Protection.
In order to generate sufficient cash to meet dividend requirements and other
operational needs and to redeem Fund shares on request, the Fund may be required
to limit reinvestment of capital on the disposition of Foreign Securities and
may be required to liquidate Foreign Securities at a time when it is otherwise
disadvantageous to do so, which may result in the realization of losses on the
disposition of such securities, and may also be required to borrow money to
satisfy dividend and redemption requirements. The liquidation of Foreign
Securities and the expenses of borrowing money in such circumstances could
impair the ability of the Fund to meet its objective of total return.
The Fund provides Investment Protection to investors who reinvest all dividends
and do not redeem their shares before the Maturity Date. In addition, as noted
above, dividends from the Fund will be taxable to shareholders whether received
in cash or reinvested in additional shares. Thus, the Fund does not provide a
specific return on investors' capital or protect principal on an after-tax or
present value basis. An investor who reinvested all dividends and who, upon
redemption at the Maturity Date, received only the original amount invested
including any sales charge, would have received a zero rate of return on such
investment. This could only happen if the value of the Fund's investments other
than Zero Coupon Treasuries were to decrease to zero, an event that the
investment manager considers highly unlikely. The present value of $1,000 on the
Maturity Date discounted for inflation assumed to be at an annual rate of 4% is
approximately $701 on the date of this prospectus.
8
<PAGE> 44
Investors subject to tax should be aware that any portion of the amount returned
to them upon redemption of shares that constitutes accretion of interest on the
Zero Coupon Treasuries will have been taxable each year as ordinary income over
the period during which shares were held. See "Dividends and Taxes."
Foreign Securities involve currency risks. The U.S. Dollar value of a Foreign
Security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based on the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies in connection with purchases
and sales of Foreign Securities.
Foreign Securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for Foreign Securities may be less liquid. In
addition, there may be less publicly available information about foreign issuers
than about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
Settlement of Foreign Securities trades may take longer and present more risk
than for domestic securities. With respect to certain foreign countries, there
is a possibility of expropriation or diplomatic developments that could affect
investment in these countries.
While the Fund's investments in Foreign Securities will principally be in
developed countries, the Fund may invest a portion of its assets in developing
or "emerging" markets, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. 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 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 can be expected to continue in the future.
Many of the risks described above relating to Foreign Securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.
Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed
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<PAGE> 45
markets. There also may be a lower level of monitoring and regulation of
developing markets and the activities of investors in such markets, and
enforcement of existing regulations has been extremely limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by 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. Certain
emerging markets may lack clearing facilities equivalent to those in developed
countries. Accordingly, settlements can pose additional risks in such markets
and ultimately can expose the Fund to the risk of losses resulting from the
Fund's inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for the Fund's portfolio securities in such
markets may not be readily available. The Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of the Fund. 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, the market could impose temporary
restrictions on foreign capital remittances.
For many Foreign Securities, there are U.S. Dollar-denominated American
Depository Receipts ("ADRs"), which are bought and sold in the United States and
are generally issued by domestic banks. ADRs represent the right to receive
securities of foreign issuers deposited in the domestic bank or a correspondent
bank. ADRs do not eliminate all the risk inherent in investing in the securities
of foreign issuers. However, by investing in ADRs rather than directly in
foreign issuers' stock, the Fund will avoid currency risks during the settlement
period for either purchases or sales. In general, there is a large, liquid
market in the United States for most ADRs. The Fund may also invest in European
Depository Receipts ("EDRs"), which are receipts evidencing an arrangement with
a European bank similar to that for ADRs and are designed for use in the
European securities markets. EDRs are not necessarily denominated in the
currency of the underlying security.
The Fund may purchase and write options on securities and index options, may
purchase and sell financial futures contracts and options on financial futures
contracts and may engage in foreign currency transactions. See "Additional
Investment Information" below for a discussion of these investment techniques
and the related risks.
MATURITY DATE. The Board of Trustees of the Trust may in its sole discretion
elect, without shareholder approval, to continue the operation of the Fund after
the Maturity Date with a new maturity date ("New Maturity Date"). Such a
decision may be made to provide shareholders with the opportunity of continuing
their investment in the Fund for a new term without recognizing any taxable
capital gains as a result of a redemption. In that event, shareholders of the
Fund may either continue as such or redeem their shares in the Fund.
Shareholders who reinvest all dividends and hold their shares to the Maturity
Date will be entitled to the benefit of the Fund's Investment Protection on the
Maturity Date whether they continue as shareholders or redeem their shares. If
this alternative were to be elected, the Fund would at the Maturity Date collect
the proceeds of the Zero Coupon Treasuries that mature on such date and, after
allowing for any redemption requests by shareholders, reinvest such proceeds in
Zero Coupon Treasuries and Foreign Securities as necessary to provide for the
Fund's Investment Protection benefit on the New Maturity Date. For such
purposes, the principal investment of shareholders then in the Fund would be
deemed to be the net
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<PAGE> 46
asset value of their investment in the Fund at the current Maturity Date. Thus,
in effect, the total value of such shareholders' investment in the Fund on the
current Maturity Date will be treated as an investment for the new term and will
benefit from the Fund's Investment Protection for the new term if they reinvest
dividends and maintain their investment in the Fund until the New Maturity Date.
If the Board of Trustees elects to continue the Fund, shareholders will be given
60 days' prior notice of such election and the New Maturity Date. In that event,
it is anticipated that the offering of the Fund's shares would commence again
after the Maturity Date with a new prospectus for such period as the Board of
Trustees shall determine.
On the Maturity Date, the Fund may also be terminated at the election of the
Board of Trustees of the Trust in its sole discretion and without approval by
shareholders, upon 60 days' prior notice to shareholders. In such event, the
proceeds of the Zero Coupon Treasuries maturing on such date shall be collected
and the Foreign Securities and other assets then owned by the Fund shall be sold
or otherwise reduced to cash, the liabilities of the Fund will be discharged or
otherwise provided for, the Fund's outstanding shares will be mandatorily
redeemed at the net asset value per share determined on the Maturity Date and,
within seven days thereafter, the Fund's net assets will be distributed to
shareholders and the Fund shall be thereafter terminated. Termination of the
Fund may require the disposition of the Foreign Securities at a time when it is
otherwise disadvantageous to do so and may involve selling securities at a
substantial loss. The estimated expenses of liquidation and termination of the
Fund, however, are not expected to affect materially the ability of the Fund to
provide for its Investment Protection benefit. In the event of termination of
the Fund as noted above, the redemption of shares effected in connection with
such termination would for current federal income tax purposes constitute a sale
upon which a gain or loss may be realized depending upon whether the value of
the shares being redeemed is more or less than the shareholder's adjusted cost
basis of such shares.
Subject to shareholder approval, other alternatives may be pursued by the Fund
after the Maturity Date. For instance, the Board of Trustees may consider the
possibility of a tax-free reorganization between the Fund and another registered
open-end management investment company or any other series of the Trust. The
Board of Trustees has not considered any possibilities regarding the operation
of the Fund after the Maturity Date.
ADDITIONAL INVESTMENT INFORMATION. The annual turnover rate of the Fund's
portfolio may vary from year to year, and may also be affected by cash
requirements for redemptions and repurchases of Fund shares, and by the
necessity of maintaining the Fund as a regulated investment company under the
Internal Revenue Code in order to receive certain favorable tax treatment. The
Fund's portfolio turnover rate is listed under "Financial Highlights."
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities or other assets. If, for any reason, the
current value of the Fund's total assets falls below an amount equal to three
times the amount of its indebtedness from money borrowed, the Fund will, within
three days (not including Sundays and holidays), reduce its indebtedness to the
extent necessary. The Fund will not borrow for leverage purposes. The Fund may
pledge up to 15% of its total assets to secure any such borrowings. 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. See "Investment Policies and Techniques--Over-the-Counter Options"
in the Statement of Additional Information for a description of the extent to
which over-the-counter traded options are in effect considered as illiquid for
purposes of the Fund's limit on illiquid securities.
The Trust has adopted for the Fund certain fundamental investment restrictions
which are presented in the Statement of Additional Information and which,
together with its investment objectives and any policies of the Fund
specifically designated in this prospectus as fundamental, cannot be changed
without approval by holders of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, this means the lesser of the vote
of (a) 67% of the shares of the Fund present at a meeting where more than 50% of
the outstanding shares are present in person or by proxy; or (b) more than 50%
of the outstanding shares of the Fund. Policies of the Fund that are neither
designated as fundamental nor incorporated into any of the fundamental
investment restrictions
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<PAGE> 47
referred to above may be changed by the Board of Trustees of the Fund without
shareholder approval. Notwithstanding the foregoing, the Board of Trustees may,
in its discretion and without shareholder approval, determine that the Fund
should be terminated on the Maturity Date or continued thereafter with a New
Maturity Date as more fully described under "Maturity Date" above.
Options and Financial Futures Transactions. The Fund may deal in options on
securities, securities indexes and foreign currencies, which options may be
listed for trading on a national securities exchange or traded over-the-counter.
The Fund may write (sell) covered call options and secured put options on up to
25% of its net assets and may purchase put and call options provided that no
more than 5% of its net assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during the option period. A put option gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying security or other asset at
the exercise price during the option period. The writer of a covered call owns
securities or other assets that are acceptable for escrow and the writer of a
secured put invests an amount not less than the exercise price in eligible
securities or other assets to the extent that it is obligated as a writer. If a
call written by the Fund is exercised, the Fund foregoes any possible profit
from an increase in the market price of the underlying security or other asset
over the exercise price plus the premium received. In writing puts, there is a
risk that the Fund may be required to take delivery of the underlying security
or other asset at a disadvantageous price.
Over-the-counter traded options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer as a result of the insolvency of such dealer or otherwise, in which event
the Fund may experience material losses. However, in writing options the premium
is paid in advance by the dealer. OTC options are available for a greater
variety of securities and other assets, and a wider range of expiration dates
and exercise prices, than are exchange traded options.
The Fund may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or an amount of foreign currency or the cash value of a securities
index during a specified future period at a specified price. The Fund will
"cover" futures contracts sold by the Fund and maintain in a segregated account
certain liquid assets in connection with futures contracts purchased by the Fund
as described under "Investment Policies and Techniques" in the Statement of
Additional Information. The Fund will not enter into any futures contracts or
options on futures contracts if the aggregate of the contract value of the
outstanding futures contracts of the Fund and futures contracts subject to
outstanding options written by the Fund would exceed 50% of the total assets of
the Fund.
The Fund may engage in financial futures transactions as an attempt to hedge
against market risks. For example, when the near-term market view is bearish but
the portfolio composition is judged satisfactory for the longer term, exposure
to temporary declines in the market may be reduced by entering into futures
contracts to sell securities or the cash value of a securities index.
Conversely, where the near-term view is bullish, but the Fund is believed to be
well positioned for the longer term with a high cash position, the Fund can
hedge against market increases by entering into futures contracts to buy
securities or the cash value of a securities index. In either case, the use of
futures contracts would tend to reduce portfolio turnover and facilitate the
Fund's pursuit of its investment objectives.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. For example, if
participants in the futures market elect to close out their contracts rather
than meet margin requirements, distortions in the normal relationship between
the underlying assets and futures markets could result.
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<PAGE> 48
Price distortions also could result if investors in futures contracts decide to
make or take delivery of underlying securities or other assets rather than
engage in closing transactions because of the resultant reduction in the
liquidity of the futures market. In addition, because, from the point of view of
speculators, margin requirements in the futures market are less onerous than
margin requirements in the cash market, increased participation by speculators
in the futures market could cause temporary price distortions. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities or other
assets and movements in the prices of futures contracts, a correct forecast of
market trends by the investment manager still may not result in a successful
hedging transaction. If any of these events should occur, the Fund could lose
money on the financial futures contracts and also on the value of its portfolio
assets. The costs incurred in connection with futures transactions could reduce
the Fund's return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by the
Fund may expire worthless, in which case the Fund would lose the premium paid
therefor.
The Fund may engage in futures transactions only on commodities exchanges or
boards of trade. The Fund will not engage in transactions in financial futures
contracts or related options for speculation, but only as an attempt to hedge
against changes in market conditions affecting the values of securities that the
Fund owns or intends to purchase.
FOREIGN CURRENCY TRANSACTIONS. The Fund may engage in foreign currency
transactions in connection with its investments in Foreign Securities. The Fund
will not speculate in foreign currency exchange. The value of the Foreign
Securities investments 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 in connection with
conversions between various currencies. 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 forward
contracts to purchase or sell foreign currencies. A forward foreign currency
exchange contract involves an obligation to purchase or sell 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.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Fund is able to protect itself against a
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S. Dollar and such foreign currency.
However, this tends to limit potential gains which might result from a positive
change in such currency relationships. The Fund may also hedge its foreign
currency exchange rate risk by engaging in currency financial futures and
options transactions.
When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The forecasting of short-term currency market movement is
extremely difficult and whether such a short-term hedging strategy will be
successful is highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for the Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
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<PAGE> 49
The Fund will not speculate in foreign currency exchange. The Fund does not
enter into forward foreign currency exchange contracts or maintain a net
exposure in such contracts where the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency. The Fund does not
intend to enter into forward foreign currency exchange contracts if it would
have more than 15% of the value of its total assets committed to such contracts.
The Fund's custodian bank segregates cash or liquid high-grade debt securities
in an amount not less than the value of the Fund's total assets committed to
forward foreign currency exchange contracts entered into for the purchase of a
foreign currency. If the value of the securities segregated declines, additional
cash or securities are added so that the segregated amount is not less than the
amount of the Fund's commitments with respect to such contracts. The Fund
generally does not enter into a forward contract with a term longer than one
year.
Derivatives. In addition to options, financial futures and foreign currency
transactions, consistent with its objective, the Fund may invest in a broad
array of financial instruments and securities in which the value of the
instrument or security is "derived" from the performance of an underlying asset
or a "benchmark" such as a security index, an interest rate or a currency
("derivatives"). Derivatives are most often used to manage investment risk, to
increase or decrease exposure to an asset class or benchmark (as a hedge or to
enhance return), or to create an investment position indirectly (often because
it is more efficient or less costly than direct investment). The types of
derivatives used by the Fund and the techniques employed by the investment
manager may change over time as new derivatives and strategies are developed or
regulatory changes occur.
Risk Factors. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures, foreign currency and other derivatives transactions. See "Investment
Policies and Techniques" in the Statement of Additional Information. The
principal risks are: (a) possible imperfect correlation between movements in the
prices of options, futures or other derivatives contracts and movements in the
prices of the securities or currencies hedged, used for cover or that the
derivatives intended to replicate; (b) lack of assurance that a liquid secondary
market will exist for any particular option, futures or other derivatives
contract at any particular time; (c) the need for additional skills and
techniques beyond those required for normal portfolio management; (d) losses on
futures contracts resulting from market movements not anticipated by the
investment manager; (e) the possible need to defer closing out certain options,
futures and other derivatives contracts in order to continue to qualify for
beneficial tax treatment afforded "regulated investment companies" under the
Internal Revenue Code; and (f) the possible non-performance of the counter-party
to the derivatives contract.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities (principally to
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by segregated collateral (cash or U.S. Government
securities) equal to no less than the market value, determined daily, of the
securities loaned. The Fund will receive amounts equal to dividends or interest
on the securities loaned. It will also earn income for having made the loan. Any
cash collateral pursuant to these loans will be invested in short-term money
market instruments. As with other extensions of credit, there are risks of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the investment manager to be of good standing, and when the Fund's
investment manager believes the potential earnings to justify the attendant
risk. Management will limit such lending to not more than one-third of the value
of the Fund's total assets.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of the Fund and
provides the Fund with continuous professional investment supervision. KFS is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-five years. KFS and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, the Kemper insurance companies, Kemper Corporation and other
corporate, pension, profit-sharing and individual accounts representing
approximately $60 billion under
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<PAGE> 50
management. KFS acts as investment manager or principal underwriter for 26
open-end and seven closed-end investment companies, with 64 separate investment
portfolios, representing more than 3 million shareholder accounts. KFS is a
wholly owned subsidiary of Kemper Financial Companies, Inc., which is a
financial services holding company that is more than 99% owned by Kemper
Corporation ("Kemper"), a diversified insurance and financial services holding
company.
Kemper has entered into a definitive agreement with an investor group led by
Zurich Insurance Company ("Zurich") pursuant to which Kemper would be acquired
by the investor group in a merger transaction. As part of the transaction,
Zurich or an affiliate would purchase KFS. The Kemper and Zurich boards have
approved the transaction. In addition, because the transaction would constitute
an assignment of the Fund's investment management agreement with KFS under the
Investment Company Act of 1940, and therefore a termination of such agreements,
KFS has received approval of new agreements from the Trust's board and the
shareholders of the Fund. Consummation of the transaction is subject to
remaining contingencies, including approval by the stockholders of Kemper and
state insurance department regulatory approvals. The investor group has informed
Kemper that it expects the transaction to close early in 1996.
Responsibility for overall management of the Fund rests with the Board of
Trustees and officers of the Trust. Professional investment supervision is
provided by KFS. The investment management agreement provides that KFS shall act
as the Fund's investment adviser, manage its investments and provide it with
various services and facilities. KFS will utilize the services of Kemper
Investment Management Company Limited, 1 Fleet Place, London EC4M 7RQ, a wholly
owned subsidiary of KFS, with respect to Foreign Securities investments of the
Fund, including analysis, research, execution and trading services.
Dennis H. Ferro is the portfolio manager for the Fund and has served in this
capacity since its inception. Mr. Ferro joined KFS in March 1994 and is
currently an Executive Vice President of KFS. Prior to coming to KFS, Mr. Ferro
was President, Managing Director and Chief Investment Officer of an
international investment advisory firm. He received a B.A. in Political Science
from Villanova University, Villanova, Pennsylvania and an M.B.A. in Finance from
St. Johns University, Jamaica, New York. Mr. Ferro is a Chartered Financial
Analyst.
KFS has an Equity Investment Committee that determines overall investment
strategy for equity portfolios managed by KFS. The Equity Investment Committee
is currently comprised of the following members: Daniel J. Bukowski, Tracy
McCormick Chester, James H. Coxon, Richard A. Goers, Karen A. Hussey, Frank D.
Korth, Gary A. Langbaum, Maura J. Murrihy, Thomas M. Regner, Steven H. Reynolds
and Stephen B. Timbers. The portfolio manager works with the Equity Investment
Committee and various equity analysts and equity traders to manage the Fund's
investments. Equity analysts--through research, analysis and evaluation--work to
develop investment ideas appropriate for the Fund. These ideas are studied and
debated by the Equity Investment Committee and, if approved, are added to a list
of eligible investments. The portfolio manager uses the list of eligible
investments to help structure the Fund's portfolio in a manner consistent with
the Fund's objective. The KFS International Equity Investments area, directed by
Dennis H. Ferro, provides research and analysis regarding foreign investments to
the portfolio manager. After investment decisions are made, equity traders
execute the portfolio manager's instructions through various broker-dealer
firms.
The Fund pays KFS an investment management fee, payable monthly, at the annual
rate of .60 of 1% of average daily net assets of the Fund. The investment
management agreement provides that the Fund shall pay the charges and expenses
of its operations, including the fees and expenses of the trustees (except those
affiliated with KFS), independent auditors, counsel, custodian and transfer
agent and the cost of share certificates, reports and notices to shareholders,
brokerage commissions or transaction costs, costs of calculating net asset
value, taxes and membership dues.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting agreement, Kemper
Distributors, Inc. ("KDI"), a wholly owned subsidiary of KFS, is the principal
underwriter of the Fund's shares and acts as agent of the Fund in the sale of
its shares. KDI receives no compensation from the Fund as principal underwriter
and pays all expenses of distribution of the Fund's shares under the
underwriting agreement not otherwise paid by dealers or other financial services
15
<PAGE> 51
firms. The Fund bears the expenses of registration of its shares with the
Securities and Exchange Commission, while KDI, as underwriter, pays the cost of
qualifying and maintaining the qualification of the Fund's shares for sale under
the securities laws of the various states. 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 Fund shares.
ADMINISTRATOR. KDI also provides information and administrative services for
Fund shareholders pursuant to an administrative services agreement
("administrative agreement"). KDI enters into related arrangements with various
financial services firms, such as broker-dealer firms or banks ("firms"), that
provide services and facilities for their customers or clients who are
shareholders of the Fund. Such administrative services and assistance may
include, but are not limited to, establishing and maintaining shareholder
accounts and records, processing purchase and redemption transactions, answering
routine inquiries regarding the Fund and its special features, and such other
services as may be agreed upon from time to time and permitted by applicable
statute, rule or regulation. KDI bears all its expenses of providing services
pursuant to the administrative agreement, including the payment of any service
fees. For services under the administrative agreement, the Fund pays KDI a fee,
payable monthly, at the annual rate of up to .25 of 1% of average daily net
assets of the Fund. KDI then pays each firm a service fee at an annual rate of
up to .25 of 1% of net assets of those accounts in the Fund that it maintains
and services. Firms to which service fees may be paid include broker-dealers
affiliated with KDI. A firm becomes eligible for the service fee based on assets
in the accounts in the month following the month of purchase and the fee
continues until terminated by KDI or the Fund. The fees are calculated monthly
and paid quarterly.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fees that it receives
from the Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of the Fund while this
procedure is in effect would depend upon the proportion of Fund assets that is
in accounts for which there is a firm of record.
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian, and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of the Fund
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of the Fund held outside the United States. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Fund. IFTC also is the Fund's transfer
agent and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company, an affiliate of KFS, serves as "Shareholder Service
Agent" of the Fund and, as such, performs all of IFTC's duties as transfer agent
and dividend paying agent. For a description of transfer agent and shareholder
service agent fees payable to IFTC and the Shareholder Service Agent, see
"Investment Manager and Underwriter" in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS. KFS places all orders for purchases and sales of the
Fund's securities. Subject to seeking best execution of orders, KFS may consider
sales of shares of the Fund and other funds managed by KFS or its affiliates as
a factor in selecting broker-dealers. See "Portfolio Transactions" in the
Statement of Additional Information.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund will normally distribute annual dividends of net investment
income and any net realized short-term and long-term capital gains.
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<PAGE> 52
Income dividends and capital gain dividends, if any, will be credited to
shareholder accounts in full and fractional Fund shares at net asset value on
the reinvestment date without sales charge 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 at net asset value; or
(2) To receive income and capital gain dividends in cash.
Any dividends that are reinvested will be reinvested in shares of the Fund. As
noted previously (see "Investment Objectives, Policies and Risk Factors--How the
Fund Works and Special Risk Factors"), only shareholders who reinvest all their
dividends in the Fund and hold their shares until the Maturity Date will receive
the benefit of the Fund's Investment Protection.
TAXES. The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code") and, if so qualified,
will not be liable for federal income taxes to the extent its earnings are
distributed. Dividends derived from net investment income and net short-term
capital gains are taxable to shareholders as ordinary income and long-term
capital gain dividends are taxable to shareholders as long-term capital gain
regardless of how long the shares have been held and whether received in cash or
shares. Long-term capital gain dividends received by individual shareholders are
taxed at a maximum rate of 28%. Dividends declared in October, November or
December to shareholders of record as of a date in one of those months and paid
during the following January are treated as paid on December 31 of the calendar
year declared. It is anticipated that only a small portion, if any, of the
dividends paid by the Fund will qualify for the dividends received deduction
available to corporate shareholders.
The Zero Coupon Treasuries will be treated as bonds that were issued to the Fund
at an original issue discount. Original issue discount is treated as interest
for federal income tax purposes and the amount of original issue discount
generally will be the difference between the bond's purchase price and its
stated redemption price at maturity. The Fund will be required to include in
gross income for each taxable year the daily portions of original issue discount
attributable to the Zero Coupon Treasuries held by the Fund as such original
issue discount accrues. Dividends derived from such original issue discount that
accrues for such year will be taxable to shareholders as ordinary income. In
general, original issue discount accrues daily under a constant interest rate
method which takes into account the semi-annual compounding of accrued interest.
In the case of the Zero Coupon Treasuries, this method will generally result in
an increasing amount of income to the Fund each year.
A dividend received by a shareholder shortly after the purchase of shares
reduces the net asset value of the shares by the amount of the dividend and,
although in effect a return of capital, will be taxable to the shareholder. If
the net asset value of shares were reduced below the shareholder's cost by
dividends representing gains realized on sales of securities, such dividends
would be a return of investment though taxable as stated above.
Fund dividends that are derived from interest on the Zero Coupon Treasuries and
other direct obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states. In
other states, arguments can be made that such distributions should be exempt
from state and local taxes based on federal law, 31 U.S.C. Section 3124, and the
U.S. Supreme Court's interpretation of that provision in American Bank and Trust
Co. v. Dallas County, 463 U.S. 855 (1983). The Fund currently intends to advise
shareholders of the proportion of its dividends that consists of such interest.
Shareholders should consult their tax advisers regarding the possible exclusion
of such portion of their dividends for state and local income tax purposes.
If more than 50% of the value of the Fund's total assets at the close of a
fiscal year consists of Foreign Securities, the Fund may make the election
permitted under Section 853 of the Code so that shareholders will be able to
claim a credit or deduction on their income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of the income taxes paid by the Fund to foreign countries (which taxes
relate primarily to investment income). The shareholders of the Fund may claim a
credit by reason of the Fund's election, subject to certain limitations imposed
by Section 904 of the Code. Also, under the Code, no deduction for foreign
17
<PAGE> 53
taxes may be claimed by individual shareholders who do not elect to itemize
deductions on their federal income tax returns; although such a shareholder may
claim a credit for foreign taxes and in any event will be treated as having
taxable income in the amount of the shareholder's pro rata share of foreign
taxes paid by the Fund.
The Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
("IRA") or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for dividend reinvestment and periodic investment and redemption
programs. Information for income tax purposes will be provided after the end of
the calendar year. Shareholders are encouraged to retain copies of their account
confirmation statements or year-end statements for tax reporting purposes.
However, those who have incomplete records may obtain historical account
transaction information at a reasonable fee.
NET ASSET VALUE
The net asset value per share is determined by calculating the total value of
the Fund's assets, which will normally be composed chiefly of investment
securities, deducting total liabilities and dividing the result by the number of
shares outstanding. Fixed income securities, including Zero Coupon Treasuries,
are valued by using market quotations, or independent pricing services that use
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
Portfolio securities that are traded on a domestic securities exchange or
securities listed on the NASDAQ National Market are valued at the last sale
price on the exchange or market where primarily traded or listed or, if there is
no recent last sale price available, at the last current bid quotation.
Portfolio securities that are primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on their
respective exchanges where primarily traded. A security that is listed or traded
on more than one exchange is valued at the quotation on the exchange determined
to be the primary market for such security by the Board of Trustees or its
delegates. Securities not so traded or listed are valued at the last current bid
quotation if market quotations are available. Equity options are valued at the
last sale price unless the bid price is higher or the asked price is lower, in
which event such bid or asked price is used. Over-the-counter traded options are
valued based upon current prices provided by market makers. Financial futures
and options thereon are valued at the settlement price established each day by
the board of trade or exchange on which they are traded. Other securities and
assets are valued at fair value as determined in good faith by the Board of
Trustees. Because of the need to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of net asset value does
not necessarily take place contemporaneously with the determination of the
prices of many of the portfolio securities. For purposes of determining the
Fund's net asset value, all assets and liabilities initially expressed in
foreign currency values will be converted into U.S. Dollar values at the mean
between the bid and offered quotations of such currencies against U.S. Dollars
as last quoted by a recognized dealer. If an event were to occur after the value
of a security was so established but before the net asset value per share was
determined, which was likely to materially change the net asset value, then that
security would be valued using fair value considerations by the Board of
Trustees or its delegates. On each day the New York Stock Exchange (the
"Exchange") is open for trading, the net asset value is determined as of the
earlier of 3:00 p.m. Chicago time or the close of the Exchange.
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<PAGE> 54
PURCHASE OF SHARES
Shares of the Fund may be purchased from investment dealers during the Offering
Period described below at the public offering price, which is the net asset
value next determined plus a sales charge that is a percentage of the public
offering price and varies as shown below. The minimum initial investment is
$1,000 and the minimum subsequent investment is $100. The minimum initial
investment for an Individual Retirement Account or employee benefit plan account
is $250 and the minimum subsequent investment is $50. These minimum amounts may
be changed at any time in management's discretion.
<TABLE>
<CAPTION>
Sales Charge
----------------------------------------
Allowed
As a As a to Dealers
Percentage Percentage as a
of of Net Percentage
Offering Asset of Offering
Amount of Purchase Price Value* Price
------ ------ ------
<S> <C> <C> <C>
Less than $100,000.................................. 5.00% 5.26% 4.50%
$100,000 but less than $250,000..................... 4.00 4.17 3.60
$250,000 but less than $500,000..................... 3.00 3.09 2.70
$500,000 but less than $1 million................... 2.00 2.04 1.80
$1 million and over................................. 0.00** 0.00** ***
</TABLE>
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
*** Commission is payable by KDI as discussed below.
Shares will only be offered to the public during the Offering Period, which is
expected to end on December 31, 1995. The Fund may at its option extend or
shorten the Offering Period. The offering of shares of the Fund shall be subject
to suspension or termination as provided under "Investment Objectives, Policies
and Risk Factors--How the Fund Works." In addition, the offering of Fund shares
may be suspended from time to time during the Offering Period in the discretion
of KDI. During any period in which the public offering of shares is suspended or
terminated, shareholders will still be permitted to reinvest dividends in shares
of the Fund.
Share certificates will not be issued unless requested in writing. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).
The Fund receives the entire net asset value of all shares sold. KDI, the Fund's
principal underwriter, retains the sales charge 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 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.
Banks and other financial services firms may provide administrative services
related to order placement and payment to facilitate transactions in shares of
the Fund for their clients, and KDI may pay them a transaction fee up to the
level of the discount or other concession allowable to dealers as described
above. Banks currently are prohibited under the Glass-Steagall Act from
providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
19
<PAGE> 55
providing any of the described services, management would consider what action,
if any, would be appropriate. Management does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts or promotional incentives, in the
form of cash or other compensation, to firms that sell shares of the Fund.
Non-cash compensation includes luxury merchandise and trips to luxury resorts.
In some instances, such discounts or other incentives will be offered only to
certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Fund, or other funds underwritten by
KDI.
Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which neither KFS nor Dreman Value Advisors, Inc. serve as
investment manager ("non-Kemper fund") provided that: (a) the investor has
previously paid either an initial sales charge in connection with the purchase
of the non-Kemper fund shares redeemed or a contingent deferred sales charge in
connection with the redemption of the non-Kemper fund shares, and (b) the
purchase of Fund shares is made within 90 days after the date of such
redemption. To make such a purchase at net asset value, the investor or the
investor's dealer must, at the time of purchase, submit a request that the
purchase be processed at net asset value pursuant to this privilege. The
redemption of the shares of the non-Kemper fund is, for federal income tax
purposes, a sale upon which a gain or loss may be realized.
Shares of the Fund may be purchased at net asset value by: (a) any purchaser
provided that the amount invested in the Fund or other Kemper Mutual Funds
described under "Special Features--Combined Purchases" totals at least
$1,000,000 including purchases 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 provided in either case that such plan has
not less than 200 eligible employees (the "Large Order NAV Purchase Privilege").
A contingent deferred sales charge of 1% may be imposed upon redemption of
shares of the Fund that are purchased under the Large Order NAV Purchase
Privilege 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); and
(e) redemptions under the Fund's Systematic Withdrawal Plan at a maximum of 10%
per year of the net asset value of the account.
Shares of the Fund purchased under the Large Order NAV Purchase Privilege may be
exchanged for shares of another Kemper Mutual Fund or a Money Market Fund under
the exchange privilege described under "Special Features--Exchange Privilege"
without paying any contingent deferred sales charge at the time of exchange. If
the 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.
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of shares of the Fund to employer
sponsored employee benefit plans using the subaccount recordkeeping system made
available through the Shareholder Service Agent 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 in any
calendar year, .50% on the next $5 million and .25% on amounts over $10 million
in such
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<PAGE> 56
calendar year. KDI may in its discretion compensate investment dealers or other
financial services firms in connection with the sale of shares of the Fund to
other purchasers 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 $3 million, .50% on the next $2 million and .25% on
amounts over $5 million. For purposes of determining the appropriate commission
percentage to be applied to a particular sale under the foregoing schedule, KDI
will consider the cumulative amount invested by the purchaser in the Fund and
other Kemper Mutual Funds listed under "Special Features--Combined Purchases,"
including purchases pursuant to the "Combined Purchases," "Letter of Intent" and
"Cumulative Discount" features referred to above. The privilege of purchasing
shares of the Fund at net asset value under the Large Order NAV Purchase
Privilege is not available if another net asset value purchase privilege is also
applicable.
Shares may be sold at net asset value in any amount to: (a) officers, trustees,
directors, employees (including retirees) and sales representatives of the Fund,
its investment manager, its principal underwriter or certain affiliated
companies, for themselves or members of their families; (b) registered
representatives and employees of broker-dealers having selling group agreements
with KDI and officers, directors and employees of service agents of the Fund,
themselves or their spouses or dependent children; (c) shareholders who owned
shares of Kemper-Dreman Fund, Inc. ("KDF") on September 8, 1995, and have
continuously owned shares of KDF (or a Kemper Fund acquired by exchange of KDF
shares) since that date, for themselves or members of their families; and (d)
any trust, pension, profit-sharing or other benefit plan for only such persons.
Shares may be sold at net asset value in any amount to selected employees
(including their spouses and dependent children) of banks and other financial
services firms that provide administrative services related to order placement
and payment to facilitate transactions in shares of the Fund for their clients
pursuant to an agreement with KDI or one of its affiliates. Only those employees
of such banks and other firms who as part of their usual duties provide services
related to transactions in Fund shares may purchase Fund shares at net asset
value hereunder. Shares may be sold at net asset value in any amount to unit
investment trusts sponsored by Everen Securities, Inc. In addition, unitholders
of unit investment trusts sponsored by Everen Securities, Inc. may purchase Fund
shares at net asset value through reinvestment programs described in the
prospectuses of such trusts which have such programs. Shares of the Fund may be
sold at net asset value through certain investment advisers registered under the
Investment Advisers 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 a "wrap
account" or similar program under which such clients pay a fee to the investment
adviser or other firm. Such shares are sold for investment purposes and on the
condition that they will not be resold except through redemption or repurchase
by the Fund. The Fund may also issue shares at net asset value in connection
with the acquisition of the assets of or merger or consolidation with another
investment company, or to shareholders in connection with the investment or
reinvestment of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes an individual, or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the
21
<PAGE> 57
Fund's transfer agent will have no information with respect to or control over
accounts of specific shareholders. Such shareholders may obtain access to their
accounts and information about their accounts only from their firm. Certain of
these firms may receive compensation from the Fund through the Shareholder
Service Agent for recordkeeping and other expenses relating to these nominee
accounts. In addition, certain privileges with respect to the purchase and
redemption of shares or the reinvestment of dividends may not be available
through such firms. Some firms may participate in a program allowing them access
to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. Such firms, including affiliates of KDI, may receive compensation
from the Fund through the Shareholder Service Agent for these services. This
prospectus should be read in connection with such firms' material regarding
their fees and services.
Orders for the purchase of shares of the Fund will be confirmed at a price based
on the net asset value next determined after receipt by KDI of the order
accompanied by payment. However, orders received by dealers or other firms prior
to the determination of net asset value (see "Net Asset Value") and received 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. The Fund reserves the right to
determine the net asset value more frequently than once a day if deemed
desirable. Dealers and other financial services firms are obligated to transmit
orders promptly. Collection may take significantly longer for a check drawn on a
foreign bank than for a check drawn on a domestic bank. Therefore, if an order
is accompanied by a check drawn on a foreign bank, funds must normally be
collected before shares will be purchased. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.
The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem them by making 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. As noted previously (see "Investment Objectives, Policies
and Risk Factors--How the Fund Works and Special Risk Factors"), only
shareholders who hold their shares in the Fund until the Maturity Date and
reinvest their dividends in the Fund will necessarily receive the benefit of the
Fund's Investment Protection.
The redemption price will be the net asset value next determined following
receipt by the Shareholder Service Agent of a properly executed request with any
required documents as described above. Payment for shares redeemed will be made
in cash as promptly as practicable but in no event later than seven days after
receipt of a properly executed request accompanied by any outstanding share
certificates in proper form for transfer. When the Fund is requested to redeem
shares for which it may not have yet received good payment, it may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 15 days
from receipt by the Fund of the purchase amount. The redemption within one year
of shares
22
<PAGE> 58
purchased at net asset value under the Large Order NAV Purchase Privilege may be
subject to a 1% contingent deferred sales charge (see "Purchase of Shares").
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. The Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agent
reasonably believes, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The SHAREHOLDER WILL BEAR THE RISK OF LOSS,
including loss resulting from fraudulent or unauthorized transactions, 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 are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional 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 may not be
redeemed under this privilege of redeeming shares by telephone request until
such shares have been owned for at least 15 days. This privilege of redeeming
shares by telephone request or by written request without a signature guarantee
may not be used to redeem shares held in certificated form and may not be used
if the shareholder's account has had an address change within 30 days of the
redemption request. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the telephone
redemption privilege, although investors can still redeem by mail. The Fund
reserves the right to terminate or modify this privilege at any time.
REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which the Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value next determined after receipt of a request by KDI.
However, requests for repurchases received by dealers or other firms prior to
the determination of net asset value (see "Net Asset Value") and received by KDI
prior to the close of KDI's business day will be confirmed at the net asset
value effective on that day. The offer to repurchase may be suspended at any
time. Requirements as to stock powers, certificates, payments and delay of
payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by federal wire transfer
to a single previously designated account. Requests received by the Shareholder
Service Agent prior to the determination of net asset value will result in
shares being redeemed that day at the net asset value effective on that day and
normally the proceeds will be sent to the designated account the following
business day. Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by the Fund for up to seven days if KFS deems it
appropriate under then current market conditions. Once authorization is on file,
the Shareholder Service Agent will honor requests by telephone at 1-800-621-1048
or in writing, subject to the limitations on liability described under "General"
above. The Fund is not responsible for the efficiency of the
23
<PAGE> 59
federal wire system or the account holder's financial services firm or bank. The
Fund currently does not charge the account holder for wire transfers. The
account holder is responsible for any charges imposed by the account holder's
firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above
or contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer may not be redeemed by wire
transfer until such shares have been owned for at least 15 days. Account holders
may not use this procedure 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 redemption privilege. The
Fund reserves the right to terminate or modify this privilege at any time.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed shares of the Fund or
any other Kemper Mutual Fund listed under "Special Features--Combined Purchases"
may reinvest up to the full amount redeemed at net asset value at the time of
the reinvestment in shares of the Fund or in shares of the other listed Kemper
Mutual Funds. A shareholder of the Fund or any other Kemper Mutual Fund who
redeems shares purchased under the Large Order NAV Purchase Privilege (see
"Purchase of 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 shares of the Fund or shares of other 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 of
another Kemper Mutual Fund who has redeemed shares of that fund 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 the Fund or in Class A shares of the other Kemper Mutual Funds
listed under "Special Features--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 funds
available for sale in the shareholder's state of residence as listed under
"Special Features--Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of Fund
shares, the reinvestment may be subject to the "wash sale" rules if made within
30 days of the redemption, resulting in the postponement of the recognition of
such loss for federal income tax purposes. The reinvestment privilege may be
terminated or modified at any time and is subject to the limited Offering Period
of the Fund.
SPECIAL FEATURES
COMBINED PURCHASES. The Fund's shares may be purchased at the rate applicable to
the discount bracket attained by combining concurrent investments in Class A
shares (or the equivalent) of any of the following funds: Kemper Technology
Fund, Kemper Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization
Equity Fund, Kemper Income and Capital Preservation Fund, Kemper Municipal Bond
Fund, Kemper Diversified Income Fund, Kemper High Yield Fund, Kemper U.S.
Government Securities Fund, Kemper International Fund, Kemper State Tax-Free
Income Series, Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip
Fund, Kemper Global Income Fund, Kemper Target Equity Fund (series are subject
to a limited offering period) Kemper Intermediate Municipal Bond Fund, Kemper
Cash Reserves Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate
Government Fund, Kemper-Dreman Fund, Inc. and Kemper Value+Growth Fund ("Kemper
Mutual Funds"). Except as noted below, there is no combined purchase credit for
direct purchases of shares of Kemper Money Market Fund, Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market 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 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 investment, such as guaranteed investment contracts and
employer stock, maintained on such subaccount record keeping system.
24
<PAGE> 60
LETTER OF INTENT. The same reduced sales charges, 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. As noted under "Purchase of
Shares," the Offering Period for the purchase of shares of the Fund is limited.
However, shares of other Kemper Mutual Funds noted above would be available
beyond that period. The Letter, which imposes no obligation to purchase or sell
additional 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 will be 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.
CUMULATIVE DISCOUNT. The Fund's shares also may be purchased at the rate
applicable to the discount bracket attained by adding to the cost of Fund shares
being purchased the value of all 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.
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. Subject to the following limitations, shares of the Kemper
Mutual Funds and Money Market Funds listed under "Special Features--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. Shares purchased by check or through
EXPRESS-Transfer may not be exchanged until they have been owned for at least 15
days. In addition, shares of a Kemper Mutual 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. A series of Kemper Target
Equity Fund will be 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, Tax-Exempt New York
Money Market Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with KDI.
Exchanges may only be made for funds that are available for sale in the
shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and Tax-Exempt New York Money
Market Fund is available for sale only in New York, Connecticut, New Jersey and
Pennsylvania.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, dealers or other
firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis of such shares. Shareholders interested in
exercising the exchange privilege may obtain prospectuses of the other funds
from dealers, other firms or KDI. Exchanges may be accomplished by a written
request to Kemper Mutual Funds, Attention: Exchange Department, P.O. Box 419557,
Kansas City, Missouri
25
<PAGE> 61
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 or in writing, subject to the limitations on
liability under "Redemption or Repurchase of Shares--General." Any share
certificates must be deposited prior to any exchange of such shares. During
periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the telephone exchange privilege. The
exchange privilege is not a right and may be suspended, terminated or modified
at any time. Except as otherwise permitted by applicable regulations, 60 days'
prior written notice of any termination or material change will be provided.
EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $2,500) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $500 and maximum
$2,500) from their Fund account and transfer the proceeds to their bank, savings
and loan, or credit union checking account. By enrolling in EXPRESS-Transfer,
the shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to transfer the specified amounts between the
shareholder's Fund account and the predesignated bank, savings and loan or
credit union account, subject to the limitations on liability under "Redemption
or Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a
shareholder can initiate a transaction by calling Kemper Shareholder Services
toll free at 1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m.
Chicago time. Shareholders may terminate this privilege by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable 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").
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of the Fund's shares at
the offering price (net asset value plus the sales charge) may provide for the
payment from the owner's account of any requested dollar amount to be paid to
the owner or a designated payee monthly, quarterly, semiannually or annually.
The $5,000 minimum account size is not applicable to Individual Retirement
Accounts. The minimum periodic payment is $100. 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 shares while participating in a systematic withdrawal plan
ordinarily will be disadvantageous to the investor because the investor will be
paying a sales charge on the purchase of shares at the same time that the
investor is redeeming shares upon which a sales charge may already have been
paid. Therefore, the Fund will not knowingly permit additional investments of
less than $2,000 if the investor is at the same time making systematic
withdrawals. (See "Purchase of Shares" regarding the limited Offering Period for
the Fund's shares.) The right is reserved to amend the systematic withdrawal
plan on 30 days' notice. The plan may be terminated at any time by the investor
or the Fund. As noted previously (see "Investment Objectives, Policies and Risk
Factors--How the Fund Works and Special Risk Factors"), only shareholders who
hold their shares in the Fund until the Maturity Date and reinvest their
dividends in the Fund will necessarily receive the benefit of the Fund's
Investment Protection.
TAX-SHELTERED RETIREMENT PLANS. KFS provides retirement plan services and
documents and KDI can establish investor accounts in any of the following types
of retirement plans:
- - Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.
- - 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
26
<PAGE> 62
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from KDI upon request. The brochures for plans trusteed by
IFTC describe the current fees payable to IFTC for its services as trustee.
Investors should consult with their own tax advisers before establishing a
retirement plan. In view of the limited Offering Period of the Fund (see
"Purchase of Shares"), the Fund may not be appropriate for periodic contribution
plans.
PERFORMANCE
The Fund may advertise several types of performance information, including
"average annual total return" and "total return." Each of these figures is based
upon historical results and is not representative of the future performance of
the Fund.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in the Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in the Fund
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund). Average annual total return figures
represent the average annual percentage change over the period in question.
Total return figures represent the aggregate percentage or dollar value change
over the period in question.
The Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged indexes including the Dow Jones Industrial Average, the
Standard & Poor's 500 Stock Index and the Europe Australia Far East ("EAFE")
Index. The Fund's performance may also be compared to the performance of other
mutual funds or mutual fund indexes as reported by independent mutual fund
reporting services such as Lipper Analytical Services, Inc. ("Lipper"). Lipper
performance calculations are based upon changes in net asset value with all
dividends reinvested and do not include the effect of any sales charges.
The Fund may quote information from publications such as Morningstar, Inc., The
Wall Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago
Tribune, USA Today, Institutional Investor and Registered Representative. Also,
investors may want to compare the historical returns of various investments,
performance indexes of those investments or economic indicators, including but
not limited to stocks, bonds, certificates of deposit, money market funds and
U.S. Treasury obligations. Bank product performance may be based upon, among
other things, the BANK RATE MONITOR National Index(TM) or various certificate of
deposit indexes. Money market fund performance may be based upon, among other
things, the IBC/Donoghue Money Fund Report(R) or Money Market Insight(R),
reporting services on money market funds. Performance of U.S. Treasury
obligations may be based upon, among other things, various U.S. Treasury bill
indexes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured.
The Fund may depict the historical performance of the securities in which the
Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indexes of those investments or economic indicators. The Fund may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Fund.
The Fund's shares are sold at net asset value plus a maximum sales charge of
5.0% of the offering price. While the maximum sales charge is normally reflected
in the Fund's performance figures, certain total return calculations may not
include such charge and those results would be reduced if it were included. The
Fund's returns and net asset value will fluctuate. Shares of the Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Additional information concerning the Fund's
performance and concerning the historical performance of various types of
investments that may be used to provide for retirement needs appears in
27
<PAGE> 63
the Statement of Additional Information. Additional information about the Fund's
performance also appears in its Annual Report to Shareholders, which is
available without charge from the Fund.
CAPITAL STRUCTURE
The Trust is an open-end, diversified management investment company, organized
as a business trust under the laws of Massachusetts on August 3, 1988. Effective
May 1, 1994, the Trust changed its name from Kemper Retirement Fund to Kemper
Target Equity Fund. The Trust may issue an unlimited number of shares of
beneficial interest in one or more series, all having no par value. The Trust
has established seven series of shares: Kemper Retirement Fund Series I, Kemper
Retirement Fund Series II, Kemper Retirement Fund Series III, Kemper Retirement
Fund Series IV, Kemper Retirement Fund Series V, which are no longer offered,
and Kemper Retirement Fund Series VI, which is currently offered under another
prospectus, and the Fund. The Board of Trustees may authorize the issuance of
additional series if deemed desirable, each with its own investment objective,
policies and restrictions. Since the Trust may offer multiple series, it is
known as a "series company." Shares of a series have equal noncumulative voting
rights and equal rights with respect to dividends, assets and liquidation of
such series. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Trust is not required to hold annual shareholders' meetings and does not
intend to do so. However, it will hold special meetings as required or deemed
desirable for such purposes as electing trustees, changing fundamental policies
or approving an investment management agreement. Subject to the Agreement and
Declaration of Trust of the Trust, shareholders may remove trustees.
Shareholders will vote by series and not in the aggregate except when voting in
the aggregate is required under the Investment Company Act of 1940, such as for
the election of trustees. Any series of the Trust, including the Fund, may be
divided by the Board of Trustees into classes of shares, subject to compliance
with the Securities and Exchange Commission regulations permitting the creation
of separate classes of shares. The Trust's shares currently are not divided into
classes. Shares of a series would be subject to any preferences, rights or
privileges of any classes of shares of the series. Generally each class of
shares issued by a particular series of the Trust would differ as to the
allocation of certain expenses of the series such as distribution and
administrative expenses permitting, among other things, different levels of
service or methods of distribution among various classes.
28
<PAGE> 64
[KEMPER LOGO]
INVESTMENT MANAGER
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
1-800-621-1048
KWI-4-1 10/95 (LOGO)printed on recycled paper
KEMPER
WORLDWIDE
2004 FUND
PROSPECTUS
OCTOBER 25, 1995
[KEMPER LOGO]
KEMPER
<PAGE> 65
KEMPER TARGET EQUITY FUND
KEMPER RETIREMENT FUND SERIES VI
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
----------------------------------------- ---------------------------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies
and Techniques
14. Management of the Fund................... Investment Manager and Underwriter;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Underwriter
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions
18. Capital Stock and Other Securities....... Dividends and Taxes;
Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends and Taxes
21. Underwriters............................. Investment Manager and Underwriter
22. Calculation of Performance Data.......... Performance
23. Financial Statements..................... Financial Statements
</TABLE>
<PAGE> 66
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 25, 1995
KEMPER RETIREMENT FUND SERIES VI
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-621-1048
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Kemper Retirement Fund Series VI (the
"Fund") dated October 25, 1995. The prospectus may be obtained without charge
from the Fund. The Fund is a series of Kemper Target Equity Fund.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------------------
<S> <C>
Investment Restrictions............................................ B-1
Investment Policies and Techniques................................. B-2
Dividends and Taxes................................................ B-9
Performance........................................................ B-11
Investment Manager and Underwriter................................. B-13
Portfolio Transactions............................................. B-15
Purchase and Redemption of Shares.................................. B-16
Officers and Trustees.............................................. B-17
Shareholder Rights................................................. B-19
</TABLE>
The financial statements appearing in the Fund's 1995 Annual Report to
Shareholders are incorporated herein by reference. The Annual Report accompanies
this document.
KRF 13 10/95 (LOGO)printed on recycled paper
<PAGE> 67
INVESTMENT RESTRICTIONS
Kemper Target Equity Fund (the "Trust") has adopted the following fundamental
investment restrictions which cannot be changed with respect to Kemper
Retirement Fund Series VI (the "Fund"), without approval of a "majority" of its
outstanding shares, which means the lesser of (1) 67% of the Fund's shares
present at a meeting at which the holders of more than 50% of the outstanding
shares are present in person or by proxy; or (2) more than 50% of the Fund's
outstanding shares.
The Fund may not, as a fundamental policy:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result,
more than 5% of the total value of the Fund's assets would be invested in
securities of that issuer.
(2) Purchase more than 10% of any class of voting securities of any issuer.
(3) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objectives and policies.
(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions.
(7) Make short sales of securities or other assets or maintain a short position
for the account of the Fund unless at all times when a short position is open it
owns an equal amount of such securities or other assets or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities or other assets of the same issue as, and equal in
amount to, the securities or other assets sold short and unless not more than
10% of the Fund's total assets is held as collateral for such sales at any one
time.
(8) Write or sell put or call options, combinations thereof or similar options;
nor may the Fund purchase put or call options if more than 5% of the Fund's net
assets would be invested in premiums on put and call options, combinations
thereof or similar options; however, the Fund may buy or sell options on
financial futures contracts.
(9) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(10) Invest for the purpose of exercising control or management of another
issuer.
(11) Purchase securities (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result of such purchase
25% or more of the Fund's total assets would be invested in any one industry.
B-1
<PAGE> 68
(12) Invest in commodities or commodity futures contracts, although it may buy
or sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate (including real estate limited
partnerships), although it may invest in securities which are secured by real
estate and securities of issuers which invest or deal in real estate including
real estate investment trusts.
(13) Invest in interests in oil or gas exploration or development programs,
although it may invest in the securities of issuers which invest in or sponsor
such programs.
(14) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(15) Issue senior securities as defined in the Investment Company Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number (4) in the latest
fiscal period and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval.
The Fund may not, as a non-fundamental policy:
(i) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(ii) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(iii) Invest in oil, gas or other mineral leases.
(iv) Invest more than 5% of the Fund's total assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) which with their predecessors have a record of less than
three years continuous operation and equity securities of issuers which are not
readily marketable.
(v) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities will not exceed 10% of total
assets.
(vi) Invest more than 10% of its total assets in securities of real estate
investment trusts.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. The Fund may invest in Zero Coupon Treasuries and Equity Securities (as
defined in the prospectus) and engage in futures and options transactions and
other investment techniques in accordance with its investment objectives and
policies. See "Investment Objectives, Policies and Risk Factors" in the
prospectus. Supplemental information concerning the Fund's investments and
certain investment techniques is set forth below.
ZERO COUPON TREASURIES. There are currently two basic types of zero coupon
securities, those created by separating the interest and principal components of
a previously issued interest-paying security and those originally issued in the
form of a face amount only security paying no interest. Zero coupon securities
of the U.S. Government and certain of its agencies and instrumentalities and of
private corporate issuers are currently available, although the Fund will
purchase only those that represent direct obligations of the U.S. Government.
B-2
<PAGE> 69
Zero coupon securities of the U.S. Government that are currently available are
called STRIPS (Separate Trading of Registered Interest and Principal of
Securities) or CUBES (Coupon Under Book-Entry Safekeeping). STRIPS and CUBES are
issued under programs introduced by the U.S. Treasury and are direct obligations
of the U.S. Government. The U.S. Government does not issue zero coupon
securities directly. The STRIPS program, which is ongoing, is designed to
facilitate the secondary market stripping of selected Treasury notes and bonds
into individual interest and principal components. Under the program, the U.S.
Treasury continues to sell its notes and bonds through its customary auction
process. However, a purchaser of those notes and bonds who has access to a
book-entry account at a Federal Reserve bank may separate the specified Treasury
notes and bonds into individual interest and principal components. The selected
Treasury securities may thereafter be maintained in the book-entry system
operated by the Federal Reserve in a manner that permits the separate trading
and ownership of the interest and principal payments. The Federal Reserve does
not charge a fee for this service; however, the book-entry transfer of interest
or principal components is subject to the same fee schedule generally applicable
to the transfer of Treasury securities.
Under the program, in order for a book-entry Treasury security to be separated
into its component parts, the face amount of the security must be an amount
which, based on the stated interest rate of the security, will produce a
semi-annual interest payment of $1,000 or a multiple of $1,000. Once a
book-entry security has been separated, each interest and principal component
may be maintained and transferred in multiples of $1,000 regardless of the face
amount initially required for separation or the resulting amount required for
each interest payment.
CUBES, like STRIPS, are direct obligations of the U.S. Government. CUBES are
coupons that have previously been physically stripped from Treasury notes and
bonds, but which were deposited with the Federal Reserve and are now carried and
transferable in book-entry form only. Only stripped Treasury coupons maturing on
or after January 15, 1988, that were stripped prior to January 5, 1987, were
eligible for conversion to book-entry form under the CUBES program.
Investment banks may also strip Treasury securities and sell them under
proprietary names. These securities may not be as liquid as STRIPS and CUBES and
the Fund has no present intention of investing in these instruments.
STRIPS and CUBES are purchased at a discount from $1,000. Absent a default by
the U.S. Government, a purchaser will receive face value for each of the STRIPS
and CUBES provided the STRIPS and CUBES are held to their due dates. While
STRIPS and CUBES can be purchased on any business day, they all currently come
due on February 15, May 15, August 15 or November 15.
FINANCIAL FUTURES CONTRACTS. The Fund may enter into financial futures contracts
for the future delivery of a financial instrument, such as a security, or an
amount of foreign currency or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might adversely affect the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities or other assets, in most cases a party
will close out the contractual commitment before delivery without having to make
or take delivery of the underlying assets by purchasing (or selling, as the case
may be) on a commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, if effected through a member of
an exchange, cancels the obligation to make or take delivery of the underlying
securities or other assets. All transactions in the futures market are made,
offset or fulfilled through a clearing house associated with the exchange
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on which the contracts are traded. The Fund will incur brokerage fees when it
purchases or sells contracts, and will be required to maintain margin deposits.
At the time the Fund enters into a futures contract, it is required to deposit
with its custodian, on behalf of the broker, a specified amount of cash or
eligible securities, called "initial margin." The initial margin required for a
futures contract is set by the exchange on which the contract is traded.
Subsequent payments, called "variation margin," to and from the broker are made
on a daily basis as the market price of the futures contract fluctuates. The
costs incurred in connection with futures transactions could reduce the Fund's
return. Futures contracts entail risks. If the investment manager's judgment
about the general direction of markets or exchange rates is wrong, the overall
performance may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager may still not result in a successful hedging
transaction. If any of these events should occur, the Fund could lose money on
the financial futures contracts and also on the value of its assets.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Fund may purchase and write call and
put options on financial futures contracts. 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 at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. The Fund would be required
to deposit with its custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by it. The Fund will
establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities" below. Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above. Also, an option purchased by the Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.
OPTIONS ON SECURITIES. The Fund may invest in put and call options on
securities. The Fund will only invest in options which are traded on securities
exchanges and for which it pays a premium (cost of option). The Fund may enter
into closing transactions, exercise its options or permit them to expire. A put
option gives the holder (buyer) the "right to sell" a security at a specified
price (the exercise price) at any time until a certain date (the expiration
date). A call option gives the holder (buyer) the "right to purchase" a security
at a specified price (the exercise price) at any time until a certain date (the
expiration date). The Fund may purchase spread options which are options for
which the exercise price may be a fixed dollar spread or yield spread between
the security underlying the option and another security it does not own, but
that is used as a bench mark. Options traded on national securities exchanges
are issued by The Options Clearing Corporation.
In effect, the buyer of a put option who also owns the related security is
protected by ownership of the put option against any decline in that security's
price below the exercise price less the amount paid for the option. The ability
to purchase put options allows the Fund to protect capital gains in an
appreciated security it owns, without being required to sell that security.
At times the Fund may wish to establish a position in a security upon which call
options are available. By purchasing a call option the Fund is able to fix the
cost of acquiring the security, this being the cost of the call option plus the
exercise price of the option. This procedure also provides some protection from
an unexpected downturn in the
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market because the Fund would be at risk only for the amount of the premium paid
for the call option which it can, if it chooses, permit to expire.
When the Fund purchases a call option it pays a premium. The Fund will benefit
only if the market price of the related investment is above the call price plus
the premium during the exercise period and the call is either exercised or sold
at a profit. If it is not exercised or sold, it will become worthless at its
expiration date and the Fund will lose its premium payment. If the Fund buys a
put option, it also pays a premium. If the market price of the related
investment is above the exercise price and, as a result, the put is not
exercised or sold, the put will become worthless at its expiration date.
OPTIONS ON SECURITIES INDICES. The Fund also may purchase call and put options
on securities indices in an attempt to hedge against market conditions affecting
the value of securities that the Fund owns or intends to purchase, and not for
speculation. Through the purchase of index options, the Fund can achieve many of
the same objectives as through the use of options on individual securities.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to the difference between the closing price of the
index and the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Unlike security options, all settlements are in cash and gain or loss depends
upon price movements in the market generally (or in a particular industry or
segment of the market) rather than upon price movements in individual
securities. Price movements in securities that the Fund owns or intends to
purchase will probably not correlate perfectly with movements in the level of an
index since the prices of such securities may be affected by somewhat different
factors. Therefore, the Fund bears the risk that a loss on an index option would
not be completely offset by movements in the price of such securities.
Options on a securities index involve risks similar to those risks relating to
transactions in financial futures contracts described above. Also, an option
purchased by the Fund may expire worthless, in which case the Fund would lose
the premium paid therefor.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when purchasing a futures contract or entering into a forward foreign
currency exchange purchase, the Fund will maintain in a segregated account cash,
U.S. Government securities or liquid high-grade debt obligations equal to the
value of such contracts. The Fund will use cover in connection with selling a
futures contract.
The Fund will not engage in transactions in financial futures contracts or
options thereon for speculation, but only to attempt to hedge against changes in
market conditions affecting the values of securities or other assets which the
Fund holds or intends to purchase.
FOREIGN SECURITIES. Although the Fund will invest primarily in securities that
are publicly traded in the United States, it has the discretion to invest a
portion of its assets in foreign securities that are traded principally in
securities markets outside the United States. The Fund currently limits
investment in foreign securities not publicly traded in the United States to
less than 10% of its total assets. As discussed below, American Depository
Receipts are publicly traded in the United States and, therefore, are not
subject to the preceding limitation. The Fund intends to invest in foreign
securities that are not publicly traded in the United States only when the
potential benefits to the Fund are deemed to outweigh the risks.
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the dollar falls against such currency. Fluctuations in exchange
rates may also affect the earning power and asset value of the foreign entity
issuing the security. Dividend and interest payments may be repatriated based on
the exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed.
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Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for foreign securities may be less liquid. In
addition, there may be less publicly available information about foreign issuers
than about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
Settlement of Foreign Securities trades may take longer and present more risk
than for domestic securities. With respect to certain foreign countries, there
is a possibility of expropriation or diplomatic developments that could affect
investment in these countries. Losses and other expenses may be incurred in
converting between various currencies in connection with purchases and sales of
foreign securities.
EMERGING MARKETS. While the Fund's investments in foreign securities will
principally be in developed countries, the Fund may invest a portion of its
assets in developing or "emerging" markets, which involve exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. 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 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 can be expected to continue in the future.
Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.
Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result
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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. Certain emerging
markets may lack clearing facilities equivalent to those in developed countries.
Accordingly, settlements can pose additional risks in such markets and
ultimately can expose the Fund to the risk of losses resulting from the Fund's
inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for the Fund's portfolio securities in such
markets may not be readily available. The Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the cost
and expenses of the Fund. 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, the market could impose temporary
restrictions on foreign capital remittances.
PRIVATIZED ENTERPRISES. 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 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 of 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 the 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
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
DEPOSITORY RECEIPTS. For many foreign securities, there are U.S.
Dollar-denominated American Depository Receipts ("ADRs"), which are bought and
sold in the United States and are generally issued by domestic banks. ADRs
represent the right to receive securities of foreign issuers deposited in the
domestic bank or a correspondent bank. ADRs do not eliminate all the risk
inherent in investing in the securities of foreign issuers. However, by
investing in
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ADRs rather than directly in foreign issuers' stock, the Fund will avoid
currency risks during the settlement period for either purchases or sales. In
general, there is a large, liquid market in the United States for most ADRs. The
Fund may also invest in European Depository Receipts ("EDRs"), which are
receipts evidencing an arrangement with a European bank similar to that for ADRs
and are designed for use in the European securities markets. EDRs are not
necessarily denominated in the currency of the underlying security.
FOREIGN CURRENCY TRANSACTIONS. As indicated above (see "Foreign Securities"),
the Fund may invest a limited portion of its assets in securities denominated in
foreign currencies. The value of the assets of the Fund invested in such
securities 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 in connection with conversions between various
currencies. 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 forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract.
By entering into a forward contract in U.S. Dollars for the purchase or sale of
the amount of foreign currency involved in an underlying security transaction,
the Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the U.S. Dollar and such foreign currency. However, this tends to limit gains
which might result from a positive change in such currency relationships.
When KFS believes that the currency of a particular foreign country may suffer a
substantial decline against the U.S. Dollar, it may enter into a forward
contract to sell an amount of foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such foreign currency.
It is extremely difficult to forecast short-term currency market movements, and
whether such a short-term hedging strategy would be successful is highly
uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for the Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Fund will incur a gain or a
loss (as described below) to the extent that there has been movement in forward
contract prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, the Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any gain
which might result should the value of such currency increase. The Fund may have
to convert its holdings of foreign currencies into U.S. Dollars from time to
time in order to meet such needs as Fund expenses and redemption requests.
The Fund does not enter into forward contracts or maintain a net exposure in
such contracts where the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's portfolio securities or other
assets denominated in that currency. The Fund does not intend to enter into
forward contracts for the purchase of a foreign currency if the Fund would have
more than 5% of the value of its total assets committed to such contracts. The
Fund segregates cash or liquid high-grade securities in an amount not less than
the value of the Fund's total
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assets committed to forward foreign currency exchange contracts entered into for
the purchase of a foreign currency. If the value of the securities segregated
declines, additional cash or securities are added so that the segregated amount
is not less than the amount of the Fund's commitments with respect to such
contracts. The Fund generally does not enter into a forward contract with a term
longer than one year.
The Fund may also hedge its foreign currency exchange rate risk by engaging in
foreign currency financial futures transactions and by purchasing foreign
currency options. A foreign currency call rises in value if the underlying
currency appreciates. Conversely, a put rises in value if the underlying
currency depreciates. Through the purchase or sale of foreign currency financial
futures contracts, the Fund may be able to achieve many of the same objectives
as through forward foreign currency exchange contracts more effectively and
perhaps at a lower cost. Unlike forward foreign currency exchange contracts,
foreign currency futures contracts and options on foreign currency futures
contracts are standardized as to amount and delivery period and are traded on
boards of trade and commodities exchanges. Such contracts may provide greater
liquidity and lower cost than forward foreign currency exchange contracts. For
additional information concerning options transactions and financial futures
transactions, please see "Investment Objectives, Policies and Risk
Factors--Additional Investment Information" in the prospectus and related
subsections above under "Investment Policies and Techniques."
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be marked-to-
market every business day so that the value of such securities is at least equal
to the investment value of the repurchase agreement, including any accrued
interest thereon. The Fund currently does not intend to invest more than 5% of
its net assets in repurchase agreements during the current year.
SHORT SALES AGAINST-THE-BOX. The Fund may make short sales against-the-box for
the purpose of deferring realization of gain or loss for federal income tax
purposes. A short sale "against-the-box" is a short sale in which the Fund owns
at least an equal amount of the securities or other assets sold short or
securities convertible into or exchangeable for, without payment of any further
consideration, securities or other assets of the same issue as, and at least
equal in amount to, the securities or other assets sold short. The Fund may
engage in such short sales only to the extent that not more than 10% of the
Fund's total assets (determined at the time of the short sale) is held as
collateral for such sales. The Fund currently does not intend, however, to
engage in such short sales to the extent that more than 5% of its net assets
will be held as collateral therefor during the current year.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund will normally distribute annual dividends of net investment
income and any net realized short-term and long-term capital gains. The Fund may
at any time vary the foregoing dividend practice and, therefore, reserves the
right from time to time either to distribute or to retain for reinvestment such
of its net investment income and its net short-term and long-term capital gains
as the Board of Trustees determines appropriate under then current
circumstances. In particular, and without limiting the foregoing, the 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 will be reinvested in shares
of the Fund unless shareholders indicate in writing that they wish to receive
them in cash or in shares of other Kemper Funds. As reflected in the prospectus
(see "Dividends and Taxes"), shareholders must reinvest all dividends and hold
their shares until the Maturity Date in order to be assured of the benefit of
the Fund's Investment Protection.
TAXES. The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Code and, if so qualified, will not be liable for
federal income taxes to the extent its earnings are distributed. One of
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the Subchapter M requirements to be satisfied is that less than 30% of the
Fund's gross income during the fiscal year must be derived from gains (not
reduced by losses) from the sale or other disposition of securities and certain
other investments held for less than three months. The Fund may be limited in
its options, futures and foreign currency transactions in order to prevent
recognition of such gains.
The Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Fund's securities.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of the Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 in the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. The Fund intends to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax.
A portion of the ordinary income dividends from the Fund may be eligible for the
dividends received deduction available to corporate shareholders. The aggregate
amount eligible for the dividends received deduction may not exceed the
aggregate qualifying dividends received by the Fund for the fiscal year.
A shareholder who redeems shares of the Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of the Fund or any other Kemper Mutual Fund listed in the
prospectus under "Special Features--Combined Purchases" may reinvest the amount
redeemed at net asset value at the time of the reinvestment in shares of the
Fund or in shares of the other Kemper Mutual Funds within six months of the
redemption as described in the prospectus under "Redemption or Repurchase of
Shares--Reinvestment Privilege." If the redeemed shares were held less than 91
days, then the lesser of (a) the sales charge waived on the reinvestment shares,
or (b) the sales charge incurred on the redeemed shares, is included in the
basis of the reinvestment shares and is not included in the basis of the
redeemed shares. If a shareholder realizes a loss on the redemption or exchange
of Fund shares and reinvests in the same Fund's shares 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 Fund shares for shares of another
fund is treated as a redemption and reinvestment for federal income tax
purposes.
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PERFORMANCE
As described in the prospectus, the Fund's historical performance or return may
be shown in the form of "average annual total return" and "total return"
figures. These various measures of performance are described below.
The Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge, and computing the "redeemable value" of that investment at
the end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total return may
also be calculated without deducting the maximum sales charge.
Calculation of the Fund's total return is not subject to a standardized formula,
except when calculated for the Fund's "Financial Highlights" table in the Fund's
financial statements. Total return performance for a specific period is
calculated by first taking an investment (normally assumed to be $10,000)
("initial investment") in the Fund's shares on the first day of the period,
either adjusting or not adjusting to deduct the maximum sales charge, and
computing the "ending value" of that investment at the end of the period. The
total return percentage is then determined by subtracting the initial investment
from the ending value and dividing the remainder by the initial investment and
expressing the result as a percentage. The calculation assumes that all income
and capital gains dividends paid by the Fund have been reinvested at net asset
value on the reinvestment dates during the period. Total return may also be
shown as the increased dollar value of the hypothetical investment over the
period. Total return calculations that do not include the effect of the sales
charge would be reduced if such charge were included.
The Fund's performance figures are based upon historical results and are not
representative of future performance. The Fund's shares are sold at net asset
value plus a maximum sales charge of 5.0% of the offering price. Returns and net
asset value will fluctuate. Factors affecting the Fund's performance include
general market conditions, operating expenses and investment management. Any
additional fees charged by a dealer or other financial services firm would
reduce returns described in this section. Shares of the Fund are redeemable at
the then current net asset value, which may be more or less than original cost.
The figures below show performance information for the period ended June 30,
1995. Comparative information with respect to the Russell 1000(R) Growth Index,
the Standard & Poor's 500 Stock Index, the Wilshire 750 Mid-Cap Growth Index,
the Consumer Price Index and the Lipper Balanced Target Maturity Fund Index is
also included, where available. There are differences and similarities between
the investments which the Fund may purchase for its portfolio and the
investments measured by such indexes. The Russell 1000(R) Growth Index is an
unmanaged index of common stocks of larger U.S. companies with greater than
average growth orientation and represents the universe of stocks from which
"earnings/growth" money managers typically select. The Standard & Poor's 500
Stock Index is an unmanaged index of common stocks which is considered to be
generally representative of the U.S. stock market. The market prices and yields
of those stocks will fluctuate. The Wilshire 750 Mid-Cap Growth Index is an
unmanaged index that generally represents the performance of mid-size
capitalization stocks during various market conditions. The Consumer Price Index
is generally considered to be a measure of inflation. The Lipper Balanced Target
Maturity Fund Index is an unweighted performance average of other mutual funds
that invest to provide a guaranteed return of investment at maturity. The Fund
primarily invests in zero coupon bonds and common stocks in pursuing its
objectives of providing a guaranteed return of investment on the Maturity Date
(May 15, 2006) to investors who reinvest all dividends and hold their shares to
the Maturity Date and of providing
B-11
<PAGE> 78
long-term growth of capital. Its net asset value and returns fluctuate. No
adjustment has been made for taxes payable on dividends. The period indicated
was one of fluctuating securities prices.
<TABLE>
<CAPTION>
VALUE OF FUND JUNE 30, 1995
---------------------------------------------------------------------------------------------------------
CAPITAL
TOTAL INITIAL GAIN INCOME ENDING PERCENTAGE ENDING PERCENTAGE
RETURN $10,000 DIVIDENDS DIVIDENDS VALUE INCREASE VALUE INCREASE
TABLE INVESTMENT(1) REINVESTED REINVESTED(2) (ADJUSTED)(1) (ADJUSTED)(1) (UNADJUSTED)(3) (UNADJUSTED)(3)
- ------------------ ------------- ---------- ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(9) $ 9,778 $0 $0 $9,778 (2.2)% $ 10,289 2.9%
<CAPTION>
COMPARED TO
----------------------------------------------------
LIPPER
RUSSELL BALANCED WILSHIRE
TOTAL 1000(R) STANDARD CONSUMER TARGET 750 MID-
RETURN GROWTH & POOR'S PRICE MATURITY CAP GROWTH
TABLE INDEX(4) 500(5) INDEX(6) FUND(7) INDEX(8)
- ------------------ ------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Life of Fund(9) 7.5% 6.5% 0.4% 5.9% 8.0%
</TABLE>
- ---------------
(1) The initial investment was adjusted for the maximum sales charge at the
beginning of the period.
(2) Includes short-term capital gain dividends, if any.
(3) The initial investment was not adjusted for the maximum sales charge at the
beginning of the period.
(4) The Russell 1000(R) Growth Index is an unmanaged index comprised of common
stocks of larger U.S.companies with greater than average growth
orientation. Assumes reinvestment of dividends. Source is Lipper Analytical
Services, Inc.
(5) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(6) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(7) Lipper Balanced Target Maturity Fund Average is an unweighted average of
the performance of the mutual funds in that category. Performance is based
on changes in net asset value with all dividends reinvested and with no
adjustment for sales charges. Source is Lipper Analytical Services, Inc.
(8) The Wilshire 750 Mid-Cap Growth Index is an unmanaged index comprised of
750 mid-size capitalization companies generally represented in large and
small company universes. The market capitalization range of the Mid-Cap 750
is from $400 million to $1.7 billion. Assumes reinvestment of dividends.
Source is Wilshire Associates Incorporated.
(9) Since May 1, 1995.
(10) The effect of the adjustment for the maximum sales charge reduces
performance to a greater extent when performance is calculated for a period
of less than one year under the Securities and Exchange Commission
standardized formula.
The following table illustrates an assumed $10,000 investment in shares of the
Fund on May 1, 1995, which includes the current maximum sales charge of 5.0%,
with income and capital gain dividends, if any, reinvested in additional shares.
The table covers the period through June 30, 1995.
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
-------------------------- ---------------------------------------------------
CAPITAL REINVESTED
PERIOD INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
6/30 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ------ ----------- ---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
1995 $ 0 $0 $9,778 $0 $0 $9,778
</TABLE>
- ---------------
* Includes short-term capital gain dividends, if any.
B-12
<PAGE> 79
The following table compares the performance of the Fund with that of other
mutual funds within the category described below according to data reported by
Lipper Analytical Services, Inc. ("Lipper"), New York, New York, which is a
mutual fund reporting service. Lipper performance figures are based on changes
in net asset value, with all income and capital gain dividends reinvested. Such
calculations do not include the effect of any sales charges. Future performance
cannot be guaranteed. Lipper publishes performance analyses on a regular basis.
<TABLE>
<CAPTION>
LIPPER
BALANCED TARGET
MATURITY FUNDS
---------------
<S> <C>
2 Months (Period ended 6/30/95).................................................... 13 of 14
</TABLE>
The Lipper Balanced Target Maturity Fund category includes funds which invest to
provide a guaranteed return of investment at maturity (target periods).
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the Fund's investment manager. Pursuant to
an investment management agreement, KFS acts as the Fund's investment adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical, bookkeeping and administrative
services, and permits any of its officers or employees to serve without
compensation as trustees or officers of the Trust if elected to such positions.
The investment management agreement provides that the Fund shall pay the charges
and expenses of its operations, including the fees and expenses of the trustees
(except those who are officers or employees of KFS), independent auditors,
counsel, custodian and transfer agent and the cost of share certificates,
reports and notices to shareholders, brokerage commissions or transaction costs,
costs of calculating net asset value, taxes and membership dues. The Fund bears
the expenses of registration of its shares with the Securities and Exchange
Commission, while the principal underwriter, pays the cost of qualifying and
maintaining the qualification of the Fund's shares for sale under the securities
laws of the various states. Kemper Retirement Fund Series I, Series II, Series
III, Series IV and Series V (which are no longer being offered), and the Fund
are subject to the investment management agreement. The Trust's expenses are
generally allocated among the series on the basis of relative net assets at the
time of allocation, except that expenses directly attributable to a particular
series are charged to that series.
The Fund pays KFS an investment management fee, payable monthly, at an annual
rate of .50 of 1% of average daily net assets of the Fund. KFS has agreed to
reimburse the Fund to the extent required by applicable state expense
limitations should all operating expenses of the Fund, including the investment
management fees of KFS but excluding taxes, interest, distribution fees,
extraordinary expenses, brokerage commissions or transaction costs and any other
properly excludable expenses, exceed the applicable state expense limitations.
The Fund believes that the most restrictive state expense limitation currently
in effect would require that such operating expenses not exceed 2.5% of the
first $30 million of average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million. Under such state expense
limitation, custodian costs attributable to foreign securities that are in
excess of similar domestic custodian costs are excluded from operating expenses.
The investment management agreement provides that KFS shall not be liable for
any error of judgment or of law, or for any loss suffered by the Fund in
connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
KFS in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under the agreement.
The investment management agreement continues in effect from year to year for
each series subject to the agreement so long as its continuation is approved at
least annually by (a) 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 Trust and (b) by the shareholders of each series or the Board of
Trustees. It may be terminated at any time upon 60 days' notice by either party,
or by a majority vote of the outstanding shares of a series with respect to that
series, and will
B-13
<PAGE> 80
terminate automatically upon assignment. If continuation is not approved for a
series, the investment management agreement nevertheless may continue in effect
for the series for which it is approved and KFS may continue to serve as
investment manager for the series for which it is not approved to the extent
permitted by the Investment Company Act of 1940. The management fee and the
expense limitation are computed based upon the average daily net assets of all
series subject to the agreement and are allocated among such series based upon
the relative net assets of each such series. Additional series may be subject to
the same or a different agreement. Kemper Worldwide 2004 Fund, a series of the
Trust, has a different agreement.
For the services and facilities furnished to the Fund pursuant to the investment
management agreement during the period from May 1, 1995 to June 30, 1995, KFS
received management fees of $3,000.
PRINCIPAL UNDERWRITER. Kemper Distributors, Inc. ("KDI"), a wholly owned
subsidiary of KFS, is the principal underwriter for shares of the Trust and acts
as agent of the Trust in the continuous offering of its shares. The Trust pays
the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI 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. Terms of continuation, termination and assignment under the
underwriting agreement are identical to those described above with regard to the
investment management agreement, except that termination other than upon
assignment requires six months' notice and continuation, amendment and
termination need not be on a series by series basis.
As principal underwriter for the Fund, KDI retained commissions of $35,000 for
the period from May 1, 1995 to June 30, 1995 after allowing $300,000 as
commissions to firms of which $37,000 was paid to firms affiliated with KDI.
ADMINISTRATIVE SERVICES. Administrative services are provided to the Trust 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 the Trust, including the payment of any service fees.
The Trust pays KDI an administrative services fee, payable monthly, at the
annual rate of up to .25 of 1% of average daily net assets of the Trust.
KDI enters into related arrangements with various financial services firms, such
as broker-dealers or banks ("firms"), that provide services and facilities for
their customers or clients who are shareholders of the Trust. The firms shall
provide such office space and equipment, telephone facilities and personnel as
is necessary or appropriate for providing information and services to their
clients. Such services and assistance may include, but are not limited to,
establishing and maintaining shareholder accounts and records, processing
purchase and redemption transactions, answering routine inquiries regarding the
Trust, and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. KDI pays such firms a
service fee, payable quarterly, at an annual rate of up to .25 of 1% of the net
assets in Trust accounts that they maintain and service commencing with the
month after investment. Firms to which service fees may be paid include
broker-dealers affiliated with KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Trust. Currently, the
administrative services fee payable to KDI is based only upon Trust assets in
accounts for which there is a firm listed on the Trust's records and it is
intended that KDI will pay all the administrative services fees that it receives
from the Trust to firms in the form of service fees. The effective
administrative services fee rate to be charged against all assets of the Trust
while this procedure is in effect would depend upon the proportion of Trust
assets that is in accounts for which there is a firm of record. The Board of
Trustees of the Trust, in its discretion, may approve basing the fee to KDI on
all Trust assets in the future.
For the period from May 1, 1995 to June 30, 1995, the Fund incurred an
administrative services fee of $1,000, all of which KDI paid to firms.
B-14
<PAGE> 81
Certain trustees or officers of the Trust are also directors or officers of KFS
and/or KDI as indicated under "Officers and Trustees."
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of the Trust
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of the Trust held outside the United States. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Fund. IFTC is also the Trust's transfer
agent and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company ("KSVC"), an affiliate of KFS, serves as "Shareholder
Service Agent" of the Fund, and, as such, performs all of IFTC's duties as
transfer agent and dividend paying agent. IFTC receives from the Fund as
transfer agent, and pays to KSVC, annual account fees of $6 per account plus
account set up, transaction and maintenance charges and out-of-pocket expense
reimbursement. IFTC's fee is reduced by certain earnings credits in favor of the
Fund. During the period from May 1, 1995 to June 30, 1995, IFTC remitted
shareholder service fees of $7,000 to KSVC.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Trust's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
PORTFOLIO TRANSACTIONS
KFS is the investment manager for the Kemper Funds and KFS and its affiliates
also furnish investment management services to other clients including Kemper
Corporation and the Kemper insurance companies. KFS is the sole shareholder of
Kemper Asset Management Company and Kemper Investment Management Company
Limited. These three entities share some common research and trading facilities.
At times investment decisions may be made to purchase or sell the same
investment securities for the Fund and for one or more of the other clients
advised by KFS. When two or more of such clients are simultaneously engaged in
the purchase or sale of the same security through the same trading facility, the
transactions are allocated as to amount and price in a manner considered
equitable to each.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities and options and futures contracts available to the Fund. On
the other hand, the ability of the Fund to participate in volume transactions
may produce better executions for the Fund in some cases. The Board of Trustees
of the Trust believes that the benefits of KFS's organization outweigh any
limitations that may arise from simultaneous transactions or position
limitations.
KFS, in effecting purchases and sales of portfolio securities for the account of
the Fund, will implement the Fund's policy of seeking best execution of orders,
which includes best net prices, except to the extent that KFS may be permitted
to pay higher brokerage commissions for research services as described below.
Consistent with this policy, orders for portfolio transactions are placed with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services, which include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Fund and KFS. Any research benefits derived are
available for all clients, including clients of affiliated companies. Since it
is only supplementary to KFS's own research efforts and must be analyzed and
reviewed by KFS's staff, the receipt of research information is not expected to
materially reduce expenses. In selecting among firms believed to meet the
criteria for handling a particular transaction, KFS may give consideration to
those firms that have sold or are selling shares of the Fund and other funds
managed by KFS and its affiliates, as well as to those firms that provide
market, statistical and other
B-15
<PAGE> 82
research information to the Fund and KFS, although KFS is not authorized to pay
higher commissions or, in the case of principal trades, higher prices to firms
that provide such services, except as described below.
KFS may in certain instances be permitted to pay higher brokerage commissions
(not including principal trades) solely for receipt of market, statistical and
other research services. Subject to Section 28(e) of the Securities Exchange Act
of 1934 and procedures adopted by the Board of Trustees of the Trust, the Fund
could pay a firm that provides research services to KFS commissions for
effecting a securities transaction for the Fund in excess of the amount other
firms would have charged for the transaction if KFS determines in good faith
that the greater commission is reasonable in relation to the value of the
research services provided by the executing firm viewed in terms either of a
particular transaction or KFS's overall responsibilities to the Fund or other
clients. Research benefits will be available for all clients of KFS and its
subsidiaries. The investment management fee paid by the Fund to KFS is not
reduced because KFS receives these research services.
During the period from May 1, 1995 to June 30, 1995, the Fund paid no portfolio
brokerage commissions.
PURCHASE AND REDEMPTION OF SHARES
During the Offering Period described in the prospectus (see "Purchase of
Shares"), Fund shares are sold at their public offering price, which is the net
asset value next determined after an order is received in proper form plus a
sales charge as described in the Fund's prospectus. The minimum initial
investment is $1,000 and the minimum subsequent investment is $100, but such
minimum amounts may be changed at any time. See the prospectus for certain
exceptions to these minimums. 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 the Fund determines that it has received
payment of the proceeds of the check. The time required for such determination
will vary and cannot be determined in advance. 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 the Fund's portfolio
securities at the time; provided, however, shareholders who hold their shares to
the Maturity Date and reinvest their dividends will receive the benefit of the
Fund's Investment Protection.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares will be redeemed by the Fund at the applicable net asset value as
described in the Fund's prospectus. The redemption within one year of shares
purchased at net asset value under the Large Order NAV Purchase Privilege
described in the prospectus may be subject to a 1% contingent deferred sales
charge (see "Purchase of Shares" in the prospectus). When the Fund is asked to
redeem shares for which it may not yet have received good payment, it may delay
the mailing of a redemption check until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 15 days.
Scheduled variations in or the elimination of the sales charge for purchases by
certain classes of persons or through certain types of transactions as described
in the prospectus is provided because of expected economies in sales and
sales-related efforts.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
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
the Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will
satisfy the redemption request in whole or in part by a distribution of
portfolio securities in lieu of cash, in conformity with the applicable rules of
the Securities and Exchange Commission, taking such securities at the same
B-16
<PAGE> 83
value used to determine net asset value, and selecting the securities in such
manner as the Board of Trustees may deem fair and equitable. If such a
distribution occurred, shareholders receiving securities and selling them could
receive less than the redemption value of such securities and in addition would
incur certain transaction costs. Such a redemption would not be as liquid as a
redemption entirely in cash. The Trust has elected to be governed by Rule 18f-1
under the Investment Company Act of 1940 pursuant to which the Fund is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
assets of the Fund during any 90-day period for any one shareholder of record.
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with KFS, the Fund's investment
adviser and KDI, the Fund's principal underwriter, are as follows (The number
following each person's title is the number of investment companies managed by
KFS or an affiliate for which he or she holds similar positions):
JAMES B. AKINS (10/15/26), Director (11), 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.
ARTHUR R. GOTTSCHALK (2/13/25), Trustee (11), 10642 Brookridge Drive, Frankfort,
Illinois; Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; Member, Board of Governors, Heartland
Institute/Illinois; formerly, Illinois State Senator.
FREDERICK T. KELSEY (4/25/27), Trustee (11), 3133 Laughing Gull Court, John's
Island, South Carolina; Retired; formerly, consultant to Goldman, Sachs & Co.;
formerly, President, Treasurer and Trustee of Institutional Liquid Assets and
its affiliated mutual funds; Trustee of the Benchmark Fund and the Pilot Fund.
DAVID B. MATHIS* (4/13/38), Trustee (33), Kemper Center, Long Grove, Illinois;
Chairman, Chief Executive Officer and Director of Kemper Corporation; Director,
KFS, Kemper Financial Companies, Inc., several other Kemper Corporation
subsidiaries and IMC Global Inc.; Chairman of the Board, Lumbermens Mutual
Casualty Company.
FRED B. RENWICK (2/1/30), Director (11), 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director;
TIFF Industrial Program, Inc.; Director, The Wartberg Home Foundation; Chairman
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment Committee; previously member of the Investment
Committee of Atlanta University Board of Trustees; previously Director of Board
of Pensions Evangelical Lutheran Church in America.
STEPHEN B. TIMBERS (8/8/44), President and Trustee* (33), 120 S. LaSalle St.,
Chicago, Illinois; Chairman, Chief Executive Officer, Chief Investment Officer
and Director, KFS; President, Chief Operating Officer and Director, Kemper
Corporation; Director, Kemper Financial Companies, Inc., KDI; Gillett Holdings,
Inc. and LTV Corporation.
JOHN B. TINGLEFF (5/4/35), Trustee (11), 2015 South Lake Shore Drive, Harbor
Springs, Michigan; Retired; formerly President, Tingleff & Associates
(management consulting firm); formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
JOHN G. WEITHERS (8/8/33), Trustee (11), 311 Springlake, 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.
JOHN E. PETERS (11/4/47), Vice President* (33), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President, KFS; President and Director,
KDI.
B-17
<PAGE> 84
TRACY McCORMICK CHESTER (9/27/54), Vice President* (3), 120 South LaSalle
Street, Chicago, Illinois; Senior Vice President and Portfolio Manager, Kemper
Financial Services, Inc.; formerly, Portfolio Manager for Fiduciary Management;
prior thereto, independent consultant managing private accounts.
DENNIS H. FERRO (6/20/45), Vice President* (3), 120 South LaSalle Street,
Chicago, Illinois; Executive Vice President and Director of International Equity
Investments, Kemper Financial Services, Inc.; prior thereto, President, Managing
Director and Chief Investment Officer of an international investment advisory
firm.
CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary* (33), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to the Fund.
JEROME L. DUFFY (6/29/36), Treasurer* (33), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary* (33), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, KFS.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary* (25), 120 South LaSalle
Street, Chicago, Illinois; Vice President and Director of State Registrations,
KFS and KDI.
* Interested persons 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 Trust, except that Mr. Custer's law firm
receives fees from the Trust as counsel to the Trust. The table below shows
amounts estimated to be paid or accrued to those trustees who are not designated
"interested persons" during the Fund's 1995 fiscal year as if the Fund had
existed for the entire fiscal year except that the information in the last
column is for calendar year 1994.
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT BENEFITS KEMPER FUNDS
COMPENSATION ACCRUED AS PART OF PAID TO
NAME OF TRUSTEE FROM FUND(3) FUND EXPENSES TRUSTEES(2)
- ------------------------------------------------- ------------ ------------------- ------------
<S> <C> <C> <C>
James B. Akins................................... $2,300 $ 0 $ 66,600
Arthur R. Gottschalk(1).......................... $2,500 $ 0 $ 72,000
Frederick T. Kelsey(1)........................... $2,500 $ 0 $ 73,800
Fred B. Renwick.................................. $2,300 $ 0 $ 66,600
John B. Tingleff................................. $2,500 $ 0 $ 70,500
John G. Weithers................................. $2,500 $ 0 $ 70,100
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Trust. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Market Fund--Money
Market Portfolio. Total deferred amounts and interest accrued through June
30, 1995 are $400 and $800 for Messrs. Gottschalk and Kelsey, respectively.
(2) Includes estimated compensation for service for calendar year 1994 on the
boards of 11 Kemper funds with 25 fund portfolios and amounts for new funds
as if the fund had existed at the beginning of the year and, for Kemper
Dreman Fund, Inc. as if it had been affiliated with the Kemper funds in 1994
and the Board Members had been such for all the Kemper funds during the
period.
(3) Estimated compensation that assumes all Board Members served on Board for
all of 1995 fiscal year.
As of September 29, 1995, the trustees and officers as a group owned less than
1% of the outstanding shares of the Fund and no person owned of record 5% or
more of the outstanding shares of the Fund, except that National Financial
Services Corp., One World Financial Center, 200 Liberty Street, New York, New
York owned of record 10.2% and Donaldson, Lufkin & Jenrette, P.O. Box 2052,
Jersey City, New Jersey owned of record 5.3% of the outstanding shares of the
Fund.
B-18
<PAGE> 85
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Trust ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which approval by shareholders is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Trust, a series or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust, establishing a series, supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision thereof); (e) as to whether a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the shareholders, to the same
extent as the stockholders of a Massachusetts business corporation; and (f) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Trust, or any registration of the Trust with the Securities and
Exchange Commission or any state, or as the trustees may consider necessary or
desirable. The shareholders also would vote upon changes in fundamental
investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Trust could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Trust and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any series or class) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by KFS and KDI as remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
B-19
<PAGE> 86
KEMPER TARGET EQUITY FUND
KEMPER WORLDWIDE 2004 FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
----------------------------------------- ---------------------------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies
and Techniques
14. Management of the Fund................... Investment Manager and Underwriter;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Underwriter
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions
18. Capital Stock and Other Securities....... Dividends and Taxes;
Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends and Taxes
21. Underwriters............................. Investment Manager and Underwriter
22. Calculation of Performance Data.......... Performance
23. Financial Statements..................... Financial Statements
</TABLE>
<PAGE> 87
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 25, 1995
KEMPER WORLDWIDE 2004 FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-621-1048
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Kemper Worldwide 2004 Fund (the "Fund"), a
series of Kemper Target Equity Fund (the "Trust"), dated October 25, 1995. The
prospectus may be obtained without charge from the Fund.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Restrictions........................................... B-1
Investment Policies and Techniques................................ B-2
Dividends and Taxes............................................... B-10
Performance....................................................... B-11
Investment Manager and Underwriter................................ B-13
Portfolio Transactions............................................ B-15
Purchase and Redemption of Shares................................. B-16
Officers and Trustees............................................. B-17
Shareholder Rights................................................ B-19
</TABLE>
The financial statements appearing in the Fund's 1995 Annual Report to
Shareholders are incorporated herein by reference. The Annual Report accompanies
this document.
KWF4 13 10/95 (LOGO)printed on recycled paper
<PAGE> 88
INVESTMENT RESTRICTIONS
Kemper Target Equity Fund (the "Trust") has adopted the following fundamental
investment restrictions which cannot be changed with respect to Kemper Worldwide
2004 Fund (the "Fund") without approval of a "majority" of its outstanding
shares, which means the lesser of (1) 67% of the Fund's shares present at a
meeting at which the holders of more than 50% of the outstanding shares are
present in person or by proxy; or (2) more than 50% of the Fund's outstanding
shares.
The Fund may not, as a fundamental policy:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States or any foreign government or their agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total assets
would be invested in securities of that issuer. With respect to 75% of its total
assets, the Fund will limit its investments in the securities of any one foreign
government issuer to 5% of the Fund's total assets.
(2) Purchase more than 10% of any class of voting securities of any issuer.
(3) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objectives and policies.
(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions.
(7) Make short sales of securities or other assets or maintain a short position
for the account of the Fund unless at all times when a short position is open it
owns an equal amount of such securities or other assets or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities or other assets of the same issue as, and equal in
amount to, the securities or other assets sold short and unless not more than
10% of the Fund's total assets is held as collateral for such sales at any one
time.
(8) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may the Fund purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts.
(9) Purchase securities (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result of such purchase
25% or more of the Fund's total assets would be invested in any one industry.
(10) Invest in commodities or commodity futures contracts, although it may buy
or sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate (including real estate limited
partnerships), although it may invest in securities which are secured by real
estate and securities of issuers which invest or deal in real estate including
real estate investment trusts.
B-1
<PAGE> 89
(11) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities. The Fund may buy and sell
securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.
(12) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number (4) in the latest
fiscal period and it has no present intention of borrowing during the current
year. The Trust has adopted the following non-fundamental restrictions, which
may be changed by the Board of Trustees without shareholder approval.
The Fund may not, as a non-fundamental policy:
(i) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(ii) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase in
the open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than (i) 3%
of the total outstanding voting stock of such company is owned by the Fund, (ii)
5% of the Fund's total assets would be invested in any one such company, and
(iii) 10% of the Fund's total assets would be invested in such securities.
(iii) Invest more than 15% of its net assets in illiquid securities.
(iv) Invest in interests in oil, gas or other mineral exploration or development
programs or leases, although it may invest in the securities of issuers which
invest in or sponsor such programs.
(v) Invest more than 5% of the Fund's total assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) which with their predecessors have a record of less than
three years continuous operation and equity securities of issuers which are not
readily marketable.
(vi) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(vii) Invest for the purpose of exercising control or management of another
issuer.
(viii) Invest more than 5% of its total assets in restricted securities,
excluding restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities will not exceed 10% of total
assets.
(ix) Invest more than 10% of its total assets in securities of real estate
investment trusts.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. The Fund may invest in Zero Coupon Treasuries and Foreign Securities
(as defined in the prospectus) and engage in futures and options transactions
and other investment techniques in accordance with its investment objectives and
policies. See "Investment Objectives, Policies and Risk Factors" in the
prospectus. Supplemental information concerning the Fund's investments and
certain investment techniques is set forth below.
B-2
<PAGE> 90
ZERO COUPON TREASURIES. There are currently two basic types of zero coupon
securities, those created by separating the interest and principal components of
a previously issued interest-paying security and those originally issued in the
form of a face amount only security paying no interest. Zero coupon securities
of the U.S. Government and certain of its agencies and instrumentalities and of
private corporate issuers are currently available, although the Fund will
purchase only those that represent direct obligations of the U.S. Government.
Zero coupon securities of the U.S. Government that are currently available are
called STRIPS (Separate Trading of Registered Interest and Principal of
Securities) or CUBES (Coupon Under Book-Entry Safekeeping). STRIPS and CUBES are
issued under programs introduced by the U.S. Treasury and are direct obligations
of the U.S. Government. The U.S. Government does not issue zero coupon
securities directly. The STRIPS program, which is ongoing, is designed to
facilitate the secondary market stripping of selected Treasury notes and bonds
into individual interest and principal components. Under the program, the U.S.
Treasury continues to sell its notes and bonds through its customary auction
process. However, a purchaser of those notes and bonds who has access to a
book-entry account at a Federal Reserve bank may separate the specified Treasury
notes and bonds into individual interest and principal components. The selected
Treasury securities may thereafter be maintained in the book-entry system
operated by the Federal Reserve in a manner that permits the separate trading
and ownership of the interest and principal payments. The Federal Reserve does
not charge a fee for this service; however, the book-entry transfer of interest
or principal components is subject to the same fee schedule generally applicable
to the transfer of Treasury securities.
Under the program, in order for a book-entry Treasury security to be separated
into its component parts, the face amount of the security must be an amount
which, based on the stated interest rate of the security, will produce a
semi-annual interest payment of $1,000 or a multiple of $1,000. Once a
book-entry security has been separated, each interest and principal component
may be maintained and transferred in multiples of $1,000 regardless of the face
amount initially required for separation or the resulting amount required for
each interest payment.
CUBES, like STRIPS, are direct obligations of the U.S. Government. CUBES are
coupons that have previously been physically stripped from Treasury notes and
bonds, but which were deposited with the Federal Reserve and are now carried and
transferable in book-entry form only. Only stripped Treasury coupons maturing on
or after January 15, 1988, that were stripped prior to January 5, 1987, were
eligible for conversion to book-entry form under the CUBES program.
Investment banks may also strip Treasury securities and sell them under
proprietary names. These securities may not be as liquid as STRIPS and CUBES and
the Fund has no present intention of investing in these instruments.
STRIPS and CUBES are purchased at a discount from $1,000. Absent a default by
the U.S. Government, a purchaser will receive face value for each of the STRIPS
and CUBES provided the STRIPS and CUBES are held to their due dates. While
STRIPS and CUBES can be purchased on any business day, they all currently come
due on February 15, May 15, August 15 or November 15.
FINANCIAL FUTURES CONTRACTS. The Fund may enter into financial futures contracts
for the future delivery of a financial instrument, such as a security, or an
amount of foreign currency, or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might adversely affect the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.
B-3
<PAGE> 91
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities or other assets, in most cases a party
will close out the contractual commitment before delivery without having to make
or take delivery of the underlying assets by purchasing (or selling, as the case
may be) on a commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, if effected through a member of
an exchange, cancels the obligation to make or take delivery of the underlying
securities or other assets. All transactions in the futures market are made,
offset or fulfilled through a clearing house associated with the exchange on
which the contracts are traded. The Fund will incur brokerage fees when it
purchases or sells contracts, and will be required to maintain margin deposits.
At the time the Fund enters into a futures contract, it is required to deposit
with its custodian, on behalf of the broker, a specified amount of cash or
eligible securities, called "initial margin." The initial margin required for a
futures contract is set by the exchange on which the contract is traded.
Subsequent payments, called "variation margin," to and from the broker are made
on a daily basis as the market price of the futures contract fluctuates. The
costs incurred in connection with futures transactions could reduce the Fund's
return. Futures contracts entail risks. If the investment manager's judgment
about the general direction of markets or exchange rates is wrong, the overall
performance may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager may still not result in a successful hedging
transaction. If any of these events should occur, the Fund could lose money on
the financial futures contracts and also on the value of its assets.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Fund may purchase and write call and
put options on financial futures contracts. 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 at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. The Fund would be required
to deposit with its custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by it. The Fund will
establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities." Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above. Also, an option purchased by the Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.
OPTIONS ON SECURITIES. The Fund may write (sell) "covered" call options on
securities so long as it owns the underlying securities subject to the option or
an option to purchase the same underlying securities, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain for the term of the option a segregated account
consisting of cash, U.S. Government securities or other liquid high grade debt
obligations ("eligible securities") having a value at least equal to the
fluctuating market value of the optioned securities. The Fund may write
"covered" put options provided that, as long as the Fund is obligated as a
writer of a put option, the Fund will own an option to sell the underlying
securities subject to the option, having an exercise price equal to or greater
than the exercise price of the "covered" option, or it will deposit and maintain
in a segregated account eligible securities having a value equal to or greater
than the exercise price of the option. A call option gives the purchaser the
right to buy, and the writer the obligation to sell, the underlying security at
the exercise price during the option period. A put option gives the purchaser
the right to sell, and the writer has the
B-4
<PAGE> 92
obligation to buy, the underlying security at the exercise price during the
option period. The premium received for writing an option will reflect, among
other things, the current market price of the underlying security, the
relationship of the exercise price to such market price, the price volatility of
the underlying security, the option period, supply and demand and interest
rates. The exercise price of an option may be below, equal to or above the
current market value of the underlying security at the time the option is
written. The Fund may write or purchase spread options, which are options for
which the exercise price may be a fixed dollar spread or yield spread between
the security underlying the option and another security it does not own, but
that is used as a bench mark. The buyer of a put who also owns the related
security is protected by ownership of a put option against any decline in that
security's price below the exercise price less the amount paid for the option.
The ability to purchase put options allows the Fund to protect capital gains in
an appreciated security it owns, without being required to actually sell that
security. At times the Fund would like to establish a position in a security
upon which call options are available. By purchasing a call option, the Fund is
able to fix the cost of acquiring the security, this being the cost of the call
plus the exercise price of the option. This procedure also provides some
protection from an unexpected downturn in the market because the Fund is only at
risk for the amount of the premium paid for the call option which it can, if it
chooses, permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying asset rise
in value, and the secured put writer retains the risk of loss should the
underlying asset decline in value. For the covered call writer, substantial
appreciation in the value of the underlying asset would result in the asset
being "called away." For the secured put writer, substantial depreciation in the
value of the underlying asset would result in the asset being "put to" the
writer. If a covered call option expires unexercised, the writer realizes a gain
and the buyer a loss in the amount of the premium. If the covered call option
writer has to sell the underlying asset because of the exercise of the call
option, it realizes a gain or loss from the sale of the underlying asset, with
the proceeds being increased by the amount of the premium.
If a secured put option expires unexercised, the writer realizes a gain and the
buyer a loss in the amount of the premium. If the secured put writer has to buy
the underlying asset because of the exercise of the put option, the secured put
writer incurs an unrealized loss to the extent that the current market value of
the underlying asset is less than the exercise price of the put option minus the
premium received.
OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objectives and Policies"), the Fund may deal in over-the-counter traded options
("OTC options"). OTC options differ from exchange traded options in several
respects. They are transacted directly with dealers and not with a clearing
corporation, and there is a risk of nonperformance by the dealer as a result of
the insolvency of such dealer or otherwise, in which event the Fund may
experience material losses. However, in writing options the premium is paid in
advance by the dealer. OTC options are available for a greater variety of
securities, and a wider range of expiration dates and exercise prices, than are
exchange traded options. Since there is no exchange, pricing is normally done by
reference to information from market makers, which information is carefully
monitored by the investment manager and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, the Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when the Fund writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying asset until the option expires or the option is exercised. Therefore,
a covered call option writer of an OTC option may not be able to sell an
underlying asset even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the assets
pledged to secure the put for other investment purposes while it is obligated as
a put writer. Similarly, a purchaser of such put or call option might also find
it difficult to terminate its position on a timely basis in the absence of a
secondary market.
B-5
<PAGE> 93
The Fund understands the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Fund has adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Fund's portfolio. A brief description of
such procedures is set forth below.
The Fund will only engage in OTC options transactions with dealers approved by
the investment manager pursuant to procedures adopted by the Trust's Board of
Trustees. The investment manager believes that the approved dealers should be
able to enter into closing transactions if necessary and, therefore, present
minimal credit risks to the Fund. The investment manager will monitor the
creditworthiness of the approved dealers on an on-going basis. The Fund
currently will not engage in OTC options transactions if the amount invested by
the Fund in OTC options, plus a "liquidity charge" related to OTC options
written by the Fund, plus the amount invested by the Fund in illiquid
securities, would exceed 15% of the Fund's net assets. The "liquidity charge"
referred to above is computed as described below.
The Fund anticipates entering into agreements with dealers to which the Fund
sells OTC options. Under these agreements the Fund would have the absolute right
to repurchase the OTC options from the dealer at any time at a price no greater
than a price established under the agreements (the "Repurchase Price"). The
"liquidity charge" referred to above for a specific OTC option transaction will
be the Repurchase Price related to the OTC option less the intrinsic value of
the OTC option. The intrinsic value of an OTC call option for such purposes will
be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an OTC put option, intrinsic value
will be the amount by which the exercise price exceeds the current market value
of the underlying security. If there is no such agreement requiring a dealer to
allow the Fund to repurchase a specific OTC option written by the Fund, the
"liquidity charge" will be the current market value of the assets serving as
"cover" for such OTC option.
OPTIONS ON SECURITIES INDICES. The Fund also may purchase and write call and put
options on securities indices in an attempt to hedge against market conditions
affecting the values of securities that the Fund owns or intends to purchase,
and not for speculation. Through the writing or purchase of index options, the
Fund can achieve many of the same objectives as through the use of options on
individual securities. Options on securities indices are similar to options on a
security except that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the securities index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option. The writer of
the option is obligated, in return for the premium received, to make delivery of
this amount. Unlike security options, all settlements are in cash and gain or
loss depends upon price movements in the market generally (or in a particular
industry or segment of the market), rather than upon price movements in
individual securities. Price movements in securities that the Fund owns or
intends to purchase will probably not correlate perfectly with movements in the
level of an index since the prices of such securities may be affected by
somewhat different factors and, therefore, the Fund bears the risk that a loss
on an index option would not be completely offset by movements in the price of
such securities.
The Fund will cover call options written on a securities index by owning
securities whose price changes, in the opinion of the Fund's investment manager,
are expected to be similar to those of the index, or in such other manner as may
be in accordance with applicable laws, regulations and exchange rules. Price
changes of the securities owned will probably not be perfectly correlated with
the index. The Fund will secure put options written on a securities index by
segregating liquid high-grade securities equal to the exercise price, or in such
other manner as may be in accordance with applicable laws, regulations and
exchange rules. When the Fund writes an option on a securities index, it will be
required to deposit with its custodian and mark-to-market eligible securities
equal in value to at least 100% of the exercise price in the case of a put, or
the contract value in the case of a call. In addition, if the Fund writes a call
option on a securities index at a time when the contract value exceeds the
exercise price, the
B-6
<PAGE> 94
Fund will segregate and mark-to-market, until the option expires or is closed
out, cash or cash equivalents equal in value to such excess.
The Fund may also purchase and write options on other appropriate indices, as
available, such as foreign currency indices. Options on futures contracts and
index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by the
Fund may expire worthless, in which case the Fund would lose the premium paid
therefor.
FOREIGN CURRENCY OPTIONS. A foreign currency option provides the option buyer
with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buyer may close its
position during the option period in the secondary market for such options any
time prior to expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Fund against an adverse movement in the
value of a foreign currency, it does not limit the gain which might result from
a favorable movement in the value of such currency. For example, if the Fund
were holding securities denominated in an appreciating foreign currency and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, it would not have to exercise its put. Similarly, if the Fund has
entered into a contract to purchase a security denominated in a foreign currency
and had purchased a foreign currency call to hedge against a rise in value of
the currency but instead the currency had depreciated in value between the date
of purchase and the settlement date, the Fund would not have to exercise its
call but could acquire in the spot market the amount of foreign currency needed
for settlement.
FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of its financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), the Fund may use foreign currency futures contracts
and options on such futures contracts. Through the purchase or sale of such
contracts, the Fund may be able to achieve many of the same objectives as
through forward foreign currency exchange contracts more effectively and
possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days ("term") from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. The Fund's investment manager believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that to do so is in the best interests of a Fund. A
Fund will not speculate in foreign currency.
If the Fund retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Fund will incur a gain or a
loss (as described below) to the extent that there has been movement in forward
contract prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, the Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.
B-7
<PAGE> 95
The Fund will have to convert its holdings of foreign currencies into U.S.
Dollars from time to time. 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.
The Fund will not enter into such forward contracts or maintain a net exposure
in such contracts when the Fund would be obligated to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. The Fund does not intend to enter
into forward contracts for the purchase of a foreign currency if it would have
more than 15% of the value of its total assets committed to such contracts. The
Fund's custodian bank segregates cash or liquid high-grade securities in an
amount not less than the value of the Fund's total assets committed to forward
foreign currency exchange contracts entered into for the purchase of a foreign
currency. If the value of the securities segregated declines, additional cash or
securities is added so that the segregated amount is not less than the amount of
the Fund's commitments with respect to such contracts. The Fund generally does
not enter into a forward contract with a term longer than one year.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when purchasing a futures contract, writing a put option or entering
into a forward foreign currency exchange purchase, the Fund will maintain in a
segregated account cash, U.S. Government securities or liquid high-grade debt
obligations equal to the value of such contracts. The Fund will use cover in
connection with selling a futures contract.
The Fund will not engage in transactions in financial futures contracts or
options thereon for speculation, but only to attempt to hedge against changes in
market conditions affecting the values of securities or other assets which the
Fund holds or intends to purchase.
FOREIGN DEBT SECURITIES. As reflected in the prospectus, the Fund as part of its
investments in Foreign Securities may invest in fixed income securities
(normally limited to 5% of net assets). The Fund will invest in foreign fixed
income securities based on KFS's analysis without relying on published ratings.
The Fund will invest in a particular security if in the view of KFS the
increased yield offered, regardless of published ratings, is sufficient to
compensate for the assumed risk. Since investments will be based upon KFS's
analysis rather than upon published ratings, achievement of the Fund's goals may
depend more upon the abilities of KFS than would otherwise be the case.
Investment in lower rated securities, while providing greater income and
opportunity for gain than investment in higher rated securities, entails
relatively greater risk of loss of income and principal.
The Fund may invest in emerging market and other foreign fixed income
securities. Investments in emerging market and other foreign securities involve
certain risk considerations not typically associated with investing in
securities of U.S. issuers, including: (a) currency devaluations and other
currency exchange rate fluctuations; (b) political uncertainty and instability,
including military coups and armed conflict; (c) more substantial government
involvement in the economy; (d) higher rates of inflation; (e) less government
supervision and regulation of the securities markets and participants in those
markets; (f) controls on foreign investment and limitations on repatriation of
invested capital and on the Fund's ability to exchange local currencies for U.S.
Dollars; (g) greater price volatility, substantially less liquidity and
significantly smaller capitalization of securities markets; (h) absence of
uniform accounting and auditing standards; (i) generally higher commission
expenses; (j) delay in settlement of securities transactions; and (k) greater
difficulty in enforcing shareholder rights and remedies.
Emerging markets may also present greater risks of nationalization,
expropriation and other confiscation than do developed markets. Such risks are
present in markets in Eastern Europe, for example, and these and the other risks
discussed above could affect adversely the economies of such markets or the
Fund's investments in such markets.
Income on Foreign Securities may be subject to withholding and other taxes,
which would reduce the yield on such securities to the Fund and which may not be
recoverable by the Fund or its shareholders. Because the Fund may invest in
foreign currency denominated securities, changes in foreign currency exchange
rates will affect the Fund's net asset value, the value of interest earned, and
gains and losses realized on the sale of securities denominated in foreign
currencies.
B-8
<PAGE> 96
The value of the 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. Many of the foreign fixed income
obligations in which the Fund will invest will have long maturities. 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 involve special risks. 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. A significant
portion of the sovereign debt in which the Fund may invest is issued as part of
debt restructuring and such debt is to be considered speculative.
PRIVATIZED ENTERPRISES. 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 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 the 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
B-9
<PAGE> 97
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
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be marked-to-
market every business day so that the value of such securities is at least equal
to the investment value of the repurchase agreement, including any accrued
interest thereon. The Fund currently does not intend to invest more than 5% of
its net assets in repurchase agreements during the current year.
SHORT SALES AGAINST-THE-BOX. The Fund may make short sales against-the-box for
the purpose of deferring realization of gain or loss for federal income tax
purposes. A short sale "against-the-box" is a short sale in which the Fund owns
at least an equal amount of the securities or other assets sold short or
securities convertible into or exchangeable for, without payment of any further
consideration, securities or other assets of the same issue as, and at least
equal in amount to, the securities or other assets sold short. The Fund may
engage in such short sales only to the extent that not more than 10% of the
Fund's total assets (determined at the time of the short sale) is held as
collateral for such sales. The Fund currently does not intend, however, to
engage in such short sales to the extent that more than 5% of its net assets
will be held as collateral therefor during the current year.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund will normally distribute annual dividends of net investment
income and any net realized short-term and long-term capital gains. The Fund may
at any time vary the foregoing dividend practice and, therefore, reserves the
right from time to time either to distribute or to retain for reinvestment such
of its net investment income and its net short-term and long-term capital gains
as the Board of Trustees determines appropriate under then current
circumstances. In particular, and without limiting the foregoing, the 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 will be reinvested in shares
of the Fund unless shareholders indicate in writing that they wish to receive
them in cash or in shares of other Kemper Funds. As reflected in the prospectus
(see "Dividends and Taxes"), shareholders must reinvest all dividends and hold
their shares until the Maturity Date in order to be assured of the benefit of
the Fund's Investment Protection.
TAXES. The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Code and, if so qualified, will not be liable for
federal income taxes to the extent its earnings are distributed. One of the
Subchapter M requirements to be satisfied is that less than 30% of the Fund's
gross income during the fiscal year must be derived from gains (not reduced by
losses) from the sale or other disposition of securities and certain other
investments held for less than three months. The Fund may be limited in its
options, futures and foreign currency transactions in order to prevent
recognition of such gains.
The Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Fund's securities.
Gains and losses attributable to fluctuations in the value of foreign currencies
will be characterized generally as ordinary gain or loss under Section 988 of
the Code. For example, if the Fund sold a foreign bond and part of the gain or
loss on the sale was attributable to an increase or decrease in the value of a
foreign currency, then the
B-10
<PAGE> 98
currency gain or loss would be treated as ordinary income or loss. If such
transactions result in greater net ordinary income, the dividends paid by the
Fund will be increased; if the result of such transactions is lower net ordinary
income, a portion of dividends paid could be classified as a return of capital.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of the Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 in the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. The Fund intends to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax.
A shareholder who redeems shares of the Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of the Fund or any other Kemper Mutual Fund listed in the
prospectus under "Special Features--Combined Purchases" may reinvest the amount
redeemed at net asset value at the time of the reinvestment in shares of the
Fund or in shares of the other Kemper Mutual Funds within six months of the
redemption as described in the prospectus under "Redemption or Repurchase of
Shares--Reinvestment Privilege." If the redeemed shares were held less than 91
days, then the lesser of (a) the sales charge waived on the reinvestment shares,
or (b) the sales charge incurred on the redeemed shares is included in the basis
of the reinvestment shares and is not included in the basis of the redeemed
shares. If a shareholder realizes a loss on the redemption or exchange of Fund
shares and reinvests in the same Fund's shares 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 Fund shares for shares of another fund is
treated as a redemption and reinvestment for federal income tax purposes.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, the Fund's historical performance or return may
be shown in the form of "average annual total return" and "total return"
figures. These various measures of performance are described below.
The Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge, and computing the "redeemable value" of that investment at
the end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total return may
also be calculated without deducting the maximum sales charge.
Calculation of the Fund's total return is not subject to a standardized formula,
except when calculated for the Fund's "Financial Highlights" table in the Fund's
financial statements. Total return performance for a specific period is
calculated by first taking an investment (normally assumed to be $10,000)
("initial investment") in the Fund's shares on the first day of the period,
either adjusting or not adjusting to deduct the maximum sales charge, and
computing the "ending value" of that investment at the end of the period. The
total return percentage is then
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<PAGE> 99
determined by subtracting the initial investment from the ending value and
dividing the remainder by the initial investment and expressing the result as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Total return may also be shown as the increased dollar
value of the hypothetical investment over the period. Total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
The Fund's performance figures are based upon historical results and are not
representative of future performance. The Fund's shares are sold at net asset
value plus a maximum sales charge of 5.0% of the offering price. Returns and net
asset value will fluctuate. Factors affecting the Fund's performance include
general market conditions, operating expenses and investment management. Any
additional fees charged by a dealer or other financial services firm would
reduce returns described in this section. Shares of the Fund are redeemable at
the then current net asset value, which may be more or less than original cost.
The figures below show performance information for the period ended June 30,
1994. Comparative information with respect to the Dow Jones Industrial Average,
the Standard & Poor's 500 Stock Index, Europe Australia Far East ("EAFE") Index,
the Consumer Price Index and the Lipper Balanced Target Maturity Fund Index is
also included, where available. There are differences and similarities between
the investments which the Fund may purchase for its portfolio and the
investments measured by such indexes. The Fund primarily invests in zero coupon
bonds and international equities in pursuing its objectives of providing a
guaranteed return of investment on the Maturity Date (November 15, 2004) to
investors who reinvest all dividends and hold their shares to the Maturity Date
and of providing a total return. Its net asset value and returns fluctuate. No
adjustment has been made for taxes payable on dividends. The period indicated
was one of fluctuating securities prices.
<TABLE>
<CAPTION>
VALUE OF FUND JUNE 30, 1995
--------------------------------------------------------------------------------------------------------
CAPITAL
TOTAL INITIAL GAIN INCOME ENDING PERCENTAGE ENDING PERCENTAGE
RETURN $10,000 DIVIDENDS DIVIDENDS VALUE INCREASE VALUE INCREASE
TABLE INVESTMENT(1) REINVESTED REINVESTED(2) (ADJUSTED)(1) (ADJUSTED)(1) (UNADJUSTED)(3) (UNADJUSTED)(3)
- ------------------ ------------ ---------- ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(9) $ 10,518 $0 $141 $ 10,659 6.6% $ 11,216 12.2%
One Year 10,495 0 141 10,636 6.4 11,191 11.9
<CAPTION>
COMPARED TO
-------------------------------------------------------
LIPPER
STANDARD EUROPE BALANCED
TOTAL DOW JONES & POOR'S AUSTRALIA CONSUMER TARGET
RETURN INDUSTRIAL 500(5) FAR EAST PRICE MATURITY
TABLE AVERAGE(4) INDEX INDEX(6) INDEX(7) FUND(8)
- ------------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Life of Fund(9) 26.9% 25.1% 2.8% 3.5% 14.4%
One Year 29.1 26.0 2.0 3.0 16.1
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
ANNUAL TOTAL DOW JONES STANDARD & POOR'S EUROPE AUSTRALIA CONSUMER
RETURN TABLE FUND INDUSTRIAL AVERAGE(4) 500 INDEX(5) FAR EAST INDEX(6) PRICE INDEX(7)
- ------------------------- ---- ---------------------- ------------------ -------------------- ---------------
<S> <C> <C> <C> <C> <C>
Life of Fund(9) 5.7 % 22.8% 21.3% 2.5% 3.0%
One Year 6.4 29.1 26.0 2.0 3.0
<CAPTION>
AVERAGE LIPPER
ANNUAL TOTAL BALANCED TARGET
RETURN TABLE MATURITY FUND(8)
- ------------------------- ----------------
<S> <C>
Life of Fund(9) 12.3%
One Year 16.1
</TABLE>
- ---------------
(1) The initial investment was adjusted for the maximum sales charge at the
beginning of the period.
(2) Includes short-term capital gain dividends, if any.
(3) The initial investment was not adjusted for the maximum sales charge at the
beginning of the period.
(4) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(5) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(6) The EAFE Index (Morgan Stanley Capital International Europe, Australia, Far
East Index) is a generally accepted benchmark for performance of major
overseas markets. This Index is unmanaged and is U.S. Dollar adjusted.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(7) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(8) Lipper Balanced Target Maturity Fund Average is an unweighted average of
the performance of the mutual funds in that category. Performance is based
on changes in net asset value with all dividends reinvested and with no
adjustment for sales charges. Source is Lipper Analytical Services, Inc.
(9) Since May 3, 1994.
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<PAGE> 100
The following table illustrates an assumed $10,000 investment in shares of the
Fund on May 3, 1994, which includes the current maximum sales charge of 5.0%,
with income and capital gain dividends, if any, reinvested in additional shares.
The table covers the period through June 30, 1995.
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
------------------------- ----------------------------------------------------
CAPITAL REINVESTED
PERIOD INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
6/30 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ------ ---------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
1994 $ 0 $0 $ 9,525 $ 0 $0 $ 9,525
1995 $126 $0 $ 10,518 $141 $0 $10,659
</TABLE>
- ---------------
* Includes short-term capital gain dividends, if any.
The following table compares the performance of the Fund with that of other
mutual funds within the Balanced Target Maturity Fund category according to data
reported by Lipper Analytical Services, Inc. ("Lipper"), New York, New York,
which is a mutual fund reporting service. Lipper performance figures are based
on changes in net asset value, with all income and capital gain dividends
reinvested. Such calculations do not include the effect of any sales charges.
Future performance cannot be guaranteed. Lipper publishes performance analyses
on a regular basis.
<TABLE>
<CAPTION>
LIPPER BALANCED
TARGET MATURITY
FUND
---------------
<S> <C>
1 Year (Period ended 6/30/95)..................................................... 10 of 13
</TABLE>
The Lipper Balanced Target Maturity Fund category includes funds which invest to
provide a guaranteed return of investment at maturity (target periods).
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the Fund's investment manager. Pursuant to
an investment management agreement, KFS acts as the Fund's investment adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical, bookkeeping and administrative
services, and permits any of its officers or employees to serve without
compensation as trustees or officers of the Trust if elected to such positions.
The investment management agreement provides that the Trust shall pay the
charges and expenses of its operations, including the fees and expenses of the
trustees (except those who are officers or employees of KFS), independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, brokerage commissions or
transaction costs, costs of calculating net asset value, taxes and membership
dues. The Fund bears the expenses of registration of its shares with the
Securities and Exchange Commission, while KDI, as principal underwriter, pays
the cost of qualifying and maintaining the qualification of the Fund's shares
for sale under the securities laws of the various states. Kemper Retirement Fund
Series I through VI, each of which is a series of the Trust, are currently
subject to a different investment management agreement. The Trust's expenses are
generally allocated among the series on the basis of relative net assets at the
time of allocation, except that expenses directly attributable to a particular
series are charged to that series.
The Fund pays KFS an investment management fee, payable monthly, at an annual
rate of .60 of 1% of average daily net assets of the Fund. KFS has agreed to
reimburse the Fund to the extent required by applicable state expense
limitations should all operating expenses of the Fund, including the investment
management fees of KFS but excluding taxes, interest, distribution fees,
extraordinary expenses, brokerage commissions or transaction costs and any other
properly excludable expenses, exceed the applicable state expense limitations.
The Fund believes that the most restrictive state expense limitation currently
in effect would require that such operating expenses not exceed 2.5% of the
first $30 million of average daily net assets, 2% of the next $70 million and
1.5% of average daily net
B-13
<PAGE> 101
assets over $100 million. Under such state expense limitation, custodian costs
attributable to foreign securities that are in excess of similar domestic
custodian costs are excluded from operating expenses.
The investment management agreement provides that KFS shall not be liable for
any error of judgment or of law, or for any loss suffered by the Fund in
connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
KFS in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under the agreement.
The investment management agreement continues in effect from year to year for
each series subject to the agreement so long as its continuation is approved at
least annually by (a) 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 Trust and (b) by the shareholders of each series or the Board of
Trustees. It may be terminated at any time upon 60 days' notice by either party,
or by a majority vote of the outstanding shares of a series with respect to that
series, and will terminate automatically upon assignment. If continuation is not
approved for a series, the investment management agreement nevertheless may
continue in effect for the series for which it is approved and KFS may continue
to serve as investment manager for the series for which it is not approved to
the extent permitted by the Investment Company Act of 1940. The management fee
and the expense limitation are computed based upon the average daily net assets
of all series subject to the agreement and are allocated among such series based
upon the relative net assets of each such series. Additional series may be
subject to the same or a different agreement.
For the services and facilities furnished to the Fund pursuant to the investment
management agreement during the fiscal year ended June 30, 1995 and the period
from May 3, 1994 to June 30, 1994, KFS received management fees aggregating
$129,000 and $3,000, respectively.
PRINCIPAL UNDERWRITER. Kemper Distributors, Inc. ("KDI"), a wholly owned
subsidiary of KFS, is the principal underwriter for shares of the Trust and acts
as agent of the Trust in the continuous offering of its shares. The Trust pays
the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI 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. Terms of continuation, termination and assignment under the
underwriting agreement are identical to those described above with regard to the
investment management agreement, except that termination other than upon
assignment requires six months' notice and continuation, amendment and
termination need not be on a series by series basis.
As principal underwriter for the Fund during the fiscal year ended June 30, 1995
and the period from May 3, 1994 to June 30, 1994, KDI retained commissions of
$119,000 and $27,000, respectively, after allowing $1,286,000 and $250,000,
respectively, as commissions to retail firms of which $328,000 and $90,000,
respectively, was paid to firms affiliated with KDI.
ADMINISTRATIVE SERVICES. Administrative services are provided to the Trust
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 the Trust, including the payment of any
service fees. The Trust pays KDI an administrative services fee, payable
monthly, at the annual rate of up to .25 of 1% of average daily net assets of
the Trust.
KDI enters into related arrangements with various financial services firms, such
as broker-dealers or banks ("firms"), that provide services and facilities for
their customers or clients who are shareholders of the Trust. The firms shall
provide such office space and equipment, telephone facilities and personnel as
is necessary or appropriate for providing information and services to their
clients. Such services and assistance may include, but are not limited to,
establishing and maintaining shareholder accounts and records, processing
purchase and redemption transactions, answering routine inquiries regarding the
Trust, and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. KDI pays such firms a
service fee, payable quarterly, at an annual rate of up to .25 of 1% of the net
assets in Trust accounts that they maintain and service
B-14
<PAGE> 102
commencing with the month after investment. Firms to which service fees may be
paid include broker-dealers affiliated with KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Trust. Currently, the
administrative services fee payable to KDI is based only upon Trust assets in
accounts for which there is a firm listed on the Trust's records and it is
intended that KDI will pay all the administrative services fees that it receives
from the Trust to firms in the form of service fees. The effective
administrative services fee rate to be charged against all assets of the Trust
while this procedure is in effect would depend upon the proportion of Trust
assets that is in accounts for which there is a firm of record. The Board of
Trustees, in its discretion, may approve basing the fee to KDI on all Trust
assets in the future.
During the fiscal year ended June 30, 1995 and the period from May 3, 1994 to
June 30, 1994, the Fund incurred an administrative services fee of $49,000 and
less than $1,000, respectively, all of which was paid as services fees to firms,
including $14,000 and less than $1,000, respectively, to firms affiliated with
KDI.
Certain trustees or officers of the Trust are also directors or officers of KFS
and/or KDI as indicated under "Officers and Trustees."
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of the Trust
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of the Trust held outside the United States. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Fund. IFTC is also the Trust's transfer
agent and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company ("KSVC"), an affiliate of KFS, serves as "Shareholder
Service Agent of the Fund and, as such, performs all of IFTC's duties as
transfer agent and dividend paying agent." IFTC receives from the Fund as
transfer agent, and pays to KSVC, annual account fees of $6 per account plus
account set up, transaction and maintenance charges and out-of-pocket expense
reimbursement. IFTC's fee is reduced by certain earnings credits in favor of the
Fund. During the 1995 fiscal year, IFTC remitted shareholder service fees of
$40,000 to KSVC as Shareholder Service Agent.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Trust's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
PORTFOLIO TRANSACTIONS
KFS is the investment manager for the Kemper Funds and KFS and its affiliates
also furnish investment management services to other clients including Kemper
Corporation and the Kemper insurance companies. KFS is the sole shareholder of
Kemper Asset Management Company and Kemper Investment Management Company
Limited. These three entities share some common research and trading facilities.
At times investment decisions may be made to purchase or sell the same
investment securities for the Fund and for one or more of the other clients
advised by KFS. When two or more of such clients are simultaneously engaged in
the purchase or sale of the same security through the same trading facility, the
transactions are allocated as to amount and price in a manner considered
equitable to each.
National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options the
Fund will be able to write on a particular security.
B-15
<PAGE> 103
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities and options and futures contracts available to the Fund. On
the other hand, the ability of the Fund to participate in volume transactions
may produce better executions for the Fund in some cases. The Board of Trustees
of the Trust believes that the benefits of KFS's organization outweigh any
limitations that may arise from simultaneous transactions or position
limitations.
KFS, in effecting purchases and sales of portfolio securities for the account of
the Fund, will implement the Fund's policy of seeking best execution of orders,
which includes best net prices, except to the extent that KFS may be permitted
to pay higher brokerage commissions for research services as described below.
Consistent with this policy, orders for portfolio transactions are placed with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services which include execution, clearance procedures,
wire service quotations and statistical and other research information provided
to the Fund and KFS. Any research benefits derived are available for all
clients, including clients of affiliated companies. Since it is only
supplementary to KFS's research efforts and must be analyzed and reviewed by
KFS's staff, the receipt of research information is not expected to materially
reduce expenses. In selecting among firms believed to meet the criteria for
handling a particular transaction, KFS may give consideration to those firms
that have sold or are selling shares of the Fund and other funds managed by KFS
and its affiliates, as well as to those firms that provide market, statistical
and other research information to the Fund and KFS, although KFS is not
authorized to pay higher commissions or, in the case of principal trades, higher
prices to firms that provide such services, except as described below.
KFS may in certain instances be permitted to pay higher brokerage commissions
(not including principal trades) solely for receipt of market, statistical and
other research services. Subject to Section 28(e) of the Securities Exchange Act
of 1934 and procedures adopted by the Board of Trustees of the Trust, the Fund
could pay a firm that provides research services to KFS a commission for
effecting a securities transaction for the Fund in excess of the amount other
firms would have charged for the transaction if KFS determines in good faith
that the greater commission is reasonable in relation to the value of the
research services provided by the executing firm viewed in terms either of a
particular transaction or KFS's overall responsibilities to the Fund or other
clients. Not all of such research services may be useful or of value in advising
the Fund. Research benefits will be available for all clients of KFS and its
subsidiaries. The investment management fee paid by the Fund to KFS is not
reduced because KFS receives these research services.
During the fiscal year ended June 30, 1995, the Fund paid portfolio brokerage
commissions of $179,000; and of this amount 6% was allocated to broker-dealer
firms either on the basis of research information or sales of Kemper Mutual Fund
shares and during the period from May 3, 1994 to June 30, 1994, the Fund paid
portfolio brokerage commissions of $8,000.
PURCHASE AND REDEMPTION OF SHARES
During the Offering Period described in the prospectus (see "Purchase of
Shares"), Fund shares are sold at their public offering price, which is the net
asset value next determined after an order is received in proper form plus a
sales charge as described in the Fund's prospectus. The minimum initial
investment is $1,000 and the minimum subsequent investment is $100, but such
minimum amounts may be changed at any time. See the prospectus for certain
exceptions to these minimums. 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 the Fund determines that it has received
payment of the proceeds of the check. The time required for such determination
will vary and cannot be determined in advance. 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 the Fund's portfolio
securities at the time; provided, however, shareholders who hold their shares to
the Maturity Date and reinvest their dividends will receive the benefit of the
Fund's Investment Protection.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares will be redeemed by the Fund at the applicable net asset value as
described in the Fund's prospectus. The redemption within one year of shares
B-16
<PAGE> 104
purchased at net asset value under the Large Order NAV Purchase Privilege
described in the prospectus may be subject to a 1% contingent deferred sales
charge (see "Purchase of Shares" in the prospectus). When the Fund is asked to
redeem shares for which it may not yet have received good payment, it may delay
the mailing of a redemption check until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 15 days.
Scheduled variations in or the elimination of the sales charge for purchases by
certain classes of persons or through certain types of transactions as described
in the prospectus is provided because of expected economies in sales and
sales-related efforts.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
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
the Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will
satisfy the redemption request in whole or in part by a distribution of
portfolio securities in lieu of cash, in conformity with the applicable rules of
the Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees may deem fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Fund during any 90-day period for any one shareholder of record.
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with KFS, the Fund's investment
adviser and KDI, the Fund's principal underwriter, are as follows (The number
following each person's title is the number of investment companies managed by
KFS or an affiliate for which he or she holds similar positions):
JAMES B. AKINS (10/15/26), Director (11), 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.
ARTHUR R. GOTTSCHALK (2/13/25), Trustee (11), 10642 Brookridge Drive, Frankfort,
Illinois; Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; Member, Board of Governors, Heartland
Institute/Illinois; formerly, Illinois State Senator.
FREDERICK T. KELSEY (4/25/27), Trustee (11), 3133 Laughing Gull Court, John's
Island, South Carolina; Retired; formerly, consultant to Goldman, Sachs & Co.;
formerly, President, Treasurer and Trustee of Institutional Liquid Assets and
its affiliated mutual funds; Trustee of the Benchmark Fund and the Pilot Fund.
DAVID B. MATHIS* (4/13/38), Trustee (33), Kemper Center, Long Grove, Illinois;
Chairman, Chief Executive Officer and Director of Kemper Corporation; Director,
KFS, Kemper Financial Companies, Inc., several other Kemper Corporation
subsidiaries and IMC Global Inc.; Chairman of the Board, Lumbermens Mutual
Casualty Company.
FRED B. RENWICK (2/1/30), Director (11), 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director;
TIFF Industrial Program, Inc.; Director, The Wartberg Home
B-17
<PAGE> 105
Foundation; Chairman Investment Committee of Morehouse College Board of
Trustees; Chairman, American Bible Society Investment Committee; previously
member of the Investment Committee of Atlanta University Board of Trustees;
previously Director of Board of Pensions Evangelical Lutheran Church in America.
STEPHEN B. TIMBERS (8/8/44), President and Trustee* (33), 120 S. LaSalle St.,
Chicago, Illinois; Chairman, Chief Executive Officer, Chief Investment Officer
and Director, KFS; President, Chief Operating Officer and Director, Kemper
Corporation; Director, Kemper Financial Companies, Inc., KDI; Gillett Holdings,
Inc. and LTV Corporation.
JOHN B. TINGLEFF (5/4/35), Trustee (11), 2015 South Lake Shore Drive, Harbor
Springs, Michigan; Retired; formerly President, Tingleff & Associates
(management consulting firm); formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
JOHN G. WEITHERS (8/8/33), Trustee (11), 311 Springlake, 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.
JOHN E. PETERS (11/4/47), Vice President* (33), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President, KFS; President and Director,
KDI.
TRACY McCORMICK CHESTER (9/27/54), Vice President* (3), 120 South LaSalle
Street, Chicago, Illinois; Senior Vice President and Portfolio Manager, Kemper
Financial Services, Inc.; formerly, Portfolio Manager for Fiduciary Management;
prior thereto, independent consultant managing private accounts.
DENNIS H. FERRO (6/20/45), Vice President* (3), 120 South LaSalle Street,
Chicago, Illinois; Executive Vice President and Director of International Equity
Investments, Kemper Financial Services, Inc.; prior thereto, President, Managing
Director and Chief Investment Officer of an international investment advisory
firm.
CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary* (33), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to the Fund.
JEROME L. DUFFY (6/29/36), Treasurer* (33), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary* (33), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, KFS.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary* (25), 120 South LaSalle
Street, Chicago, Illinois; Vice President and Director of State Registrations,
KFS and KDI.
* Interested persons 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 Trust, except that Mr. Custer's law firm
receives fees from the Trust as counsel to the Trust. The table below shows
amounts estimated to be paid or accrued to those trustees who are not designated
"interested persons" during the
B-18
<PAGE> 106
Fund's 1995 fiscal year as if the Fund had existed for the entire fiscal year
except that the information in the last column is for calendar year 1994.
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT BENEFITS KEMPER FUNDS
COMPENSATION ACCRUED AS PART OF PAID TO
NAME OF TRUSTEE FROM FUND(3) FUND EXPENSES TRUSTEES(2)
- ------------------------------------------------- ------------ ------------------- ------------
<S> <C> <C> <C>
James B. Akins................................... $2,300 $ 0 $ 66,600
Arthur R. Gottschalk(1).......................... $2,500 $ 0 $ 72,000
Frederick T. Kelsey(1)........................... $2,500 $ 0 $ 73,800
Fred B. Renwick.................................. $2,300 $ 0 $ 66,600
John B. Tingleff................................. $2,500 $ 0 $ 70,500
John G. Weithers................................. $2,500 $ 0 $ 70,100
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Market Fund--Money
Market Portfolio. Total deferred amounts and interest accrued through June
30, 1995 are $2,400 and $3,800 for Messrs. Gottschalk and Kelsey,
respectively.
(2) Includes estimated compensation for service for calendar year 1994 on the
boards of 11 Kemper funds with 25 fund portfolios and amounts for new funds
as if the fund had existed at the beginning of the year and, for Kemper
Dreman Fund, Inc. as if it had been affiliated with the Kemper funds in 1994
and the Board Members had been such for all the Kemper funds during the
period.
(3) Estimated compensation that assumes all Board Members served on Board for
all of 1995 fiscal year.
As of September 29, 1995, the trustees and officers as a group owned less than
1% of the outstanding shares of the Fund and no person owned of record 5% or
more of the outstanding shares of the Fund, except that EVEREN Clearing Corp.,
77 W. Wacker Drive, Chicago, Illinois owned of record 8.7% of the outstanding
shares of the Fund.
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Trust ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which approval by shareholders is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Trust, a series or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust, establishing a series, supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision thereof); (e) as to whether a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the shareholders, to the same
extent as the stockholders of a Massachusetts business corporation; and (f) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Trust, or any registration of the Trust with the Securities and
Exchange Commission or any state, or as the trustees may consider necessary or
desirable. The shareholders also would vote upon changes in fundamental
investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
B-19
<PAGE> 107
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Trust could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Trust and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any series) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by KFS and KDI as remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
B-20
<PAGE> 108
Kemper Target Equity Fund
Kemper Retirement Fund Series I, II, III, IV and V
Annual Report to Shareholders
For the Year Ended
June 30, 1995
Provides a guaranteed return of
investment on the designated
maturity date to investors who
reinvest all dividends and
hold their shares to the maturity date,
and seeks to provide long-term
growth of capital
(LOGO)
<PAGE> 109
KEMPER RETIREMENT FUND SERIES I
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- --------
<S> <C> <C>
U. S. GOVERNMENT
OBLIGATIONS-48.5%
- -------------------------------------------------------------
U.S. Treasury,
zero coupon, 1999
(Cost: $45,603) $66,500 $ 51,522
- -------------------------------------------------------------
COMMON STOCKS
BROADCASTING AND PUBLISHING-1.2%
- -------------------------------------------------------------
Readers Digest Association 16,000shs. 706
- -------------------------------------------------------------
Singapore Press Holdings Ltd. 744 11
- -------------------------------------------------------------
(a)Viacom International "B" 11,192 519
- -------------------------------------------------------------
1,236
CHEMICALS-2.1%
- -------------------------------------------------------------
Air Products & Chemicals 9,000 502
- -------------------------------------------------------------
B.F. Goodrich Co. 3,200 172
- -------------------------------------------------------------
E.I. DuPont de Nemours & Co. 7,000 481
- -------------------------------------------------------------
Monsanto Co. 6,000 541
- -------------------------------------------------------------
Pall Corp. 25,000 556
- -------------------------------------------------------------
2,252
COMMUNICATIONS AND MEDIA-.9%
----------------------------------
(a)Cox Communications Inc. 18,000 349
- -------------------------------------------------------------
SBC Communications, Inc. 12,800 610
- -------------------------------------------------------------
959
COMPUTER SOFTWARE, ELECTRONIC DATA PROCESSING AND
ELECTRONIC COMPONENTS-8.3%
- -------------------------------------------------------------
Adobe Systems 9,000 522
- -------------------------------------------------------------
AMP, Inc. 7,000 296
- -------------------------------------------------------------
(a)Atmel Corporation 10,500 581
- -------------------------------------------------------------
(a)BMC Software 7,000 541
- -------------------------------------------------------------
(a)Cisco Systems 4,000 202
- -------------------------------------------------------------
(a)Compaq Computer Corp. 5,000 227
- -------------------------------------------------------------
First Data Corporation 12,000 683
- -------------------------------------------------------------
General Motors Corporation, "E" 9,300 405
- -------------------------------------------------------------
Hewlett-Packard, Co. 8,600 641
- -------------------------------------------------------------
(a)Informix Corp. 24,000 609
- -------------------------------------------------------------
Intel Corp. 20,400 1,292
- -------------------------------------------------------------
Linear Technology Corp. 4,000 264
- -------------------------------------------------------------
Loral Corp. 9,000 466
- -------------------------------------------------------------
(a)Microsoft Corp. 8,000 723
- -------------------------------------------------------------
(a)Novell 30,000 598
- -------------------------------------------------------------
(a)Silicon Graphics Inc. 10,000 399
- -------------------------------------------------------------
(a)Sun Microsystems 8,000 388
- -------------------------------------------------------------
8,837
CONSTRUCTION-.4%
- -------------------------------------------------------------
Fluor Corp. 9,000 468
- -------------------------------------------------------------
Road Builder 1,000 3
- -------------------------------------------------------------
471
CONSUMER PRODUCTS AND SERVICES-8.0%
- -------------------------------------------------------------
Campbell Soup Co. 12,000 588
- -------------------------------------------------------------
Coca-Cola Co. 18,000 1,148
- -------------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
- -------------------------------------------------------------
Colgate-Palmolive Co. 10,000 $ 731
- -------------------------------------------------------------
(a)CUC International 10,000 420
- -------------------------------------------------------------
Gillette Co. 10,000 446
- -------------------------------------------------------------
Greencore Group PLC 1,705 13
- -------------------------------------------------------------
PepsiCo 25,000 1,141
- -------------------------------------------------------------
Philip Morris Companies 17,900 1,331
- -------------------------------------------------------------
Pioneer Hi-Bred International 8,000 336
- -------------------------------------------------------------
Procter & Gamble Co. 9,200 661
- -------------------------------------------------------------
Sara Lee Corp. 37,000 1,054
- -------------------------------------------------------------
Service Corp. International 20,000 632
- -------------------------------------------------------------
8,501
DRUGS AND HEALTH CARE-8.2%
- -------------------------------------------------------------
Abbott Laboratories 32,000 1,296
- -------------------------------------------------------------
(a)Amgen, Inc. 5,000 402
- -------------------------------------------------------------
(a)Boston Scientific Corp. 22,000 701
- -------------------------------------------------------------
(a)Centocor Inc. 20,000 286
- -------------------------------------------------------------
Columbia/HCA Healthcare Corp. 10,000 433
- -------------------------------------------------------------
Eli Lilly & Co. 10,200 801
- -------------------------------------------------------------
Johnson & Johnson 11,500 778
- -------------------------------------------------------------
Merck & Co., Inc. 22,000 1,078
- -------------------------------------------------------------
Pfizer 5,000 462
- -------------------------------------------------------------
(a)R. P. Scherer Corp. 5,000 211
- -------------------------------------------------------------
SmithKline Beecham PLC 27,000 1,222
- -------------------------------------------------------------
St. Jude Medical 11,000 551
- -------------------------------------------------------------
United Healthcare Corp. 10,000 414
- -------------------------------------------------------------
8,635
ELECTRICAL EQUIPMENT-2.6%
- -------------------------------------------------------------
Emerson Electric Co. 15,000 1,072
- -------------------------------------------------------------
General Electric Co. 20,000 1,128
- -------------------------------------------------------------
GM Hughes Electronics Corp. 10,000 395
- -------------------------------------------------------------
York International Corp. 3,900 175
- -------------------------------------------------------------
2,770
ENERGY AND RELATED SERVICES-2.2%
- -------------------------------------------------------------
Enron Corp. 15,800 555
- -------------------------------------------------------------
Mobil Corp. 6,200 595
- -------------------------------------------------------------
Noble Affiliates 18,800 479
- -------------------------------------------------------------
Schlumberger Ltd. 8,000 497
- -------------------------------------------------------------
Union Texas Petroleum Holdings 10,000 211
- -------------------------------------------------------------
2,337
ENTERTAINMENT AND RESTAURANTS-2.3%
- -------------------------------------------------------------
Harrah's Entertainment 8,250 232
- -------------------------------------------------------------
La Quinta Inns, Inc. 8,000 216
- -------------------------------------------------------------
McDonald's Corp. 23,000 900
- -------------------------------------------------------------
Promus Companies 4,125 91
- -------------------------------------------------------------
Tabcorp Holdings Ltd. 2,818 6
- -------------------------------------------------------------
Walt Disney Company 18,500 1,029
- -------------------------------------------------------------
2,474
</TABLE>
7
<PAGE> 110
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
FINANCIAL SERVICES-3.1%
----------------------------------------------------------
Aalberts Industries N.V. 248 $ 14
----------------------------------------------------------
Allied Irish Banks PLC 835 4
----------------------------------------------------------
American General Corp. 18,000 608
----------------------------------------------------------
American International Group, Inc. 2,600 296
----------------------------------------------------------
Boatmen's Bancshares 16,000 564
----------------------------------------------------------
CITIC Pacific Ltd. 3,000 8
----------------------------------------------------------
Dean Witter Discover 10,000 470
----------------------------------------------------------
General Re Corp. 2,400 321
----------------------------------------------------------
Hagemeyer N.V. 126 6
----------------------------------------------------------
Providian Corp. 25,500 924
----------------------------------------------------------
Sanyo Shinpan Finance Co., Ltd. 600 44
----------------------------------------------------------
Sumitomo Corporation 1,000 9
----------------------------------------------------------
3,268
MANUFACTURING AND METALS-3.0%
----------------------------------------------------------
Allied-Signal 8,700 387
----------------------------------------------------------
Armstrong World Industries 7,000 351
----------------------------------------------------------
Boeing Co. 15,000 939
----------------------------------------------------------
(a)Crown Cork & Seal Co. 10,000 501
----------------------------------------------------------
Federal Signal Corp. 16,000 346
----------------------------------------------------------
Leggett & Platt Incorporated 5,000 220
----------------------------------------------------------
WMX Technologies 17,000 482
----------------------------------------------------------
3,226
PAPER AND FOREST PRODUCTS-.6%
----------------------------------------------------------
Scott Paper Co. 13,000 643
----------------------------------------------------------
RETAILING-3.3%
----------------------------------------------------------
Home Depot 14,000 569
----------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
May Department Stores Co. 14,000 $ 583
----------------------------------------------------------
(a)Office Depot 18,000 506
----------------------------------------------------------
Tandy Corp. 14,000 726
----------------------------------------------------------
Wal-Mart Stores 43,000 1,150
----------------------------------------------------------
3,534
TELECOMMUNICATIONS-.5%
----------------------------------------------------------
A T & T 10,800 574
----------------------------------------------------------
TRANSPORTATION-.4%
----------------------------------------------------------
(a)Wisconsin Central
Transportation Corp. 8,600 421
----------------------------------------------------------
TOTAL COMMON STOCKS-47.1%
(Cost: $41,283) 50,138
----------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATION-.6%
----------------------------------
Thermo Electron Corp., 5.00%, 2001
(Cost: $503) $ 500 682
----------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield-6.00% and 6.36%
Due-July 1995
----------------------------------------------------------
ConAgra Inc. 900 899
----------------------------------------------------------
Sheffield Receivables Corp. 1,600 1,599
----------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS-2.3%
(Cost: $2,498) 2,498
----------------------------------------------------------
TOTAL INVESTMENTS-98.5%
(Cost: $89,887) 104,840
----------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES-1.5% 1,642
----------------------------------------------------------
NET ASSETS-100% $106,482
==========================================================
</TABLE>
See accompanying Notes to Portfolios of Investments.
8
<PAGE> 111
KEMPER RETIREMENT FUND SERIES II
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- --------
<S> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS-63.3%
------------------------------------------------------------
U.S. Treasury,
zero coupon, 2000
(Cost: $99,127) $148,200 $109,680
------------------------------------------------------------
COMMON STOCKS
BROADCASTING AND PUBLISHING-.8%
------------------------------------------------------------
Readers Digest Association 19,000 shs. 838
------------------------------------------------------------
Singapore Press Holdings Ltd. 720 11
------------------------------------------------------------
(a)Viacom International "B" 13,010 603
------------------------------------------------------------
1,452
CHEMICALS-1.6%
------------------------------------------------------------
Air Products & Chemicals 10,800 602
------------------------------------------------------------
B.F. Goodrich Co. 4,000 215
------------------------------------------------------------
E.I. DuPont de Nemours & Co. 9,000 619
------------------------------------------------------------
Monsanto Co. 7,000 631
------------------------------------------------------------
Pall Corp. 28,000 623
------------------------------------------------------------
2,690
COMMUNICATIONS AND MEDIA-.6%
------------------------------------------------------------
(a)Cox Communications Inc. 20,000 388
------------------------------------------------------------
SBC Communications, Inc. 15,000 714
------------------------------------------------------------
1,102
COMPUTER SOFTWARE, ELECTRONIC DATA PROCESSING AND ELECTRONIC
COMPONENTS-6.1%
------------------------------------------------------------
Adobe Systems 11,000 638
------------------------------------------------------------
AMP, Inc. 8,000 338
------------------------------------------------------------
(a)Atmel Corporation 12,300 681
------------------------------------------------------------
(a)BMC Software 8,500 657
------------------------------------------------------------
(a)Cisco Systems 5,500 278
------------------------------------------------------------
(a)Compaq Computer Corp. 6,000 272
------------------------------------------------------------
First Data Corporation 15,000 853
------------------------------------------------------------
General Motors Corporation, "E" 11,400 496
------------------------------------------------------------
Hewlett-Packard, Co. 10,000 745
------------------------------------------------------------
(a)Informix Corp. 30,000 761
------------------------------------------------------------
Intel Corp. 23,600 1,494
------------------------------------------------------------
Linear Technology Corp. 5,000 330
------------------------------------------------------------
Loral Corp. 9,800 507
------------------------------------------------------------
(a)Microsoft Corp. 9,500 859
------------------------------------------------------------
(a)Novell 35,000 698
------------------------------------------------------------
(a)Silicon Graphics Inc. 12,400 494
------------------------------------------------------------
(a)Sun Microsystems 10,000 485
------------------------------------------------------------
10,586
CONSTRUCTION-.3%
------------------------------------------------------------
Fluor Corp. 9,000 468
------------------------------------------------------------
Road Builder 1,000 3
------------------------------------------------------------
471
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
CONSUMER PRODUCTS AND SERVICES-5.8%
------------------------------------------------------------
Campbell Soup Co. 14,000 $ 686
------------------------------------------------------------
Coca-Cola Co. 21,000 1,339
------------------------------------------------------------
Colgate-Palmolive Co. 12,100 885
------------------------------------------------------------
(a)CUC International 12,500 525
------------------------------------------------------------
Gillette Co. 11,000 491
------------------------------------------------------------
Greencore Group PLC 2,100 16
------------------------------------------------------------
PepsiCo 31,000 1,414
------------------------------------------------------------
Philip Morris Companies 20,600 1,532
------------------------------------------------------------
Pioneer Hi-Bred International 9,000 378
------------------------------------------------------------
Procter & Gamble Co. 10,900 783
------------------------------------------------------------
Sara Lee Corp. 43,000 1,226
------------------------------------------------------------
Service Corp. International 24,000 759
------------------------------------------------------------
10,034
DRUGS AND HEALTH CARE-6.0%
------------------------------------------------------------
Abbott Laboratories 38,200 1,547
------------------------------------------------------------
(a)Amgen, Inc. 6,000 483
------------------------------------------------------------
(a)Boston Scientific Corp. 26,000 829
------------------------------------------------------------
(a)Centocor Inc. 20,000 286
------------------------------------------------------------
Columbia/HCA Healthcare Corp. 11,700 506
------------------------------------------------------------
Eli Lilly & Co. 12,500 981
------------------------------------------------------------
Johnson & Johnson 13,500 913
------------------------------------------------------------
Merck & Co., Inc. 24,800 1,215
------------------------------------------------------------
Pfizer 6,000 554
------------------------------------------------------------
(a)R. P. Scherer Corp. 6,000 253
------------------------------------------------------------
SmithKline Beecham PLC 32,000 1,448
------------------------------------------------------------
St. Jude Medical 14,000 702
------------------------------------------------------------
United Healthcare Corp. 12,000 496
------------------------------------------------------------
U.S. Bioscience, with warrants
expiring 1998 316 2
------------------------------------------------------------
10,215
ELECTRICAL EQUIPMENT-1.8%
------------------------------------------------------------
Emerson Electric Co. 17,000 1,216
------------------------------------------------------------
General Electric Co. 22,500 1,268
------------------------------------------------------------
GM Hughes Electronics Corp. 12,000 474
------------------------------------------------------------
York International Corp. 4,700 211
------------------------------------------------------------
3,169
ENERGY AND RELATED SERVICES-1.6%
------------------------------------------------------------
Enron Corp. 19,700 692
------------------------------------------------------------
Mobil Corp. 7,300 701
------------------------------------------------------------
Noble Affiliates 22,500 574
------------------------------------------------------------
Schlumberger Ltd. 10,000 621
------------------------------------------------------------
Union Texas Petroleum Holdings 12,000 253
------------------------------------------------------------
2,841
ENTERTAINMENT AND RESTAURANTS-1.7%
------------------------------------------------------------
Harrah's Entertainment 11,050 311
------------------------------------------------------------
La Quinta Inns, Inc. 10,000 270
------------------------------------------------------------
</TABLE>
9
<PAGE> 112
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
------------------------------------------------------------
McDonald's Corp. 26,000 $ 1,017
------------------------------------------------------------
Promus Companies 5,525 122
------------------------------------------------------------
Tabcorp Holdings Ltd. 3,340 7
------------------------------------------------------------
Walt Disney Company 21,500 1,196
------------------------------------------------------------
2,923
FINANCIAL SERVICES-2.2%
------------------------------------------------------------
Aalberts Industries N.V. 300 17
------------------------------------------------------------
Allied Irish Banks PLC 800 4
------------------------------------------------------------
American General Corp. 22,000 743
------------------------------------------------------------
American International Group, Inc. 3,200 365
------------------------------------------------------------
Boatmen's Bancshares 18,500 652
------------------------------------------------------------
CITIC Pacific Ltd. 3,000 8
------------------------------------------------------------
Dean Witter Discover 12,000 564
------------------------------------------------------------
General Re Corp. 2,800 375
------------------------------------------------------------
Hagemeyer N.V. 146 7
------------------------------------------------------------
Providian Corp. 30,000 1,088
------------------------------------------------------------
Sanyo Shinpan Finance Co., Ltd. 300 22
------------------------------------------------------------
Sumitomo Corporation 1,000 9
------------------------------------------------------------
3,854
MANUFACTURING AND METALS-2.2%
------------------------------------------------------------
Allied-Signal 10,100 449
------------------------------------------------------------
Armstrong World Industries 9,000 451
------------------------------------------------------------
Boeing Co. 18,000 1,127
------------------------------------------------------------
(a)Crown Cork & Seal Co. 12,000 602
------------------------------------------------------------
Federal Signal Corp. 19,000 411
------------------------------------------------------------
Leggett & Platt Incorporated 6,000 264
------------------------------------------------------------
WMX Technologies 21,000 596
------------------------------------------------------------
3,900
PAPER AND FOREST PRODUCTS-.4%
------------------------------------------------------------
Scott Paper Co. 15,000 742
------------------------------------------------------------
RETAILING-2.4%
------------------------------------------------------------
The Gap 400 14
------------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
------------------------------------------------------------
Home Depot 16,900 $ 687
------------------------------------------------------------
May Department Stores Co. 18,000 749
------------------------------------------------------------
(a)Office Depot 22,000 619
------------------------------------------------------------
Tandy Corp. 15,000 778
------------------------------------------------------------
Wal-Mart Stores 48,000 1,284
------------------------------------------------------------
4,131
TELECOMMUNICATIONS-.4%
------------------------------------------------------------
A T & T 12,300 653
------------------------------------------------------------
TRANSPORTATION-.3%
------------------------------------------------------------
(a)Wisconsin Central Transportation
Corp. 10,000 490
------------------------------------------------------------
TOTAL COMMON STOCKS-34.2%
(Cost: $48,684) 59,253
------------------------------------------------------------
CONVERTIBLE CORPORATE
OBLIGATION-.5%
------------------------------------------------------------
Thermo Electron Corp., 5.00%, 2001
(Cost: $604) $ 600 818
------------------------------------------------------------
MONEY MARKET
INSTRUMENT-1.3%
Yield-6.46%
Due-July 1995
------------------------------------------------------------
Enron Corp.
(Cost: $2,298) 2,300 2,298
------------------------------------------------------------
TOTAL INVESTMENTS-99.3%
(Cost: $150,713) 172,049
------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES-.7% 1,288
------------------------------------------------------------
NET ASSETS-100% $173,337
============================================================
</TABLE>
See accompanying Notes to Portfolios of Investments.
10
<PAGE> 113
KEMPER RETIREMENT FUND SERIES III
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- --------
<S> <C> <C>
U. S. GOVERNMENT
OBLIGATIONS-59.7%
----------------------------------------------------------
U.S. Treasury, zero coupon, 2002
(Cost: $68,140) $111,000 $ 74,394
----------------------------------------------------------
COMMON STOCKS
BROADCASTING AND PUBLISHING-.9%
----------------------------------------------------------
Readers Digest Association 16,000shs. 706
----------------------------------------------------------
Singapore Press Holdings Ltd. 720 11
----------------------------------------------------------
(a)Viacom International "B" 9,373 435
----------------------------------------------------------
1,152
CHEMICALS-1.8%
----------------------------------------------------------
Air Products & Chemicals 8,700 485
----------------------------------------------------------
B.F. Goodrich Co. 3,200 172
----------------------------------------------------------
E.I. DuPont de Nemours & Co. 7,000 481
----------------------------------------------------------
Monsanto Co. 6,000 541
----------------------------------------------------------
Pall Corp. 25,000 556
----------------------------------------------------------
2,235
COMMUNICATIONS AND MEDIA-.7%
----------------------------------------------------------
(a)Cox Communications Inc. 18,000 349
----------------------------------------------------------
SBC Communications, Inc. 12,000 571
----------------------------------------------------------
920
COMPUTER SOFTWARE, ELECTRONIC DATA PROCESSING AND
ELECTRONIC COMPONENTS-6.8%
----------------------------------------------------------
Adobe Systems 9,000 522
----------------------------------------------------------
AMP, Inc. 6,800 287
----------------------------------------------------------
(a)Atmel Corporation 10,500 581
----------------------------------------------------------
(a)BMC Software 7,000 541
----------------------------------------------------------
(a)Cisco Systems 4,800 243
----------------------------------------------------------
(a)Compaq Computer Corp. 5,000 227
----------------------------------------------------------
First Data Corporation 10,200 580
----------------------------------------------------------
General Motors Corporation, "E" 8,800 383
----------------------------------------------------------
Hewlett-Packard, Co. 8,200 611
----------------------------------------------------------
(a)Informix Corp. 20,000 508
----------------------------------------------------------
Intel Corp. 19,400 1,228
----------------------------------------------------------
Linear Technology Corp. 4,000 264
----------------------------------------------------------
Loral Corp. 6,800 352
----------------------------------------------------------
(a)Microsoft Corp. 8,000 723
----------------------------------------------------------
(a)Novell 28,000 558
----------------------------------------------------------
(a)Silicon Graphics Inc. 10,000 399
----------------------------------------------------------
(a)Sun Microsystems 8,000 388
----------------------------------------------------------
8,395
CONSTRUCTION-.3%
----------------------------------------------------------
Fluor Corp. 7,000 364
----------------------------------------------------------
Road Builder 1,000 3
----------------------------------------------------------
367
CONSUMER PRODUCTS AND SERVICES-6.4%
----------------------------------------------------------
Campbell Soup Co. 11,000 539
----------------------------------------------------------
Coca-Cola Co. 16,500 1,052
----------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
Colgate-Palmolive Co. 9,000 $ 658
----------------------------------------------------------
(a)CUC International 9,000 378
----------------------------------------------------------
Gillette Co. 10,000 446
----------------------------------------------------------
Greencore Group PLC 1,650 12
----------------------------------------------------------
PepsiCo 24,000 1,095
----------------------------------------------------------
Philip Morris Companies 15,400 1,145
----------------------------------------------------------
Pioneer Hi-Bred International 8,000 336
----------------------------------------------------------
Procter & Gamble Co. 8,700 625
----------------------------------------------------------
Sara Lee Corp. 36,000 1,026
----------------------------------------------------------
Service Corp. International 20,000 633
----------------------------------------------------------
7,945
DRUGS AND HEALTH CARE-6.7%
----------------------------------------------------------
Abbott Laboratories 27,300 1,106
----------------------------------------------------------
(a)Amgen, Inc. 5,000 402
----------------------------------------------------------
(a)Boston Scientific Corp. 20,000 638
----------------------------------------------------------
(a)Centocor Inc. 20,000 286
----------------------------------------------------------
Columbia/HCA Healthcare Corp. 9,500 411
----------------------------------------------------------
Eli Lilly & Co. 10,400 816
----------------------------------------------------------
Johnson & Johnson 11,000 744
----------------------------------------------------------
Merck & Co., Inc. 21,300 1,044
----------------------------------------------------------
Pfizer 5,200 480
----------------------------------------------------------
(a)R. P. Scherer Corp. 5,000 211
----------------------------------------------------------
SmithKline Beecham PLC 27,000 1,222
----------------------------------------------------------
St. Jude Medical 11,000 551
----------------------------------------------------------
United Healthcare Corp. 10,000 414
----------------------------------------------------------
8,325
ELECTRICAL EQUIPMENT-2.1%
----------------------------------------------------------
Emerson Electric Co. 14,500 1,037
----------------------------------------------------------
General Electric Co. 17,000 958
----------------------------------------------------------
GM Hughes Electronics Corp. 10,000 395
----------------------------------------------------------
York International Corp. 3,900 175
----------------------------------------------------------
2,565
ENERGY AND RELATED SERVICES-1.8%
----------------------------------------------------------
Enron Corp. 15,800 555
----------------------------------------------------------
Mobil Corp. 5,800 557
----------------------------------------------------------
Noble Affiliates 18,000 459
----------------------------------------------------------
Schlumberger Ltd. 8,000 497
----------------------------------------------------------
Union Texas Petroleum Holdings 10,000 211
----------------------------------------------------------
2,279
ENTERTAINMENT AND RESTAURANTS-1.9%
----------------------------------------------------------
Harrah's Entertainment 7,950 224
----------------------------------------------------------
La Quinta Inns, Inc. 8,000 216
----------------------------------------------------------
McDonald's Corp. 22,000 861
----------------------------------------------------------
Promus Companies 3,975 87
----------------------------------------------------------
Tabcorp Holdings Ltd. 3,175 7
----------------------------------------------------------
Walt Disney Company 17,100 951
----------------------------------------------------------
2,346
</TABLE>
11
<PAGE> 114
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
FINANCIAL SERVICES-2.4%
----------------------------------------------------------
Aalberts Industries N.V. 240 $ 14
----------------------------------------------------------
Allied Irish Banks PLC 750 4
----------------------------------------------------------
American General Corp. 15,000 506
----------------------------------------------------------
American International Group, Inc. 2,600 296
----------------------------------------------------------
Boatmen's Bancshares 15,500 546
----------------------------------------------------------
CITIC Pacific Ltd. 3,000 8
----------------------------------------------------------
Dean Witter Discover 8,000 376
----------------------------------------------------------
General Re Corp. 2,000 268
----------------------------------------------------------
Hagemeyer N.V. 123 5
----------------------------------------------------------
Providian Corp. 25,500 924
----------------------------------------------------------
Sanyo Shinpan Finance Co., Ltd. 600 44
----------------------------------------------------------
Sumitomo Corporation 1,000 9
----------------------------------------------------------
3,000
MANUFACTURING AND METALS-2.4%
----------------------------------------------------------
Allied-Signal 8,700 387
----------------------------------------------------------
Armstrong World Industries 7,000 351
----------------------------------------------------------
Boeing Co. 13,800 864
----------------------------------------------------------
(a)Crown Cork & Seal Co. 10,000 501
----------------------------------------------------------
Federal Signal Corp. 14,000 303
----------------------------------------------------------
Leggett & Platt Incorporated 5,000 220
----------------------------------------------------------
WMX Technologies 16,500 468
----------------------------------------------------------
3,094
PAPER AND FOREST PRODUCTS-.5%
----------------------------------------------------------
Scott Paper Co. 13,000 644
----------------------------------------------------------
RETAILING-2.6%
----------------------------------------------------------
Home Depot 14,200 577
----------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
May Department Stores Co. 12,000 $ 500
----------------------------------------------------------
(a)Office Depot 18,000 506
----------------------------------------------------------
Tandy Corp. 10,000 519
----------------------------------------------------------
Wal-Mart Stores 43,000 1,150
----------------------------------------------------------
3,252
TELECOMMUNICATIONS-.4%
----------------------------------------------------------
A T & T 10,000 531
----------------------------------------------------------
TRANSPORTATION-.3%
----------------------------------------------------------
(a)Wisconsin Central
Transportation Corp. 8,200 402
----------------------------------------------------------
TOTAL COMMON STOCKS-38.0%
(Cost: $39,124) 47,452
----------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATION-.5%
----------------------------------------------------------
Thermo Electron Corp., 5.00%, 2001
(Cost: $503) $ 500 681
----------------------------------------------------------
MONEY MARKET INSTRUMENT-1.4%
Yield-6.46%
Due-July 1995
----------------------------------------------------------
Enron Corp.
(Cost: $1,699) 1,700 1,699
----------------------------------------------------------
TOTAL INVESTMENTS-99.6%
(Cost: $109,466) 124,226
----------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES-.4% 455
----------------------------------------------------------
NET ASSETS-100% $124,681
----------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
12
<PAGE> 115
KEMPER RETIREMENT FUND SERIES IV
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- --------
<S> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS-64.1%
----------------------------------------------------------
U.S. Treasury,
zero coupon, 2003
(Cost: $99,014) $155,900 $ 97,611
----------------------------------------------------------
COMMON STOCKS
BROADCASTING AND PUBLISHING-.8%
----------------------------------------------------------
Readers Digest Association 16,000 shs. 706
----------------------------------------------------------
Singapore Press Holdings Ltd. 720 11
----------------------------------------------------------
(a)Viacom International "B" 11,374 527
----------------------------------------------------------
1,244
CHEMICALS-1.5%
----------------------------------------------------------
Air Products & Chemicals 9,300 518
----------------------------------------------------------
B.F. Goodrich Co. 3,200 172
----------------------------------------------------------
E.I. DuPont de Nemours & Co. 7,000 481
----------------------------------------------------------
Monsanto Co. 6,000 541
----------------------------------------------------------
Pall Corp. 25,000 556
----------------------------------------------------------
2,268
COMMUNICATIONS AND MEDIA-.6%
----------------------------------------------------------
(a)Cox Communications Inc. 18,000 349
----------------------------------------------------------
SBC Communications, Inc. 13,000 619
----------------------------------------------------------
968
COMPUTER SOFTWARE, ELECTRONIC DATA PROCESSING AND
ELECTRONIC COMPONENTS-5.8%
----------------------------------------------------------
Adobe Systems 9,000 522
----------------------------------------------------------
AMP, Inc. 6,800 287
----------------------------------------------------------
(a)Atmel Corporation 10,500 581
----------------------------------------------------------
(a)BMC Software 7,000 541
----------------------------------------------------------
(a)Cisco Systems 5,100 258
----------------------------------------------------------
(a)Compaq Computer Corp. 5,000 227
----------------------------------------------------------
First Data Corporation 12,000 683
----------------------------------------------------------
General Motors Corporation, "E" 9,100 396
----------------------------------------------------------
Hewlett-Packard, Co. 8,800 656
----------------------------------------------------------
(a)Informix Corp. 24,000 609
----------------------------------------------------------
Intel Corp. 21,400 1,355
----------------------------------------------------------
Linear Technology Corp. 4,000 264
----------------------------------------------------------
Loral Corp. 6,800 352
----------------------------------------------------------
(a)Microsoft Corp. 8,000 723
----------------------------------------------------------
(a)Novell 31,000 618
----------------------------------------------------------
(a)Silicon Graphics Inc. 10,000 399
----------------------------------------------------------
(a)Sun Microsystems 8,000 388
----------------------------------------------------------
8,859
CONSTRUCTION-.2%
----------------------------------------------------------
Fluor Corp. 7,000 364
----------------------------------------------------------
Road Builder 1,000 3
----------------------------------------------------------
367
CONSUMER PRODUCTS AND SERVICES-5.6%
----------------------------------------------------------
Campbell Soup Co. 12,000 588
----------------------------------------------------------
Coca-Cola Co. 18,300 1,167
----------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
Colgate-Palmolive Co. 9,800 $ 717
----------------------------------------------------------
(a)CUC International 10,000 420
----------------------------------------------------------
Gillette Co. 10,800 482
----------------------------------------------------------
Greencore Group PLC 1,950 15
----------------------------------------------------------
PepsiCo 26,000 1,186
----------------------------------------------------------
Philip Morris Companies 18,000 1,339
----------------------------------------------------------
Pioneer Hi-Bred International 8,000 336
----------------------------------------------------------
Procter & Gamble Co. 9,200 661
----------------------------------------------------------
Sara Lee Corp. 37,000 1,055
----------------------------------------------------------
Service Corp. International 20,000 632
----------------------------------------------------------
8,598
DRUGS AND HEALTH CARE-5.6%
----------------------------------------------------------
Abbott Laboratories 32,500 1,316
----------------------------------------------------------
(a)Amgen, Inc. 5,000 402
----------------------------------------------------------
(a)Boston Scientific Corp. 22,000 701
----------------------------------------------------------
(a)Centocor Inc. 20,000 286
----------------------------------------------------------
Columbia/HCA Healthcare Corp. 10,000 433
----------------------------------------------------------
Eli Lilly & Co. 10,200 801
----------------------------------------------------------
Johnson & Johnson 11,700 791
----------------------------------------------------------
Merck & Co., Inc. 19,900 975
----------------------------------------------------------
Pfizer 5,500 508
----------------------------------------------------------
(a)R. P. Scherer Corp. 5,000 211
----------------------------------------------------------
SmithKline Beecham PLC 25,000 1,131
----------------------------------------------------------
St. Jude Medical 11,000 551
----------------------------------------------------------
United Healthcare Corp. 10,000 414
----------------------------------------------------------
8,520
ELECTRICAL EQUIPMENT-1.7%
----------------------------------------------------------
Emerson Electric Co. 15,000 1,073
----------------------------------------------------------
General Electric Co. 18,000 1,015
----------------------------------------------------------
GM Hughes Electronics Corp. 10,000 395
----------------------------------------------------------
York International Corp. 3,900 175
----------------------------------------------------------
2,658
ENERGY AND RELATED SERVICES-1.6%
----------------------------------------------------------
Enron Corp. 16,700 587
----------------------------------------------------------
Mobil Corp. 6,200 595
----------------------------------------------------------
Noble Affiliates 18,800 479
----------------------------------------------------------
Schlumberger Ltd. 8,000 497
----------------------------------------------------------
Union Texas Petroleum Holdings 10,000 211
----------------------------------------------------------
2,369
ENTERTAINMENT AND RESTAURANTS-1.6%
----------------------------------------------------------
Harrah's Entertainment 7,550 212
----------------------------------------------------------
La Quinta Inns, Inc. 8,000 216
----------------------------------------------------------
McDonald's Corp. 23,000 900
----------------------------------------------------------
Promus Companies 3,775 83
----------------------------------------------------------
Tabcorp Holdings Ltd. 3,175 7
----------------------------------------------------------
Walt Disney Company 17,000 946
----------------------------------------------------------
2,364
</TABLE>
13
<PAGE> 116
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
FINANCIAL SERVICES-2.2%
----------------------------------------------------------
Aalberts Industries N.V. 240 $ 14
----------------------------------------------------------
Allied Irish Banks PLC 800 4
----------------------------------------------------------
American General Corp. 18,000 608
----------------------------------------------------------
American International Group, Inc. 2,600 296
----------------------------------------------------------
Boatmen's Bancshares 16,000 564
----------------------------------------------------------
CITIC Pacific Ltd. 3,000 8
----------------------------------------------------------
Dean Witter Discover 10,000 470
----------------------------------------------------------
General Re Corp. 2,500 335
----------------------------------------------------------
Hagemeyer N.V. 146 7
----------------------------------------------------------
Providian Corp. 25,500 924
----------------------------------------------------------
Sanyo Shinpan Finance Co., Ltd. 600 44
----------------------------------------------------------
Sumitomo Corporation 1,000 9
----------------------------------------------------------
3,283
MANUFACTURING AND METALS-2.1%
----------------------------------------------------------
Allied-Signal 8,700 387
----------------------------------------------------------
Armstrong World Industries 7,000 351
----------------------------------------------------------
Boeing Co. 14,500 908
----------------------------------------------------------
(a)Crown Cork & Seal Co. 10,000 501
----------------------------------------------------------
Federal Signal Corp. 19,000 411
----------------------------------------------------------
Leggett & Platt Incorporated 5,000 220
----------------------------------------------------------
WMX Technologies 17,000 482
----------------------------------------------------------
3,260
PAPER AND FOREST PRODUCTS-.4%
----------------------------------------------------------
Scott Paper Co. 13,000 643
----------------------------------------------------------
RETAILING-2.4%
----------------------------------------------------------
Home Depot 16,000 650
----------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
May Department Stores Co. 14,000 $ 583
----------------------------------------------------------
(a)Office Depot 17,000 478
----------------------------------------------------------
Tandy Corp. 14,000 726
----------------------------------------------------------
Wal-Mart Stores 43,000 1,150
----------------------------------------------------------
3,587
TELECOMMUNICATIONS-.4%
----------------------------------------------------------
A T & T 11,000 584
----------------------------------------------------------
TRANSPORTATION-.3%
----------------------------------------------------------
(a)Wisconsin Central Transportation
Corp. 8,000 392
----------------------------------------------------------
TOTAL COMMON STOCKS-32.8%
(Cost: $41,563) 49,964
----------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATION-.5%
----------------------------------------------------------
Thermo Electron Corp., 5.00%, 2001
(Cost: $503) $ 500 681
----------------------------------------------------------
MONEY MARKET INSTRUMENT-1.4%
Yield-6.01%
Due-July 1995
----------------------------------------------------------
Sheffield Receivables Corp.
(Cost: $2,099) 2,100 2,099
----------------------------------------------------------
TOTAL INVESTMENTS-98.8%
(Cost: $143,179) 150,355
----------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES-1.2% 1,824
----------------------------------------------------------
NET ASSETS-100% $152,179
----------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
14
<PAGE> 117
KEMPER RETIREMENT FUND SERIES V
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- --------
<S> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS-57.2%
----------------------------------------------------------
U.S. Treasury, zero coupon, 2004
(Cost: $69,282) $139,300 $ 77,241
----------------------------------------------------------
COMMON STOCKS
BROADCASTING AND PUBLISHING-1.0%
----------------------------------------------------------
Readers Digest Association 17,100 shs. 755
----------------------------------------------------------
Singapore Press Holdings Ltd. 588 9
----------------------------------------------------------
(a)Viacom International "B" 11,798 547
----------------------------------------------------------
1,311
CHEMICALS-1.9%
----------------------------------------------------------
Air Products & Chemicals 12,700 708
----------------------------------------------------------
B.F. Goodrich Co. 3,200 172
----------------------------------------------------------
E.I. DuPont de Nemours & Co. 7,000 481
----------------------------------------------------------
Monsanto Co. 7,000 631
----------------------------------------------------------
Pall Corp. 26,000 578
----------------------------------------------------------
2,570
COMMUNICATIONS AND MEDIA-.6%
----------------------------------------------------------
(a)Cox Communications Inc. 18,000 349
----------------------------------------------------------
SBC Communications, Inc. 10,000 476
----------------------------------------------------------
825
COMPUTER SOFTWARE, ELECTRONIC DATA PROCESSING AND
ELECTRONIC COMPONENTS-7.0%
----------------------------------------------------------
Adobe Systems 10,500 609
----------------------------------------------------------
AMP, Inc. 9,200 389
----------------------------------------------------------
(a)Atmel Corporation 10,500 581
----------------------------------------------------------
(a)BMC Software 7,000 541
----------------------------------------------------------
(a)Cisco Systems 4,500 228
----------------------------------------------------------
(a)Compaq Computer Corp. 5,000 227
----------------------------------------------------------
First Data Corporation 12,000 683
----------------------------------------------------------
General Motors Corporation, "E" 11,700 509
----------------------------------------------------------
Hewlett-Packard, Co. 9,200 685
----------------------------------------------------------
(a)Informix Corp. 28,000 711
----------------------------------------------------------
Intel Corp. 18,400 1,165
----------------------------------------------------------
Linear Technology Corp. 3,000 198
----------------------------------------------------------
Loral Corp. 11,800 611
----------------------------------------------------------
(a)Microsoft Corp. 9,500 859
----------------------------------------------------------
(a)Novell 34,000 678
----------------------------------------------------------
(a)Silicon Graphics Inc. 10,000 399
----------------------------------------------------------
(a)Sun Microsystems 8,000 388
----------------------------------------------------------
9,461
CONSTRUCTION-.3%
----------------------------------------------------------
Fluor Corp. 7,000 364
----------------------------------------------------------
Road Builder 1,000 3
----------------------------------------------------------
367
CONSUMER PRODUCTS AND SERVICES-6.6%
----------------------------------------------------------
Campbell Soup Co. 14,000 686
----------------------------------------------------------
Coca-Cola Co. 13,500 861
----------------------------------------------------------
Colgate-Palmolive Co. 12,800 936
----------------------------------------------------------
(a)CUC International 12,500 525
----------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
Gillette Co. 10,000 $ 446
----------------------------------------------------------
Greencore Group PLC 1,960 15
----------------------------------------------------------
PepsiCo 31,000 1,414
----------------------------------------------------------
Philip Morris Companies 20,600 1,532
----------------------------------------------------------
Pioneer Hi-Bred International 8,000 336
----------------------------------------------------------
Procter & Gamble Co. 10,200 733
----------------------------------------------------------
Sara Lee Corp. 34,500 983
----------------------------------------------------------
Service Corp. International 16,000 506
----------------------------------------------------------
8,973
DRUGS AND HEALTH CARE-6.7%
----------------------------------------------------------
Abbott Laboratories 31,500 1,276
----------------------------------------------------------
(a)Amgen, Inc. 5,000 402
----------------------------------------------------------
(a)Boston Scientific Corp. 22,000 701
----------------------------------------------------------
(a)Centocor Inc. 20,000 286
----------------------------------------------------------
Columbia/HCA Healthcare Corp. 12,600 545
----------------------------------------------------------
Eli Lilly & Co. 10,400 816
----------------------------------------------------------
Johnson & Johnson 12,500 845
----------------------------------------------------------
Merck & Co., Inc. 27,400 1,343
----------------------------------------------------------
Pfizer 6,000 554
----------------------------------------------------------
(a)R. P. Scherer Corp. 4,000 169
----------------------------------------------------------
SmithKline Beecham PLC 24,000 1,086
----------------------------------------------------------
St. Jude Medical 11,000 551
----------------------------------------------------------
United Healthcare Corp. 10,000 414
----------------------------------------------------------
8,988
ELECTRICAL EQUIPMENT-1.9%
----------------------------------------------------------
Emerson Electric Co. 13,200 944
----------------------------------------------------------
General Electric Co. 19,800 1,116
----------------------------------------------------------
GM Hughes Electronics Corp. 10,000 395
----------------------------------------------------------
York International Corp. 3,900 175
----------------------------------------------------------
2,630
ENERGY AND RELATED SERVICES-1.7%
----------------------------------------------------------
Enron Corp. 18,900 664
----------------------------------------------------------
Mobil Corp. 6,000 576
----------------------------------------------------------
Noble Affiliates 14,700 375
----------------------------------------------------------
Schlumberger Ltd. 8,000 497
----------------------------------------------------------
Union Texas Petroleum Holdings 10,000 211
----------------------------------------------------------
2,323
ENTERTAINMENT AND RESTAURANTS-1.9%
----------------------------------------------------------
Harrah's Entertainment 6,000 169
----------------------------------------------------------
La Quinta Inns, Inc. 8,000 216
----------------------------------------------------------
McDonald's Corp. 26,500 1,037
----------------------------------------------------------
Promus Companies 3,000 66
----------------------------------------------------------
Tabcorp Holdings Ltd. 2,958 6
----------------------------------------------------------
Walt Disney Company 18,200 1,012
----------------------------------------------------------
2,506
FINANCIAL SERVICES-2.5%
----------------------------------------------------------
Aalberts Industries N.V. 245 14
----------------------------------------------------------
Allied Irish Banks PLC 740 3
----------------------------------------------------------
American General Corp. 21,000 709
----------------------------------------------------------
</TABLE>
15
<PAGE> 118
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
----------------------------------------------------------
American International Group, Inc. 2,600 $ 296
----------------------------------------------------------
Boatmen's Bancshares 17,000 599
----------------------------------------------------------
CITIC Pacific Ltd. 3,000 8
----------------------------------------------------------
Dean Witter Discover 10,000 470
----------------------------------------------------------
General Re Corp. 2,500 335
----------------------------------------------------------
Hagemeyer N.V. 119 5
----------------------------------------------------------
Providian Corp. 24,000 870
----------------------------------------------------------
Sanyo Shinpan Finance Co., Ltd. 400 29
----------------------------------------------------------
Sumitomo Corporation 1,000 9
----------------------------------------------------------
3,347
MANUFACTURING AND METALS-2.4%
----------------------------------------------------------
Allied-Signal 8,700 387
----------------------------------------------------------
Armstrong World Industries 7,000 351
----------------------------------------------------------
Boeing Co. 15,500 971
----------------------------------------------------------
(a)Crown Cork & Seal Co. 10,000 501
----------------------------------------------------------
Federal Signal Corp. 13,000 281
----------------------------------------------------------
Leggett & Platt Incorporated 5,000 220
----------------------------------------------------------
WMX Technologies 17,200 488
----------------------------------------------------------
3,199
PAPER AND FOREST PRODUCTS-.5%
----------------------------------------------------------
Scott Paper Co. 13,000 643
----------------------------------------------------------
RETAILING-3.1%
----------------------------------------------------------
Home Depot 17,700 719
----------------------------------------------------------
May Department Stores Co. 17,000 708
----------------------------------------------------------
(a)Office Depot 24,000 675
----------------------------------------------------------
Tandy Corp. 14,000 726
----------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
Wal-Mart Stores 50,000 $ 1,337
----------------------------------------------------------
4,165
TELECOMMUNICATIONS-.4%
----------------------------------------------------------
A T & T 10,800 574
----------------------------------------------------------
TRANSPORTATION-.1%
----------------------------------------------------------
(a)Wisconsin Central
Transportation Corp. 4,000 196
----------------------------------------------------------
TOTAL COMMON STOCKS-38.6%
(Cost: $44,390) 52,078
----------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATIONS-.3%
----------------------------------------------------------
Thermo Electron Corp., 5.00%, 2001
(Cost: $302) $ 300 409
----------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield-6.00% to 6.36%
Due-July 1995
----------------------------------------------------------
ConAgra Inc. 1,800 1,799
----------------------------------------------------------
Sheffield Receivables Corp. 1,000 999
----------------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS-2.1%
(Cost: $2,798) 2,798
----------------------------------------------------------
TOTAL INVESTMENTS-98.2%
(Cost: $116,772) 132,526
----------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES-1.8% 2,411
----------------------------------------------------------
NET ASSETS-100% $134,937
==========================================================
</TABLE>
See accompanying Notes to Portfolios of Investments.
16
<PAGE> 119
NOTES TO PORTFOLIOS OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments for federal income tax purposes at June 30,
1995, the unrealized appreciation and depreciation on investments is as follows:
<TABLE>
<CAPTION>
Series I Series II Series III Series IV Series V
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost of investments for federal income tax purposes $89,887,000 150,713,000 109,466,000 143,179,000 116,772,000
=================================================================================================================================
Gross unrealized appreciation 15,219,000 21,640,000 15,024,000 8,853,000 16,035,000
- ---------------------------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 266,000 304,000 264,000 1,677,000 281,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 14,953,000 21,336,000 14,760,000 7,176,000 15,754,000
=================================================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
17
<PAGE> 120
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND--
KEMPER RETIREMENT FUND SERIES I, II, III, IV AND V
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Kemper Target Equity Fund--Kemper Retirement
Fund Series I, II, III, IV and V as of June 30, 1995, the related statements of
operations for the year then ended and changes in net assets for each of the two
years in the period then ended for Series I, II, III and IV and for the year
then ended and the period from November 15, 1993 (initial public offering) to
June 30, 1994 for Series V and the financial highlights for each of the fiscal
periods since 1991. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Target Equity Fund--Kemper Retirement Fund Series I, II, III, IV and V at June
30, 1995, the results of their operations and the changes in their net assets
for the periods referred to above, and the financial highlights for each of the
fiscal periods since 1991, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1995
18
<PAGE> 121
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1995
(in thousands)
<TABLE>
<CAPTION>
SERIES
--------------------------------------------
ASSETS I II III IV V
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments, at value
(Cost: $89,887,
$150,713, $109,466,
$143,179 and
$116,772,
respectively) $104,840 172,049 124,226 150,355 132,526
- ------------------------------------------------------------------
Cash 34 20 95 576 71
- ------------------------------------------------------------------
Receivable for:
Investments sold 2,604 2,600 1,639 2,451 3,460
- ------------------------------------------------------------------
Dividends and
interest 92 107 97 90 93
- ------------------------------------------------------------------
Total assets 107,570 174,776 126,057 153,472 136,150
- ------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------
Payable for:
Fund shares
redeemed 41 130 309 182 125
- ------------------------------------------------------------------
Investments
purchased 945 1,147 942 950 946
- ------------------------------------------------------------------
Management fee 44 72 52 64 57
- ------------------------------------------------------------------
Administrative
services fee 22 37 26 33 28
- ------------------------------------------------------------------
Custodian and
transfer agent fees
and related
expenses 18 36 31 52 51
- ------------------------------------------------------------------
Other 18 17 16 12 6
- ------------------------------------------------------------------
Total liabilities 1,088 1,439 1,376 1,293 1,213
- ------------------------------------------------------------------
Net assets $106,482 173,337 124,681 152,179 134,937
==================================================================
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------
Excess of amounts
received from
issuance of shares
over amounts paid on
redemptions of shares
on account of capital $ 87,439 145,275 105,469 146,039 121,070
- ------------------------------------------------------------------
Undistributed net
realized gain (loss)
on investments 2,061 2,954 1,967 (3,840) (4,202)
- ------------------------------------------------------------------
Net unrealized
appreciation on
investments 14,953 21,336 14,760 7,176 15,754
- ------------------------------------------------------------------
Undistributed net
investment income 2,029 3,772 2,485 2,804 2,315
- ------------------------------------------------------------------
Net assets applicable
to shares
outstanding $106,482 173,337 124,681 152,179 134,937
==================================================================
THE PRICING OF SHARES
- ------------------------------------------------------------------
Shares outstanding,
no par value 9,518 13,394 11,599 15,106 14,163
- ------------------------------------------------------------------
Net asset value and
redemption price per
share (net assets /
shares outstanding) $11.19 12.94 10.75 10.07 9.53
==================================================================
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF OPERATIONS
Year ended June 30, 1995
(in thousands)
<TABLE>
<CAPTION>
SERIES
---------------------------------------
INVESTMENT INCOME I II III IV V
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividends $ 757 890 708 751 603
- ------------------------------------------------------------------
Interest 4,318 8,423 5,497 6,529 4,613
- ------------------------------------------------------------------
Total investment
income 5,075 9,313 6,205 7,280 5,216
- ------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------
Management fee 514 848 604 731 514
- ------------------------------------------------------------------
Administrative services
fee 249 415 297 362 244
- ------------------------------------------------------------------
Custodian and transfer
agent fees and related
expenses 181 274 237 249 262
- ------------------------------------------------------------------
Professional fees 21 34 24 29 15
- ------------------------------------------------------------------
Reports to shareholders 18 29 21 25 46
- ------------------------------------------------------------------
Trustees' fees and other 19 20 19 19 17
- ------------------------------------------------------------------
Total expenses 1,002 1,620 1,202 1,415 1,098
- ------------------------------------------------------------------
Net investment income 4,073 7,693 5,003 5,865 4,118
- ------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
- ------------------------------------------------------------------
Net realized gain (loss)
on sales of investments 2,405 3,240 1,948 (1,684) (3,553)
- ------------------------------------------------------------------
Change in net unrealized
appreciation on
investments 9,708 14,922 13,385 21,482 20,561
- ------------------------------------------------------------------
Net gain on investments 12,113 18,162 15,333 19,798 17,008
- ------------------------------------------------------------------
Net increase in net assets
resulting from operations $16,186 25,855 20,336 25,663 21,126
==================================================================
</TABLE>
19
<PAGE> 122
STATEMENTS OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
SERIES I SERIES II
-------------------- --------------------
YEAR ENDED YEAR ENDED
-------------------- --------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
OPERATIONS 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income $ 4,073 3,938 7,693 7,701
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain 2,405 8,403 3,240 10,642
- -----------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) 9,708 (15,948) 14,922 (25,035)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 16,186 (3,607) 25,855 (6,692)
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (3,759) (3,713) (7,527) (8,051)
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments (6,595) (10,538) (8,450) (8,191)
- -----------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (10,354) (14,251) (15,977) (16,242)
- -----------------------------------------------------------------------------------------------------------------------
Net decrease from capital share transactions (3,114) (718) (9,596) (6,805)
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 2,718 (18,576) 282 (29,739)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Beginning of year 103,764 122,340 173,055 202,794
- -----------------------------------------------------------------------------------------------------------------------
End of year $106,482 103,764 173,337 173,055
- -----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income at end of year $ 2,029 1,715 3,772 3,604
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SERIES III SERIES IV
-------------------- --------------------
YEAR ENDED YEAR ENDED
-------------------- --------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
OPERATIONS 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income $ 5,003 5,046 5,865 5,002
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 1,948 5,988 (1,684) (1,751)
- -----------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) 13,385 (16,904) 21,482 (16,596)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 20,336 (5,870) 25,663 (13,345)
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (5,019) (4,782) (5,860) (2,602)
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments (4,317) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (9,336) (4,782) (5,860) (2,602)
- -----------------------------------------------------------------------------------------------------------------------
Net (decrease) increase from capital share transactions (9,451) (9,848) (14,279) 100,720
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,549 (20,500) 5,524 84,773
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Beginning of year 123,132 143,632 146,655 61,882
- -----------------------------------------------------------------------------------------------------------------------
End of year $124,681 123,132 152,179 146,655
- -----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income at end of year $ 2,485 2,499 2,804 2,797
=======================================================================================================================
</TABLE>
20
<PAGE> 123
<TABLE>
<CAPTION>
SERIES V
-------------------------------
YEAR ENDED NOVEMBER 15, 1993
JUNE 30, TO
OPERATIONS 1995 JUNE 30, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 4,118 727
- ------------------------------------------------------------------------------------------------------------------
Net realized loss (3,553) (646)
- ------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) 20,561 (4,807)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 21,126 (4,726)
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (2,533) --
- ------------------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 52,069 68,901
- ------------------------------------------------------------------------------------------------------------------
Total increase in net assets 70,662 64,175
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 64,275 100
- ------------------------------------------------------------------------------------------------------------------
End of period $134,937 64,275
- ------------------------------------------------------------------------------------------------------------------
Undistributed net investment income at end of period $ 2,315 727
==================================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
21
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUNDS
Kemper Retirement Fund Series I, II, III, IV and V (the Funds) are series of
Kemper Target Equity Fund (the Trust), an open-end, management investment
company, organized as a business trust under the laws of Massachusetts. The
objectives of the Funds are to provide a guaranteed return of investment on the
Maturity Date (November 15, 1999 for Series I, August 15, 2000 for Series II,
February 15, 2002 for Series III, February 15, 2003 for Series IV and November
15, 2004 for Series V) to investors who reinvest all dividends and hold their
shares to the Maturity Date, and to provide long-term growth of capital. The
assurance that investors who reinvest all dividends and hold their shares until
the Maturity Date will receive at least their original investment on the
Maturity Date is provided by the principal amount of the zero coupon U.S.
Treasury obligations in the Funds' portfolios, as well as by a guarantee from
Kemper Financial Services, Inc. (KFS), the Funds' investment manager.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at value. Portfolio securities that are traded on a
domestic securities exchange or securities listed on the NASDAQ National Market
are valued at the last sale price on the exchange or market where primarily
traded or listed or, if there is no recent sale, at the last current bid
quotation. Portfolio securities that are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges where primarily traded. Securities not
so traded or listed are valued at the last current bid quotation if market
quotations are available. Fixed income securities are valued by using market
quotations, or independent pricing services that use prices provided by market
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Options are valued at
the last sale price unless the bid price is higher or the asked price is lower,
in which event such bid or asked price is used. Financial futures and options
thereon are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Forward foreign currency contracts
are valued at the forward rates prevailing on the day of valuation. Other
securities and assets are valued at fair value as determined in good faith by
the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Dividend income is recorded on the ex-dividend date,
and interest income is recorded on the accrual basis. Interest income includes
premium and discount amortization on money market instruments; it also includes
original issue and market discount amortization on long-term fixed income
securities. Realized gains and losses from investment transactions are reported
on an identified cost basis. Gains and losses on premiums from expired options
are recognized on date of expiration. Realized and unrealized gains and losses
on financial futures, options and forward foreign currency contracts are
included in net realized and unrealized gain (loss) on investments, as
appropriate.
EXPENSES
Expenses arising in connection with a series of the Trust are allocated to that
series. Other Trust expenses are allocated among the series in proportion to
their relative net assets.
FUND SHARE VALUATION
Fund shares were sold during limited offering periods which ended during the
years 1990 through 1994, and are redeemed on a continuous basis. Fund shares
were sold and are redeemed at net asset value (plus a commission on most sales).
On each day the New York Stock Exchange is open for trading, the net asset value
per share is determined as of the earlier of 3:00 p.m. Chicago time or the close
of the Exchange by dividing the total value of each Fund's investments and other
assets, less liabilities, by the respective number of shares outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
Each Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required. The accumulated net realized loss on sales of investments for
federal income tax purposes at June 30, 1995, amounting to approximately
$3,828,000 in Kemper Retirement Fund Series IV and $4,195,000 in Kemper
Retirement Fund Series V, are available to offset future taxable gains in the
respective Funds. If not applied, the loss carryovers expire during the period
2001 through 2004.
22
<PAGE> 125
Dividends payable to its shareholders are recorded by each Fund on the
ex-dividend date.
Distributions are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Trust has a management agreement with KFS and the Funds pay a management fee
at an annual rate of .50% of average daily net assets. The Funds incurred a
management fee of $3,211,000 for the year ended June 30, 1995.
UNDERWRITING AGREEMENT
The Trust has an underwriting agreement with Kemper Distributors, Inc. (KDI).
Before February 1, 1995, KFS was the Trust's principal underwriter. As principal
underwriter for the Trust, KDI (as successor to KFS), retained commissions of
$300,000 for the year ended June 30, 1995, after allowing $2,993,000 as
commissions to firms, of which $434,000 was paid to firms affiliated with KDI.
ADMINISTRATIVE SERVICES AGREEMENT
The Trust has an administrative services agreement with KDI. Before February 1,
1995, KFS was the Trust's administrator. For providing information and
administrative services to shareholders, the Funds pay KDI a fee at an annual
rate of up to .25% of average daily net assets. KDI in turn has various
agreements with financial services firms that provide these services and pays
these firms based on assets of Fund accounts the firms service. For the year
ended June 30, 1995, the Funds incurred an administrative services fee of
$1,567,000, all of which KDI (as successor to KFS) paid to firms, including
$239,000 that was paid to firms affiliated with KDI.
CUSTODIAN AND TRANSFER AGENT AGREEMENT
The Trust has a custodian agreement and a transfer agent agreement with
Investors Fiduciary Trust Company (IFTC), which was 50% owned by KFS until
January 31, 1995, when KFS completed the sale of IFTC to a third party. For the
year ended June 30, 1995, the Funds incurred custodian and transfer agent fees
of $845,000 (excluding related expenses). Pursuant to a services agreement with
IFTC, Kemper Service Company (KSvC), an affiliate of KFS, is the shareholder
service agent of the Trust. For the year ended June 30, 1995, IFTC remitted
shareholder service fees of $698,000 to KSvC with respect to the Funds.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Trust are also officers or directors of KFS.
During the year ended June 30, 1995, the Trust made no payments to its officers
and the Funds incurred trustees' fees of $75,000 to independent trustees.
4. INVESTMENT TRANSACTIONS
For the year ended June 30, 1995, investment transactions (excluding short-term
instruments) are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Series Series Series
Series I II III IV Series V
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases $ 63,220 78,175 61,723 65,282 127,631
- -------------------------------------------------------------------
Proceeds from
sales 66,594 88,301 66,816 71,164 69,072
- -------------------------------------------------------------------
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
The following tables summarize the activity in capital shares of the Funds (in
thousands):
<TABLE>
<CAPTION>
Year ended June 30,
---------------------------------------------------------
1995 1994
----------------------- -----------------------
SERIES I Shares Amount Shares Amount
------ -------- ------ --------
<S> <C> <C> <C> <C>
Shares issued in reinvestment of dividends 1,053 $ 10,275 1,217 $ 14,015
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 1,260 13,389 1,228 14,733
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease from capital
share transactions (207) $ (3,114) (11) $ (718)
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
---------------------------------------------------------
1995 1994
----------------------- -----------------------
SERIES II Shares Amount Shares Amount
------ -------- ------ --------
<S> <C> <C> <C> <C>
Shares issued in reinvestment of dividends 1,415 $ 15,925 1,216 $ 16,187
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 2,086 25,521 1,691 22,992
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease from capital
share transactions (671) $ (9,596) (475) $ (6,805)
=================================================================================================================================
</TABLE>
23
<PAGE> 126
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------------------------
1995 1994
------------------------ ------------------------
SERIES III Shares Amount Shares Amount
------ -------- ------ --------
<S> <C> <C> <C> <C>
Shares issued in reinvestment of dividends 1,037 $ 9,388 447 $ 4,798
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 1,919 18,839 1,368 14,646
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease from capital share transactions (882) $ (9,451) (921) $(9,848)
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------------------------
1995 1994
------------------------ ------------------------
SERIES IV Shares Amount Shares Amount
------ -------- ------ --------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 11,183 $110,536
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 680 5,848 258 2,508
- ---------------------------------------------------------------------------------------------------------------------------------
680 5,848 11,441 113,044
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 2,191 20,127 1,293 12,324
- ---------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase from capital
share transactions (1,511) $(14,279) 10,148 $100,720
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
------------------------ November 15, 1993 to
1995 June 30, 1994
------------------------ ------------------------
SERIES V Shares Amount Shares Amount
------ -------- ------ --------
<S> <C> <C> <C> <C>
Shares sold 7,150 $ 59,864 8,027 $ 70,165
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 299 2,422 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
7,449 62,286 8,027 70,165
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 1,175 10,217 149 1,264
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase from capital
share transactions 6,274 $52,069 7,878 $68,901
=================================================================================================================================
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------------------------------
SERIES I 1995 1994 1993 1992 1991
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $10.67 12.57 12.01 11.05 10.16
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .45 .42 .41 .42 .41
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.20 (.78) 1.59 1.53 .77
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.65 (.36) 2.00 1.95 1.18
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .41 .40 .42 .45 .26
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments .72 1.14 1.02 .54 .03
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends 1.13 1.54 1.44 .99 .29
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.19 10.67 12.57 12.01 11.05
=================================================================================================================================
TOTAL RETURN (%): 17.03 (3.76) 17.47 17.58 11.97
=================================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .97 .91 .92 .92 1.09
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 3.96 3.32 3.19 3.37 4.21
=================================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands) $106,482 103,764 122,340 116,041 108,782
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 63 59 61 57 106
=================================================================================================================================
</TABLE>
24
<PAGE> 127
<TABLE>
<CAPTION>
Year ended June 30, September 11,
--------------------------------------------------- 1990 to
SERIES II 1995 1994 1993 1992 June 30, 1991
-------- -------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.30 13.95 12.40 10.75 9.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .60 .56 .53 .38 .20
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.25 (1.04) 1.67 1.59 1.63
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.85 (.48) 2.20 1.97 1.83
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .57 .58 .49 .25 .08
- ------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments .64 .59 .16 .07 --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends 1.21 1.17 .65 .32 .08
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.94 12.30 13.95 12.40 10.75
==============================================================================================================================
TOTAL RETURN (%): 16.52 (4.07) 18.18 18.35 20.45
==============================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .96 .90 .95 .93 1.16
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.54 3.91 3.83 3.98 3.75
==============================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $173,337 173,055 202,794 187,438 78,638
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 47 44 51 51 64
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------- March 10, 1992
SERIES III 1995 1994 1993 to June 30, 1992
-------- -------- ------- ----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.87 10.72 9.10 9.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .44 .40 .29 .12
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.24 (.88) 1.51 (.02)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.68 (.48) 1.80 .10
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .43 .37 .18 --
- ------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments .37 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends .80 .37 .18 --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.75 9.87 10.72 9.10
==============================================================================================================================
TOTAL RETURN (%): 18.37 (4.76) 19.96 1.11
==============================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.00 .95 .95 .97
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.14 3.59 3.46 3.95
==============================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $124,681 123,132 143,632 62,536
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 52 47 59 12
==============================================================================================================================
</TABLE>
25
<PAGE> 128
<TABLE>
<CAPTION>
SERIES IV
Year ended June 30, January 15, 1993
---------------------------- to
PER SHARE OPERATING PERFORMANCE: 1995 1994 June 30, 1993
-------- ---------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.83 9.57 9.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .39 .26 .06
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.22 (.85) .51
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.61 (.59) .57
- --------------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income .37 .15 --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.07 8.83 9.57
================================================================================================================================
TOTAL RETURN (%): 18.95 (6.31) 6.33
================================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .97 .97 1.21
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.01 3.43 2.87
================================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $152,179 146,655 61,882
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 45 51 31
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SERIES V
Year ended November 15, 1993
June 30, to
PER SHARE OPERATING PERFORMANCE: 1995 June 30, 1994
---------- -----------------
<S> <C> <C>
Net asset value, beginning of period $8.15 9.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .28 .15
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.31 (1.00)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.59 (.85)
- --------------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income .21 --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.53 8.15
================================================================================================================================
TOTAL RETURN (%): 19.97 (9.44)
================================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.07 1.29
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.01 3.13
================================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $134,937 64,275
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 73 35
================================================================================================================================
</TABLE>
NOTE FOR ALL SERIES: Ratios have been determined on an annualized basis. Total
return is not annualized and does not reflect the effect of any sales charges.
26
<PAGE> 129
Kemper Retirement Fund
Series VI
Annual Report to Shareholders
For the Period Ended
June 30, 1995
Provides a guaranteed return of
investment on the designated
maturity date to investors who
reinvest all dividends and
hold their shares to the maturity date,
and seeks to provide long-term
growth of capital
[KEMPER][MUTUAL FUNDS](LOGO)
<PAGE> 130
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
------ ------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-49.3%
- ------------------------------------------------------------
U.S. Treasury,
zero coupon, 2006
(Cost: $3,501) $7,100 $3,543
- ------------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield - 5.22% to 5.98%
Due - July 1995
- ------------------------------------------------------------
Federal Home Loan Mortgage Corporation 2,700 2,697
- ------------------------------------------------------------
U.S. Treasury Bill 100 100
- ------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS-38.9%
(Cost: $2,796) 2,797
- ------------------------------------------------------------
TOTAL INVESTMENTS-88.2%
(Cost: $6,297) 6,340
- ------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES-11.8% 849
- ------------------------------------------------------------
NET ASSETS-100% $7,189
============================================================
</TABLE>
NOTE TO PORTFOLIO OF INVESTMENTS
Based on the cost of investments of $6,297,000 for federal income tax purposes
at June 30, 1995, the aggregate unrealized appreciation on investments was
$43,000.
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND--
KEMPER RETIREMENT FUND SERIES VI
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Target Equity Fund--Kemper Retirement
Fund Series VI as of June 30, 1995 and the related statements of operations,
changes in net assets and the financial highlights for the period from May 1,
1995 (initial public offering) to June 30, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of June 30, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Target Equity Fund--Kemper Retirement Fund Series VI at June 30, 1995 and the
results of its operations, the changes in its net assets and the financial
highlights for the period from May 1, 1995 to June 30, 1995 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1995
4
<PAGE> 131
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(in thousands)
<TABLE>
<S> <C>
ASSETS
- ------------------------------------------------------
Investments, at value
(Cost: $6,297) $6,340
- ------------------------------------------------------
Cash 286
- ------------------------------------------------------
Receivable for Fund shares sold 828
- ------------------------------------------------------
Total assets 7,454
- ------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------
Payable for:
Fund shares redeemed 3
- ------------------------------------------------------
Investments purchased 258
- ------------------------------------------------------
Management fee 2
- ------------------------------------------------------
Other 2
- ------------------------------------------------------
Total liabilities 265
- ------------------------------------------------------
Net assets applicable to 776 shares
outstanding,
no par value, equivalent to $9.26 per share $7,189
======================================================
ANALYSIS OF NET ASSETS
- ------------------------------------------------------
Excess of amounts received from issuance of
shares over amounts paid on redemptions of
shares on account of capital $7,140
- ------------------------------------------------------
Accumulated net realized loss on investments (14)
- ------------------------------------------------------
Net unrealized appreciation on investments 43
- ------------------------------------------------------
Undistributed net investment income 20
- ------------------------------------------------------
Net assets applicable to shares outstanding $7,189
======================================================
THE PRICING OF SHARES
- ------------------------------------------------------
Net asset value and redemption price per share
($7,189 / 776 shares outstanding) $9.26
- ------------------------------------------------------
Maximum offering price per share (net asset
value, plus 5.26% of net asset value or
5.00% of offering price) $9.75
- ------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the period from May 1, 1995 (initial public offering) to June 30, 1995
(in thousands)
<TABLE>
<S> <C>
INTEREST INCOME $ 26
- ------------------------------------------------------
EXPENSES
- ------------------------------------------------------
Management fee 3
- ------------------------------------------------------
Administrative services fee 1
- ------------------------------------------------------
Trustees' fees and other 2
- ------------------------------------------------------
Total expenses 6
- ------------------------------------------------------
Net investment income 20
- ------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------
Net realized loss from futures transactions (14)
- ------------------------------------------------------
Change in net unrealized appreciation on
investments 43
- ------------------------------------------------------
Net gain on investments 29
- ------------------------------------------------------
Net increase in net assets resulting from
operations $ 49
======================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the period from May 1, 1995 (initial public offering) to June 30, 1995
(in thousands)
<TABLE>
<S> <C>
OPERATIONS
- ------------------------------------------------------
Net investment income $ 20
- ------------------------------------------------------
Net realized loss (14)
- ------------------------------------------------------
Change in net unrealized appreciation 43
- ------------------------------------------------------
Net increase in net assets resulting from
operations 49
- ------------------------------------------------------
Net increase from capital share transactions 7,040
- ------------------------------------------------------
Total increase in net assets 7,089
- ------------------------------------------------------
NET ASSETS
- ------------------------------------------------------
Beginning of period 100
- ------------------------------------------------------
End of period (including undistributed net
investment income of $20 at June 30, 1995) $7,189
======================================================
</TABLE>
5
<PAGE> 132
NOTES TO FINANCIAL STATEMENTS
For the period from May 1, 1995 (initial public offering) to June 30, 1995
1. DESCRIPTION OF THE FUND
Kemper Retirement Fund Series VI (the Fund) is a series of Kemper Target Equity
Fund (the Trust), an open-end, management investment company, organized as a
business trust under the laws of Massachusetts. The objectives of the Fund are
to provide a guaranteed return of investment on the Maturity Date (May 15, 2006)
to investors who reinvest all dividends and hold their shares to the Maturity
Date, and to provide long-term growth of capital. The assurance that investors
who reinvest all dividends and hold their shares until the Maturity Date will
receive at least their original investment on the Maturity Date is provided by
the principal amount of the zero coupon U.S. Treasury obligations in the Fund's
portfolio, as well as by a guarantee from Kemper Financial Services, Inc. (KFS),
the Fund's investment manager.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at value. Portfolio securities that are traded on a
domestic securities exchange or securities listed on the NASDAQ National Market
are valued at the last sale price on the exchange or market where primarily
traded or listed or, if there is no recent sale, at the last current bid
quotation. Portfolio securities that are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges where primarily traded. Securities not
so traded or listed are valued at the last current bid quotation if market
quotations are available. Fixed income securities are valued by using market
quotations, or independent pricing services that use prices provided by market
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Options are valued at
the last sale price unless the bid price is higher or the asked price is lower,
in which event such bid or asked price is used. Financial futures and options
thereon are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Forward foreign currency contracts
are valued at the forward rates prevailing on the day of valuation. Other
securities and assets are valued at fair value as determined in good faith by
the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Dividend income is recorded on the ex-dividend date,
and interest income is recorded on the accrual basis. Interest income includes
premium and discount amortization on money market instruments; it also includes
original issue and market discount amortization on long-term fixed income
securities. Realized gains and losses from investment transactions are reported
on an identified cost basis. Gains and losses on premiums from expired options
are recognized on date of expiration. Realized and unrealized gains and losses
on financial futures, options and forward foreign currency contracts are
included in net realized and unrealized gain (loss) on investments, as
appropriate.
EXPENSES
Expenses arising in connection with a series of the Trust are allocated to that
series. Other Trust expenses are allocated among the series in proportion to
their relative net assets.
FUND SHARE VALUATION
Fund shares are sold to the public during a limited offering period, which
currently is expected to last until May, 1996 (Offering Period). The Offering
Period may be extended or shortened at the option of the Fund. Fund shares are
redeemed on a continuous basis. Fund shares are sold and redeemed at net asset
value (plus a commission on most sales). On each day the New York Stock Exchange
is open for trading, the net asset value per share is determined as of the
earlier of 3:00 p.m. Chicago time or the close of the Exchange by dividing the
total value of the Fund's investments and other assets, less liabilities, by the
number of shares outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required. The accumulated net realized loss on sales of investments for
federal income tax purposes at June 30, 1995, amounting to approximately
$14,000, is available to offset future taxable gains. If not applied, the loss
carryover expires in 2003.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date.
Distributions are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Trust has a management agreement with KFS and the Fund pays a management fee
at an annual rate of .50% of average daily net assets. The Fund incurred a
management fee of $3,000 for the period ended June 30, 1995.
UNDERWRITING AGREEMENT
The Trust has an underwriting agreement with Kemper Distributors, Inc. (KDI). As
principal underwriter for the Fund, KDI retained commissions of $35,000 for the
6
<PAGE> 133
period ended June 30, 1995 after allowing $300,000 as commissions to firms of
which $37,000 was paid to firms affiliated with KDI.
ADMINISTRATIVE SERVICES AGREEMENT
The Trust has an administrative services agreement with KDI. For providing
information and administrative services to shareholders, the Fund pays KDI a fee
at an annual rate of up to .25% of average daily net assets. KDI in turn has
various agreements with financial services firms that provide these services and
pays these firms based on assets of Fund accounts the firms service. For the
period ended June 30, 1995, the Fund incurred an administrative services fee of
$1,000, all of which KDI paid to firms.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the Fund's custodian and transfer agent,
Kemper Service Company (KSvC), an affiliate of KFS, is the shareholder service
agent of the Fund. For the period ended June 30, 1995, the custodian remitted
shareholder service fees of $7,000 to KSvC.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Trust are also officers or directors of KFS.
During the period ended June 30, 1995, the Trust made no payments to its
officers and the Fund incurred trustees' fees of $1,000 to independent trustees.
4. INVESTMENT TRANSACTIONS
For the period ended June 30, 1995, investment transactions (excluding
short-term instruments) are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $3,501
- --------------------------------------------------------------
Proceeds from sales --
- --------------------------------------------------------------
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund for
the period ended June 30, 1995 (in thousands):
<TABLE>
<CAPTION>
Shares Amount
------ ------
<S> <C> <C>
Shares sold 770 $7,084
- -------------------------------------------------------------
Less shares redeemed 5 44
- -------------------------------------------------------------
Net increase from capital share transactions 765 $7,040
=============================================================
</TABLE>
6. FINANCIAL FUTURES CONTRACTS
In order to participate in the equity market during the initial period of the
Fund's operations, the Fund has entered into exchange traded financial futures
contracts described below. The Fund bears the market risk that arises from
changes in the value of these financial instruments.
At the time the Fund enters into a futures contract, it is required to make a
margin deposit with its custodian of a specified amount of cash or eligible
securities. Subsequently, gain or loss is recognized and payments are made on a
daily basis between the Fund and the broker as the market price of the futures
contract fluctuates. At June 30, 1995, the market value of investments pledged
by the Fund to cover margin requirements for open futures positions was
$100,000. At June 30, 1995, the Fund had outstanding financial futures contracts
as follows:
<TABLE>
<CAPTION>
Contract Loss at
Type Amount Position Expiration 6/30/95
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index $2,451,000 Long Sept. 95 $14,000
- ------------------------------------------------------------------
</TABLE>
7
<PAGE> 134
FINANCIAL HIGHLIGHTS
For the period from May 1, 1995 (initial public offering) to June 30, 1995
<TABLE>
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .06
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .20
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .26
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.26
===============================================================================================================================
TOTAL RETURN (%): 2.89
===============================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.09
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 3.91
===============================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $7,189
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) --
===============================================================================================================================
</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of sales charges. Per share data was
determined based on average shares outstanding.
8
<PAGE> 135
Kemper Target Equity Fund
Kemper Worldwide 2004 Fund
Annual Report to Shareholders
For the Year Ended
June 30, 1995
Provides a guaranteed return of
investment on the designated maturity
date to investors who reinvest all
dividends and hold their shares to
the maturity date, and seeks to
provide a total return, a combination
of capital growth and income
[KEMPER LOGO]
<PAGE> 136
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- -------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-58.7%
- ---------------------------------------------------------
U.S. Treasury,
zero coupon, 2004
(Cost: $15,961) $32,500 $18,027
- ---------------------------------------------------------
COMMON STOCKS
CONTINENTAL EUROPE
FINLAND-1.6%
- ---------------------------------------------------------
Oy Nokia AB
Telecommunications company 8,560shs. 500
- ---------------------------------------------------------
FRANCE-1.6%
- ---------------------------------------------------------
Carrefour S.A.
Food retailer 500 256
- ---------------------------------------------------------
L'Oreal S.A.
Consumer products and services 500 126
- ---------------------------------------------------------
Technip S.A.
Oil company 1,900 118
- ---------------------------------------------------------
500
GERMANY-.9%
- ---------------------------------------------------------
Mannesmann AG
Construction and engineering
company 330 101
- ---------------------------------------------------------
Veba AG
Diversified company 450 177
- ---------------------------------------------------------
278
IRELAND-2.7%
- ---------------------------------------------------------
(a)Allied Irish Banks PLC
Banking 30,000 141
- ---------------------------------------------------------
Greencore Group PLC
Food producer 34,600 261
- ---------------------------------------------------------
Independent Newspapers Ltd.
Publisher 27,000 148
- ---------------------------------------------------------
Irish Life Assurance PLC
Life assurance and pension
policies 80,000 266
- ---------------------------------------------------------
Kerry Group PLC
Food processing 3,370 22
- ---------------------------------------------------------
838
ITALY-.3%
- ---------------------------------------------------------
Sirti SpA
Telecommunications company 9,575 71
- ---------------------------------------------------------
NETHERLANDS-4.6%
- ---------------------------------------------------------
ABN Amro Bank
Banking 3,495 135
- ---------------------------------------------------------
Getronics NV
Information systems 3,900 191
- ---------------------------------------------------------
Hagemeyer N.V.
Trading company 4,620 206
- ---------------------------------------------------------
Koninklijke Ahold
Food retailer and distributor 4,000 143
- ---------------------------------------------------------
Koninklijke PTT Netherland N.V.
Commercial services 3,689 132
- ---------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
PolyGram NV
Music recording company 5,000 $ 295
- ---------------------------------------------------------
Wolters Kluwer
Multinational publishing
organization 3,400 300
- ---------------------------------------------------------
1,402
SPAIN-.9%
- ---------------------------------------------------------
Banco Bilbao Vizcaya
Banking 3,948 114
- ---------------------------------------------------------
Repsol S.A.
Oil and gas producer 4,800 151
- ---------------------------------------------------------
265
SWEDEN-3.7%
- ---------------------------------------------------------
Astra AB
Pharmaceutical company 12,500 386
- ---------------------------------------------------------
Atlas Copco AB
Industrial machinery manufacturer 15,000 208
- ---------------------------------------------------------
LM Ericsson "B"
Telecommunications equipment
manufacturer 20,400 406
- ---------------------------------------------------------
H & M Hennes & Mauritz AB
Retailing 2,410 141
- ---------------------------------------------------------
1,141
SWITZERLAND-3.2%
- ---------------------------------------------------------
Roche Holdings AG
Pharmaceutical company 65 419
- ---------------------------------------------------------
Union Bank of Switzerland
Banking 320 331
- ---------------------------------------------------------
Zehnder Holdings AG
Climate control equipment
manufacturer 315 230
- ---------------------------------------------------------
980
- ---------------------------------------------------------
TOTAL CONTINENTAL EUROPE-19.5% 5,975
- ---------------------------------------------------------
PACIFIC REGION
HONG KONG-2.3%
- ---------------------------------------------------------
CITIC Pacific Ltd.
Financial services 30,000 75
- ---------------------------------------------------------
Hong Kong Telecommunications Ltd.
Telecommunication services 87,200 173
- ---------------------------------------------------------
HSBC Holdings PLC
Banking 8,128 104
- ---------------------------------------------------------
Hutchison Whampoa Ltd.
Diversified holding company 22,000 106
- ---------------------------------------------------------
New World Development Co., Ltd.
Investment holding and property
investment company 37,437 125
- ---------------------------------------------------------
Peregrine Investment Holdings
Investment banking 93,000 132
- ---------------------------------------------------------
715
JAPAN-6.1%
- ---------------------------------------------------------
Amada Co., Ltd.
Equipment manufacturer 2,000 17
- ---------------------------------------------------------
</TABLE>
6
<PAGE> 137
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
Bridgestone Corp.
Manufacturer of rubber related
products 5,000 $ 74
- ---------------------------------------------------------
Fuji Bank Ltd.
Banking 14,000 282
- ---------------------------------------------------------
Fujisawa Pharmaceutical
Pharmaceutical company 15,000 157
- ---------------------------------------------------------
Kyocera Corp.
Electronics manufacturer 2,000 165
- ---------------------------------------------------------
Marui Co., Ltd.
Retailer 7,000 111
- ---------------------------------------------------------
Nippondenso Co., Ltd.
Automotive components
manufacturer and supplier 3,000 55
- ---------------------------------------------------------
Omron Corp.
Electronics manufacturer 5,000 96
- ---------------------------------------------------------
Sanyo Shinpan Finance Co., Ltd.
Consumer finance company 400 29
- ---------------------------------------------------------
Seven Eleven Japan Co., Ltd.
Convenience retailer 2,000 143
- ---------------------------------------------------------
Sharp Corp.
Electronics manufacturer 6,000 79
- ---------------------------------------------------------
Sumitomo Bank Ltd.
Banking 10,000 173
- ---------------------------------------------------------
Sumitomo Corp.
Wholesaler 15,000 136
- ---------------------------------------------------------
Sumitomo Trust & Banking
Banking 10,000 121
- ---------------------------------------------------------
Tokyo Electron Ltd.
Electronics manufacturer 2,000 68
- ---------------------------------------------------------
(a)Ube Industries, Ltd.
Diversified company 50,000 174
- ---------------------------------------------------------
1,880
MALAYSIA-.6%
- ---------------------------------------------------------
Genting Berhad
Entertainment company 2,000 20
- ---------------------------------------------------------
Resorts World Bhd
Operator of tourist resorts 14,000 82
- ---------------------------------------------------------
Road Builder
Construction company 10,000 33
- ---------------------------------------------------------
Telekom Malaysia
Telecommunications company 6,000 46
- ---------------------------------------------------------
181
SINGAPORE-1.4%
- ---------------------------------------------------------
Fraser & Neave Ltd.
Beer and soft drink manufacturer 11,000 127
- ---------------------------------------------------------
Keppel Corp. Ltd.
Conglomerate holding company 14,000 114
- ---------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
Singapore Press Holdings
Publisher 12,000 $ 179
- ---------------------------------------------------------
420
- ---------------------------------------------------------
TOTAL PACIFIC REGION-10.4% 3,196
- ---------------------------------------------------------
COMMONWEALTH COUNTRIES
AUSTRALIA-2.1%
- ---------------------------------------------------------
Australian and New Zealand
Banking Group Ltd.
Financial services 101,700 360
- ---------------------------------------------------------
Tabcorp Holdings Ltd.
Entertainment and gaming 145,200 301
- ---------------------------------------------------------
661
NEW ZEALAND-.7%
- ---------------------------------------------------------
Lion Nathan Ltd.
Beer and soft drink manufacturer 101,800 201
- ---------------------------------------------------------
UNITED KINGDOM-6.5%
- ---------------------------------------------------------
British Petroleum
Petroleum mining and production
company 35,555 255
- ---------------------------------------------------------
Commercial Union PLC
Holding company 9,000 84
- ---------------------------------------------------------
Dixons Group PLC
Electronics retailer 40,000 163
- ---------------------------------------------------------
Glaxo Wellcome PLC
Pharmaceutical company 30,000 368
- ---------------------------------------------------------
LLoyds Bank PLC
Banking 10,000 99
- ---------------------------------------------------------
Reed International PLC
Publisher 20,000 281
- ---------------------------------------------------------
(a)Telewest Communications
Communications utility 162,000 420
- ---------------------------------------------------------
Tesco PLC
Food retailer 40,861 189
- ---------------------------------------------------------
Tomkins PLC
Industrial manufacturer 40,000 143
- ---------------------------------------------------------
2,002
- ---------------------------------------------------------
TOTAL COMMONWEALTH COUNTRIES-9.3% 2,864
- ---------------------------------------------------------
LATIN AMERICA AND EMERGING MARKETS
CHILE-.4%
- ---------------------------------------------------------
(a)Provida Corporation, ADR
Financial services 4,800 129
- ---------------------------------------------------------
TOTAL COMMON STOCKS-39.6%
(Cost: $11,290) 12,164
- ---------------------------------------------------------
</TABLE>
7
<PAGE> 138
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- -------
<S> <C> <C>
MONEY MARKET INSTRUMENTS-2.6%
Yield-6.45%
Due-July 1995
- ------------------------------------------------------
Enron Corp.
(Cost: $799) $ 800 $ 799
- ------------------------------------------------------
TOTAL INVESTMENTS-100.9%
(Cost: $28,050) 30,990
- ------------------------------------------------------
LIABILITIES, LESS CASH AND
OTHER ASSETS-(.9)% (291
- ------------------------------------------------------
NET ASSETS-100% $30,699
======================================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $28,050,000 for federal income tax purposes
at June 30, 1995, the aggregate gross unrealized appreciation was $3,249,000,
the aggregate gross unrealized depreciation was $309,000 and the net unrealized
appreciation of investments was $2,940,000.
At June 30, 1995, the Fund's portfolio of investments had the following industry
diversification (dollars in thousands):
<TABLE>
<CAPTION>
VALUE %
------- -----
<S> <C> <C>
Financial Services $ 2,700 8.8
- -------------------------------------------------------------------------------------------------------------------
Consumer Products and Services 1,489 4.9
- -------------------------------------------------------------------------------------------------------------------
Chemicals, Medical Equipment and Pharmaceuticals 1,330 4.3
- -------------------------------------------------------------------------------------------------------------------
Communications 1,196 3.9
- -------------------------------------------------------------------------------------------------------------------
Publishing 908 3.0
- -------------------------------------------------------------------------------------------------------------------
Retailing 890 2.9
- -------------------------------------------------------------------------------------------------------------------
Food and Beverages 867 2.8
- -------------------------------------------------------------------------------------------------------------------
Industrial Products and Services 598 1.9
- -------------------------------------------------------------------------------------------------------------------
Diversified 571 1.9
- -------------------------------------------------------------------------------------------------------------------
Energy Sources 524 1.7
- -------------------------------------------------------------------------------------------------------------------
Utilities 420 1.4
- -------------------------------------------------------------------------------------------------------------------
Electrical and Electronics 408 1.3
- -------------------------------------------------------------------------------------------------------------------
Construction and Building Materials 134 .4
- -------------------------------------------------------------------------------------------------------------------
Automobiles, Parts and Service 129 .4
- -------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 12,164 39.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL U. S. GOVERNMENT OBLIGATIONS 18,027 58.7
- -------------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS 799 2.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 30,990 100.9
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS (291) (.9)
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS $30,699 100.0
===================================================================================================================
</TABLE>
8
<PAGE> 139
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND--
KEMPER WORLDWIDE 2004 FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Target Equity Fund--Kemper Worldwide
2004 Fund as of June 30, 1995, and the related statements of operations, changes
in net assets and the financial highlights for the year then ended and for the
period from May 3, 1994 (initial public offering) to June 30, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Target Equity Fund--Kemper Worldwide 2004 Fund at June 30, 1995 and the results
of its operations, the changes in its net assets and the financial highlights
for the year then ended and for the period from May 3, 1994 to June 30, 1994 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1995
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(in thousands)
<TABLE>
<S> <C>
ASSETS
- -------------------------------------------------------
Investments, at value
(Cost: $28,050) $ 30,990
- -------------------------------------------------------
Cash 93
- -------------------------------------------------------
Receivable for:
Fund shares sold 88
- -------------------------------------------------------
Investments sold 502
- -------------------------------------------------------
Dividends and interest 49
- -------------------------------------------------------
Total assets 31,722
- -------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------
Payable for:
Fund shares redeemed 19
- -------------------------------------------------------
Investments purchased 960
- -------------------------------------------------------
Management fee 15
- -------------------------------------------------------
Administrative services fee 6
- -------------------------------------------------------
Custodian and transfer agent fees
and related expenses 16
- -------------------------------------------------------
Other 7
- -------------------------------------------------------
Total liabilities 1,023
- -------------------------------------------------------
Net assets applicable to 3,082
shares outstanding, no par value,
equivalent to $9.96 per share $ 30,699
=======================================================
ANALYSIS OF NET ASSETS
- -------------------------------------------------------
Excess of amounts received from
issuance of shares over amounts
paid on redemptions of shares
on account of capital $ 28,207
- -------------------------------------------------------
Accumulated net realized loss on sales of
investments and foreign currency transactions (890)
- -------------------------------------------------------
Net unrealized appreciation on investments
and assets and liabilities in foreign
currencies 2,891
- -------------------------------------------------------
Undistributed net investment income 491
- -------------------------------------------------------
Net assets applicable to shares outstanding $ 30,699
=======================================================
THE PRICING OF SHARES
- -------------------------------------------------------
Net asset value and redemption price per share
($30,699 / 3,082 shares outstanding) $ 9.96
=======================================================
Maximum offering price per share
(net asset value, plus 5.26% of net
asset value or 5.00% of offering price) $10.48
=======================================================
</TABLE>
See accompanying Notes to Financial Statements
9
<PAGE> 140
STATEMENT OF OPERATIONS
Year ended June 30, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
- ------------------------------------------------------
Interest $ 910
- ------------------------------------------------------
Dividends 175
- ------------------------------------------------------
1,085
EXPENSES
- ------------------------------------------------------
Management fee 129
- ------------------------------------------------------
Administrative services fee 49
- ------------------------------------------------------
Custodian and transfer agent fees and related
expenses 63
- ------------------------------------------------------
Professional fees 10
- ------------------------------------------------------
Reports to shareholders 10
- ------------------------------------------------------
Trustees' fees and other 15
- ------------------------------------------------------
Total expenses 276
- ------------------------------------------------------
Net investment income 809
- ------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
- ------------------------------------------------------
Net realized loss on sales of investments and
foreign currency transactions (916)
- ------------------------------------------------------
Change in net unrealized appreciation on
investments and assets and liabilities in
foreign currencies 2,964
- ------------------------------------------------------
Net gain on investments 2,048
- ------------------------------------------------------
Net increase in net assets resulting
from operations $2,857
======================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
May 3, 1994
Year ended to
June 30, June 30,
1995 1994
----------- ------------
<S> <C> <C>
OPERATIONS
- ---------------------------------------------------------
Net investment income $ 809 12
- ---------------------------------------------------------
Net realized loss (916) (3)
- ---------------------------------------------------------
Change in net unrealized
appreciation (depreciation) 2,964 (73)
- ---------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 2,857 (64)
- ---------------------------------------------------------
Distribution from net investment
income (301) --
- ---------------------------------------------------------
Net increase from capital share
transactions 22,243 5,864
- ---------------------------------------------------------
Total increase in net assets 24,799 5,800
- ---------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------
Beginning of period 5,900 100
- ---------------------------------------------------------
End of period (including
undistributed net investment
income of $491 in 1995 and $9 in
1994) $30,699 5,900
=========================================================
</TABLE>
10
<PAGE> 141
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUND
Kemper Worldwide 2004 Fund (the Fund) is a series of Kemper Target Equity Fund
(the Trust), an open-end, management investment company, organized as a business
trust under the laws of Massachusetts. The objectives of the Fund are to provide
a guaranteed return of investment on the Maturity Date (November 15, 2004) to
investors who reinvest all dividends and hold their shares to the Maturity Date,
and to provide total return, a combination of capital growth and income. The
Fund pursues its objectives by investing a portion of its assets in zero coupon
U.S. Treasury obligations and the balance of its assets primarily in an
internationally diversified portfolio of foreign securities. The assurance that
investors who reinvest all dividends and hold their shares until the Maturity
Date will receive at least their original investment on the Maturity Date is
provided by the principal amount of the zero coupon U.S. Treasury obligations in
the Fund's portfolio, as well as by a guarantee from Kemper Financial Services,
Inc. (KFS), the Fund's investment manager.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at value. Any portfolio securities that are primarily
traded on a domestic securities exchange are valued at the last sale price on
that exchange or, if there is no recent last sale price available, at the last
current bid quotation. Portfolio securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges where primarily traded. A security
that is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by the Board
of Trustees or its delegates. All other securities not so traded are valued at
the last current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or asked
price is used. Exchange traded fixed income options are valued at the last sale
price unless there is no sale price, in which event prices provided by market
makers are used. Over-the-counter traded fixed income options are valued based
upon current prices provided by market makers. Financial futures and options
thereon are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Forward foreign currency contracts
and foreign currencies are valued at the forward and current exchange rates,
respectively, prevailing on the day of valuation. Other securities and assets
are valued at fair value as determined in good faith by the Board of Trustees.
CURRENCY TRANSLATION
The books and records of the Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in foreign currency values are converted into
U.S. dollar values at the mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by a recognized dealer. If such
quotations are not readily available, the rate of exchange is determined in good
faith by the Board of Trustees. Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the rate of exchange prevailing
on the respective dates of such transactions. The Fund includes that portion of
the results of operations resulting from changes in foreign exchange rates with
the net realized and unrealized gain (loss) from investments, as appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Fund. Interest income is recorded on the
accrual basis and includes amortization of money market instrument premium and
discount; it also includes original issue and market discount amortization on
long-term fixed income securities. Realized gains and losses from investment
transactions are reported on an identified cost basis. Gains and losses on
premiums from expired options are recognized on date of expiration. Realized and
unrealized gains and losses on financial futures, options and forward foreign
currency contracts are included in net realized and unrealized gain (loss) on
investments, as appropriate.
EXPENSES
Expenses arising in connection with a series of the Trust are allocated to that
series. Other Trust expenses are allocated among the series in proportion to
their relative net assets.
FUND SHARE VALUATION
Fund shares are sold to the public during a limited offering period, which
currently is expected to last until September 30, 1995 (Offering Period). The
Offering Period may be extended or shortened at the option of the Fund. Fund
shares are redeemed on a continuous basis. Fund shares are sold and redeemed at
net asset value (plus a commission on most sales). On each day the New York
Stock Exchange is open for trading, the net asset value per share is determined
as of the earlier of 3:00 p.m. Chicago time or the close of the Exchange
11
<PAGE> 142
by dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of shares outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required. The accumulated net realized loss on sales of investments for
federal income tax purposes at June 30, 1995, amounting to approximately
$885,000, is available to offset future taxable gains. If not applied, the loss
carryover expires during the period 2003 through 2004.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date.
Distributions are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Trust has a management agreement with KFS and the Fund pays a management fee
at an annual rate of .60% of average daily net assets. The Fund incurred a
management fee of $129,000 for the year ended June 30, 1995.
UNDERWRITING AGREEMENT
The Trust has an underwriting agreement with Kemper Distributors, Inc. (KDI).
Before February 1, 1995, KFS was the Trust's principal underwriter. As principal
underwriter for the Fund, KDI (as successor to KFS) retained commissions of
$119,000 for the year ended June 30, 1995 after allowing $1,286,000 as
commissions to firms of which $328,000 was paid to firms affiliated with KDI.
ADMINISTRATIVE SERVICES AGREEMENT
The Trust has an administrative services agreement with KDI. Before February 1,
1995, KFS was the Trust's administrator. For providing information and
administrative services to shareholders, the Fund pays KDI a fee at an annual
rate of up to .25% of average daily net assets. KDI in turn has various
agreements with financial services firms that provide these services and pays
these firms based on assets of Fund accounts the firms service. For the year
ended June 30, 1995, the Fund incurred an administrative services fee of
$49,000, all of which KDI (as successor to KFS) paid to firms, including $14,000
that was paid to firms affiliated with KDI.
CUSTODIAN AND TRANSFER AGENT AGREEMENT
The Trust has a custodian agreement and a transfer agent agreement with
Investors Fiduciary Trust Company (IFTC), which was 50% owned by KFS until
January 31, 1995, when KFS completed the sale of IFTC to a third party. For the
year ended June 30, 1995, the Fund incurred custodian and transfer agent fees of
$44,000 (excluding related expenses). Pursuant to a services agreement with
IFTC, Kemper Service Company (KSvC), an affiliate of KFS, is the shareholder
service agent of the Trust. For the year ended June 30, 1995, IFTC remitted
shareholder service fees of $40,000 to KSvC with respect to the Fund.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Trust are also officers or directors of KFS.
During the year ended June 30, 1995, the Trust made no payments to its officers
and the Fund incurred trustees' fees of $15,000 to independent trustees.
4. INVESTMENT TRANSACTIONS
For the year ended June 30, 1995, investment transactions (excluding short-term
instruments) are as follows (dollars in thousands):
Purchases $38,806
- --------------------------------------------------------------------------------
Proceeds from sales 15,437
- --------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
May 3, 1994
Year ended to
June 30, 1995 June 30, 1994
---------------- ---------------
Shares Amount Shares Amount
------- ------- ------ ------
<S> <C> <C> <C> <C>
Shares sold 2,657 $24,385 645 $5,883
- -----------------------------------------------------------
Shares issued in
reinvestment of
dividends 32 290 -- --
- -----------------------------------------------------------
2,689 24,675 645 5,883
- -----------------------------------------------------------
Less shares redeemed 261 2,432 2 19
- -----------------------------------------------------------
Net increase from
capital share
transactions 2,428 $22,243 643 $5,864
===========================================================
</TABLE>
12
<PAGE> 143
6. FORWARD FOREIGN CURRENCY CONTRACTS
In order to protect itself against a decline in the value of particular foreign
currencies against the U.S. Dollar, the Fund has entered into forward contracts
to deliver foreign currency in exchange for U.S. Dollars as described below. The
Fund bears the market risk that arises from changes in foreign exchange rates,
and accordingly, the unrealized loss on these contracts is reflected in the
accompanying financial statements. The Fund also bears the credit risk if the
counterparty fails to perform under the contract. At June 30, 1995, the Fund had
outstanding forward foreign currency contracts as follows:
<TABLE>
<CAPTION>
Contract Unrealized
Foreign Currency amount in Loss
to be delivered U.S. Dollars Settlement at 6/30/95
(in thousands) (in thousands) Date (in thousands)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
759 French Francs $ 150 July 1995 $ 7
- ----------------------------------------------------------------------------------------
102,600 Japanese Yen 1,200 July 1995 9
- ----------------------------------------------------------------------------------------
924 Netherland Guilders 575 July 1995 22
- ----------------------------------------------------------------------------------------
328 Swiss Francs 275 July 1995 10
- ----------------------------------------------------------------------------------------
Net unrealized loss $ 48
- ----------------------------------------------------------------------------------------
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
May 3,
Year ended 1994 to
PER SHARE OPERATING PERFORMANCE: June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Net asset value, beginning of period $ 9.02 9.00
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .27 .02
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .79 --
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 1.06 .02
- -----------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .12 --
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.96 9.02
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 11.91 .22
=================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.29 1.32
- -----------------------------------------------------------------------------------------------------------------
Net investment income 3.77 2.59
=================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $30,699 5,900
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 75 --
=================================================================================================================
</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of any sales charges.
13
<PAGE> 144
KEMPER TARGET EQUITY FUND
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements--Kemper Retirement Fund Series VI and Kemper
Worldwide 2004 Fund.
(i) Financial Statements included in Part A of the Registration
Statement: Financial Highlights.
(ii) Kemper Retirement Fund Series I, Kemper Retirement Fund Series II,
Kemper Retirement Fund Series III, Kemper Retirement Fund Series IV
and Kemper Retirement Fund Series V
Statement of Assets and Liabilities--June 30, 1995.
Statement of Operations for the year ended June 30, 1995.
Statement of Changes in Net Assets for the fiscal years
ended June 30, 1994 (period from November 15, 1993
to June 30, 1994 for Kemper Retirement Fund Series V)
and June 30, 1995.
Portfolio of Investments--June 30, 1995.
Notes to Financial Statements.
Kemper Retirement Fund Series VI
Statement of Assets and Liabilities--June 30, 1995.
Statement of Operations for the period from May 1, 1995
to June 30, 1995.
Statement of Changes in Net Assets for the period
from May 1, 1995 to June 30, 1995.
Portfolio of Investments--June 30, 1995.
Notes to Financial Statements.
Kemper Worldwide 2004 Fund:
Statement of Assets and Liabilities--June 30, 1995.
Statement of Operations for the year ended June 30, 1995.
Statement of Changes in Net Assets for the fiscal year
ended June 30, 1995 and the period from May 3, 1994
to June 30, 1994.
Portfolio of Investments--June 30, 1995.
Notes to Financial Statements.
Schedules II, III, IV and V are omitted as the required information is
not present. Schedule 1 has been omitted as the required information is
presented in the portfolio of investments at June 30, 1995.
Schedules I, II, III, IV and V are omitted as the required information
is not present.
(b) Exhibits
<TABLE>
<S> <C>
99.B1.(a) Amended and Restated Agreement and Declaration of Trust.(1)
99.B1.(b) Written Instrument Establishing and Designating Kemper Retirement Fund Series
VI.(1)
99.B2. By-Laws.(1)
99.B3. Inapplicable.
99.B4. Text of Share Certificate.(1)
99.B5.(a) Investment Management Agreement (Kemper Retirement Fund Series).(1)
99.B5.(b) Notification of Additional Portfolio (Series VI).(1)
99.B5.(c) Investment Management Agreement (Kemper Worldwide 2004 Fund).(1)
99.B6.(a) Underwriting Agreement.(1)
99.B6.(b) Form of Selling Group Agreement.(1)
99.B6.(c) Assignment and Assumption Agreement.(1)
99.B7. Inapplicable.
99.B8.(a) Custody Agreement.(1)
99.B8.(b) Foreign Custody Agreement.(1)
99.B9.(a) Agency Agreement.(1)
99.B9.(b) Supplement to Agency Agreement.(1)
99.B9.(c) Administrative Services Agreement.(1)
99.B9.(d) Guaranty Agreement--Kemper Retirement Fund Series I.(1)
99.B9.(e) Guaranty Agreement--Kemper Retirement Fund Series II.(1)
99.B9.(f) Guaranty Agreement--Kemper Retirement Fund Series III.(1)
99.B9.(g) Guaranty Agreement--Kemper Retirement Fund Series IV.(1)
99.B9.(h) Guaranty Agreement--Kemper Retirement Fund Series V.(1)
99.B9.(i) Guaranty Agreement--Kemper Retirement Fund Series VI.(1)
99.B9.(j) Guaranty Agreement--Kemper Worldwide 2004 Fund.(1)
</TABLE>
C-1
<PAGE> 145
<TABLE>
<S> <C>
99.B9.(k) Assignment and Assumption Agreement.(1)
99.B10. Inapplicable.
99.B11. Consent and Report of Independent Auditors.
99.B12. Inapplicable.
99.B13. Inapplicable.
99.B14.(a) Kemper Retirement Plan Prototype.
99.B14.(b) Model Individual Retirement Account.
99.B15. Inapplicable.
99.B16. Performance Calculations.(1)
99.B24. Powers of Attorney.
99.B27.1 Financial Data Schedule--Kemper Retirement Fund Series I.
99.B27.2 Financial Data Schedule--Kemper Retirement Fund Series II.
99.B27.3 Financial Data Schedule--Kemper Retirement Fund Series III.
99.B27.4 Financial Data Schedule--Kemper Retirement Fund Series IV.
99.B27.5 Financial Data Schedule--Kemper Retirement Fund Series V.
99.B27.6 Financial Data Schedule--Kemper Retirement Fund Series VI.
99.B27.7 Financial Data Schedule--Kemper Worldwide 2004 Fund.
99.485.(b) Representation of Counsel (Rule 485(b) ).
</TABLE>
- ---------------
(1)Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed on or about April 20,
1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of September 29, 1995 there were holders of record of the shares of
Registrant as follows:
<TABLE>
<CAPTION>
SERIES NUMBER
-------------------------------------------------- ------
<S> <C>
Kemper Retirement Fund Series I................... 6,603
Kemper Retirement Fund Series II.................. 11,022
Kemper Retirement Fund Series III................. 8,878
Kemper Retirement Fund Series IV.................. 10,802
Kemper Retirement Fund Series V................... 10,703
Kemper Retirement Fund Series VI.................. 1,669
Kemper Worldwide 2004 Fund........................ 2,735
</TABLE>
ITEM 27. 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
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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.
ITEM 28.(A) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information pertaining to business and other connections of the
Registrant's investment adviser is hereby incorporated by reference to the
section of the Prospectus captioned "Investment Manager and Underwriter," and to
the section of the Statement of Additional Information captioned "Investment
Manager and Underwriter."
Kemper Financial Services, Inc., investment adviser of the Registrant, is
investment adviser of the following:
Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Kemper Money Market Fund
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund
Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund,
Sterling Funds and Kemper International Bond Fund.
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Item 28(b)(i) Business and Other Connections of Officers
and Directors of Kemper Financial Services Inc.,
the Investment Advisor
BORIS, JAMES R.
Director, Chairman of the Board and Chief Executive Officer,
Everen Capital Corporation
Chairman of the Board and Chief
Executive Officer, Everen Securities, Inc.
Director, Kemper Financial Services, Inc.
Director, INVEST Financial Corporation
Director, INVEST Financial Corporation Holding Company
Executive Vice President, Kemper Corporation
Director, Executive Vice President, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
MATHIS, DAVID B.
Director, Kemper Financial Services, Inc.
Director, Federal Kemper Life Assurance Company
Director, Fidelity Life Association
Director, Chairman and Chief Executive Officer, Kemper Corporation
Director, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
Director, IMC Global, Inc.
Trustee, Kemper Funds
Director, Vice President, Lumbermen's Mutual Casualty Company
TIMBERS, STEPHEN B.
Director, Chairman, Chief Executive Officer and Chief Investment Officer,
Kemper Financial Services, Inc.
Director, Vice President, Kemper Asset Holdings, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Kemper Asset Management Company
Director, Chairman, Kemper Service Company
Director, Federal Kemper Life Assurance Company
Director, Dreman Value Advisors, Inc.
Director, Vice President, FKLA Loire Court, Inc.
Vice President, FKLA Realty Corporation
Director, President, Galaxy Offshore, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Vice President, FLA Realty Corp.
Director, President and Chief Operating Officer, Kemper
Corporation
Director, Chairman, President and Chief Executive Officer, Kemper Financial
Companies, Inc.
Director, President, Kemper International Management, Inc.
Director, Kemper Investors Life Insurance Company
Trustee and President, Kemper Funds
Vice President, Kemper Portfolio Corp.
Director, Vice President, Kemper Real Estate, Inc.
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Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Vice President, KFC Portfolio Corp.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Centreville, Inc.
Director, Vice President, KI Colorado Boulevard, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Lewinsville, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
Director, The LTV Corporation
Director, Gillett Holdings, Inc.
Director, Investment Analysts Society of Chicago
NEAL, JOHN E.
Director, President and Chief Operating Officer, Kemper Financial Services,
Inc.
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Kemper Asset Management Company
Director, Dreman Value Advisors, Inc.
Director, Ardenwood Financial Corporation
Director, Avondale Redmond, Inc.
Director, Black Mountain, Inc.
Director, Brannan Resources, Inc.
Director, Butterfield Financial Corporation
Director, Camelot Financial Corporation
Director, Clay Capital, Inc.
Director, Coast Broadcasting Company
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Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, Kemper Real Estate, Inc.
Director, President, Kemper Cymrot, Inc.
Director, President, Cymrot Management, Inc.
Director, President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Lafayette Apartments, Inc.
Director, Lafayette Hills, Inc.
Director, Margarita Village Retirement Community, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Corporate Centre, Inc.
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Red Hill Associates, Inc.
Director, Seagate Associates, Inc.
Director, Seattle Gateway, Inc.
Director, Sutter Street, Inc.
Director, Technology Way, Inc.
Director, Time DC, Inc.
Director, Tourelle Corporation
Director, Two Corporate Centre, Inc.
Director, Venture Way, Inc.
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Centreville, Inc.
Director, President, KI Colorado Boulevard, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI LaFiesta Square, Inc.
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Director, President, KI Lewinsville, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.
Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Lafayette BART, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, RespiteCare
Director, President, SMS Realty Corp.
Director, Urban Shopping Centers, Inc.
Vice President, Kemper-Dreman Fund, Inc.
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Horizon Fund
PETERS, JOHN E.
Director, Senior Executive Vice President, Kemper Financial
Services, Inc.
Director, Dreman Value Advisors, Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Kemper Asset Management Company
Vice President, Kemper Funds
Director, Kemper Service Company
FITZPATRICK, JOHN H.
Director, Chief Financial Officer, Kemper Financial Services, Inc.
Director, Ardenwood Financial Corporation
Director, Camelot Financial Corporation
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kacor Trust Deed Company
Director, Senior Vice President and Chief Financial Officer,
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Federal Kemper Life Assurance Company
Senior Vice President, Chief Financial Officer, Fidelity Life
Association
Director, Vice President, FKLA Loire Court, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Director, Executive Vice President and Chief Financial Officer,
Kemper Corporation
Director, Executive Vice President and Chief Financial
Officer, Kemper Financial Companies, Inc.
Senior Vice President, Kemper Investors Life Insurance Company
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Director, Vice President, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management
Company
Director, KRDC, Inc.
Director, Margarita Village Retirement Community, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Montgomery Gallery, Inc.
Director, One Corporate Centre, Inc.
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Seattle Gateway, Inc.
Director, SMS Realty Corporation
Director, Sutter Street, Inc.
Director, Time DC, Inc.
Director, Two Corporate Centre, Inc.
Director, Vice President, KFC Portfolio Corp.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Centreville, Inc.
Director, Vice President, KI Colorado Boulevard, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Lewinsville, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Director, Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
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Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
BEIMFORD, JR., JOSEPH P.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Municipal Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
CHAPMAN II, WILLIAM E.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
COXON, JAMES H.
Executive Vice President, Kemper Financial Services, Inc.
Director, Vice President, Galaxy Offshore, Inc.
Executive Vice President, Kemper Asset Management Company
FERRO, DENNIS H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper International Fund
Director, Managing Director-Equities, Kemper Investment Management
Company Limited
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
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Vice President, The Growth Fund of Spain, Inc.
GREENAWALT, JAMES L.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
JOHNS, GORDON K.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Global Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper International Bond Fund
Vice President, Kemper International Management, Inc.
Managing Director and Joint Secretary, Kemper Investment
Management Company Limited
Vice President, Kemper Multi-Market Income Trust
Director, Thames Heritage Parade Limited
LANGBAUM, GARY A.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Total Return Fund
Vice President, Kemper Investors Fund
REYNOLDS, STEVEN H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper International Fund
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
SILIGMUELLER, DALE S.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Service Company
BUKOWSKI, DANIEL J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Value Plus Growth Fund
BUTLER, DAVID H.
Senior Vice President, Kemper Financial Services, Inc.
CERVONE, DAVID M.
Senior Vice President, Kemper Financial Services, Inc.
CESSINE, ROBERT S.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
CHESTER, TRACY McCORMICK
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Value Plus Growth Fund
CIARLELLI, ROBERT W.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Kemper Service Company
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COLLECCHIA, FRANK E.
Senior Vice President, Kemper Financial Services, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company
Senior Investment Officer, Fidelity Life Association
Vice President, FKLA Loire Court, Inc.
Vice President, FLA First Nationwide, Inc.
Vice President, FLA Plate Building, Inc.
Vice President, Galaxy Offshore, Inc.
Senior Investment Officer, Kemper Investors Life Insurance
Company
Vice President, KI Arnold Industrial, Inc.
Vice President, KI Canyon Park, Inc.
Vice President, KI Centreville, Inc.
Vice President, KI Colorado Boulevard, Inc.
Vice President, KI Dublin Boulevard, Inc.
Vice President, KI LaFiesta Square, Inc.
Vice President, KI Lewinsville, Inc.
Vice President, KI Monterey Research, Inc.
Vice President, KI Olive Street, Inc.
Vice President, KI Sutter Street, Inc.
Vice President, KI Thornton Boulevard, Inc.
Vice President, KR 77 Fitness Center, Inc.
Vice President, KR Avondale Redmond, Inc.
Vice President, KR Black Mountain, Inc.
Vice President, KR Brannan Resources, Inc.
Vice President, KR Clay Capital, Inc.
Vice President, KR Cranbury, Inc.
Vice President, KR Delta Wetlands, Inc.
Vice President, KR Gainesville, Inc.
Vice President, KR Halawa Associates, Inc.
Vice President, KR Hotels, Inc.
Vice President, KR Lafayette Apartments, Inc.
Vice President, KR Lafayette BART, Inc.
Vice President, KR Palm Plaza, Inc.
Vice President, KR Red Hill Associates, Inc.
Vice President, KR Seagate/Gateway North, Inc.
Vice President, KR Venture Way, Inc.
Vice President, KR Walnut Creek, Inc.
COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Kemper Financial
Services, Inc.
Vice President and Secretary, Kemper Funds
Assistant Secretary, Kemper International Management, Inc.
DIERENFELDT, DAVID F.
Senior Vice President, Associate General Counsel,
Assistant Secretary, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Secretary, Dreman Value Advisors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
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Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services
Insurance Agency, Inc.
Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Kemper Asset Management Company
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company
Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Service Company
DUDASIK, PATRICK H.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Chief Financial Officer and Treasurer,
Dreman Value Advisors, Inc.
Vice President and Treasurer, Kemper Asset Management Company
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Treasurer and Chief Financial Officer, Kemper Service Company
Director and Treasurer, Kemper Investment Management Company
Limited
DUFFY, JEROME L.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Funds
GALLAGHER, MICHAEL L.
Senior Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
GLASSMAN, HARVEY
Senior Vice President, Kemper Financial Services, Inc.
GOERS, RICHARD A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
GUENTHER, HAROLD E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Galaxy Offshore, Inc.
HUSSEY, KAREN A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund
Vice President, Kemper Small Capitalization Equity Fund
INNES, BRUCE D.
Senior Vice President, Kemper Financial Services, Inc.
Co-President, International Association of Corporate and
Professional Recruiters
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KLEIN, GEORGE
Senior Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Asset Management
Company
KORTH, FRANK D.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
McNAMARA, MICHAEL A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
MIER, CHRISTOPHER J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Sterling Funds
MURRIHY, MAURA J.
Senior Vice President, Kemper Financial Services, Inc.
NATHANSON, IRA
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Corporation
RABIEGA, CRAIG F.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
RACHWALSKI, JR. FRANK J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Portfolios
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Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
REGNER, THOMAS M.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Horizon Fund
RESIS, JR., HARRY E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
SCHUMACHER, ROBERT T.
Senior Vice President, Kemper Financial Services, Inc.
SLOAN, PAUL F.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Portfolios
Vice President, Kemper U.S. Government Securities Fund
Vice President, Kemper Adjustable Rate U.S. Government Fund
SMITH, JR., EDWARD BYRON
Senior Vice President, Kemper Financial Services, Inc.
VINCENT, CHRISTOPHER T.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Asset Management Company
BAZAN, KENNETH M.
First Vice President, Kemper Financial Services, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
BOEHM, JONATHAN J.
First Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
BURROW, DALE R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
BYRNES, ELIZABETH A.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust
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CHIEN, CHRISTINE
First Vice President, Kemper Financial Services, Inc.
DeMAIO, CHRIS C.
First Vice President, Kemper Financial Services, Inc.
Vice President and Chief Accounting Officer, Kemper Service
Company
DEXTER, STEPHEN P.
First Vice President, Kemper Financial Services, Inc.
DOYLE, DANIEL J.
First Vice President, Kemper Financial Services, Inc.
FENGER, JAMES E.
First Vice President, Kemper Financial Services, Inc.
HALE, DAVID D.
First Vice President, Kemper Financial Services, Inc.
HARRINGTON, MICHAEL E.
First Vice President, Kemper Financial Services, Inc.
HORTON, ROBERT J.
First Vice President, Kemper Financial Services, Inc.
JACOBS, PETER M.
First Vice President, Kemper Financial Services, Inc.
KEELEY, MICHELLE M.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios
KIEL, CAROL L.
First Vice President, Kemper Financial Services, Inc.
LAUGHLIN, ANN M.
First Vice President, Kemper Financial Services, Inc.
LENTZ, MAUREEN P.
First Vice President, Kemper Financial Services, Inc.
McCRINDLE-PETRARCA, SUSAN
First Vice President, Kemper Financial Services, Inc.
MINER, EDWARD
First Vice President, Kemper Financial Services, Inc.
MURRAY, SCOTT S.
First Vice President, Kemper Financial Services, Inc.
C-15
<PAGE> 159
Vice President, Kemper Service Company
PAYNE, III, ROBERT D.
First Vice President, Kemper Financial Services, Inc.
PANOZZO, ROBERTA L.
First Vice President, Kemper Financial Services, Inc.
RADIS, STEVE A.
First Vice President, Kemper Financial Services, Inc.
RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant
Secretary, Kemper Financial Services, Inc.
Assistant Secretary, Kemper Distributors, Inc.
SILVIA, JOHN E.
First Vice President, Kemper Financial Services, Inc.
STUEBE, JOHN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
THOUIN-LEERKAMP, EDITH A.
First Vice President, Kemper Financial Services, Inc.
Director-European Equities, Kemper Investment Management Company Limited
TRUTTER, JONATHAN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
WETHERALD, ROBERT F.
First Vice President, Kemper Financial Services, Inc.
WILLSON, STEPHEN R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
WITTNEBEL, MARK E.
First Vice President, Kemper Financial Services, Inc.
BARRY, JOANN M.
Vice President, Kemper Financial Services, Inc.
BODEM, RICHARD A.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
C-16
<PAGE> 160
CARNEY, ANNE T.
Vice President, Kemper Financial Services, Inc.
CARTER, PAUL J.
Vice President, Kemper Financial Services, Inc.
CHRISTIANSEN, HERBERT A.
Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
COHEN, JERRI I.
Vice President, Kemper Financial Services, Inc.
ESOLA, CHARLES J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
FRIHART, THORA A.
Vice President, Kemper Financial Services, Inc.
GERACI, AUGUST L.
Vice President, Kemper Financial Services, Inc.
GERICKE, KATHLEEN E.
Vice President, Kemper Financial Services, Inc.
GOLAN, JAMES S.
Vice President, Kemper Financial Services, Inc.
HESS, THOMAS L.
Vice President, Kemper Financial Services, Inc.
HUOT, LISA L.
Vice President, Kemper Financial Services, Inc.
KARWOWSKI, KENNETH F.
Vice President, Kemper Financial Services, Inc.
KNAPP, WILLIAM M.
Vice President, Kemper Financial Services, Inc.
KOCH, DEBORAH L.
Vice President, Kemper Financial Services, Inc.
KOURY, KATHRYN E.
Vice President, Kemper Financial Services, Inc.
KRANZ, KATHY J.
Vice President, Kemper Financial Services, Inc.
KRUEGER, PAMELA D.
Vice President, Kemper Financial Services, Inc.
C-17
<PAGE> 161
KYCE, JOYCE
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
LeFEBVRE, THOMAS J.
Vice President, Kemper Financial Services, Inc.
MANGIPUDI, V. RAO
Vice President, Kemper Financial Services, Inc.
McGOVERN, KAREN B.
Vice President, Kemper Financial Services, Inc.
MILLER, MAUREEN A.
Vice President, Kemper Financial Services, Inc.
MITCHELL, KATHERINE H.
Vice President, Kemper Financial Services, Inc.
MURPHY, THOMAS M.
Vice President, Kemper Financial Services, Inc.
NEVILLE, BRIAN P.
Vice President, Kemper Financial Services, Inc.
PANOZZO, ALBERT R.
Vice President, Kemper Financial Services, Inc.
PONTECORE, SUSAN E.
Vice President, Kemper Financial Services, Inc.
QUADRINI, LISA L.
Vice President, Kemper Financial Services, Inc.
ROKOSZ, PAUL A.
Vice President, Kemper Financial Services, Inc.
ROSE, KATIE M.
Vice President, Kemper Financial Services, Inc.
SHULTZ, KAREN D.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
SMITH, ROBERT G.
Vice President, Kemper Financial Services, Inc.
SOPHER, EDWARD O.
Vice President, Kemper Financial Services, Inc.
STROMM, LAWRENCE D.
Vice President, Kemper Financial Services, Inc.
C-18
<PAGE> 162
TEPPER, SHARYN A.
Vice President, Kemper Financial Services, Inc.
VANDEMERKT, RICHARD J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WATKINS, JAMES K.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WERTH, ELIZABETH C.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Distributors, Inc.
Assistant Secretary, Kemper Mutual Funds
Assistant Secretary, Kemper International Bond Fund
Assistant Secretary, Kemper Target Equity Fund
Assistant Secretary, Sterling Funds
Assistant Secretary, Kemper-Dreman Fund, Inc.
Assistant Secretary, Kemper Horizon Fund
WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.
ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.
C-19
<PAGE> 163
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Kemper Distributors, Inc. acts as principal underwriter and distributor
of the Registrant's shares and acts as principal underwriter of the Kemper
Mutual Funds, Kemper Investors Fund, Sterling Funds, Kemper-Dreman Fund, Inc.
and Kemper International Bond Fund.
(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 120 South LaSalle Street, Chicago, Illinois 60603.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES WITH
NAME POSITIONS AND OFFICES WITH UNDERWRITER REGISTRANT
- ------------------------------ ----------------------------------------- ---------------------------
<S> <C> <C>
John E. Peters................ Principal, President Vice President
Willam E. Chapman, II......... Director, Executive Vice President None
James L. Greenawalt........... Director, Executive Vice President None
John E. Neal.................. Director None
Stephen B. Timbers............ Director President, Trustee
Patrick H. Dudasik............ Financial Principal, Treasurer and Chief None
Financial Officer
Linda A. Bercher.............. Senior Vice President None
Terry Cunningham.............. Senior Vice President None
Daniel T. O'Lear.............. Senior Vice President None
John H. Robison, Jr........... Senior Vice President None
Henry J. Schulthesz........... Senior Vice President None
David F. Dierenfeldt.......... Vice President, Secretary None
Thomas V. Bruns............... Vice President None
Carlene D. Merold............. Vice President None
Elizabeth C. Werth............ Vice President Assistant Secretary
Kathleen A. Gallichio......... Assistant Secretary None
Diane E. Ratekin.............. Assistant Secretary None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, at the offices of Registrant's investment manager, Kemper
Financial Services, Inc., 120 South LaSalle Street, Chicago, Illinois 60603, at
the offices of Registrant's principal underwriter, Kemper Distributors, Inc.,
120 South LaSalle Street, Chicago, Illinois 60603, at the offices of the
Registrant's custodian and transfer agent, Investors Fiduciary Trust Company,
127 West 10th Street, Kansas City, Missouri 64105 or at the offices of the
Registrant's shareholder services agent, Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Not applicable.
C-20
<PAGE> 164
S I G N A T U R E S
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 16th day
of October, 1995.
KEMPER TARGET EQUITY FUND
By /s/ Stephen B. Timbers
-----------------------------------
Stephen B. Timbers, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below on October 16,
1995 on behalf of the following persons in the capacities
indicated.
Signature Title
--------- -----
/s/ Stephen B. Timbers President (Principal
---------------------------------------- Executive Officer) and
Stephen B. Timbers Trustee
/s/James E. Akins* Trustee
----------------------------------------
/s/Arthur R. Gottschalk* Trustee
----------------------------------------
/s/Frederick T. Kelsey* Trustee
----------------------------------------
/s/David B. Mathis* Trustee
----------------------------------------
/s/Fred B. Renwick* Trustee
----------------------------------------
/s/John B. Tingleff* Trustee
----------------------------------------
/s/John G. Weithers* Trustee
----------------------------------------
/s/Jerome L. Duffy Treasurer (Principal
---------------------------------------- Financial and
Jerome L. Duffy Accounting Officer)
*Philip J. Collora signs this document pursuant to powers of
attorney filed herewith.
/s/ Philip J. Collora
------------------------------
Philip J. Collora
<PAGE> 165
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
99.B1.(a) Amended and Restated Agreement and Declaration of Trust.(1)
99.B1.(b) Written Instrument Establishing and Designating Kemper Retirement
Fund Series VI.(1)
99.B2. By-Laws.(1)
99.B3. Inapplicable.
99.B4. Text of Share Certificate.(1)
99.B5.(a) Investment Management Agreement (Kemper Retirement Fund Series).(1)
99.B5.(b) Notification of Additional Portfolio (Series VI).(1)
99.B5.(c) Investment Management Agreement (Kemper Worldwide 2004 Fund).(1)
99.B6.(a) Underwriting Agreement.(1)
99.B6.(b) Form of Selling Group Agreement.(1)
99.B6.(c) Assignment and Assumption Agreement.(1)
99.B7. Inapplicable.
99.B8.(a) Custody Agreement.(1)
99.B8.(b) Foreign Custody Agreement.(1)
99.B9.(a) Agency Agreement.(1)
99.B9.(b) Supplement to Agency Agreement.(1)
99.B9.(c) Administrative Services Agreement.(1)
99.B9.(d) Guaranty Agreement--Kemper Retirement Fund Series I.(1)
99.B9.(e) Guaranty Agreement--Kemper Retirement Fund Series II.(1)
99.B9.(f) Guaranty Agreement--Kemper Retirement Fund Series III.(1)
99.B9.(g) Guaranty Agreement--Kemper Retirement Fund Series IV.(1)
99.B9.(h) Guaranty Agreement--Kemper Retirement Fund Series V.(1)
99.B9.(i) Guaranty Agreement--Kemper Retirement Fund Series VI.(1)
99.B9.(j) Guaranty Agreement--Kemper Worldwide 2004 Fund.(1)
99.B9.(k) Assignment and Assumption Agreement.(1)
99.B10. Inapplicable.
99.B11. Consent and Report of Independent Auditors.
99.B12. Inapplicable.
99.B13. Inapplicable.
99.B14.(a) Kemper Retirement Plan Prototype.
99.B14.(b) Model Individual Retirement Account.
99.B15. Inapplicable.
99.B16. Performance Calculations.(1)
99.B24. Powers of Attorney.
99.B27.1 Financial Data Schedule--Kemper Retirement Fund Series I.
99.B27.2 Financial Data Schedule--Kemper Retirement Fund Series II.
99.B27.3 Financial Data Schedule--Kemper Retirement Fund Series III.
99.B27.4 Financial Data Schedule--Kemper Retirement Fund Series IV.
99.B27.5 Financial Data Schedule--Kemper Retirement Fund Series V.
99.B27.6 Financial Data Schedule--Kemper Retirement Fund Series VI.
99.B27.7 Financial Data Schedule--Kemper Worldwide 2004 Fund.
99.485.(b) Representation of Counsel (Rule 485(b) ).
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed on or about April 20,
1995.
<PAGE> 1
EXHIBIT 99.B11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our reports on the Kemper Target Equity Fund - Series I, II, III, IV,
and V, Kemper Target Equity Fund - Kemper Retirement Fund Series VI and Kemper
Target Equity Fund - Kemper Worldwide 2004 Fund dated August 11, 1995 in the
Registration Statement (Form N-1A) of Kemper Target Equity Fund and their
incorporation by reference in the related Prospectuses and Statements of
Additional Information of Kemper Retirement Fund Series VI and Kemper Worldwide
2004 Fund, respectively, filed with the Securities and Exchange Commission in
this Post-Effective Amendment No. 21 to the Registration Statement under the
Securities Act of 1933 (Registration No. 33-30876) and this Amendment No. 23 to
the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-5896).
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Chicago, Illinois
October 12, 1995
<PAGE> 2
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND -
KEMPER RETIREMENT FUND SERIES I, II, III, IV AND V
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Kemper Target Equity Fund-Kemper
Retirement Fund Series I, II, III, IV and V as of June 30, 1995, the related
statements of operations for the year then ended and changes in net assets for
each of the two years in the period then ended for Series I, II, III and IV and
for the year then ended and the period from November 15, 1993 (initial public
offering) to June 30, 1994 for Series V and the financial highlights for each
of the fiscal periods since 1991. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of June 30, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper Target Equity Fund-Kemper Retirement Fund Series I, II, III, IV and V at
June 30, 1995, the results of their operations and the changes in their net
assets for the periods referred to above, and the financial highlights for each
of the fiscal periods since 1991, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1995
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND -
KEMPER RETIREMENT FUND SERIES VI
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Target Equity Fund-Kemper Retirement
Fund Series VI as of June 30, 1995 and the related statements of operations,
changes in net assets and the financial highlights for the period from May 1,
1995 (initial public offering) to June 30, 1995. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of June 30, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper Target Equity Fund-Kemper Retirement Fund Series VI at June 30, 1995 and
the results of its operations, the changes in its net assets and the financial
highlights for the period from May 1, 1995 to June 30, 1995 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1995
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND -
KEMPER WORLDWIDE 2004 FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Target Equity Fund-Kemper Worldwide
2004 Fund as of June 30, 1995, and the related statements of operations,
changes in net assets and the financial highlights for the year then ended and
for the period from May 3, 1994 (initial public offering) to June 30, 1994.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of June 30, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper Target Equity Fund-Kemper Worldwide 2004 Fund at June 30, 1995 and the
results of its operations, the changes in its net assets and the financial
highlights for the year then ended and for the period from May 3, 1994 to June
30, 1994 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1995
<PAGE> 1
EXHIBIT 99.B14.(a)
KEMPER
RETIREMENT PLAN PROTOTYPE
A Keogh/Corporate Retirement
Plan for Professionals and
Small Corporations
THE KEMPER RED BOOK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
CHOOSING YOUR PLAN................................... SECTION 1
PLAN INSTALLATION FORMS.............................. SECTION 2
PARTICIPANT RECORDS ................................. SECTION 3
PLAN DOCUMENT ....................................... SECTION 4
</TABLE>
<PAGE> 3
CHOOSING YOUR PLAN
RETIREMENT PLANNING SOLUTIONS THAT BENEFIT BOTH YOU AND YOUR EMPLOYEES
Providing for retirement is an increasing concern for employers, as well
as employees. With a shrinking work force, employers will have to be more
competitive than ever to attract a qualified staff. The rising costs of
traditional pension plans, however, can be a significant financial drain
on a company's profits. So how can a company remain competitive and not
risk its bottom line?
Many employers have discovered that defined contribution plans such as
Money Purchase and Profit Sharing plans provide a viable solution that can
benefit both the company and its employees.
FIND OUT IF ONE OF THESE PLANS IS RIGHT FOR YOU...
With the variety of retirement plans available today, it's often difficult
to know which one is best for your company's needs. If you're a sole
proprietor, independent contractor, owner of a small business or in
private practice, with few or no employees, and are looking for a way to
save for retirement and reduce your tax liabilities, consider one of these
plans.
PROFIT SHARING PLAN
A profit sharing plan is just that - a plan that enables the
employees to participate in the profits of the company. The
flexibility of contribution limits and the relative ease of
maintenance make profit sharing plans an attractive alternative for
both employers and employees.
A profit sharing plan allows employees to participate in the
company's success, thereby giving further incentive for employee
productivity and loyalty. More profits mean higher contributions, up
to legal limits.
MONEY PURCHASE PLAN
A money purchase plan shares many of the same advantages and features
of a profit sharing plan, but has a higher contribution level. It
has the same eligibility requirements, tax benefits and distribution
choices. The difference is in the contribution limits and
requirements.
- Allows for higher contribution levels
- Contribution levels are fixed
Because there is a fixed contribution formula, required contributions
can be easily computed and budgeted. Once a percentage has been
determined, contributions are mandatory each year, and for the same
percentage level - regardless of whether the company is profitable
that year. Failure to contribute the required amount in a year could
result in stiff tax penalties, and jeopardize the qualified status of
the plan.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TYPE OF PLAN PROFIT SHARING MONEY PURCHASE COMBINATION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TYPE OF CONTRIBUTION Flexible Fixed Flexible/Fixed
- ------------------------------------------------------------------------------------------------------------
MAXIMUM ANNUAL 15% of 25% of 25% of
CONTRIBUTION LIMIT Eligible Payroll Eligible Payroll Eligible Payroll
- ------------------------------------------------------------------------------------------------------------
PARTICIPANT 25% of Compensation 25% of Compensation 25% of Compensation
ANNUAL LIMIT not to Exceed $30,000 not to Exceed $30,000 not to Exceed $30,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
COMBINED MONEY PURCHASE AND PROFIT SHARING PLAN
Many employers like the idea of making contributions as high as 25% of
eligible payroll, but are not comfortable committing to this every year.
Fortunately, the IRS allows a combination or "paired" plan that gives the
"best of both worlds."
- Higher contribution levels of a money purchase plan
- Flexible contribution limits of a profit sharing plan
Paired plans combine the flexibility of a profit sharing plan with the
higher contribution limits of a money purchase pension plan. A combined
plan lets you enjoy control over a portion of the contribution similar to
a profit sharing plan, but also offers the higher contribution limits
found in a money purchase plan. Employees are assured that they will be
provided with at least some level of retirement benefit.
Typically, if an employer wishes to maximize the contribution, he or she
would set the money purchase plan contribution at 10%, which would be
mandatory each year, and allow the remaining 15% to be a part of the
profit sharing plan, which is contingent on whether or not the company can
afford it. That way, the employer is only locked into a 10% mandatory
contribution rather than 25%.
THE KEMPER RED BOOK KEOGH PROTOTYPE
The Plan Document, contained in the last section of this booklet, provides
the plan parameters for self-employed partnerships and corporations, and
has been amended for the Tax Reform Act of 1986. Investors Fiduciary Trust
Company (IFTC) will act as trustee for a plan using Kemper mutual funds.
Kemper Investors Life Insurance Company (KILICO) annuities do not require
a trustee. Before any contributions can be made to the plan, an Adoption
Agreement (see section entitled "Plan Installation Forms") that outlines
the plan parameters must be signed and dated.
ELIGIBILITY
Since the plan is employer-sponsored, the employer has the ability to
establish minimum requirements for plan participation, generally based on
age and years of service. As the employer, you decide how flexible plan
participation will be, keeping within certain minimum requirements set by
the IRS. Of course, eligibility requirements may be lower. Those who must
be eligible for the plan are:
- Any employee over age 21, AND
- Employees who have had at least two years of service, AND
- Employees who are not covered by a collective bargaining agreement.
All employees (including leased and control group) who fulfill eligibility
requirements, except for union employees covered under a collective
bargaining agreement, are eligible participants in the plan. Entry dates
for the plan are semi-annual.
CONTRIBUTIONS
One of the most important benefits of the plan is that the employer's
contributions are a tax-deductible business expense. This special tax
treatment makes it one of the few remaining tax shelters available.
All plan participants employed on the last day of the plan year will share
in the employer's contribution regardless of the hours worked during the
plan year. Terminated participants will share in the employer's
contribution only if they completed at least 501 hours of service during
the plan year in which they terminated.
Compensation is defined as an employee's total gross salary earned while
the employee was actually a plan participant. Rollover contributions are
allowed if the Employer wishes. Employee after-tax contributions are not
allowed under this plan document.
<PAGE> 5
CHOOSING YOUR PLAN
DISTRIBUTIONS
Terminated participants will receive their distribution on the 60th day of
the plan year following separation of service. If the value of the account
is more than $3,500 the participant must agree to take his or her money,
and the participant can choose lump sum or installment payments. If the
account value is $3,500 or less, the participant receives a lump sum
payment. Participants are always 100% vested.
Kemper Financial Services, Inc. will provide self-trusteed, variable
documents which allow you to vary the plan parameters. Please contact your
representative or Kemper Financial Services, Inc. at 1-800-621-5027.
QUESTIONS AND ANSWERS
Q. WHAT IS THE DEADLINE FOR ESTABLISHING A RETIREMENT PLAN?
A. The plan must be established on or before the last day of the taxable
year for which a deduction is to be taken.
Q. DOES "ESTABLISH" MEAN THERE MUST BE ASSETS IN THE PLAN?
A. Yes, at least $250 is required to open and establish the account in
the tax year. The balance of the contribution must comply with tax
deadlines.
Q. WHAT IS THE DEADLINE FOR MAKING CONTRIBUTIONS ONCE THE PLAN IS
ESTABLISHED?
A. Contributions for any year must be made before the latest possible
filing date for the Employer's federal income tax return for that
year, including extensions.
Q. SHOULD I BE BONDED?
A. Yes, Employers should be bonded if the plan covers employees other
than the owner(s) and the owner(s) spouse; the bond must cover at
least 10% of the plan's assets; the face value of the bond may not be
less than $1,000.
Q. WHAT IS MEANT BY "YEAR OF SERVICE" WHEN DETERMINING WHO IS ELIGIBLE
TO PARTICIPATE IN THE PLAN?
A. "Year of Service" for purposes of eligibility means 12 consecutive
months during which an employee completes at least 1,000 hours of
service. The 12-month period begins on the day an employee performs
his or her first hour of service.
Q. WHEN DOES AN EMPLOYEE PARTICIPATE ONCE ELIGIBILITY REQUIREMENTS ARE
MET?
A. The employee becomes a Participant on the first day of the Plan Year,
or the first day of the seventh month of the Plan Year, following
satisfaction of the eligibility requirement. For example, if the Plan
Year is a calendar year and an employee satisfies the eligibility
requirement on March 1, he or she will enter the plan on July 1.
Q. CAN THE EMPLOYEE CONTRIBUTE UNDER THIS PLAN?
A. Pre-tax employee salary reduction contributions may be allowed, but
only if you elect to include the 401(k) arrangement found in Article
XIII of the Profit Sharing Adoption Agreement. After-tax
contributions are not allowed.
Q. WHAT IS SOCIAL SECURITY INTEGRATION?
A. When your overall retirement plan scheme combines Social Security
with your private retirement plan, this is called integration.
Integration allows you to take advantage of the Social Security tax
payments you already make when designing your private retirement
plan's formula. The result favors the highly paid employees because
they receive a larger portion of the total contribution.
Contribution formulas and worksheets for self-employed participants
in integrated plans are available from Kemper Financial Services upon
request.
Q. WHAT IS THE COMPENSATION FOR A SOLE PROPRIETOR?
A. If you are a sole proprietor or your business is a partnership, you
must base contributions on earned income, which is defined as net
profits minus the amount you contributed to the plan. Your net
profits are shown on the Schedule C form for a sole proprietor, and
the schedule K-1 form for a partnership. Contributions for all other
employees are based on gross earnings actually paid for services
rendered.
<PAGE> 6
Q. WHAT DOES IT MEAN TO "AMEND AND RESTATE" A PLAN?
A. To amend and restate your plan means you have updated your plan in
its entirety by replacing the plan document with a new plan document.
This may be necessary if your existing plan document prohibits plan
investments with Kemper or because of changes in the laws governing
qualified retirement plans.
Many employers are now formally updating their plans to comply with
the Tax Reform Act of 1986. These amendments must be retroactive to
the first day of your 1987 plan year unless interim amendments were
adopted for the 1987 and 1988 plan years.
INVESTING YOUR PLAN ASSETS
One of the most important decisions you have to make is where to invest
your plan's assets. The better your plan's investment performance, the
easier it will be for you and your employees to retire in comfort. You'll
want to select investments with a broad range of objectives to meet the
diverse investment needs of your employees, and take great care in
choosing the company that will manage your plan's assets.
...WITH KEMPER
That's why many plans like yours invest their plan assets with Kemper.
Kemper Financial Services, Inc. has managed investments for over 40 years
and has more than $67 billion in assets under management. Kemper offers a
variety of investment products to fit almost every investment objective.
Kemper's mutual funds and annuities provide investments to suit the needs
of either the aggressive or the conservative investor. Employees can
select the investments that best match their specific needs and
requirements. Consider Kemper's experience and professional managers when
choosing the investments for your plan.
FUNDING THE PLAN
...WITH MUTUAL FUNDS
The Employer completes the Employer Contribution Schedule. Each eligible
employee completes an Employee Enrollment Form. All necessary forms and a
check made payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419356
Kansas City, MO 64141-6356
The IFTC Trustee fee is $12 per account, per participant, per year, with a
$24 maximum charge per participant.
...WITH ANNUITIES
A KILICO Enrollment Application is completed for each plan participant.
Please call Policyholder Services for the proper forms at 1-800-554-5426.
The check should be made payable to Kemper Investors Life Insurance
Company and mailed to:
Kemper Investors Life Insurance Company
P.O. Box 95963
Chicago, IL 60694
There are no trustee fees when using KILICO products.
<PAGE> 7
CHOOSING YOUR PLAN
...WITH UNIT INVESTMENT TRUSTS
For a Kemper Capital Markets enrollment kit, please call Kemper
Capital Markets at 1-800-621-5024. Applications and a check made
payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419430
Kansas City, MO 64141-6430
The IFTC Trustee fee is $12 per account, per participant, per year,
with a $24 maximum charge per participant.
To obtain additional prospectuses for any of the Kemper products,
containing more complete information including management fees and
expenses, please contact your representative or Kemper Financial Services,
Inc. at 1-800-621-5027. Please read the prospectus carefully before you
invest or send money.
GETTING STARTED
The next two sections, "Plan Installation Forms" and "Participant
Records," provide the necessary forms to complete the installation of
the plan. Please read the instructions at the beginning of each
section carefully before completing the applicable forms.
If you are a sole proprietor and do not have any covered employees,
complete the Adoption Agreement only.
The last section, "Plan Document," is provided for your reference
only.
<PAGE> 8
PLAN INSTALLATION FORMS
GETTING STARTED
COMPLETE THE FOLLOWING DOCUMENTS AND RETURN ORIGINALS TO THE APPROPRIATE
ADDRESS SHOWN UNDER THE PRECEDING SECTION ENTITLED "FUNDING THE PLAN."
REMEMBER TO RETAIN A PHOTOCOPY FOR YOUR RECORDS.
ADOPTION AGREEMENT
Complete the information requested ONLY for the particular type
of plan you've selected (either profit sharing, money purchase or a
combination).
ENROLLMENT FORM
Photocopy and complete an enrollment form for EACH eligible participant.
SUMMARY PLAN DESCRIPTION CARD
Complete this card ONLY if you have Employees.
ASSET TRANSFER FORM
Complete this form ONLY if there are existing plan assets.
<PAGE> 9
"LINE-BY-LINE" INSTRUCTIONS FOR COMPLETING YOUR ADOPTION AGREEMENT
- Specify the type of business entity adopting the plan by checking the
appropriate box.
- Enter the address of the business. This may be a home address if there is
no separate business address.
- Enter the Employer's Taxpayer Identification Number (TIN). If you do not
presently have a TIN for your business, you should apply for one using IRS
Form SS-4. Form SS-4 is available from Kemper Financial Services upon
request.
- Enter the name of the Employer on the blank line provided. If the
Employer is a sole proprietor who does not have a formal business name,
enter the name of the individual adopting the plan.
ARTICLE I
1.17 (A) In most situations the Plan Year End will be December 31, but if
the Employer operates on a fiscal year, then enter the
appropriate date.
(B) If item (b) is left blank, the Limitation Year will be the same
as the Plan Year.
1.18 (A) If this Adoption Agreement is used to establish a new plan,
rather than amend an older plan, check item l.18(a) and skip
item 1.18(b).
(B) Complete item 1.18(b) if this is a restatement of an older plan.
ARTICLE II
2.01 (A) Check (1) or (2) to define the minimum age requirement (if any)
that must be attained before an employee is eligible to
participate in the plan.
(B) Check (1), (2) or (3) to define the minimum service (if any)
that must be completed before an employee is eligible to
participate in the plan. The plan defines a Year of Service as a
12 consecutive month period in which the employee works 1,000
hours or more. The 12 consecutive month period begins on the
date the employee first performs an Hour of Service and each
anniversary thereof.
ARTICLE III
3.01 If this is a MONEY PURCHASE PENSION PLAN, indicate the base
contribution rate in the first blank. The base contribution rate
must equal or exceed 3%. If the plan will be integrated with
Social Security, enter the integration rate in the second blank
and complete the integration level section.
3.04 If this is a PROFIT SHARING PLAN and the contribution allocation
will be integrated with Social Security, complete the
integration level section 13.00. If this is a PROFIT SHARING
PLAN, check here if you wish to include employee salary deferral
contributions. If you do NOT want to allow employee salary
deferral contributions, skip this item and go directly to the
"Effective Date Addendum" of Article V.
ARTICLE XIII
13.00 If this is a Profit Sharing Plan, check here if you wish to
include employee salary deferral contributions. If you do not
want to allow employee salary deferral contributions, skip this
item and go directly to the "Effective Date Addendum."
13.05 Enter a date, which is no later than April 15th, by which a
participant must notify you if he or she has exceeded the dollar
limit for employee salary deferral contributions. For
administrative ease, March 1 is recommended.
13.08(A) Leave blank and skip to item 13.09 if the Employer will not make
regular matching contributions to the plan. Check 13.08(a) if
the Employer intends to match the salary deferral contributions
of ALL participants.
(B) Check 13.08(b) if Highly Compensated Employees will not receive
the Employer's regular matching contribution.
(C) Enter the amount of the Employer's matching contribution on the
line provided. Note that the employer is REQUIRED to make this
matching contribution each year.
(D) If 13.08(d) is left blank, all of a participant's salary
deferral contributions will be matched by the Employer.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible for
the matching contribution.
13.09(A) Leave blank and skip to item 13.12 if the Employer will not make
Qualified Matching Contributions to the Plan.
Check 13.09(a) if the Employer intends to contribute Qualified
Matching Contributions for ALL participants.
<PAGE> 10
PLAN INSTALLATION FORMS
(B) Check 13.09 (b) if Highly Compensated Employees will not
receive the Qualified Matching Contribution.
(C) Enter the amount of the Employer's Qualified Matching
Contribution on the line provided. Note that the employer is
REQUIRED to make this Qualified Matching Contribution each
year.
(D) If (d) is left blank, all of a participant's salary deferral
contributions will be eligible for the qualified matching
contribution.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible
for the Qualified Matching Contribution.
13.12(A) Check 13.12 (a) if the Employer intends to contribute Qualified
Nonelective Contributions for ALL participants.
(B) Check 13.12 (b) if Highly Compensated Employees will not
receive Qualified Nonelective Contributions.
(C) If (c) is checked, a participant's share of the qualified
nonelective contribution will be based on the participant's
total compensation.
(D) If (d) is checked, only compensation up to the stated dollar
amount will be used to calculate a participant's share of the
qualified nonelective contribution.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
(A)(1) Check (1) and enter a percentage on the line provided if
you wish to establish a maximum deferral percentage.
(2) Check (2) and enter a percentage on the line provided if
you wish to establish a minimum deferral percentage.
(3) Check (3) if no restrictions are imposed on a participant's
salary reduction contributions.
(B) Check (1), (2), (3) OR (4) to restrict when a participant
may stop their salary deferral contributions.
(C) Check (1), (2), (3) OR (4) to indicate when a participant
may resume making salary deferral contributions.
(D) Check (1), (2), (3) OR (4) to indicate how frequently a
participant may change the amount of his or her salary
deferral contributions.
ARTICLE V
EFFECTIVE DATE ADDENDUM
If you are restating an older plan, complete only if the
effective date of the restatement is before January 1,1989
AND these specific provisions have changed as a result of
the restatement. If a provision listed below has changed, the
date on which that provision begins to apply may be later
than your restated effective date if you check the applicable
box. Indicate the later effective date by inserting a date
on the line provided.
If this is a NEW PLAN, skip the Effective Date Addendum and go
directly to "Participation Agreement."
PARTICIPATION AGREEMENT
If the Employer has an ownership interest in another business
which results in a controlled group of businesses as defined
by the Internal Revenue Code, then each related business must
sign the Participation Agreement as a Participating Employer.
The "Signatory Employer" is the Employer who also signs the
Execution Page of the adoption agreement.
If the employer sponsoring this plan has no ownership interest
in any other business, skip the Participation Agreement and go
directly to "Execution Page."
EXECUTION PAGE
The Employer should sign and date the appropriate Adoption
Agreement. The signature of the sole proprietor, general
partner or corporate officer belongs on the line above
"Employer." Whoever witnesses the Employer's signature should
sign on the line beside "Attest."
The Dealer/Agent should complete the dealer information section.
<PAGE> 11
ADOPTION AGREEMENT #001
STANDARDIZED PROFIT SHARING/401(K) PLAN
(PAIRED PROFIT SHARING PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:
________________________________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN):________________________
THE EMPLOYER HEREBY ESTABLISHES THE ____________________________________________
Name of Employer
PROFIT SHARING PLAN in accordance with all the terms of the KEMPER RETIREMENT
PLAN PROTOTYPE KEOGH/CORPORATE AND TRUST AGREEMENT attached hereto, which the
Employer has received, read, accepts and hereby incorporates into this
STANDARDIZED PROFIT SHARING/401(K) PLAN ADOPTION AGREEMENT #001 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending ________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: ________.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The Effective Date of the Plan is the first day of the
Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This Plan
is a substitution and amendment of an existing retirement plan
originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan,
an Employee must satisfy the following eligibility conditions:
(A) Age requirement. (Choose one)
/ / (1) Age __________ (specify age, not exceeding 21).
/ / (2) No age requirement.
(B) Service requirement. (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service without an intervening Break
in Service. See Section 2.03(a) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date (if
employed on that date) coincident with or immediately following the
date the Employee completes the eligibility conditions described in
Options (a) and (b) of this Adoption Agreement Section 2.01.
<PAGE> 12
PLAN INSTALLATION FORMS
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The amount of the Employer's annual contribution to the Trust will
equal the amount (or additional amount) the Employer may from time to
time deem advisable, irrespective of whether the Employer has Net
Profits.
3.04 CONTRIBUTION ALLOCATION
Profit Sharing plan - Employer contributions for the plan year will
be allocated to participants' accounts as follows: [NOTE: IF THE
EMPLOYER WILL NOT BE INTEGRATING THE PLAN WITH SOCIAL SECURITY OR
ADOPTING THE PAIRED MONEY PURCHASE PENSION PLAN #002, SKIP STEPS ONE,
TWO AND THREE BELOW AND GO DIRECTLY TO STEP FOUR.]
STEP ONE: Contributions will be allocated to each participant's
account in the ratio that each participant's total compensation bears
to all participants' total compensation, but not in excess of 3% of
each participant's total compensation.
STEP TWO: Any contributions remaining after the allocation in Step
One will be allocated to each participant's account in the ratio
that each participant's compensation for the plan year in excess of
the integration level bears to the excess compensation of all
participants, but not in excess of 3%.
STEP THREE: Any contributions remaining after the allocation in Step
Two will be allocated to each participant's account in the ratio that
the sum of each participant's total compensation plus excess
compensation bears to the sum of all participant's total compensation
plus total excess compensation, but not in excess of the
profit-sharing maximum disparity rate.
STEP FOUR: Any remaining employer contributions or forfeitures will
be allocated to each participant's account in the ratio that each
participant's total compensation for the plan year bears to all
participants' total compensation for that year.
The integration level shall be equal to the amount elected by the
employer in the Adoption Agreement. The taxable wage base (TWB) is
the maximum amount of earnings which may be considered wages for a
year under Section 3121(a)(1) of the Code in effect as of the
beginning of the plan year.
Compensation shall mean compensation as defined in Section 1.12 of
the plan.
The integration level is equal to (Choose one):
/ / Taxable Wage Base (TWB)
/ / $_______ (a dollar amount less than the TWB)
/ / ________ % of TWB (not to exceed 100%)
The maximum Profit Sharing disparity rate is equal to the lesser of:
(a) 2.7% or
(b) the applicable percentage determined in accordance with the
table below:
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN: BUT NOT MORE THAN: THE APPLICABLE PERCENTAGE IS:
- ------------------------ ------------------ -----------------------------
<S> <C> <C>
$0 X(*) 2.7%
X(*) of TWB 80% of TWB 1.3%
80% of TWB Y(**) of TWB 2.4%
</TABLE>
* X = the greater of $10,000 or 20% of the TWB.
**Y = any amount more than 80% of the TWB but less than 100% of the TWB.
If the integration level used is equal to the TWB, the applicable
percentage is 2.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
________________________________________________________________
________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
employer discretion.)
<PAGE> 13
ARTICLE XIII
401(k) ARRANGEMENT
13.00 / / CHECK THIS BOX IF THIS PLAN IS A 401(k) PLAN AND COMPLETE THE
FOLLOWING:
13.01 ELIGIBILITY
If the service requirement elected by the Employer at Section 2.01 of
this Adoption Agreement is two (2) years, an Employee's eligibility
to make elective deferrals will be determined as if the service
requirement at Section 2.01 were one (1) year.
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
Participants who claim Excess Elective Deferrals for the preceding
taxable year must submit their claims in writing to the plan
administrator by ___________________________________________________.
Specify a date no later than April 15
13.06 ACTUAL DEFERRAL PERCENTAGE TEST
Qualified Matching Contributions and Qualified Nonelective
Contributions may be taken into account as Elective Deferrals for
purposes of calculating the Actual Deferral Percentages. In
determining Elective Deferrals for the purpose of the ADP test, the
employer shall include Qualified Matching Contributions and Qualified
Nonelective Contributions under this plan or any other plan of the
employer, as provided by regulations under the Code.
The amount of Qualified Matching Contributions taken into account as
Elective Deferrals for purposes of calculating the Actual Deferral
Percentage, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Matching Contributions.
The amount of Qualified Nonelective Contributions taken into account
as Elective Deferrals for purposes of calculating the Actual Deferral
Percentages, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Nonelective Contributions.
13.08 MATCHING CONTRIBUTIONS
The employer will make Matching Contributions to the plan on behalf
of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Matching Contribution account an amount equal
to [______] percent of the participant's Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$______], or in excess of [______] percent, of
the participant's Compensation.
13.09 QUALIFIED MATCHING CONTRIBUTIONS
The Employer will make Qualified Matching Contributions to the plan
on behalf of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Qualified Matching Contribution account an
amount equal to [_____] percent of the participant's
Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$________], or in excess of [_______] percent, of
the participant's Compensation.
<PAGE> 14
PLAN INSTALLATION FORMS
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS
In computing the Average Contribution Percentage, the Employer shall
take into account, and include as Contribution Percentage Amounts
Elective Deferrals and Qualified Nonelective Contributions under this
plan or any other plan of the Employer, as provided by regulations.
The amount of Qualified Nonelective Contributions that are taken into
account as Contribution Percentage Amounts for purposes of
calculating the Average Contribution Percentage, subject to such
other requirements as may be prescribed by the Secretary of the
Treasury, shall be an amount determined by the Employer.
The amount of Elective Deferrals taken into account as Contribution
Percentage Amounts for purposes of calculating the Average
Contribution Percentage, subject to such other requirements as may be
prescribed by the Secretary of the Treasury, shall be an amount
determined by the Employer.
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer will make Qualified Nonelective Contributions to the
plan. If the Employer does make such contributions to the plan, then
the amount of such contributions for each Plan Year shall be an
amount determined by the Employer.
Allocation of Qualified Nonelective Contributions shall be made to
the accounts of [ELECT ONE]:
/ / (A) All participants
/ / (B) Only Nonhighly Compensated participants
Allocation of Qualified Nonelective Contributions shall be made
[ELECT ONE]:
/ / (C) In the ratio that each participant's Compensation for the
Plan Year bears to the total Compensation of all
participants for such Plan Year.
/ / (D) In the ratio that each participant's Compensation not in
excess of [$______] for the Plan Year bears to the total
Compensation of all participants not in excess of [$______]
for such Plan Year.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
The following rules and restrictions apply to an Employee's salary
reduction agreement:
(A) Limitation on Amount. The Employee's salary reduction
contributions: (Choose at least one)
/ / (1) May not exceed _________% of Compensation for the
Plan Year, subject to the annual additions
limitation described in Part 2 of Article III of
the Plan.
/ / (2) Based on percentages of Compensation must equal at
least _________% of Compensation for the
reduction period.
/ / (3) No maximum limitation other than the annual
additions limitation.
(B) An Employee may revoke, on a prospective basis, a salary
reduction agreement: (Choose one)
/ / (1) Once during any Plan Year but not later than _________
of the Plan Year.
/ / (2) As of any Plan Entry Date.
/ / (3) As of the first day of any month.
/ / (4) Other (specify, but must be at least once per Plan
Year).
(C) An Employee who revokes his or her salary reduction agreement
may file a new salary reduction agreement with an effective
date: (Choose one):
/ / (1) No earlier than the first day of the next Plan Year.
/ / (2) As of any subsequent Plan Entry Date.
/ / (3) As of the first day of any month subsequent to the
month in which he or she revoked an Agreement.
/ / (4) Other (specify, but must be at least once per Plan
Year following the Plan Year of revocation).
(D) A Participant may increase or may decrease, on a prospective
basis, his salary reduction percentage or dollar amount:
/ / (1) As of the beginning of each payroll period.
/ / (2) As of the first day of each month.
/ / (3) As of any Plan Entry Date.
/ / (4) Other (specify, but must permit an increase or a
decrease at least once per Plan Year).
<PAGE> 15
ARTICLE V
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated
Effective Date specified in Adoption Agreement Section 1.18 is
earlier than January 1,1989, and if a different restated effective
date applies to at least one of the provisions listed in this
addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES
In lieu of the restated Effective Date in Adoption Agreement Section
1.18, the following Special Effective Dates apply:
(Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION
The Compensation definition of Section 1.12 (other than
the $200,000 limitation) is effective for Plan Years
beginning after ______. [Note: May not be effective
later than the first day of the first Plan Year beginning
after the Employer executes this Adoption Agreement to
restate the Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS
The eligibility conditions specified in Adoption Agreement
Section 2.01 are effective for Plan Years beginning after
December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA
The contribution formula elected under Adoption Agreement
Section 3.01 is effective for Plan Years beginning after
December 31, 1988.
/ / (D) ELIMINATION OF NET PROFITS
The requirement for the Employer not to have net profits
to contribute to this Plan is effective for Plan Years
beginning after __________________. [Note: The date
specified may not be earlier than December 31, 1985.]
For Plan Years prior to the Special Effective Date, the terms of the
Plan prior to its restatement under this Adoption Agreement will
control for purposes of the designated provisions.
<PAGE> 16
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the
____________________________________________________________________
Name of Employer
PROFIT SHARING PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the
Plan as made by ________________, the Signatory Employer to the
Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: _________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) the adoption of a new plan by the Employer.
/ / (B) the adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
_________________________________________________________________
and having an original effective date of __________________________.
Dated this ______ day of _______ ,19__.
Attest:__________________________ By: ___________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted:________________________ By:____________________________
Date Signatory Employer
Accepted:________________________ Investors Fiduciary Trust Company
Date
By:____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 17
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer by its
duly authorized officers, has executed this Adoption Agreement on this _______
day of _________,19__.
Attest:______________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:____________________________ By:__________________________________
Date Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Pension Plan with this Paired Profit Sharing Plan, identified
by 3-digit Adoption Agreement number: 002. This Adoption Agreement may be used
only in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Pension Plan, it may rely on the Plan Sponsor's
opinion letter covering this Plan for purposes of plan qualification. For this
purpose, the Employer has not maintained another plan if this Plan, or the
Paired Pension Plan, amended and restated that prior plan and the prior plan
was the same type of plan as the restated plan. If the Employer maintains or
has maintained another plan other than a Paired Pension Plan, including a
welfare benefit fund, as defined in Code Section 419(e), which provides post-
retirement medical benefits for key employees (as defined in Code Section
419A(d)(3)), or an individual medical account (as defined in Code Section
415(1)(2)), the Employer may not rely on this Plan's qualified status unless
it obtains a determination letter from the applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 18
PLAN INSTALLATION FORMS
ADOPTION AGREEMENT #002
STANDARDIZED MONEY PURCHASE PENSION PLAN
(PAIRED PENSION PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:____________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN): ______________________
THE EMPLOYER HEREBY ESTABLISHES THE ___________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN in accordance with all the terms of the KEMPER
RETIREMENT PLAN PROTOTYPE KEOGH/CORPORATE and TRUST AGREEMENT attached hereto,
which the Employer has received, read, accepts and hereby incorporates into
this STANDARDIZED MONEY PURCHASE PENSION PLAN ADOPTION AGREEMENT #002 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending
every __________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: _______.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The "Effective Date" of the Plan is the first day of
the Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This
Plan is a substitution and amendment of an existing retirement
plan originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation
Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an
Employee must satisfy the following eligibility conditions:
/ / (A) Age requirement: (Choose one)
/ / (1) Age ______ (specify age, not exceeding 21).
/ / (2) No age requirement.
/ / (B) Service Requirement: (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service, without an intervening Break in
Service. See Section 2.03(A) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date
(if employed on that date) coincident with or immediately
following the date the Employee completes the eligibility
conditions described in Options (a) and (b) of this Adoption
Agreement Section 2.01.
<PAGE> 19
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The Employer will contribute for each participant who either
completes more than 500 hours of service during the Plan Year, or is
employed by the Employer on the last day of the Plan Year, an amount
equal to ______% (base contribution percentage, not less than 3%) of
each Participant's Compensation (as defined in Section 1.12 of the
Plan) for the Plan Year, plus _________% (not to exceed the base
contribution percentage by more than the lesser of: (1) the base
contribution percentage, or (2) the maximum disparity rate of such
Participant's Compensation in excess of the integration level.
NOTE: IF THE EMPLOYER ALSO MAINTAINS PAIRED PROFIT SHARING PLAN
#001, ONLY ONE OF THE PLANS MAY BE INTEGRATED.
The integration level shall be equal to the amount elected by the
Employer. The taxable wage base is the maximum amount of earnings
which may be considered wages for a year under Section 3121(a)(1) of
the Code in effect as of the beginning of the Plan Year.
The integration level is equal to: (Choose one)
/ / Taxable Wage Base (TWB)
/ / $_________ (a dollar amount less than the taxable wage base)
/ / __________ % of TWB (not to exceed 100%)
The maximum disparity rate is equal to the lesser of:
(A) 5.7%
(B) the applicable percentage determined in accordance with the
table below.
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN BUT NOT MORE THAN THE APPLICABLE PERCENTAGE IS
- ------------------------- ----------------- ----------------------------
<S> <C> <C>
$0 X(*) 5.7%
X(*) of TWB 80% of TWB 4.3%
80% of TWB Y(**) 5.4%
(*) X = the greater of $10,000 or 20% of the TWB.
(**) Y = any more than 80% of the TWB but less than 100% of the TWB.
</TABLE>
If the integration level is equal to taxable wage base the
applicable percentage is 5.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
______________________________________________________________________
______________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
Employer discretion.)
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is earlier than January 1, 1989,
and a different restated effective date applies to at least one of the
provisions listed in this addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES. In lieu of the restated Effective
Date in Adoption Agreement Section 1.18, the following Special Effective Dates
apply: (Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION. The Compensation definition of Section
1.12 (other than the $200,000 limitation) is effective for Plan
Years beginning after ____________. [Note: May not be effective
later than the first day of the first Plan Year beginning after
the Employer executes this Adoption Agreement to restate the
Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years
beginning after December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula
elected under Adoption Agreement Section 3.01 is effective for
Plan Years beginning after December 31, 1988.
For Plan Years prior to the Special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions.
<PAGE> 20
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the
_______________________________________________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to be bound
by, all of the elections granted under the provisions of the Plan as made
by _________, the Signatory Employer to the Execution Page of the Adoption
Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: ___________________________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) The adoption of a new plan by the Employer.
/ / (B) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
______________________________________________________________________
and having an original effective date of ___________. Dated this ____
day of ______________, 19__.
Attest: ________________________ By: ______________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted: ______________________ By: _____________________________
Date Signatory Employer
Accepted: ______________________ Investors Fiduciary Trust Company
Date
BY: _____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 21
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer, by its
duly authorized officers, has executed this Adoption Agreement on this
__________ day of _______, 19__.
Attest:________________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:______________________________ By:__________________________________
Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its Plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Profit Sharing Plan with this Paired Pension Plan, identified
by 3-digit Adoption Agreement number 001. This Adoption Agreement may be only
used in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Profit Sharing Plan, it may rely on the Plan
Sponsor's opinion letter covering this Plan for purposes of plan qualification.
For this purpose, the Employer has not maintained another plan if this Plan, or
the Paired Profit Sharing Plan, amended and restated that prior plan and the
prior plan was the same type of plan as the restated plan. If the Employer
maintains or later adopts or has maintained another plan other than a Paired
Profit Sharing Plan, including a welfare benefit fund, as defined in Code
Section 419(e), which provides post-retirement medical benefits for key
employees (as defined in Code Section 419A(d)(3)), or an individual medical
account (as defined in Code Section 415(1)(2)), the Employer may not rely on
this Plan's qualified status unless it obtains a determination letter from the
applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 22
PLAN INSTALLATION FORMS
EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS
INSTRUCTIONS:
1. Complete this form for each participant.
2. Enclose a check for the sum of all contributions made payable to
Investors Fiduciary Trust Company.
3. Deliver a prospectus(es) to each participant. (Participants should be
provided with a prospectus for each fund in which they are invested.)
Note: If you are enrolling more than five participants or if you are
enrolling participants for a 401(k) plan, you should use the KemFlex
Employer Master Account Application (Form-07) and a separate KemFlex
Employee Enrollment Form (Form-36) for each employee.
PARTICIPANT INFORMATION
______________________________________________________________________________
Name of Plan Date
______________________________________________________________________________
Participant Name
______________________________________________________________________________
Participant Social Security Number Participant Birthday
______________________________________________________________________________
Statement Mailing Address
______________________________________________________________________________
City State Zip Code
INVESTMENT SELECTION
FUND NAME AMOUNT
$
_______________________________________ ______________________
_______________________________________ ______________________
_______________________________________ ______________________
TOTAL $
______________________
THIS FORM SHOULD BE USED ONLY FOR MUTUAL FUND PURCHASES. TO FUND WITH
ANNUITIES, CALL KILICO CUSTOMER SERVICE AT 1-800-554-5426 AND REQUEST FORM
L-1004 (FORM L-1005 FOR 401(k) PLANS). TO FUND WITH UNIT INVESTMENT TRUSTS
CONTACT UIT CUSTOMER SERVICE AT 1-800-422-2848 AND REQUEST A UIT RETIREMENT
PLAN APPLICATION.
<PAGE> 23
PLAN INSTALLATION FORMS
ASSET TRANSFER FORM
INSTRUCTIONS:
This form is provided for your use in substituting the Kemper Red Book
Keogh Retirement Plan Prototype for your present qualified defined
contribution (profit sharing or money purchase pension plan).
1. Consult with your attorney or other tax advisor as to the
consequences of such an amendment.
2. Contact the present custodian bank, trustee or insurance company to
determine their requirements with respect to such transfer of assets.
3. Fill out the appropriate Kemper Red Book Keogh Retirement Plan
Prototype Adoption Agreement and Employee Enrollment Form for Mutual
Funds. Attach this Statement to it, and submit them to Investors
Fiduciary Trust Company, P.O. Box 419356, Kansas City, MO 64141-6356.
4. This statement and a letter of acceptance will be sent to the former
custodian, trustee or insurance company by IFTC. This statement
should suffice as instruction with respect to transmitting the funds
to Investors Fiduciary Trust Company, but the present custodian,
trustee, or insurance company may ask you to use its own form or
instructions, or impose additional requirements.
5. Indicate the total amount transferred on behalf of each participant
in the "Total Account Balance" column opposite the name of each
participant.
We hope this information will be useful to you; if you have any questions,
call Kemper's Sales Support Department at 1-800-621-5027.
To:____________________________________________________________________________
Current Custodian, Trustee or Insurance Company
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
The undersigned Employer previously established a qualified retirement plan on
____________, 19____ described as:
_______________________________________________________________________________
Indicate Plan Name - for example, ABC, Inc. Profit Sharing Plan
The undersigned Employer has amended and restated the plan and named Investors
Fiduciary Trust Company as a trustee of the Plan effective ___________, 19____.
The undersigned employer hereby directs the above named custodian bank, trustee
or insurance company now holding assets of the Plan to liquidate all said
assets and transfer the proceeds directly to Investors Fiduciary Trust Company,
P.O. Box 419356, Kansas City, MO 64141-6356, as trustee of the Plan, as amended
and restated.
The following is an accurate description of the allocations of Plan assets. If
you are transferring any voluntary contributions, please notify us of each
account balance.
Participant Total Account Balance
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
Employer's Signature Date
AFTER MAKING A COPY FOR YOUR RECORDS, ATTACH THIS FORM TO THE ADOPTION
AGREEMENT AND THE EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS (PREVIOUS PAGE).
MAIL ALL FORMS TO INVESTORS FIDUCIARY TRUST COMPANY, P.O. BOX 419356,
KANSAS CITY, MO 64141-6356.
<PAGE> 24
PARTICIPANT RECORDS
PARTICIPANT RECORDS
The following forms allow you to complete the administrative details
that are required of you as a plan sponsor. After they have been distributed to
and completed by your employees, they should be kept on record in your
files and should NOT be returned to Kemper.
NOTICE TO INTERESTED PARTIES
If you have employees, this notice should be posted
with other labor relations information bulletins.
BENEFICIARY FORMS
Photocopy and distribute to EACH participant.
Collect and file with other plan records.
PRE-RETIREMENT NOTICE AND WAIVER
Distribute to each affected participant (see instructions).
Collect and file Waiver.
DISTRIBUTION ELECTION FORM
Photocopy and distribute ONLY to employees terminating employment.
Collect and file with other plan records.
<PAGE> 25
NOTICE TO INTERESTED PARTIES
1. Notice To: All Employees of ______________________________________________
Name of Employer
2. _______________________________ has ______________________________________
Name of Employer Adopted/Amended
the plan described below on ______________________________________________
Date
3. Name of Plan _____________________________________________________________
4. 3-Digit Plan Identification Number _______________________________________
5. Opinion Letter Number
/ / PS-D257426a
/ / MP-D257427a
6. Sponsor: Kemper Growth Fund, Inc., 120 South LaSalle Street, Chicago, IL
60603
7. Employer's TIN __________________________________________________________
8. Address of Employer _____________________________________________________
_________________________________________________________________________
9. Address of Key Director having jurisdiction of plan _____________________
_________________________________________________________________________
10. It ____________________ contemplated that the Plan will be submitted to
is/is not
the Internal Revenue Service for an advance determination as to whether
or not it meets the qualification requirements of section 401 of the
Internal Revenue Code with respect to its _______________________________
_________________________________________________________________________
Initial Qualification/Amendment
11. All Employees who have completed ___ Years of Service and attained age ___
are eligible to participate.
12. The IRS _________________ previously issued a determination letter with
has/has not
respect to the qualification of this Plan.
13. You have the right to submit to the Key District Director, at the above
address, either individually or jointly with other interested parties,
your comments as to whether this Plan meets the qualification requirements
of the Internal Revenue Code. You may instead, individually or jointly
with other interested parties, request the Department of Labor to submit,
on your behalf, comments to the Key District Director regarding
qualification of the Plan. If the Department declines to comment on all or
some of the matters you raise, you may, individually, or jointly if your
request was made to the Department jointly, submit your comments on these
matters to the Key District Director.
<PAGE> 26
PARTICIPANT RECORDS
14. The Department of Labor may not comment on behalf of interested parties
unless requested to do so by the lesser of 10 Employees or 10 percent of
the Employees who qualify as interested parties. The number of persons
needed for the Department to comment with respect to this Plan is ______.
If you request the Department to comment, your comment must in writing and
must specify the matters upon which comments are requested, and must also
include: (1) the information contained in items 2 through 9 of this
Notice; and (2) the number of persons needed for the Department to
comment. A request to the Department to comment should be addressed as
follows: Administrator of Pension and Welfare Benefit Programs, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, DC 20216,
Attn: 3001 Comment Request.
15. Comments submitted by you to the Key District Director must be in writing
and received by him by
_________________________________________________________________________
75 days after adoption date
However, if there are matters that you request the Department of Labor to
comment upon on your behalf, and the Department declines, you may submit
comments on these matters to the Key District Director to be received by
him within 15 days from the time the Department notifies you that it will
not comment on a particular matter, or by ___________________________,
75 days after adoption date
whichever is later, but in no event later than ___________________________.
90 days after adoption date
A request to the Department to comment on your behalf must be received by
it by ___________________________ if you wish to preserve your right to
45 days after adoption date
comment on a matter upon which the Department declines to comment, or by
_____________________________ if you wish to waive that right.
55 days after adoption date
16. Detailed instructions regarding the requirements for notification of
interested parties may be found in Sections 16, 17, and 18 of Revenue
Procedure 92-6. Additional information concerning this __________________
adoption/amendment
(including where applicable, an updated copy of the Plan and related Trust
Agreement, a copy of the Adoption Agreement establishing the Plan, and
copies of Section 16 of Revenue Procedure 92-6) is available during the
hours of __________ for inspection and copying. (There is a nominal charge
for copying and mailing.)
<PAGE> 27
DESIGNATION OF BENEFICIARY
ALL PARTICIPANTS MUST COMPLETE. RETURN TO YOUR EMPLOYER.
_______________________________________________________________________________
Name of Plan Date
_______________________________________________________________________________
Last Name First Name MI
_______________________________________________________________________________
Social Security Number
_______________________________________________________________________________
Date of Birth (month, day, year) Sex
I hereby designate the person(s) named below as the beneficiary of my vested
account(s) payable under the Plan by reason of my death. I UNDERSTAND THAT IF I
DESIGNATE ANYONE OTHER THAN MY SPOUSE AS THE SOLE BENEFICIARY, THE SPOUSAL
CONSENT PORTION OF THIS FORM MUST BE SIGNED IN THE PRESENCE OF A NOTARY PUBLIC
OR A REPRESENTATIVE OF THE PLAN.
_______________________________________________________________________________
Name of Beneficiary (Full given name)
_______________________________________________________________________________
Relation to Participant
_______________________________________________________________________________
Address (if different from Participant)
If more than one person is named as beneficiary, any payments to which they may
be entitled will be paid in equal shares to such of the designated persons as
shall then be living; or if none, then pursuant to the terms of Section 8.02 of
the Plan.
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND CONTINGENT
BENEFICIARIES.
____________________________________ ____________________________
Date of this Designation Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named in the foregoing
"Designation of Beneficiary," hereby consent to and accept the beneficiary
designation, without regard to whether I survive or predecease my spouse. I
understand this consent allows the beneficiary(ies) named above to be paid
amounts which would otherwise be paid to me. This consent is irrevocable unless
my spouse changes the designation. If my spouse changes the designation I
understand I must file a similar consent to the new designation, or my consent
is no longer effective.
___________________________________ ____________________________________
Date Signature of Spouse
___________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 28
PARTICIPANT RECORDS
PRE-RETIREMENT SURVIVOR ANNUITY MEMORANDUM
INSTRUCTIONS:
This memorandum must be provided to married money purchase pension plan and
certain profit sharing plan participants unless their spouse is the beneficiary
of at least 50% of the participant's account balance. A participant should
receive this memorandum during the Plan Year in which they turn age 32. They
will have the right to waive it, with spousal consent, during the Plan Year in
which the participant turns age 35. A married participant age 35 or older
should immediately be given this memorandum and the Waiver of Pre-retirement
Survivor Annuity form.
________________________________________________________________________ Plan
Name of Employer
PRE-RETIREMENT SURVIVOR ANNUITY. The Plan requires the Employer to distribute a
pre-retirement survivor annuity to your surviving spouse if your death occurs
before distributions have begun and you and your spouse are married during the
one year period ending on the date of your death.
Under the pre-retirement survivor annuity, your spouse will receive lifetime
monthly annuity payments. The Employer will purchase the annuity contract from
an insurance company using 50% of your vested account balance (including the
proceeds, if any, of life insurance contracts purchased on your behalf under
the Plan). The contract will be given to your surviving spouse as evidence of a
right to receive the annuity payments from the insurance company. Generally,
the Employer may not begin payment of the annuity prior to the date a
participant would have reached age 65 without the surviving spouse's consent.
However, the surviving spouse may elect to have distribution of the
pre-retirement survivor annuity at any time following the participant's death.
If, at the time of your death, 50% of your account balance is less than
$3,500, the Employer will pay your spouse a lump sum payment instead of the
annuity.
WAIVER ELECTION. The Plan requires payment of the pre-retirement survivor
annuity unless you have a valid waiver election in effect on the date of your
death. To have a valid waiver you and your spouse must complete the waiver
election form. YOUR WAIVER ELECTION IS NOT VALID UNLESS YOUR SPOUSE, DURING THE
ELECTION PERIOD, ALSO CONSENTS IN WRITING TO YOUR BENEFICIARY DESIGNATION,
UNLESS YOUR SPOUSE IS THE SOLE PRIMARY BENEFICIARY. Your waiver election is not
valid unless you and your spouse make the election within the election period.
The election period begins on the first day of the Plan Year immediately before
your 35th birthday or, if later, the date you receive this notice. The election
period ends on the date of your death. If you wish, you may waive the
pre-retirement survivor annuity prior to the beginning of the election period.
However, on the first day of the election period mentioned above, you and your
spouse would have to complete a second waiver form. If you terminate
employment, you may waive the pre-retirement survivor annuity at any time after
the date of your termination. You may revoke or make a new waiver election as
often as you like during the election period. You may revoke a waiver election
without your spouse's consent, but your spouse would have to consent to a new
waiver. A waiver election is valid only for the spouse consenting to the
waiver. Therefore, you should inform the Employer of any change in your marital
status.
FINANCIAL EFFECT OF YOUR ELECTION. If you and your spouse do NOT waive the
pre-retirement survivor annuity, the Employer will pay your surviving spouse
the pre-retirement survivor annuity and pay the remaining value of the account
to your designated beneficiary. If the Employer pays your spouse the annuity,
the Plan does not need your spouse's consent to the beneficiary designation.
Under a pre-retirement survivor annuity, your surviving spouse will receive
lifetime income. Benefits will not continue to other beneficiaries after your
spouse's death. Your surviving spouse can choose a lump sum or installment
payments instead of the pre-retirement survivor annuity.
If you and your spouse waive the pre-retirement survivor annuity, the Employer
will pay your entire vested account balance to your designated beneficiary. The
Plan generally requires payment of the death benefit in lump sum. If your
beneficiary receives a lump sum payment, the Employer will provide the
beneficiary a notice of the special tax benefits, if any, available for the
distribution. If your vested account balance at the time of your death exceeds
$3,500, your beneficiary may choose a lump sum or installment payments. Under
the installment method, the Employer will continue payments from your account
until the entire account has been depleted. Furthermore, your vested account
balance will continue to earn investment income. If a vested account balance
remains in the Plan at the time of your primary beneficiary's death, the Plan
will pay the remaining account balance to your primary beneficiary's estate,
unless your beneficiary designation directs otherwise. If you and your spouse
waive the pre-retirement survivor annuity, your spouse must consent to the
identity of the designated beneficiary but does not have to consent to the form
of payment made to the beneficiary.
PROCEDURE. If you and your spouse wish to have the pre-retirement survivor
annuity apply, YOU DO NOT NEED TO MAKE ANY ELECTION. If you and your spouse do
NOT wish to have the pre-retirement survivor annuity apply, sign the enclosed
Waiver of Pre-retirement Survivor Annuity election form within the election
period. We also have enclosed a Designation of Beneficiary Form.
PARTICIPANTS SHOULD RETAIN THIS IN THEIR FILES
<PAGE> 29
WAIVER OF PRE-RETIREMENT SURVIVOR ANNUITY
MARRIED PARTICIPANTS MUST COMPLETE THIS FORM IF THEY WISH TO WAIVE PAYMENT OF A
PRE-RETIREMENT SURVIVOR ANNUITY. RETURN TO YOUR EMPLOYER.
__________________________________________________________________________ Plan
Name of Employer
I elect to waive payment of a pre-retirement survivor annuity if my death
occurs before distributions have begun under the Plan. The Employer has given
me an explanation of the terms of the Pre-retirement Survivor Annuity, my right
to make this waiver election, the time period during which I may make this
waiver election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand I may revoke this election at any
time during the election period.
______________________________________ _______________________________________
Date Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named above, consent to the Waiver
of the Pre-retirement Survivor Annuity form of payment. I understand the terms
of the Pre-retirement Survivor Annuity, my right not to consent to this waiver
election, the time period during which my spouse and I may make this waiver
election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand my consent is irrevocable unless
my spouse revokes the waiver election. I further understand my consent is valid
only if I consent, in writing, to my spouse's beneficiary designation or any
change in my spouse's beneficiary designation, unless my spouse has designated
me as sole primary beneficiary.
________________________________ ___________________________________________
Date Signature of Spouse
____________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 30
PARTICIPANT RECORDS
DISTRIBUTION ELECTION
PARTICIPANTS MUST COMPLETE THIS FORM ONLY IF THEIR ACCOUNT(S) IS OVER $3,500.
RETURN TO YOUR EMPLOYER.
_______________________________________________________________________ Plan
Name of Employer
A. INDICATE THE FORM OF DISTRIBUTION PAYMENT.
I, the undersigned Participant, elect payment of my account balance in
the following manner:
(1) / / I elect to transfer my distribution directly to a Kemper
IRA and defer taxes until I actually receive the money.
(Complete a Kemper IRA application if electing this
option.)
(2) / / In a lump sum.
(3) / / In a series of _______________________________
(monthly, quarterly, or annual)
installments over ____ years.
(4) / / In a qualified joint and survivor annuity contract.
(5) / / I elect to postpone distribution until the age of 65.
___________________________________ __________________________________
Date Signature of Participant
NOTE TO MARRIED MONEY PURCHASE PENSION PLAN AND CERTAIN PROFIT SHARING
PLAN PARTICIPANTS: If you requested payment of your account balance in a
form other than a qualified joint and survivor annuity, your spouse must
consent by signing Section B.
B. CONSENT OF SPOUSE
I, __________________________, spouse of the Participant, hereby consent
to the form of distribution payment elected above. I understand that by
giving this consent I am giving up the right to receive annuity benefit
payments which would otherwise be payable to me for my lifetime. I
understand my consent is irrevocable unless my spouse changes the form of
distribution payment. I understand any change is subject to my consent,
unless my spouse elects to receive the qualified joint and survivor
annuity.
___________________________________ ______________________________________
Date Signature of Participant
___________________________________ ______________________________________
Signature of Witness Title
IMPORTANT NOTE: A PARTICIPANT MAY WAIVE A QUALIFIED JOINT AND SURVIVOR
ANNUITY CONTRACT, AND A SPOUSE MAY CONSENT TO SUCH WAIVER PROVIDED THIS
ELECTION IS MADE WITHIN 90 DAYS OF THE FIRST PLAN DISTRIBUTION.
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 31
PLAN DOCUMENT
RETIREMENT PLAN
PROTOTYPE DOCUMENT
The following Plan Document and Opinion Letters
are part of your permanent plan records and may be consulted to
reference specific plan provisions.
<PAGE> 32
KEMPER RED BOOK
KEOGH RETIREMENT PLAN PROTOTYPE TRUST AGREEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I, DEFINITIONS
1.01 EMPLOYEE.............................................1
1.02 TRUSTEE..............................................1
1.03 PLAN ................................................1
1.04 ADOPTION AGREEMENT ..................................1
1.05 PLAN ADMINISTRATOR ..................................1
1.06 ADVISORY COMMITTEE...................................1
1.07 EMPLOYEE.............................................1
1.08 SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE .............1
1.09 HIGHLY COMPENSATED EMPLOYEE..........................1
1.10 PARTICIPANT..........................................2
1.11 BENEFICIARY..........................................2
1.12 COMPENSATION.........................................2
1.13 EARNED INCOME .......................................3
1.14 ACCOUNT..............................................3
1.15 ACCRUED bENEFIT .....................................3
1.16 NONFORFEITABLE.......................................3
1.17 PLAN YEAR/LIMITATION YEAR............................3
1.18 EFFECTIVE DATE ......................................3
1.19 PLAN ENTRY DATE .....................................3
1.20 ACCOUNTING DATE .....................................3
1.21 TRUST................................................3
1.22 TRUST FUND ..........................................3
1.23 NONTRANSFERABLE ANNUITY .............................3
1.24 ERISA ...............................................3
1 25 CODE.................................................3
1 26 SERVICE .............................................3
1 27 HOUR OF SERVICE .....................................3
1.28 DISABILITY...........................................4
1.29 SERVICE FOR PREDECESSOR EMPLOYER ....................4
1.30 RELATED EMPLOYERS....................................4
1.31 LEASED EMPLOYEES ....................................5
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES ...................5
1.33 TAXABLE WAGE BASE ...................................5
1.34 PAIRED PLANS ........................................5
1.35 MEMBER OF A COLLECTIVE BARGAINING UNIT ..............6
1.36 DESIGNATED INVESTMENT COMPANY .......................6
ARTICLE II, EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY..........................................6
2.02 YEAR OF SERVICE - PARTICIPATION .....................6
2.03 BREAK IN SERVICE - PARTICIPATION.....................6
2.04 PARTICIPATION UPON RE-EMPLOYMENT ....................6
2.05 CHANGE IN EMPLOYEE STATUS ...........................6
2.06 ELECTION NOT TO PARTICIPATE .........................6
</TABLE>
<PAGE> 33
PLAN DOCUMENT
<TABLE>
<S> <C>
ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT ..............................................7
3.02 DETERMINATION OF CONTRIBUTION .......................7
3.03 TIME OF PAYMENT OF CONTRIBUTION .....................7
3.04 RESERVED ............................................7
3.05 ACCRUAL OF BENEFIT ..................................7
3.06 .....................................................7
3.07 .....................................................7
3.08 .....................................................7
3.09 .....................................................7
3.10 .....................................................8
3.11 .....................................................8
3.12 .....................................................8
3.13 .....................................................8
3.14 .....................................................8
3.15 LIMITATIONS ON ALLOCATIONS ..........................8
3.16 SPECIAL ALLOCATION LIMITATION .......................9
3.17 DEFINED BENEFIT PLAN LIMITATION .....................9
3.18 DEFINITIONS - ARTICLE III ........................9-11
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS ............11
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS ...............11
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS .................11
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY...........12
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION .12
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT..........12
ARTICLE V, TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE ..............................12
5.02 VESTING ............................................12
ARTICLE VI, TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT ..............13-15
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT ............15-17
6.03 BENEFIT PAYMENT ELECTIONS...........................17
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND
SURVIVING SPOUSES ...............................17-19
6.05 WAIVER ELECTION - QUALIFIED JOINT AND
SURVIVOR ANNUITY ...................................19
6.06 WAIVER ELECTION - PRE-RETIREMENT
SURVIVOR ANNUITY ................................19-20
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS.......20
ARTICLE VII, TRUSTEE, POWERS AND DUTIES
7.01 INVESTMENT OF TRUST ASSETS .........................21
7.02 VOTING AND OTHER ACTION ............................21
7.03 REPORTS OF THE TRUSTEE AND EMPLOYER ................21
7.04 TRUSTEE FEES AND EXPENSES OF THE ACCOUNT ...........21
7.05 CONCERNING THE TRUSTEE .............................22
7.06 AMENDMENT ..........................................22
7.07 RESIGNATION OR REMOVAL OF TRUSTEE...................22
7.08 TERMINATION OF TRUST ...............................22
7.09 MISCELLANEOUS ......................................22
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION ............................23
8.02 NO BENEFICIARY DESIGNATION..........................23
8.03 PERSONAL DATA TO COMMITTEE..........................23
8.04 ADDRESS FOR NOTIFICATION............................23
8.05 ASSIGNMENT OR ALIENATION ...........................23
8.06 NOTICE OF CHANGE IN TERMS ..........................24
</TABLE>
<PAGE> 34
<TABLE>
<S> <C>
8.07 LITIGATION AGAINST THE TRUST .......................24
8.08 INFORMATION AVAILABLE...............................24
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS ............24
8.10 PARTICIPANT DIRECTION OF INVESTMENT ................24
ARTICLE IX, ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANT'S ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES ....................25
9.02 TERM ...............................................25
9.03 POWERS .............................................25
9.04 GENERAL ............................................25
9.05 FUNDING POLICY .....................................25
9.06 MANNER OF ACTION ...................................25
9.07 INTERESTED MEMBER ..................................25
9.08 INDIVIDUAL ACCOUNTS ................................25
9.09 VALUE OF PARTICIPANT'S ACCRUED BENEFIT .............26
9.10 ALLOCATIONS AND DISTRIBUTION OF NET INCOME
GAIN OR lOSS .......................................26
9.11 INDIVIDUAL STATEMENT................................26
9.12 ACCOUNT CHARGED ....................................26
9.13 MISSING BENEFICIARY ................................26
ARTICLE X, PROVISIONS RELATING TO INSURANCE
10.01 INSURANCE BENEFIT OR ANNUITY ......................27
10.02 FORM OF CONTRACT AND PREMIUM ......................27
10.03 LIMITATION OF LIFE INSURANCE PROTECTION ...........27
ARTICLE XI, MISCELLANEOUS
11.01 EVIDENCE ..........................................28
11.02 NO RESPONSIBILITY FOR EMPLOYER ACTION .............28
11.03 FIDUCIARIES NOT INSURERS ..........................28
11.04 WAIVER OF NOTICE ..................................28
11.05 SUCCESSORS.........................................28
11.06 WORD USAGE ........................................28
11.07 EMPLOYER'S RIGHT TO PARTICIPATE....................28
11.08 EMPLOYMENT NOT GUARANTEED .........................28
ARTICLE XII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 EXCLUSIVE BENEFIT .................................29
12.02 AMENDMENT BY EMPLOYER..............................29
12.03 AMENDMENT BY PLAN SPONSOR..........................30
12.04 DISCONTINUANCE.....................................30
12.05 MERGER/DIRECT TRANSFER.............................30
12.06 TERMINATION........................................31
ARTICLE XIII, CODE SECTION 401(k) ARRANGEMENTS
13.01 ELIGIBILITY........................................32
13.02 SALARY REDUCTION AGREEMENT ........................32
13.03 DEFINITIONS ....................................32-33
13.04 ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION ......33
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS ......33-34
13.06 ACTUAL DEFERRAL PERCENTAGE TEST ...................34
13.07 DISTRIBUTION OF EXCESS CONTRIBUTIONS...............35
13.08 MATCHING CONTRIBUTIONS ............................35
13.09 QUALIFIED MATCHING CONTRIBUTIONS ..................35
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS ..........35-36
13.11 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS ....36
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS ...............36
13.13 DISTRIBUTION REQUIREMENTS..........................37
</TABLE>
<PAGE> 35
PLAN DOCUMENT
ARTICLE I
DEFINITIONS
1.01 "EMPLOYER" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "TRUSTEE" means Investors Fiduciary Trust Company.
1.03 "PLAN" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement
which the Employer has executed.
1.04 "ADOPTION AGREEMENT" means the document executed by the Employer and the
Trustee by which the Employer establishes or continues this Plan.
1.05 "PLAN ADMINISTRATOR" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition
to his other duties, the Plan Administrator has full responsibility for
compliance with the reporting and disclosure rules under ERISA with
respect to this Agreement.
1.06 "ADVISORY COMMITTEE" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "EMPLOYEE" means any employee of the employer maintaining the Plan or of
any other employer required to be aggregated with such employer under
Code Section 4l4(b), (c), (m) or (o). The term employee shall also
include any leased employee deemed to be an employee of any employer
described in the previous paragraph as provided in Code Section 4l4(n)
or (o).
1.08 "SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned
Income but for the fact that the trade or business did not have net
earnings) for the taxable year from the trade or business for which the
Plan is established. "Owner-Employee" means a Self-Employed Individual
who is the sole proprietor in the case of a sole proprietorship. If the
Employer is a partnership, "Owner-Employee" means a Self-Employed
Individual who is a partner and owns more than 10% of either the capital
or profits interest of the partnership.
1.09 "HIGHLY COMPENSATED EMPLOYEE" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(A) is a 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles
of Code Section 318, for an unincorporated entity);
(B) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(C) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is
part of the top-paid 20% group of Employees (based on
Compensation for the relevant year);
(D) has Compensation in excess of 50% of the dollar amount prescribed
in Code Section 415(b)(1)(A) (relating to defined benefit plans)
and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in
the Plan Year but not during the preceding 12-month period and does not
satisfy clause (a) in either period, the Employee is a Highly
Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken
into account under clause (d) will not exceed the greater of 3 or 10% of
the total number (after application of the Code Section 414(q)
exclusions) of Employees, but no more than 50 officers. If no Employee
satisfies the Compensation requirement in clause (d) for the relevant
year, the Advisory Committee will treat the highest paid officer as
satisfying clause (d) for that year.
For purposes of this Section, "Compensation" means Compensation as
defined in Section 1.12, and Compensation must include: (i) elective
deferrals under a Code Section 401(k) arrangement or under a Simplified
Employee Pension maintained by the Employer; and (ii) amounts paid by
the Employer which are not currently includible in the Employee's gross
income because of Code Sections 125 (cafeteria plans) or 403(b)
(tax-sheltered annuities). The Advisory Committee must make the
determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the top paid 20% group, the
top 100 paid Employees, the number of officers includible in clause (d)
and the relevant Compensation, consistent with Code Section 414(q) and
regulations issued under that Code section. The Employer may make a
calendar year election to determine the Highly Compensated Employees for
the Plan Year, as prescribed by Treasury regulations. A calendar year
election must apply to all plans and arrangements of the Employer. For
purposes of applying any nondiscrimination test required under the Plan
or under the Code, in a manner consistent with applicable Treasury
regulations, the Advisory Committee will not treat as a separate
Employee a family member (a spouse, a lineal ascendant or descendant, or
a spouse of lineal ascendant or descendant) of a Highly Compensated
Employee described in clause (a) of this Section, or a family member of
one of the ten Highly Compensated Employees with the greatest
Compensation for the Plan Year, but will treat the Highly Compensated
Employee and all family members as a single Highly Compensated Employee.
This aggregation rule applies to a family member even if that family
member is a Highly Compensated Employee without family aggregation.
1
<PAGE> 36
The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs
no Service for the Employer during the Plan Year, and was a Highly
Compensated Employee either for the separation year or any Plan Year
ending on or after his 55th birthday. If the former Employee's
Separation from Service occurred prior to January 1, 1987, he is a
Highly Compensated Employee only if he satisfied clause (a) of this
Section 1.09 or received Compensation in excess of $50,000 during: (1)
the year of his Separation from Service (or the prior year); or (2) any
year ending after his 54th birthday.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees treated as
officers and the Compensation that is considered, will be made in
accordance with Code Section 414(q) and the regulations thereunder.
1.10 "PARTICIPANT" is any Employee other than a Member of a Collective
Bargaining Unit who is eligible to be and becomes a Participant in
accordance with the provisions of Section 2.01.
1.11 "BENEFICIARY" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes
entitled to a benefit under the Plan remains a Beneficiary under the
Plan until the Trustee has fully distributed his benefit to him. A
Beneficiary's right to (and the Plan Administrator's, the Advisory
Committee's or a Trustee's duty to provide to the Beneficiary)
information or data concerning the Plan does not arise until he first
becomes entitled to receive a benefit under the Plan.
1.12 "COMPENSATION" means compensation as that term is defined in Section
3.18(b) of the Plan. If compensation for any prior plan year is taken
into account in determining an employee's contributions or benefits for
the current year, the compensation for such prior year is subject to the
applicable annual compensation limit in effect for that prior year. For
this purpose, for years beginning before January 1, 1990, the applicable
annual compensation limit is $200,000. For any self-employed individual
covered under the plan, compensation will mean earned income.
Compensation shall include only that compensation which is actually paid
to the participant during the applicable period. Except as provided
elsewhere in this plan, the applicable period shall be the plan year.
Furthermore, notwithstanding the above, the definition of compensation
includes elective contributions made by the Employer on the Employee's
behalf. "Elective contributions" are amounts excludible from the
Employee's gross income under Code Section 402(a)(8) (relating to a Code
Section 401(k) arrangement), Code Section 402(h) (relating to a
Simplified Employee Pension), Code Section 125 (relating to a cafeteria
plan) or Code Section 403(b) (relating to a tax-sheltered annuity) and
contributed at the Employee's election. The term "Compensation" does
not include:
(A) Employer contributions (other than "elective contributions") to a
plan of deferred compensation to the extent the contributions are
not included in the gross income of the Employee for the taxable
year in which contributed, on behalf of an Employee to a
Simplified Employee Pension Plan to the extent such contributions
are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of
whether such amounts are includible in the gross income of the
Employee when distributed.
(B) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture.
(C) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option.
(D) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent
that the premiums are not includible in the gross income of the
Employee), or contributions made by an Employer (whether or not
under a salary reduction agreement) towards the purchase of an
annuity contract described in Code Section 403(b) (whether or
not the contributions are excludible from the gross income of the
Employee), other than "elective contributions," if elected in the
Employer's Adoption Agreement.
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.12, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into
account only Compensation actually paid for the relevant period.
For any Plan Year beginning after December 31, 1988, the Advisory
Committee must take into account only the first $200,000 (or such larger
amount as the Commissioner of Internal Revenue may prescribe under Code
Section 415(d)) of any Participant's Compensation, except that the dollar
increase in effect on January 1 of any calendar year is effective for
years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1,1990. If a plan determines
compensation on a period of time that contains fewer than 12 calendar
months, then the annual compensation limit is an amount equal to the
annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12. The $200,000
Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under
Section 1.09 and who is either (i) the Employee's spouse; or (ii) the
Employee's lineal descendant who has not attained age 19 before the
close of the year. If, as a result of the application of such rules, the
adjusted $200,000 limitation is exceeded, then (except for purposes of
determining the portion of compensation up to the integration level if
this plan provides for permitted disparity, the Advisory Committee will
apply the contribution and allocation provisions of Article III by
prorating the $200,000 (or adjusted) limitation among the affected
individuals in proportion to each such individual's Compensation
determined prior to application of this limitation.
2
<PAGE> 37
PLAN DOCUMENT
NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees: Compensation
means Compensation as defined in this Section 1.12.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Code Section 22(e)(3)) is the compensation such
Participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled Participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Code Section 414(g)) and contributions made on behalf of
such participant are nonforfeitable when made.
1.13 "EARNED INCOME" means net earnings from self-employment in the trade
or business with respect to which the Employer has established the
Plan, provided personal services of the individual are a material
income producing factor. The Advisory Committee will determine net
earnings without regard to items excluded from gross income and the
deductions allocable to those items. Net earnings are reduced by
contributions by the employer to a qualified plan to the extent
deductible under Code Section 404. The Advisory Committee will
determine net earnings after the deduction allowed to the
Self-Employed Individual for all contributions made by the Employer
to a qualified plan and, for Plan Years beginning after December 31,
1989, the deduction allowed to the Self-Employed under Code
Section 164(f) for self-employment taxes.
1.14 "ACCOUNT" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Employer's Plan.
1.15 "ACCRUED BENEFIT" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and
Employee contributions and earnings thereon including rollovers
whether vested before or after death and including the proceeds of
insurance contracts on the participant's life, if any.
1.16 "NONFORFEITABLE" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's
Accrued Benefit.
1.17 "PLAN YEAR" means the fiscal year, of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's
Adoption Agreement also must specify the "Limitation Year" applicable
to the limitations on allocations described in Article III. If the
Employer maintains Paired Plans, each Plan must have the same Plan
Year.
1.18 "EFFECTIVE DATE" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "PLAN ENTRY DATE" means the first day of the Plan Year or the first
day of the sixth month of the Plan Year.
1.20 "ACCOUNTING DATE" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all
Plan allocations for a particular Plan Year as of the Accounting Date
of that Plan Year.
1.21 "TRUST" means the separate Trust created under the Employer's Plan.
1.22 "TRUST FUND" means all property of every kind held or acquired by the
Trustee under the Employer's Plan, other than incidental benefit
insurance contracts.
1.23 "NONTRANSFERABLE ANNUITY" means an annuity which by its terms provides
that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security for the performance of an obligation or for any
purpose to any person other than Kemper Investors Life Insurance
Company. If the Trustee distributes an annuity contract, the contract
must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
l.25 "CODE" means the Internal Revenue Code of 1986, as amended.
1.26 "SERVICE" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave
of absence authorized by the Employer under a uniform,
nondiscriminatory policy applicable to all Employees. "Separation from
Service" means a separation from Service with the Employer maintaining
this Plan.
1.27 "HOUR OF SERVICE" means:
(A) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment, for the performance of duties for the
Employer. The Advisory Committee credits Hours of Service
under this paragraph (a) to the Employee for the computation
period in which the Employee performs the duties, irrespective
of when paid;
(B) Each Hour of Service for back pay, irrespective of mitigation
of damages, to which the Employer has agreed or for which the
Employee has received an award. The Advisory Committee credits
Hours of Service under this paragraph (b) to the Employee for
the computation period(s) to which the award or the agreement
pertains rather than for the computation period in which the
award, agreement or payment is made; and
3
<PAGE> 38
(C) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment (irrespective of whether the employment
relationship is terminated) for reasons other than for the
performance of duties during a computation period, such as
leave of absence, vacation, holiday, sick leave, illness,
incapacity (including disability), layoff, jury duty or
military duty. The Advisory Committee will credit no more than
501 Hours of Service under this paragraph (c) to an Employee
on account of any single continuous period during which the
Employee does not perform any duties (whether or not such
period occurs during a single computation period). The
Advisory Committee credits Hours of Service under this
paragraph (c) in accordance with the rules of paragraphs (b)
and (c) of Labor Reg. Section 2530.200b-2, which the Plan, by
this reference, specifically incorporates in full within this
paragraph (c).
The Advisory Committee will not credit an Hour of Service under more
than one of the above paragraphs. A computation period for purposes of
this Section 1.27 is the Plan Year, Year of Service period, Break in
Service period or other period, as determined under the Plan provision
for which the Advisory Committee is measuring an Employee's Hours of
Service. The Advisory Committee will resolve any ambiguity with
respect to the crediting of an Hour of Service in favor of the
Employee.
An Employee for whom a record of hours worked is not maintained shall
be credited with 45 Hours of Service for each week in which he or she
completes at least one Hour of Service.
Solely for purposes of determining whether the Employee incurs a Break
in Service under any provision of this Plan, the Advisory Committee
must credit Hours of Service during an Employee's unpaid absence
period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the
Employee's absence is due to the Employee's pregnancy, the birth of
the Employee's child, the placement with the Employee of an adopted
child, or the care of the Employee's child immediately following the
child's birth or placement. The Advisory Committee credits Hours of
Service under this paragraph on the basis of the number of Hours of
Service the Employee would receive if he were paid during the absence
period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours
per day during the absence period. The Advisory Committee will credit
only the number (not exceeding 501) of Hours of Service necessary to
prevent an Employee's Break in Service. The Advisory Committee credits
all Hours of Service described in this paragraph to the computation
period in which the absence period begins or, if the Employee does not
need these Hours of Service to prevent a Break in Service in the
computation period in which his absence period begins, the Advisory
Committee credits these Hours of Service to the immediately following
computation period.
Hours of service will also be credited for any individual considered
an employee for purposes of this Plan under Code Section 414(n) or
Section 414(o) and the regulations thereunder.
1.28 "DISABILITY" means inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12
months. The permanence and degree of such impairment shall be
supported by medical evidence. The Plan considers a Participant
disabled on the date the Advisory Committee determines the Participant
satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to
confirm disability. The Advisory Committee will apply the provisions
of this Section 1.28 in a nondiscriminatory, consistent and uniform
manner.
1.29 "SERVICE FOR PREDECESSOR EMPLOYER"
If the Employer maintains the plan of a predecessor employer, the Plan
treats service of the Employee with the predecessor employer as
service with the Employer. If the Employer does not maintain the plan
of a predecessor employer, the Plan does not credit service with the
predecessor employer.
1.30 "RELATED EMPLOYERS"
A related group is a controlled group of corporations (as
defined in Code Section 414(b)), trades or businesses (whether or not
incorporated) which are under common control (as defined in Code
Section 414(c)), or an affiliated service group (as defined in Code
Section 414(m) or in Code Section 414(o)). If the Employer is a member
of a related group, the term "Employer" includes the related group
members for purposes of crediting Hours of Service, determining Years
of Service and Breaks in Service under Articles II and V, applying the
limitations on allocations in Part 2 of Article III, applying the top
heavy rules and the minimum allocation requirements of Article III,
the definitions of Employee, Highly Compensated Employee, Compensation
and Leased Employee, and for any other purpose required by the
applicable Code section or by a Plan provision. However, an Employer
may contribute to the Plan only by being a signatory to the Execution
Page of the Adoption Agreement or to a Participation Agreement to the
Employer's Adoption Agreement. If one or more of the Employer's
related group members becomes Participating Employers by executing a
Participation Agreement to the Employer's Adoption Agreement, the term
"Employer" includes the participating related group members, for all
purposes of the Plan, and "Plan Administrator" means the Employer that
is the signatory to the Execution Page of the Adoption Agreement.
All Employees of the Employer or of any member of the Employer's
related group, are eligible to participate in the Plan, irrespective
of whether the related group member directly employing the Employee is
a Participating Employer.
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PLAN DOCUMENT
1.31 "LEASED EMPLOYEES"
The Plan treats a Leased Employee as an Employee of the Employer. A
Leased Employee is an individual (who otherwise is not an Employee of
the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer
(or for the Employer and any persons related to the Employer
determined in accordance with Code Section 414(n)(6) on a substantially
full-time basis for at least one year and who performs services
historically performed by employees in the Employer's business field.
If a Leased Employee is treated as an Employee by reason of this
Section 1.31 of the Plan, "Compensation" includes Compensation from
the leasing organization which is attributable to services performed
for the Employer. Contributions or benefits provided a leased employee
by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by
the recipient employer.
SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee
as an Employee if the leasing organization covers the employee in a
safe harbor plan and, prior to application of this safe harbor plan
exception, 20% or less of the Employer's Employees (other than Highly
Compensated Employees) are Leased Employees. A safe harbor plan is a
money purchase pension plan providing immediate participation, full
and immediate vesting, and a nonintegrated contribution formula equal
to at least 10% of the employee's compensation without regard to
employment by the leasing organization on a specified date. The safe
harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective
contributions (as defined in Section 1.12).
OTHER REQUIREMENTS. The Advisory Committee must apply this Section
1.31 in a manner consistent with Code Sections 414(n) and 414(o) and
the regulations issued under those Code sections. If a Leased
Employee is a Participant in the Plan and also participates in a
defined contribution plan maintained by the leasing organization,
then the Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without
taking into account the Leased Employee's allocation, if any, under
the leasing organization's plan.
1.32 "SPECIAL RULES FOR OWNER-EMPLOYEES"
The following special provisions and restrictions apply to
Owner-Employees:
If this plan provides contributions or benefits for one or more
owner-employees who control both the business for which this plan is
established and one or more other trades or businesses, this plan and
the plan established for other trades or businesses must, when looked
at as a single plan, satisfy sections 401(a) and (d) for the
employees of this and all other trades or businesses.
If the plan provides contributions or benefits for one or more
owner-employees who control one or more other trades or businesses,
the employees of the other trades or businesses must be included in a
plan which satisfies sections 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for
owner-employees under this plan.
If an individual is covered as an owner-employee under the plans of
two or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or businesses
which are controlled must be as favorable as those provided for him
under the most favorable plan of the trade or business which is not
controlled.
For purposes of the preceding paragraphs, an owner-employee, or two or
more owner-employees, will be considered to control a trade or
business if the owner-employee, or two or more owner-employees
together:
(1) own the entire interest in an unincorporated trade or
business, or
(2) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an owner-employee, or two or
more owner-employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such owner-employee, or such two or more owner-employees, are
considered to control within the meaning of the preceding sentence.
1.33 "TAXABLE WAGE BASE" means 100% of the taxable wage base as determined
under Section 230 of the Social Security Act in effect on the first
day of the plan year.
1.34 "PAIRED PLANS" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Kemper Retirement Plan Prototype
Keogh/Corporate, one Adoption Agreement being a Paired Profit Sharing
Plan and one Adoption Agreement being a Paired Pension Plan. A Paired
Profit Sharing Plan may include a Code Section 401(k) arrangement. A
Paired Pension Plan must be a money purchase pension plan. Paired
Plans must be the subject of a favorable opinion letter issued by
the National Office of the Internal Revenue Service.
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1.35 "MEMBER OF A COLLECTIVE BARGAINING UNIT" means any employee who is
included in a unit and whose terms and conditions of employment are
covered by a collective bargaining agreement between the Employer and
employee representatives which does not provide for participation in
the Plan, provided that there is evidence that, in connection with
such agreement, retirement benefits were the subject of good-faith
bargaining. For this purpose, the term "employee representatives" does
not include any organization more than half of whose members are
employees who are owners, officers or executives of the Employer.
1.36 "DESIGNATED INVESTMENT COMPANY" means any registered investment
company the investment manager or principal underwriter of which is
Kemper Financial Services, Inc. or an affiliate.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 "ELIGIBILITY"
Each Employee becomes a Participant in the Plan in accordance with the
participation option selected by the Employer in its Adoption
Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues
as a Participant in the Plan.
2.02 "YEAR OF SERVICE - PARTICIPATION"
For purposes of an Employee's participation in the Plan under Adoption
Agreement Section 2.01, the Plan takes into account all of his Years
of Service with the Employer, except that if an Employee has a Break
in Service before satisfying the Plan's requirement for eligibility,
Service before such break will not be taken into account. "Year of
Service" means a 12 consecutive month period during which the Employee
completes not less than 1,000 Hours of Service, measuring the
beginning of the first 12 month period from the Employment
Commencement Date, and each anniversary thereof. "Employment
Commencement Date" means the date on which the Employee first performs
an Hour of Service for the Employer.
2.03 "BREAK IN SERVICE - PARTICIPATION"
An Employee incurs a "Break in Service" if during any 12 consecutive
month period he does not complete more than 500 Hours of Service with
the Employer. The "12 consecutive month period" under this Section 2.03
is the same 12 consecutive month period for which the Plan measures
"Years of Service" under Section 2.02.
TWO-YEAR ELIGIBILITY. If the Employer elects a 2 years of service
condition for eligibility purposes under Adoption Agreement Section
2.01, the Plan treats an Employee who incurs a one year Break in
Service and who has never become a Participant as a new Employee on
the date he first performs an Hour of Service for the Employer after
the Break in Service.
2.04 "PARTICIPATION UPON RE-EMPLOYMENT"
A Participant whose employment terminates re-enters the Plan as a
Participant on the date of his re-employment. An Employee who
satisfies the Plans' eligibility conditions but who terminates
employment prior to becoming a Participant becomes a Participant on
the later of the Plan Entry Date on which he would have entered the
Plan had he not terminated employment or the date of his
re-employment. Any Employee who terminates employment prior to
satisfying the Plan's eligibility conditions becomes a Participant in
accordance with Adoption Agreement Section 2.01.
2.05 "CHANGE IN EMPLOYEE STATUS"
If a Participant has not incurred a Separation from Service but ceases
to be eligible to participate in the Plan, by reason of becoming a
member of a Collective Bargaining Unit, the Advisory Committee must
treat the Participant as an excluded employee during the period such a
Participant is a Member of a Collective Bargaining Unit. The Advisory
Committee determines a Participant's sharing in the allocation of
Employer contributions by disregarding his Compensation paid by the
Employer for services rendered in his capacity as a Member of a
Collective Bargaining Unit. However, during such period of exclusion,
the Participant, without regard to employment classification,
continues to receive credit for vesting under Article V for each
included Year of Service and the Participant' Account continues to
share fully in Trust Fund allocations under Section 9.11.
If an excluded employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment
classification, he will participate in the Plan immediately if he has
satisfied the eligibility conditions of Section 2.01 and would have
been a Participant had he not been an excluded employee during his
period of Service. Furthermore, the Plan takes into account all of the
Participant's included Years of Service with the Employer as an
Excluded Employee for purposes of vesting credit under Article V.
In the event a participant is no longer a member of an eligible class
of employees and becomes ineligible to participate but has not
incurred a break in service, such employee will participate
immediately upon returning to an eligible class of employees. If such
participant incurs a break in service, eligibility will be determined
under the break in service rules of the plan.
2.06 "ELECTION NOT TO PARTICIPATE"
The Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan.
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<PAGE> 41
PLAN DOCUMENT
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS:
SECTIONS 3.01 THROUGH 3.06
3.01 "AMOUNT"
For each Plan Year, the Employer contributes to the Trust the amount
determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a
contribution to the Trust for any Plan Year to the extent the
contribution would exceed the Participants' Maximum Permissible
Amounts.
The Trustee, upon written request from the Employer, must return to
the Employer the amount of the Employer's contribution made by the
Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code Section 404. The
Trustee will not return any portion of the Employer's contribution
under the provisions of this paragraph more than one year after:
(A) The Employer made the contribution by mistake of fact; or
(B) The disallowance of the contribution as a deduction, and then,
only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to
the contribution, but the Trustee will decrease the Employer
contribution returnable for any losses attributable to it. The Trustee
may require the Employer to furnish it whatever evidence the Trustee
deems necessary to enable the Trustee to confirm the amount the
Employer has requested be returned is properly returnable under ERISA.
3.02 "DETERMINATION OF CONTRIBUTION"
The Employer, from its records, determines the amount of any
contributions to be made by it to the Trust under the terms of the
Plan.
3.03 "TIME OF PAYMENT OF CONTRIBUTION"
The Employer may pay its contribution for each Plan Year in one or
more installments without interest. The Employer must make its
contribution to the Trustee within the time prescribed by the Code or
applicable Treasury regulations.
3.04 "RESERVED"
3.05 "ACCRUAL OF BENEFIT"
The accrual of benefit shall be determined on the basis of the Plan
Year. In determining the amount of the Employer contribution to a
participant's account, only compensation with respect to that part of
a Plan Year the employee is actually a participant shall be taken into
account.
Employer contributions will be allocated to each Participant who
either completes 500 hours of service during the Plan Year or who is
employed by the Employer on the last day of the Plan Year.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.06 THROUGH 3.09
[Note: Sections 3.06 through 3.09 apply only to Participants in this
Plan who do not participate, and who have never participated, in
another qualified plan or in a welfare benefit fund as defined in Code
Section 419(e) or an individual medical account as defined in Code
Section 415(1)(2) maintained by the Employer.
3.06 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount. If the amount the
Employer otherwise would contribute to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the Employer will reduce the amount of its
contribution so the Annual Additions for the Limitation Year will
equal the Maximum Permissible Amount.
3.07 Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Advisory Committee may determine the
Maximum Permissible Amount on the basis of the Participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated.
3.08 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum
Permissible Amount for such Limitation Year on the basis of the
Participant's actual Compensation for such Limitation Year.
3.09 If, pursuant to Section 3.08 there is an Excess Amount with respect to
a Participant for a Limitation Year, the Advisory Committee will
dispose of such Excess Amount as follows:
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<PAGE> 42
(A) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the
return would reduce the Excess Amount.
(B) If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
Contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each
succeeding Limitation Year if necessary.
(C) If, after the application of paragraph (b), an Excess Amount
still exists, and the Plan does not cover the Participant at
the end of the Limitation Year, then the Advisory Committee
will hold the Excess Amount unallocated in a suspense account.
The Advisory Committee will apply the suspense account to
reduce Employer Contributions for all remaining Participants
in the next Limitation Year, and in each succeeding Limitation
Year if necessary.
(D) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants. If a
suspense account is in existence at any time during a
limitation year pursuant to this section, it will not
participate in the allocation of the trust's investment gains
and losses. If a suspense account is in existence at any time
during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to
participants' accounts before any employer or any employee
contributions may be made to the plan for that limitation
year.
[Note: Sections 3.10 through 3.15 apply if, in addition to this Plan,
the Participant is covered under another qualified master or prototype
defined contribution plan maintained by the Employer, a welfare
benefit fund, as defined in Code Section 419(e) maintained by the
Employer or an individual medical account, as defined in Code Section
415(1)(2) maintained by the Employer which provides an annual
addition during any Limitation Year.]
3.10 The annual additions which may be credited to a participant's account
under this plan for any such limitation year will not exceed the
maximum permissible amount reduced by the annual additions credited to
a participant's account under the other plans and welfare benefit
funds for the same limitation year. If the annual additions with
respect to the participant under other defined contribution plans and
welfare benefit funds maintained by the employer are less than the
maximum permissible amount and the employer contribution that would
otherwise be contributed or allocated to the participant's account
under this plan would cause the annual additions for the limitation
year to exceed this limitation, the amount contributed or allocated
will be reduced so that the annual additions under all such plans and
funds for the limitation year will equal the maximum permissible
amount. If the annual additions with respect to the participant under
such other defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the maximum permissible amount,
no amount will be contributed or allocated to the participant's
account under this plan for the limitation year.
3.11 Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the Advisory Committee may determine the
amounts referred to in 3.10 above on the basis of the Participant's
estimated annual Compensation for such Limitation Year. The Advisory
Committee will make this determination on a reasonable and uniform
basis for all Participants similarly situated.
3.12 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts
referred to in 3.10 on the basis of the Participant's actual
Compensation for such Limitation Year.
3.13 If pursuant to Section 3.12, a Participant's Annual Additions under
this Plan and all such other plans result in an Excess Amount, such
Excess Amount will consist of the Amounts last allocated. The Advisory
Committee will determine the Amounts last allocated by treating the
Annual Additions attributable to a welfare benefit fund or individual
medical account as allocated first, irrespective of the actual
allocation date under the welfare benefit fund.
3.14 If the Advisory Committee allocates an Excess Amount to a Participant
on an allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Amount attributed to this Plan equals
the product of:
(i) the total Excess Amount allocated as of such date (including
any amount which the Advisory Committee would have allocated
but for the limitations of Code Section 415), times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount
allocated as of such date under all qualified master or
prototype defined contribution plans (determined without
regard to the limitations of Code Section 415).
3.15 The Advisory Committee will dispose of any Excess Amounts attributed
to this Plan as provided in Section 3.09.
[Note: Section 3.16 applies only to Participants who, in addition to
this Plan, participate in one or more qualified plans which are
qualified defined contribution plans other than a Master or Prototype
plan maintained by the Employer during the Limitation Year.]
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PLAN DOCUMENT
3.16 "SPECIAL ALLOCATION LIMITATION"
The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on behalf of any Participant are limited in
accordance with the provisions of Section 3.10 through 3.15, as though
the other plan were a Master or Prototype plan.
3.17 "DEFINED BENEFIT PLAN LIMITATION"
If the Employer maintains a defined benefit plan, or has ever
maintained a defined benefit plan which the Employer has terminated,
then the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The annual additions which may be credited to the
participant's account under this plan for any limitation year will be
limited in accordance with Section 3.17 of the adoption agreement. To
the extent necessary to satisfy the limitations of this Section 3.17,
the Employer will reduce the Participant's projected annual benefit
under the defined benefit plan under which the Participant
participates. The Employer also must provide in an addendum to its
Adoption Agreement the manner in which the Plan will satisfy the
top-heavy requirements of Code Section 416 after taking into account
the existence (or prior maintenance) of the defined benefit plan.
3.18 "DEFINITIONS - ARTICLE III"
For purposes of this Article III, the following terms mean:
(A) "ANNUAL ADDITION" - The sum of the following amounts
allocated on behalf of a Participant for a Limitation Year, of
(i) all Employer contributions; (ii) all forfeitures; and
(iii) all Employee contributions. Except to the extent
provided in Treasury regulations, Annual Additions include
excess contributions described in Code Section 401(k), excess
aggregate contributions described in Code Section 401(m) and
excess deferrals described in Code Section 402(g),
irrespective of whether the plan distributes or forfeits such
excess amounts. Annual Additions also include Excess Amounts
reapplied to reduce Employer contributions under Section 3.09.
Amounts allocated after March 31, 1984, to an individual
medical account (as defined in Code Section 415(1)(2))
included as part of a defined benefit pension or annuity plan
maintained by the Employer are Annual Additions. Furthermore,
Annual Additions include contributions paid or accrued after
December 31, 1985, for taxable years ending after December
31,1985, attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code Section 419A(d)(3)) under a welfare benefit
fund (as defined in Code Section 419(e)) maintained by the
Employer. For this purpose, any excess amount applied in the
limitation year to reduce employer contributions will be
considered annual additions for such limitation year.
(B) "COMPENSATION" - For purposes of applying the limitations of
Part 2 of this Article III, "Compensation" means a
participant's earned income, wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the employer maintaining the plan to the
extent that the amounts are includible in gross income
(including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, reimbursements and expense allowances), and
excluding the following:
(I) Employer contributions to a plan of deferred
compensation which are not includible in the
employee's gross income for the taxable year in which
contributed, or employer contributions under a
simplified employee pension plan to the extent such
contributions are deductible by the employee, or any
distributions from a plan of deferred compensation;
(II) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(III) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(IV) other amounts which received special tax benefits, or
contributions made by the employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in section 403(b) of
the Internal Revenue Code (whether or not the amounts
are actually excludible from the gross income of the
employee).
For purposes of applying the limitations of this article,
compensation for a limitation year is the compensation actually paid
or includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Section 22(e)(3) of the Code) is the compensation such
participant would have received for the limitation year if the
participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Section 414(g) of the Code) and contributions made on
behalf of such participant are nonforfeitable when made.
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<PAGE> 44
(C) "EMPLOYER" - The Employer that adopts this Plan and any
related employers described in Section 1.30. Solely for
purposes of applying the limitations of Part 2 of this Article
III, the Advisory Committee will determine related employers
described in Section 1.30 by modifying Code Sections 414(b)
and (c) in accordance with Code Section 415(h).
(D) "EXCESS AMOUNT" - The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(E) "LIMITATION YEAR" - The period selected by the Employer under
Adoption Agreement Section 1.17. All qualified plans of the
Employer must use the same Limitation Year. If the Employer
amends the Limitation Year to a different 12 consecutive
month period, the new Limitation Year must begin on a date
within the Limitation Year for which the Employer makes the
amendment, creating a short Limitation Year.
(F) "MASTER OR PROTOTYPE PLAN" - A plan the form of which is the
subject of a favorable opinion letter from the Internal
Revenue Service.
(G) "MAXIMUM PERMISSIBLE AMOUNT" - The lesser of (i) $30,000 (or,
if greater, one-fourth of the defined benefit dollar
limitation under Code Section 415(b)(1)(A)), or (ii) 25% of the
Participant's Compensation for the Limitation Year. If there
is a short Limitation Year because of a change in Limitation
Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
Number of months in the short Limitation Year: 12
The 25% compensation limitation shall not apply to any
contribution for medical benefits (within the meaning of Code
Section 401(h) or 419A(f)(2) which is otherwise treated as an
annual addition under Code Section 415(l)(1) or 419A(d)(2).
(H) "DEFINED CONTRIBUTION PLAN" - A retirement plan which
provides for an individual account for each participant and
for benefits based solely on the amount contributed to the
participant's account, and any income, expenses, gains and
losses, and any forfeitures of accounts of other participants
which the plan may allocate to such participant's account. The
Advisory Committee must treat all defined contribution plans
(whether or not terminated) maintained by the Employer as a
single plan. Solely for purposes of the limitations of Part 2
of this Article III, the Advisory Committee will treat
employee contributions made to a defined benefit plan
maintained by the Employer as a separate defined contribution
plan. The Advisory Committee also will treat as a defined
contribution plan an individual medical account (as defined in
Code Section 415(1)(2)) included as part of a defined benefit
plan maintained by the Employer and, for taxable years ending
after December 31,1985, a welfare benefit fund under Code
Section 419(e) maintained by the Employer to the extent there
are post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section
419A(d)(3)).
(I) "DEFINED BENEFIT PLAN" - A retirement plan which does not
provide for individual accounts for Employer contributions.
The Advisory Committee must treat all defined benefit plans
(whether or not terminated) maintained by the Employer as a
single plan.
[Note: The definitions in paragraphs (j) and (k) apply only if
the limitation described in Section 3.17 applies to the
Employer's Plan.]
(J) "DEFINED BENEFIT PLAN FRACTION" -PROJECTED annual benefit of
the Participant under the defined benefit plan(s) The lesser of
(I) 125% of the dollar limitation determined under
Code Section 415 (b) and (d) for the Limitation Year,
or
(II) 140% of the Participant's average Compensation
for his high three (3) consecutive Years of Service
To determine the denominator of this fraction, the
Advisory Committee will make any adjustment required under
Code Section 415(b) and will determine a Year of Service,
unless otherwise provided in an addendum to Adoption Agreement
Section 3.06, as a Plan Year in which the Employee completed
at least 1,000 Hours of Service. The "projected annual
benefit" is the annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if the plan
expresses such benefit in a form other than a straight life
annuity or qualified joint and survivor annuity) of the
Participant under the terms of the defined benefit plan on the
assumptions he continues employment until his normal
retirement age (or current age, if later) as stated in the
defined benefit plan, his compensation continues at the same
rate as in effect in the Limitation Year under consideration
until the date of his normal retirement age and all other
relevant factors used to determine benefits under the defined
benefit plan remain constant as of the current Limitation Year
for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits
in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the dollar
limitation used in the denominator of this fraction will not
be less than the Participant's Current Accrued Benefit. A
Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the
Participant had accrued as of the end of the 1986 Limitation
Year (the last Limitation Year beginning before January
1, 1987), determined without regard to any cost of living
adjustment occurring after May 5, 1986. This Current Accrued
Benefit rule applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 as in effect at the end of the 1986
Limitation Year.
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PLAN DOCUMENT
Notwithstanding the above, if the participant was a
participant as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined
benefit plans maintained by the employer which were in
existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual
benefits under such plans which the participant had accrued as
of the close of the last limitation year beginning before
January 1,1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Section 415 for all limitation years beginning before January
1, 1987
(k) "DEFINED CONTRIBUTION PLAN FRACTION" - Section 5.5 Defined
contribution fraction: A fraction, the numerator of which is
the sum of the annual additions to the participant's account
under all the defined contribution plans (whether or not
terminated) maintained by the employer for the current and all
prior limitation years (including the annual additions
attributable to the participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the employer, and the annual
additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(1)(2) of the Code,
maintained by the employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and
all prior limitation years of service with the employer
(regardless of whether a defined contribution plan was
maintained by the employer). The maximum aggregate amount in
any limitation year is the lesser of 125 percent of the
dollar limitation determined under Sections 415(b) and (d) of
the Code in effect under Section 415(c)(1)(A) of the Code or
35 percent of the participant 's compensation for such year.
If the employee was a participant as of the end of the first
day of the first limitation year beginning after December 31,
1986, in one or more defined contribution plans maintained by
the employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise
exceed 1.0 under the terms of this plan. Under the adjustment,
an amount equal to the product of (l) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the
plan made after May 5, 1986, but using the Section 415
limitation applicable to the first limitation year beginning
on or after January 1, 1987.
The annual addition for any limitation year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
The average compensation for the three consecutive years of
service with the employer that produces the highest average.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 "PARTICIPANT ON DEDUCTIBLE CONTRIBUTIONS"
This Plan does not permit Participant nondeductible contributions. If,
prior to the adoption of this Plan, the Plan accepted Participant
nondeductible contributions for a Plan Year beginning after December
31, 1986, those contributions must satisfy the requirements of Code
Section 401(m) and must be maintained in a separate account which
will be nonforfeitable at all times. This Section 4.01 does not
prohibit the Plan's acceptance of Participant nondeductible
contributions prior to the first Plan Year commencing after the Plan
Year in which the Employer adopts this Plan.
4.02 "PARTICIPANT DEDUCTIBLE CONTRIBUTIONS"
The Plan will not accept Participant deductible contributions which
are made for a taxable year beginning after December 31, 1986.
Contributions made prior to that date will be maintained in a separate
account which will be nonforfeitable at all times. The account will
share in the gains and losses of the trust in the same manner as
described in Section 9.10 of the Plan. No part of the deductible
voluntary contribution account will be used to purchase life
insurance. Subject to Article VI, joint and survivor annuity
requirements (if applicable), the participant may withdraw any part of
the deductible voluntary contribution account by making a written
application to the Advisory Committee.
4.03 "PARTICIPANT ROLLOVER CONTRIBUTIONS"
Any Participant, with the Employer's written consent and after filing
with the Employer the form prescribed by the Advisory Committee, may
contribute cash or other property to the Trust other than as a
voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either
directly or indirectly from one qualified plan to another qualified
plan. Before accepting a rollover contribution, the Trustee may
require an Employee to furnish satisfactory evidence that the proposed
transfer is in fact a "rollover contribution" which the Code permits
an employee to make to a qualified plan. A rollover contribution is
not an Annual Addition under Part 2 of Article III.
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<PAGE> 46
The Employer will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the
Employer in its sole discretion, agrees to invest the rollover
contribution as part of the Trust Fund. The Employer will not have
any investment responsibility with respect to a Participant's
segregated rollover Account. The Participant, however, from time to
time, may direct the Employer in writing as to the investment of his
segregated rollover Account in shares of a Designated Investment
Company, annuity contract(s) or life insurance sold or distributed by
Kemper Financial Services, Inc. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from
investments made at the direction of the Participant. As of the
Accounting Date (or other valuation date) for each Plan Year, the
Advisory Committee will allocate and credit the net income (or net
loss) from a Participant's segregated rollover Account and the
increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Employer is
not liable nor responsible for any loss resulting to any Beneficiary,
nor to any Participant, by reason of any sale or investment made or
other action taken pursuant to and in accordance with the direction of
the Participant. In all other respects, the Employer will administer
and distribute a rollover contribution in the same manner as any
Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same
extent and in the same manner as a Participant. If an Employee makes a
rollover contribution to the Trust prior to satisfying the Plan's
eligibility conditions, the Advisory Committee and Trustee must treat
the Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan. If the Employee has a Separation from Service prior to
becoming a Participant, the Trustee will distribute his rollover
contribution Account to him as if it were an Employer contribution
Account.
4.04 "PARTICIPANT CONTRIBUTION - FORFEITABILITY"
A Participant's Accrued Benefit is, at all times, 100% Nonforfeitable.
4.05 "PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION"
A Participant, by giving prior written notice to the Trustee, may
withdraw all or any part of the value of his Accrued Benefit derived
from his Participant contributions described in this Article IV. A
distribution of Participant contributions must comply with the joint
and survivor requirements described in Article VI, if those
requirements apply to the Participant. A Participant may not exercise
his right to withdrawn the value of his Accrued Benefit derived from
his Participant contributions more than once during any Plan Year. The
Trustee, in accordance with the direction of the Advisory Committee,
will distribute a Participant's unwithdrawn Accrued Benefit
attributable to his Participant contributions in accordance with the
provisions of Article VI applicable to the distribution of the
Participant's Nonforfeitable Accrued Benefit.
4.06 "PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT"
The Advisory Committee must maintain, or must direct the Trustee to
maintain, a separate Account(s) in the name of each Participant to
reflect the Participant's Accrued Benefit under the Plan derived from
his Participant contributions. A Participant's Accrued Benefit derived
from his Participant contributions as of any applicable date is the
balance of his separate Participant contribution Account(s). A
separate account will be maintained by the trustee for the
nondeductible employee contribution of each participant.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 "NORMAL RETIREMENT AGE"
Normal Retirement Age is age 65.
5.02 "VESTING"
All contributions made by or on behalf of each participant, together
with all earnings thereon, shall immediately become, and at all times
shall remain, fully vested in such participant, and nonforfeitable.
The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b)) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
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<PAGE> 47
PLAN DOCUMENT
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 "TIME OF PAYMENT OF ACCRUED BENEFIT"
Unless, pursuant to Section 6.03, the Participant or the Beneficiary
elects in writing to a different time or method of payment, the
Advisory Committee will direct the Trustee to commence distribution of
a Participant's Nonforfeitable Accrued Benefit in accordance with this
Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of the
distribution to the Participant, exceeds $3,500 and the Participant
has not attained the later of Normal Retirement Age or age 62.
Furthermore, the Participant's spouse also must consent, in writing,
to any distribution, for which Section 6.04 requires the spouse's
consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the
Plan pays an amount as an annuity or in any other form. A distribution
date under this Article VI unless otherwise specified within the Plan,
is the 60th day of the Plan Year, or as soon as administratively
practicable following that distribution date. For purposes of the
consent requirements under this Article VI, if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of any
distribution, exceeds $3,500, the Advisory Committee must treat that
present value as exceeding $3,500 for purposes of all subsequent Plan
distributions to the Participant.
If the value of a participant's vested account balance derived from
employer and employee contribution exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the participant and the participant's
spouse (or where either the participant or the spouse has died, the
survivor) must consent to any distribution of such account balance.
The consent of the participant and the participant's spouse shall be
obtained in writing within the 90-day period ending on the annuity
starting date. The annuity starting date is the first day of the first
period for which an amount is paid an annuity or any other form. The
plan administrator shall notify the participant and the participant's
spouse of the right to defer any distribution until the participant's
account balance is no longer immediately distributable. Such
notification shall include a general description of the material
features, and explanation of the relative values of, the optional
forms of benefit available under the plan in a manner that would
satisfy the notice requirements of Code Section 417(a)(3), and shall be
provided no less than 30 days and no more than 90 days prior to the
annuity starting date. Notwithstanding the foregoing, only the
participant need consent to the commencement of a distribution in the
form of a qualified joint and survivor annuity while the account
balance is immediately distributable. (Furthermore, if payment in the
form of a qualified joint and survivor annuity is not required with
respect to the participant pursuant to Section 6.04(E) of the plan,
only the participant need consent to the distribution of an account
balance that is immediately distributable.) Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Code Section
401(a)(9) or to the extent that a distribution is required to satisfy
Code Sections 401(a)(9) or 415. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider) and if the employer or any entity within the same
controlled group as the employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as
defined in section 4975(e)(7) of the Code), the participant's account
balance may, without the participant's consent, be distributed
to the participant. However, if any entity within the same controlled
group as the employer maintains another defined contribution plan
(other than an employee stock ownership plan as defined in section
4975(e)(7) of the Code) then the participant's account balance will be
transferred, without the participant's consent, to the other plan if
the participant does not consent to an immediate distribution.
Notwithstanding the foregoing, only the participant need consent to
the commencement of a distribution in the form of a qualified joint
and survivor annuity while the account balance is immediately
distributable. (Furthermore, if payment in the form of a qualified
joint and survivor annuity is not required with respect to the
participant pursuant to Section 6.04(E) of the plan, only the
participant need consent to the distribution for an account balance
that is immediately distributable). Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Section 401(a)(9)
or Section 415 of the Code. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider), the participant's account balance may, without
the participant's consent, be distributed to the participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the
Code) within the same controlled group.
An account balance is immediately distributable if any part of the
account balance could be distributed to the participant (or surviving
spouse) before the participant attains or would have attained if not
deceased the later of normal retirement age or age 62.
For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
plan year beginning after December 31, 1988, the participant's vested
account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Section
72(o)(5)(B) of the Code.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH. For a
Participant who separates from Service with the Employer for a
reason other than death, the Advisory Committee will direct
the Trustee to commence distribution of the Participant's
Accrued Benefit, as follows:
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT
EXCEEDING $3,500. In a lump sum, on the 60th day
following the close of the Plan Year in which the
Participant's Separation from Service occurs.
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<PAGE> 48
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500. In a form and at the time elected by the
Participant, pursuant to Section 6.03. In the absence
of an election by the Participant, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in a
lump sum (or, if applicable, the normal annuity form
of distribution required under Section 6.04), on the
60th day following the close of the Plan Year in
which the latest of the following events occurs: (a)
the Participant attains Normal Retirement Age; (b)
the Participant attains age 62; or (c) the
Participant separates from Service. Notwithstanding
the foregoing, the failure of a participant and
spouse to consent to a distribution while a benefit
is immediately distributable shall be deemed to be an
election to defer commencement of payment of any
benefit sufficient to satisfy this section.
(3) DISABILITY. If the Participant terminates employment
because of disability, in lump sum, no later than the
60th day following the close of the Plan Year in
which the participant terminates employment because
of disability, subject to the requirements of this
Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and
(2).
(B) REQUIRED BEGINNING DATE. If any distribution commencement date
described under Paragraph (A) of this Section 6.01, either by
Plan provision or by Participant election (or nonelection), is
later than the Participant's Required Beginning Date, the
Advisory Committee instead must direct the Trustee to make
distribution under this Section 6.01 on the Participant's
Required Beginning Date. A Participant's Required Beginning
Date is the April 1 following the close of the calendar year
in which the Participant attains age 70-1/2. However, if the
Participant, prior to incurring a Separation from Service,
attained age 70-1/2 by January 1, 1988, and, for the five Plan
Year period ending in the calendar year in which he attained
age 70-1/2 and for all subsequent years, the Participant was
not a more than 5% owner (as defined in Section 1.09(a)), the
Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from
Service, or, if earlier, the April 1 following the close of
the calendar year in which the Participant becomes a more than
5% owner. Furthermore, if a Participant attained age 70-1/2
during 1988 and did not incur a Separation from Service prior
to January 1,1989, his Required Beginning Date is April 1,
1990. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum (or, if applicable, the
normal annuity form of distribution required under Section
6.04) unless the Participant, pursuant to the provisions of
this Article VI, makes a valid election to receive an
alternative form of payment.
(1) GENERAL RULE. The required beginning date of a
participant is the first day of April of the calendar
year following the calendar year in which the
participant attains age 70-1/2.
(2) TRANSITIONAL RULES. The required beginning date of a
participant who attains age 70-1/2 before January
1, 1988, shall be determined in accordance with (a) or
(b) below:
(A) NON-FIVE PERCENT OWNERS. The required
beginning date of a participant who is not a
five-percent owner is the first day of April
of the calendar year following the calendar
year in which the later of retirement or
attainment of age 70-1/2 occurs.
(B) FIVE-PERCENT OWNERS. The required beginning
date of a participant who is a five-percent
owner during any year beginning after
December 31, 1979, is the first day of April
following the later of:
(i) the calendar year in which the
participant attains age 70-1/2, or
(ii) the earlier of the calendar year
with or within which ends the plan
year in which the participant
becomes a five-percent owner, or the
calendar year in which the
participant retires.
The required beginning date of a participant who is not a
five-percent owner who attains age 70-1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1, 1990.
(3) FIVE-PERCENT OWNER. A participant is treated as a
five-percent owner for purposes of this section if
such participant is a five-percent owner as defined
in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to
whether the plan is top-heavy) at any time during
the plan year ending with or within the calendar
year in which such owner attains age 66-1/2 or any
subsequent plan year.
(4) Once distributions have begun to a five-percent owner
under this section, they must continue to be
distributed, even if the participant ceases to be a
five-percent owner in a subsequent year.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct
the Trustee, in accordance with this Section 6.01(C), to
distribute to the Participant's Beneficiary the Participant's
Nonforfeitable Accrued Benefit remaining in the Trust at the
time of the Participant's death.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT
DOES NOT EXCEED $3,500. The Advisory Committee,
subject to the requirements of Section 6.04, must
direct the Trustee to pay the deceased Participant's
Nonforfeitable Accrued Benefit in a single cash sum,
as soon as administratively practicable following the
Participant's death or, if later, the date on which
the Advisory Committee receives notification of or
otherwise confirms the Participant's death.
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<PAGE> 49
PLAN DOCUMENT
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEED
$3,500. The Advisory Committee will direct the Trustee to pay
the deceased Participant's Nonforfeitable Accrued Benefit at
the time and in the form elected by the Participant or, if
applicable by the Beneficiary, as permitted under this Article
VI. In the absence of an election, subject to the requirements
of Section 6.04, the Advisory Committee will direct the
Trustee to distribute the Participant's undistributed
Nonforfeitable Accrued Benefit in a lump sum on the first
distribution date following the close of the Plan Year in
which the Participant's death occurs or, if later, the first
distribution date following the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death.
If the death benefit is payable to the Participant's surviving
spouse in full, the surviving spouse, in addition to the
distribution options provided in this Section 6.01(C), may
elect distribution at any time or in any form (other than a
joint and survivor annuity) this Article VI would permit for a
Participant.
Subject to Article VI Joint and Survivor Annuity Requirements,
the requirements of this Article shall apply to any
distribution of a participant's interest and will take
precedence over any inconsistent provisions of this plan.
Unless otherwise specified, the provisions of this Article
apply to the calendar year beginning after December 31, 1984.
All distributions required under this Article shall be
determined and made in accordance with the proposed
regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed regulations.
6.02 "METHOD OF PAYMENT OF ACCRUED BENEFIT"
Subject to the annuity distribution requirements, if any, prescribed
by Section 6.04, and any restrictions prescribed by Section 6.03, a
Participant or Beneficiary may elect distribution under one, or any
combination, of the following methods: (a) by payment in a lump sum;
or (b) by payment in monthly, quarterly or annual installments over a
fixed reasonable period of time, not exceeding the life or life
expectancy of the Participant, or the joint and last survivor life or
life expectancy of the Participant and an individual the Participant
designates as his Beneficiary (his "designated Beneficiary").
The distribution options permitted under this Section 6.02 are
available only if the present value of the Participant Nonforfeitable
Accrued Benefit, at the time of the distribution to the Participant,
exceeds $3,500. To facilitate installment payments under this Article
VI, the Advisory Committee may direct the Trustee to segregate all or
any part of the Participant's Accrued Benefit in a separate Account.
The Trustee will invest the Participant's segregated Account in
Federally insured interest bearing savings account(s) or time
deposit(s) (or a combination of both), or in other fixed income
investments. A segregated Account remains a part of the Trust, but it
alone shares in any income it earns, and it alone bears any expense or
loss it incurs. A Participant or Beneficiary may elect to receive an
installment distribution in the form of a Nontransferable Annuity
Contract. Under an installment distribution, the Participant or
Beneficiary, at any time, may elect to accelerate the payment of all,
or any portion, of the Participant's unpaid Nonforfeitable Accrued
Benefit, subject to the requirements of Section 6.04.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS.
The Advisory Committee may not direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit,
nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of
payment which, as of the Required Beginning Date, does not
satisfy the minimum distribution requirements under Code
Section 401(a)(9) and the applicable Treasury regulations. The
minimum distribution for a calendar year equals the
Participant's Nonforfeitable Accrued Benefit as of the latest
valuation date preceding the beginning of the calendar year
divided by the Participant's life expectancy or, if
applicable, the joint and last survivor expectancy of the
Participant and his designated Beneficiary (as determined
under Section 8.01, subject to the requirements of the Code
Section 401(a)(9) regulations). The Advisory Committee will
increase the Participant's Nonforfeitable Accrued Benefit, as
determined on the relevant valuation date, for contributions
allocated after the valuation date and by December 31 of the
valuation calendar year, and will decrease the valuation by
distributions made after the valuation date and by December 31
of the valuation calendar year. For purposes of this
valuation, the Advisory Committee will treat any portion of
the minimum distribution for the first distribution calendar
year made after the close of that year as a distribution
occurring in that first distribution calendar year. In
computing a minimum distribution the Advisory Committee must
use the unisex life expectancy multiples under Treas. Reg.
Section 1.72-9. The Advisory Committee, only upon the
participant's written request, will not compute the minimum
distribution for a calendar year subsequent to the first
calendar year for which the Plan requires a minimum
distribution by redetermining the applicable life expectancy.
Otherwise, the Advisory Committee will redetermine the joint
life and last survivor expectancy of the Participant and a
nonspouse designated Beneficiary in a manner which takes into
account any adjustment to a life expectancy other than the
Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary,
a method of payment to the Participant (whether by Participant
election or by Advisory Committee direction) may not provide
more than incidental benefits to the Beneficiary. For Plan
Year beginning after December 31, 1988, the Plan must satisfy
the minimum distribution incidental benefit ("MDIB")
requirement in the Treasury regulations issued under Code
Section 401(a)(9) for distributions made on or after the
Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the
Advisory Committee will compute the minimum distribution
required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the
Participant's death, the Advisory Committee will compute the
minimum distribution required by this Section 6.02(A) solely
on the basis of the applicable life expectancy factor and will
disregard the MDIB factor.
15
<PAGE> 50
For Plan Years beginning prior to January l, 1989, the Plan
satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB
requirement or if the present value of the retirement benefits
payable solely to the Participant is greater than 50% of the
present value of the total benefits payable to the Participant
and his Beneficiaries. The Advisory Committee must determine
whether benefits to the Beneficiary are incidental as of the
date the Trustee is to commence payment of the retirement
benefits to the Participant, or as of any date the Trustee
redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar
year is due by the Participant's Required Beginning Date. The
minimum distribution for each subsequent distribution calendar
year, including the calendar year in which the Participant's
Required Beginning Date falls, is due by December 31 of that
year. If the Participant receives distribution in the form of
a Nontransferable Annuity Contract, the distribution satisfies
this Section 6.02(A) if the contract complies with the
requirements of Code Section 401(a)(9) and the applicable
Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES.
If any portion of the Participant's interest is payable to a
designated beneficiary, method of distribution to the
Participant's Beneficiary must satisfy Code Section 401(a)(9)
and the applicable Treasury regulations. If the Participant's
death occurs after his Required Beginning Date or, if earlier,
the date the Participant commences an irrevocable annuity
pursuant to Section 6.04, the method of payment to the
Beneficiary must provide for completion of payment over a
period which does not exceed the payment period which had
commenced for the Participant. If the Participant's death
occurs prior to his Required Beginning Date, and the
Participant had not commenced an irrevocable annuity pursuant
to section 6.04, the method of payment to the Beneficiary,
subject to Section 6.04, must provide for completion of
payment to the Beneficiary over a period not exceeding (i) by
December 31 of the calendar year containing the fifth
anniversary of the Participant's; or (ii) if the Beneficiary
is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of
the Participant's Nonforfeitable Accrued Benefit over a period
described in clause (ii) unless the Trustee will commence
payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which
the Participant's death occurred or, if later, and the
designated Beneficiary is the Participant's surviving spouse,
December 31 of the calendar year in which the Participant
would have attained age 70-1/2. If the Trustee will make
distribution in accordance with clause (ii), the minimum
distribution for a calendar year equals the Participant's
Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the
designated Beneficiary's life expectancy. The Advisory
Committee must use the unisex life expectancy multiples under
Treas. Section Reg. 1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written
request of the Participant or of the Participant's surviving
spouse, may recalculate the life expectancy of the
Participant's surviving spouse no more frequently than
annually, but may not recalculate the life expectancy of a
nonspouse designated Beneficiary after the Trustee commences
payment to the designated Beneficiary. The Advisory Committee
will apply this paragraph by treating any amount paid to the
Participant's child, which becomes payable to the
Participant's surviving spouse upon the child's attaining the
age of majority, as paid to the Participant' surviving spouse.
Upon the Beneficiary's written request, the Advisory Committee
must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon
as administratively practicable following the effective date
of that request.
If the participant has not made an election pursuant to this
Section 6.02 by the time of his or her death, the
participant's designated beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to
begin under this Section, or (2) December 31 of the calendar
year which contains the fifth anniversary of the date of death
of the participant. If the participant has no designated
beneficiary, or if the designated beneficiary does not elect a
method of distribution, distribution of the participant's
entire interest must be completed by December 31 of the
calendar year containing the fifth anniversary of the
participant's death.
For purposes of this Section 6.02, if the surviving spouse
dies after the participant, but before payments to such spouse
begin, the provisions of this Section 6.02, with the exception
of paragraph (b) therein, shall be applied as if the surviving
spouse were the participant.
For the purposes of this Section 6.02, distribution of a
participant's interest is considered to begin on the
Participant's required beginning date (or the date
distribution is required to begin to the surviving spouse). If
distribution in the form of an annuity irrevocably commences
to the Participant before the required beginning date, the
date distribution is considered to begin is the date
distribution actually commences.
APPLICABLE LIFE EXPECTANCY. The life expectancy (or joint and
last survivor expectancy) calculated using the attained age of
the Participant (or designated Beneficiary as of the
Participant's (or designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
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PLAN DOCUMENT
DISTRIBUTION CALENDAR YEAR. A calendar year for which a
minimum distribution is required. For distributions beginning
before the participant's death, the first distribution
calendar year is the calendar year immediately preceding the
calendar year which contains the participant's required
beginning date. For distributions beginning after the
participant's death, the first distribution calendar year is
the calendar year in which distributions are required to begin
pursuant to this Section 6.02 above.
6.03 "BENEFIT PAYMENT ELECTIONS"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide a benefit notice to a Participant who is eligible to make an
election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features
and relative values of those options, and the Participant's right to
defer distribution until he attains the later of Normal Retirement Age
or age 62.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit in
accordance with that election. Any election under this Section 6.03 is
subject to the requirements of Section 6.02 and of Section 6.04. The
Participant or Beneficiary must make an election under this Section
6.03 by filing his election with the Advisory Committee at any time
before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
(A) PARTICIPANT ELECTIONS AFTER SEPARATE FROM SERVICE. If the
present value of a Participant's Nonforfeitable Accrued
Benefit exceeds $3,500, he may elect to have the Trustee
commence distribution as of any distribution date, but not
earlier than the first distribution date of the first Plan
Year following the Participant's separation from service. The
Participant may reconsider an election at any time prior to
the annuity starting date and elect to commence distribution
as of any other distribution date. A Participant who has not
separated from Service may elect distribution as of any
distribution date following his attainment of Normal
Retirement Age.
(B) PARTICIPANT ELECTIONS PRIOR TO TERMINATION OF EMPLOYMENT. No
distribution options are permitted prior to a Participant's
Separation of Service.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds $3,500,
the Participant's Beneficiary may elect to have the Trustee
distribute the Participant's Nonforfeitable Accrued Benefit in
a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions
designated in writing by the Participant and not revoked as of
his date of death.
(D) TRANSITIONAL ELECTIONS. Notwithstanding the provisions of
Section 6.01 and 6.02, if the Participant (or Beneficiary)
signed a written distribution designation prior to January 1,
1984, the Advisory Committee must distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the requirements, if
applicable, of Sections 6.04, 6.05 and 6.06. This Section
6.03(D) does not apply to a pre-1984 distribution designation,
and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method
of distribution would have disqualified the Plan under Code
Section 401(a)(9) as in effect on December 31, 1983; (2) the
Participant did not have an Accrued Benefit as of December
31, 1983; (3) the distribution designation does not specify the
timing and form of the distribution and the death
Beneficiaries (in order of priority); (4) the substitution of
a Beneficiary modifies the payment period of the distribution;
or, (5) the Participant (or Beneficiary) modifies or revokes
the distribution designation. In the event of a revocation,
the Plan must distribute, no later than December 31 of the
calendar year following the year of revocation, the amount
which the Participant would have received under Section
6.02(A) if the election had not been in effect or, if the
Beneficiary revokes the election, the amount which the
Beneficiary would have received under Section 6.02(B) if the
election had not been in effect. The Advisory Committee will
apply this Section 6.03(D) to rollovers and transfers in
accordance with Part J of the Code Section 401(a)(9)
regulations.
6.04 "ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES"
(A) JOINT AND SURVIVOR ANNUITY. The Advisory Committee must direct
the Trustee to distribute a married or unmarried Participant's
Nonforfeitable Accrued Benefit in the form of a qualified
joint and survivor annuity, unless the Participant makes a
valid waiver election (described in Section 6.05) within the
90 day period ending on the annuity starting date. The
participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the plan. The
earliest retirement age is the earliest date on which, under
the plan, the participant could elect to receive retirement
benefits. If, as of the annuity starting date, the participant
is married, a qualified joint and survivor annuity is an
immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life
annuity for the Participant and a survivor annuity payable for
the remaining life of the Participant's surviving spouse equal
to not less than 50% and not more than 100% of the amount of
the annuity payable during the life of the Participant. If, as
of the annuity starting date, the Participant is not married,
a qualified joint and survivor annuity is an immediate life
annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the
annuity starting date, the Advisory Committee, without
Participant or spousal consent, must direct the Trustee to pay
the Participant's Nonforfeitable Accrued Benefit in a lump
sum, in lieu of a qualified joint and survivor annuity, in
accordance with Section 6.01, if the Participant's
Nonforfeitable Accrued Benefit is not greater than $3,500.
This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after
August 23, 1984.
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<PAGE> 52
(B) PRE-RETIREMENT SURVIVOR ANNUITY. If a married Participant dies
prior to his annuity starting date, the Advisory Committee
will direct the Trustee to distribute a portion of the
Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a pre-retirement
survivor annuity, unless the Participant has a valid waiver
election (as described in Section 6.06) in effect within the
election period, or unless the Participant and his spouse were
not married throughout the one year period ending on the date
of his death. The surviving spouse may elect to have such
annuity distributed within a reasonable period after the
participant's death. The period which begins on the first day
of the plan year in which the participant attains age 35 and
ends on the date of the participant's death. If a participant
separates from service prior to the first day of the plan
year in which age 35 is attained, with respect to the account
balance as of the date of separation, the election period
shall begin on the date of separation. A pre-retirement
survivor annuity is an annuity which is purchasable with 50%
of the Participant's Nonforfeitable Accrued Benefit
(determined as of the date of the Participant's death) and
which is payable for the life of the Participant's surviving
spouse. The value of the pre-retirement survivor annuity is
attributable to Employer contributions and to Employee
contributions in the same proportion as the Participant's
Nonforfeitable Accrued Benefit is attributable to those
contributions. If the present value of the pre-retirement
survivor annuity does not exceed $3,500, the Advisory
Committee, on or before the annuity starting date (as
determined under Section 6.01(C)), must direct the Trustee to
make a lump sum distribution to the Participant's surviving
spouse, in lieu of a pre-retirement survivor annuity. This
Section 6.04(B) applies only to a Participant who dies after
August 22, 1984, and either (i) completes at least one Hour of
Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as
defined in Section 5.06) and completed at least one Hour of
Service with the Employer in a Plan Year beginning after
December 31, 1975.
(C) SURVIVING SPOUSE ELECTIONS. If the present value of the
pre-retirement survivor annuity exceeds $3,500, the
Participant's surviving spouse may elect to have the Trustee
commence payment of the pre-retirement survivor annuity at any
time following the date of the Participant's death, but not
later than the mandatory distribution periods described in
Section 6.02, and may elect either or any combination of the
two forms of payment described in Section 6.02, in lieu of the
pre-retirement survivor annuity. In the absence of an election
by the surviving spouse, the Advisory Committee must direct
the Trustee to distribute the pre-retirement survivor annuity
on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs (i)
the Participant's death; (ii) the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death; (iii) the date the Participant would have
attained Normal Retirement Age; or (iv) the date the
Participant would have attained age 62.
(D) SPECIAL RULES. If the Participant has in effect a valid waiver
election regarding the qualified joint and survivor annuity or
the pre-retirement survivor annuity, the Advisory Committee
must direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with Sections
6.01, 6.02 and 6.03. For purposes of applying this Article VI,
the Advisory Committee treats a former spouse as the
Participant's spouse or surviving spouse, and a current spouse
will not be treated as the spouse or surviving spouse, to the
extent provided under a qualified domestic relations order
described in Section 6.07. The provisions of this Section
6.04, and of Sections 6.05 and 6.06, apply separately to the
portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the
portion of the Participant's Nonforfeitable Accrued Benefit
not subject to that order. The spouse (surviving spouse) is
the spouse or surviving spouse of the participant, provided
that a former spouse will be treated as the spouse or
surviving spouse and a current spouse will not be treated as
the spouse or surviving spouse to the extent provided under a
qualified domestic relations order as described in Section
414(p) of the Code.
(E) PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing
plan, the preceding provisions of this Section 6.04 do not
apply to any Participant in the Plan except: (1) a Participant
as respects whom the Plan is a direct or indirect transferee
from a plan subject to the Code Section 417 requirements and
the Plan received the transfer after December 31, 1984, unless
the transfer is an elective transfer described in Section
12.06; (2) a Participant who elects a life annuity
distribution (if Section 12.02 of the Plan requires the Plan
to provide a life annuity distribution option); and (3) a
Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided
under this Plan. Sections 6.05 and 6.06 only apply to
Participants to whom the preceding provisions of this Section
6.04 apply.
This Section shall apply to a participant in a profit-sharing
plan, and to any distribution, made on or after the first day
of the first plan year beginning after December 31, 1988, from
or under a separate account attributable solely to accumulated
deductible employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of a
participant in a money purchase pension plan (including a
target benefit plan), if the following conditions are
satisfied: (1) the participant does not or cannot elect
payments in the form of a life annuity; and (2) on the death
of a participant, the participant's vested account balance
will be paid to the participant's surviving spouse, but if
there is no surviving spouse, or if the surviving spouse has
consented in a manner conforming to a qualified election, then
to the participant's designated beneficiary. The surviving
spouse may elect to have distribution of the vested account
balance commence within the 90-day period following the date
of the participant's death. The account balance shall be
adjusted for gains or losses occurring after the participant's
death in accordance with the provision of the plan governing
the adjustment of account balances for other types of
distributions. This section Section 6.04(E) shall not be
operative with respect to a participant in a profit-sharing
plan if the plan is a direct or indirect transferee of a
defined benefit plan, money purchase plan, a target benefit
plan, stock bonus, or profit-sharing plan which is subject to
the survivor annuity requirements of Section 401(a)(11) and
Section 417. If this Section 6.04(E) is operative, then the
provisions of this Article, other than this Section 6.04,
shall be inoperative.
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<PAGE> 53
The participant may waive the spousal death benefit described in this
Section at any time provided that no such waiver shall be effective
unless it satisfies the conditions of Section 6.05 (other than the
notification requirement referred to therein) that would apply to the
participant's waiver of the qualified pre-retirement survivor annuity.
For purposes of this Section 6.04(E), vested account balance shall
mean, in the case of a money purchase pension plan or a target benefit
plan, the participant's separate account balance attributable solely
to accumulated deductible employee contributions within the meaning of
Section 72(o)(5)(B) of the Code. In the case of a profit-sharing plan,
vested account balance shall have the same meaning as Nonforfeitable
Accrued Benefit.
6.05 "WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide the Participant a written explanation of the terms and
conditions of the qualified joint and survivor annuity, the
Participant's right to make, and the effect of, an election to waive
the joint and survivor form of benefit, the rights of the
Participant's spouse regarding the waiver election and the
Participant's right to make, and the effect of, a revocation of a
waiver election. The Plan does not limit the number of times the
Participant may revoke a waiver of the qualified joint and survivor
annuity or make a new waiver during the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under
the qualified joint and survivor annuity) has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of
the election, and a notary public or the Plan Administrator (or his
representative) witnesses the spouse's consent, (b) the election
designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the participant without any further spousal consent;
(c) the spouse consents to the alternate form of payment designated by
the Participant or to any change in that designated form of payment,
and (d) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary
designation or to any change in the Participant's Beneficiary
designation. The spouse's consent to a waiver of the qualified joint
and survivor annuity is irrevocable, unless the Participant revokes
the waiver election. The spouse may execute a blanket consent to any
form of payment designation or to any Beneficiary designation made by
the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right.
The consent requirements of this Section 6.05 apply to a former spouse
of the Participant, to the extent required under a qualified domestic
relations order described in Section 6.07. A revocation of a prior
waiver may be made by a participant without the consent of the spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the participant has received notice as
provided in this Section 6.05.
The Plan Administrator will accept as valid a waiver election which
does not satisfy the spousal consent requirements if the Plan
Administrator establishes the Participant does not have a spouse, the
Plan Administrator is not able to locate the Participant's spouse, the
Participant is legally separated or has been abandoned (within the
meaning of State law) and the Participant has a court order to that
effect, or other circumstances exist under which the Secretary of the
Treasury will excuse the consent requirement. If the Participant's
spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
Any consent obtained from a spouse shall be effective only with
respect to such spouse.
6.06 "WAIVER ELECTION - PRE-RETIREMENT SURVIVOR ANNUITY"
The Plan Administrator must provide a written explanation of the
pre-retirement survivor annuity to each married Participant, within
the following period which ends last: (1) the period beginning on the
first day of the Plan Year in which the Participant attains age 32 and
ending on the last day of the Plan Year in which the Participant
attains age 35; (2) a reasonable period ending after an Employee
becomes a Participant; (3) a reasonable period ending after the joint
and survivor rules become applicable to the Participant; or (4) a
reasonable period ending after a fully subsidized pre-retirement
survivor annuity no longer satisfies the requirements for a fully
subsidized benefit. A reasonable period described in clauses (2), (3)
and (4) is the two-year period beginning one year before and ending
one year after the applicable event. If the Participant separates from
Service before attaining age 35, clauses (1), (2), (3) and (4) do not
apply and the Plan Administrator must provide the written explanation
within the two-year period beginning one year before and ending one
year after the Separation from Service. The written explanation must
describe, in a manner consistent with Treasury regulations, the terms
and conditions of the pre-retirement survivor annuity comparable to
the explanation of the qualified joint and survivor annuity required
under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the pre-retirement survivor annuity
or make a new waiver during the election period.
A Participant's waiver election of the pre-retirement survivor annuity
is not valid unless (a) the Participant makes the waiver election no
earlier than the first day of the Plan Year in which he attains age 35
and (b) the Participant's spouse (to whom the pre-retirement survivor
annuity is payable) satisfies the consent requirements described in
Section 6.05, except the spouse need not consent to the form of
benefit payable to the designated Beneficiary. The spouse's consent to
the waiver of the pre-retirement survivor annuity is irrevocable,
unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the
Participant separates from Service prior to the first day of the Plan
Year in which he attains age 35, the Plan Administrator will accept a
waiver election as respects the Participant's Accrued Benefit
attributable to his Service prior to his Separation from Service. If
the participant thereafter returns to employment with the employer,
the applicable period for such participant shall be redetermined.
Pre-age 35
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<PAGE> 54
waiver: A participant who will not yet attain age 35 as of the end of
any current Plan Year may make a special qualified election to waive
the qualified pre-retirement survivor annuity for the period beginning
on the date of such election and ending on the first day of the Plan
Year in which the participant will attain age 35. Such election shall
not be valid unless the participant receives a written explanation of
the qualified pre-retirement survivor annuity in such terms as are
comparable to the explanation required under Section 6.05. Qualified
pre-retirement survivor annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
participant attains age 35. Any new waiver on or after such date shall
be subject to the full requirements of this Article.
Notwithstanding the other requirements of this Section 6.06, the
respective notices prescribed by this Section need not be given to a
participant if (1) the plan "fully subsidizes" the costs of a
qualified joint and survivor annuity or qualified pre-retirement
survivor annuity, and (2) the plan does not allow the participant to
waive the qualified joint and survivor annuity or qualified
pre-retirement survivor annuity and does not allow a married
participant to designate a nonspouse beneficiary. For purposes of this
Section 6.06, a plan fully subsidizes the costs of a benefit if no
increase in cost, or decrease in benefits to the participant may
result from the participant's failure to elect another benefit. Any
consent obtained from a spouse shall be effective only with respect to
such spouse.
6.07 "DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS"
Nothing contained in this Plan prevents the Trustee, in accordance
with the direction of the Advisory Committee, from complying with the
provisions of a qualified domestic relations order (as defined in Code
Section 414(p)). This Plan specifically permits distribution to an
alternate payee under a qualified domestic relations order at any time,
irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code Section 414(p)) under the Plan.
A distribution to an alternate payee prior to the Participant's
attainment of earliest retirement age is available only if: (l) the
order specifies distribution at that time or permits an agreement
between the Plan and the alternate payee to authorize an earlier
distribution; and (2) if the present value of the alternate payee's
benefits under the Plan exceeds $3,500, and if the order requires, the
alternate payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. Nothing in this
Section 6.07 permits a Participant a right to receive distribution at
a time otherwise not permitted under the Plan nor does it permit the
alternate payee to receive a form of payment not permitted under the
Plan.
The Plan Administrator must establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon
receiving a domestic relations order, the Plan Administrator promptly
will notify the Participant and any alternate payee named in the
order, in writing, of the receipt of the order and the Plan's
procedures for determining the qualified status of the order. Within a
reasonable period of time after receiving the domestic relations
order, the Plan Administrator must determine the qualified status of
the order and must notify the Participant and each alternate payee, in
writing, of its determination. The Plan Administrator must provide
notice under this paragraph by mailing to the individual's address
specified in the domestic relations order, or in a manner consistent
with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Plan Administrator is making its
determination of the qualified status of the domestic relations order,
the Advisory Committee must make a separate accounting of the amounts
payable. If the Plan Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first
are payable following receipt of the order, the Advisory Committee
will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Plan Administrator does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee
to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
prospectively if the Plan Administrator later determines the order is
a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Advisory Committee may direct
the Trustee to invest any partitioned amount in a segregated
subaccount or separate account and to invest the account in Federally
insured, interest-bearing savings account(s) or time deposit(s) (or a
combination of both), or in other fixed income investments. A
segregated subaccount remains a part of the Trust, but it alone shares
in any income it earns, and it alone bears any expense or loss it
incurs. The Trustee will make any payments or distributions required
under this Section 6.07 by separate benefit checks of other separate
distribution to the alternate payee(s).
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<PAGE> 55
PLAN DOCUMENT
ARTICLE VII
TRUSTEE, POWERS AND DUTIES
7.01 "INVESTMENT OF TRUST ASSETS"
The Trustee shall accept and hold in the Trust such contributions of
money on behalf of the Employer and Participants as it may receive
from time to time, but not more frequently than once each month, from
the Employer. All such contributions of money shall be accompanied by
written instructions from the Employer specifying the Participants'
sub-accounts to which they are to be credited, the amount to be
invested in and the choice of Designated Investment Company stock, and
by furnishing such instructions the Employer represents to the Trustee
that the same are in accordance with any uniform rules adopted by the
Employer and made known to Participants. If written instructions are
not received, or if received, are in the opinion of the Trustee
unclear, the Trustee may hold all or a portion of the contributions in
cash without liability for rising security prices or distributions,
pending receipt of written instructions or clarification. A
Participant, through his Employer, may request an exchange of all or
part of the investment company shares held hereunder for any other
investment company shares eligible for purchase under the Plan, upon
terms and conditions and within the limitations imposed by the then
current prospectuses of the respective investment companies.
Investment in shares of the Designated Investment Company shall be
made at the price and in the manner in which such shares are then
being publicly offered by such investment company. All dividends and
capital gain distributions received on such shares shall be reinvested
in such shares. If any distribution on shares of the fund may be
received at the election of the shareholder in additional shares or in
cash or other property, the Trustee shall elect to receive it in
additional shares. Sales charges attributable to the acquisition of
shares shall be charged to the account of the Participant for which
such shares are acquired. All investment company shares acquired by
the Trustee shall be registered in the name of the Trustee or of its
registered nominee.
The Employer shall remit directly to the insurance company any
premiums life insurance or annuities which constitute contributions
under the Plan, and the Trustee shall have no duty to account
therefor. Any such life insurance and/or annuity contracts shall be
issued in restricted and nontransferable form and be held by the
Employer.
7.02 "VOTING AND OTHER ACTIONS"
The Trustee shall deliver, or cause to be executed and delivered, to
the Employer all notices, prospectuses, financial statements, proxies,
and proxy soliciting material relating to shares of Designated
Investment Company stock held pursuant to the Plan. The Trustee shall
not vote any of the shares of the Fund held hereunder.
7.03 "REPORTS OF THE TRUSTEE AND EMPLOYER"
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions under this Trust.
Not later than forty-five (45) days after the close of each Plan Year
(or after the Trustee's resignation or removal pursuant to Section XI
hereof), the Trustee shall file with the Employer and each Participant
or Beneficiary for whom account is maintained by the Trustee under
this Agreement a written report or reports reflecting the receipts,
disbursements and other transactions effected by it during such Plan
Year (or period ending with such resignation or removal) and the
assets and liabilities of such account at its close. Upon the
expiration of a period of sixty (60) days immediately following the
date on which such reports are filed, the Trustee shall be forever
released and discharged from all liability and accountability to
anyone with respect to its acts, transactions, duties, obligations or
responsibility as shown in or reflected by such reports, except with
respect to any such acts or transactions as to which written
objections have been filed with the Trustee within such sixty day
period.
The Employer shall furnish to the Trustee, and the Trustee shall
furnish to the Employer, such information relevant to the Plan and
Trust as may be required under the Internal Revenue Code and any
Regulations issued or forms adopted by the Treasury Department
thereunder.
The Trustee shall keep such records, make such identifications, and
file with the Internal Revenue Service such returns and other
information concerning the Trust as may be required of it under the
Internal Revenue Code and any Regulations issued or forms adopted by
the Treasury Department thereunder.
7.04 "TRUSTEE FEES AND EXPENSES OF THE ACCOUNT"
Any income taxes or other taxes of any kind whatsoever that may be
levied or assessed upon or in respect of the Trust, any transfer taxes
incurred in connection with the investment and reinvestment of the
assets of the Trust, all other administrative expenses incurred by the
Trustee in the performance of its duties including fees for legal
services rendered to the Trustee, and such compensation to the Trustee
as may be agreed upon from time to time between the Trustee and the
Employer shall be paid from the assets of the Trust and shall, unless
allocable to the Accounts of specific Participants, be charged
proportionately to their respective accounts.
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7.05 "CONCERNING THE TRUSTEE"
The Trustee shall not be responsible in any way for the collection of
contributions provided for under the Plan, the purpose or propriety of
any distribution made pursuant to Section V hereof, or any other
action taken at the Employer's request. Nor shall the Trustee be
responsible for the administration of the Plan, its validity or
effect, or the qualification of the Plan or of the Trust Agreement
under the provisions of the Internal Revenue Code. The Trustee shall
not be required to examine the Plan or be charged with notice of its
provisions. The Trustee shall not be required to take any action upon
receipt of any notice from the Internal Revenue Service except to
forward a copy thereof to the Employer with a request for written
instructions. The Employer shall at all times fully indemnify and save
harmless the Trustee, its successors and assigns, from and against any
and all loss resulting from liability to which the Trustee may be
subject by reason of any act or conduct (except willful misconduct or
gross negligence) in its capacity as Trustee hereunder, including all
expenses reasonably incurred in its defense, in case the Employer
fails to provide such defense. The Trustee shall be under no duty to
take any action other than as herein specified with respect to the
Trust unless the Employer shall furnish the Trustee with instructions
in proper form and as authorized by the terms of the Plan; or to
defend or engage in any suit with respect to the Trust unless the
Trustee shall have first agreed in writing to do so and shall have
been fully indemnified to the satisfaction of the Trustee. The Trustee
shall be protected in acting upon any written order from the Employer
or any other notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly
executed, and, so long as it acts in good faith, in taking or omitting
to take any other action. The Trustee shall not be liable for interest
on any cash or cash balances maintained in the Trust pending
investment in accordance with appropriate directions from the
Employer.
7.06 "AMENDMENT"
If the Employer's plan fails to attain or retain qualification, such
plan will no longer participate in the prototype Plan and will be
considered an individually designed plan.
7.07 "RESIGNATION OR REMOVAL OF TRUSTEE"
The Trustee may resign at any time upon thirty (30) days notice in
writing to the Employer, and may be removed by the Employer at any
time upon thirty (30) days notice in writing to the Trustee. Upon such
resignation or removal, the Employer shall appoint a successor
Trustee. Upon receipt by the Trustee of written acceptance of such
appointment by the successor Trustee, the Trustee shall transfer and
pay over to such successor the assets of the Trust Account and all
records pertaining thereto. The Trustee is authorized, however, to
reserve such sum of money as it may deem advisable for payment of all
its fees, compensation, costs and expenses, or for payment of any
other liability constituting a charge on or against the assets of the
Trust or on or against the Trustee, with any balance of such reserve
remaining after the payment of all such items to be paid over to the
successor Trustee. The successor Trustee shall hold the assets paid
over to it under terms similar to those of this Agreement that qualify
under section 401 of the Code. If within thirty (30) days after the
Trustee's resignation or removal the Employer has not appointed a
successor Trustee which has accepted such appointment, the Trustee
shall, unless it elects to terminate the Trust pursuant to Section
XII, appoint such successor itself.
7.08 "TERMINATION OF TRUST"
The Trustee may elect to terminate the Trust if within thirty (30)
days after its resignation or removal pursuant to Section X the
Employer has not appointed a successor Trustee which has accepted such
appointment. The Trustee shall terminate the Trust upon receiving
notice of the Employer's death, if the Employer is a sole proprietor,
or upon receiving notice of the termination of the partnership, if the
Employer is a partnership, or upon receiving notice of the dissolution
of the corporation, if the Employer is a corporation, unless provision
is made by a successor to the business of the Employer for the
continuation of the Plan and this Agreement upon terms satisfactory to
the Trustee.
Termination of the Trust shall be effected by distributing all assets
thereof to the Participants and their designated beneficiaries
pursuant to the direction of the Employer (or in the absence of such
direction as determined by the Trustee), as on the termination of the
Plan. Upon the completion of such distribution, the Trustee shall be
relieved from all further liability with respect to all amounts so
paid.
7.09 "MISCELLANEOUS"
At no time shall it be possible for any part of the assets of the
Trust to be used for or diverted to purposes other than for the
exclusive benefit of Participants and Beneficiaries.
Any notice from the Trustee to the Employer, Participant or
Beneficiary provided for in this Agreement shall be effective if sent
by first class mail to the last address of record.
Upon receipt of a written request from the Employer, the Trustee shall
transfer the assets in the Trust for a Participant to any other
qualified plan maintained by the Employer for the benefit of such
Participant; and the Trustee shall have no further liability under the
Plan and Trust with respect to any assets so transferred.
This Agreement shall bind and inure to the benefit of the personal
representatives, successors and assigns of the Employer and the
Trustee.
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PLAN DOCUMENT
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 "BENEFICIARY DESIGNATION"
Any Participant may from time to time designate, in writing, any
person or persons, contingently or successively, to whom the Trustee
will pay his Accrued Benefit (including any life insurance proceeds
payable to the Participant's Account) on event of his death and the
Participant may designate the form and method of payment. The Advisory
Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the
Advisory Committee, the form effectively revokes all designations
filed prior to that date by the same Participant.
COORDINATION WITH SURVIVOR REQUIREMENTS. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01
does not impose any special spousal consent requirements on the
Participant's Beneficiary designation. However, in the absence of
spousal consent (as required by Article VI) to the Beneficiary
designation: (1) any waiver of the joint and survivor annuity or of
the pre-retirement survivor annuity is not valid; and (2) if the
Participant dies prior to his annuity starting date, the Beneficiary
designation will apply only to the portion of the death benefit which
is not payable as a pre-retirement survivor annuity.
PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing plan,
and the Employer elects to apply the joint and survivor requirements
only to Participants described in Section 6.04(E), the Beneficiary
designation of a married Participant who is not described in Section
6.04(E) is not valid unless the Participant's spouse consents (in a
manner described in Section 6.05) to the Beneficiary designation. The
spousal consent requirement in this paragraph does not apply if the
Participant and his spouse are not married throughout the one year
period ending on the date of the Participant's death, or if the
Participant's spouse is the Participant's sole primary Beneficiary.
8.02 "NO BENEFICIARY DESIGNATION"
If a Participant fails to name a Beneficiary in accordance with
Section 8.01, or if the Beneficiary named by a Participant predeceases
him or dies before complete distribution of the Participant's Accrued
Benefit as prescribed by the Participant's Beneficiary form, then the
Trustee will pay the Participant's Accrued Benefit in accordance with
Section 6.02 in the following order of priority:
(A) The Participant's surviving spouse;
(B) The Participant's surviving children, including adopted
children, in equal shares;
(C) The Participant's surviving parents, in equal shares; or
(D) The legal representative of the estate of the last to die of
the Participant and his Beneficiary.
The Advisory Committee will direct the Trustee as to the method and to
whom the Trustee will make payment under this Section 8.02. If a
benefit is forfeited because the participant or beneficiary cannot be
found, such benefit will be reinstated if a claim is made by the
participant or beneficiary.
8.03 "PERSONAL DATA TO COMMITTEE"
Each Participant and each Beneficiary of a deceased Participant must
furnish to the Advisory Committee such evidence, data or information
as the Advisory Committee considers necessary or desirable for the
purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition
precedent that each Participant will furnish promptly full, true and
complete evidence, data and information when requested by the Advisory
Committee, provided the Advisory Committee advises each Participant of
the effect of his failure to comply with its request.
8.04 "ADDRESS FOR NOTIFICATION"
Each Participant and each Beneficiary of a deceased Participant must
file with the Advisory Committee from time to time, in writing, his
post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or
Beneficiary, at his last post office address filed with the Advisory
Committee, or as shown on the records of the Employer, binds the
Participant, or Beneficiary, for all purposes of this Plan.
8.05 "ASSIGNMENT OR ALIENATION"
Subject to Code Section 414(p) relating to qualified domestic
relations orders or domestic relations orders entered into before
January 1, 1985, neither a Participant nor a Beneficiary may
anticipate, assign or alienate voluntarily or involuntarily (either at
law or in equity) any benefit provided under the Plan, and the Trustee
will not recognize any such anticipation, assignment or alienation.
Furthermore, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.
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8.06 "NOTICE OF CHANGE IN TERMS"
The Plan Administrator, within the time prescribed by ERISA and the
applicable regulations, must furnish all Participants and
Beneficiaries a summary description of any material amendment to the
Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 "LITIGATION AGAINST THE TRUST"
A court of competent jurisdiction may authorize any appropriate
equitable relief to redress violations of ERISA or to enforce any
provisions of ERISA or the terms of the Plan. A fiduciary may receive
reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 "INFORMATION AVAILABLE"
Any Participant in the Plan or any Beneficiary may examine copies of
the Plan description, latest annual report, any bargaining agreement,
this Plan and Trust, contract or any other instrument under which the
Plan was established or is operated. The Plan Administrator will
maintain all of the items listed in this Section 8.08 in his office,
or in such other place or places as he may designate from time to time
in order to comply with the regulations issued under ERISA, for
examination during reasonable business hours. Upon the written request
of a Participant or Beneficiary the Plan Administrator must furnish
him with a copy of any item listed in this Section 8.08. The Plan
Administrator may make a reasonable charge to the requesting person
for the copy so furnished.
8.09 "APPEAL PROCEDURE FOR DENIAL OF BENEFITS"
The Plan Administrator must provide adequate notice in writing to any
Participant or to any Beneficiary ("Claimant") whose claim for
benefits under the Plan the Advisory Committee has denied. The Plan
Administrator's notice to the Claimant must set forth:
(A) The specific reason for the denial;
(B) Specific references to pertinent Plan provisions on which the
Advisory Committee based its denial;
(C) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed; and
(D) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee
within 75 days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice
must further advise the Claimant that his failure to appeal
the action to the Advisory Committee in writing within the
75-day period will render the Advisory Committee's
determination final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his
duly authorized representative, may submit, in writing, whatever
issues and comments he, or his duly authorized representative, feels
are pertinent. The Claimant, or his duly authorized representative,
may review pertinent Plan documents. The Advisory Committee will
re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under
the circumstances. The Advisory Committee must advise the Claimant of
its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make
the rendering of a decision within the 60-day limit unfeasible, but in
no event may the Advisory Committee render a decision respecting a
denial for a claim for benefits later than 120 days after its receipt
of a request for review.
The Plan Administrator's notice of denial of benefit must identify the
name of each member of the Advisory Committee and the name and address
of the Advisory Committee member to whom the Claimant may forward
his appeal.
8.10 "PARTICIPANT DIRECTION OF INVESTMENT"
A Participant has the right to direct the Employer with respect to the
investment or re-investment of the assets comprising the Participant's
individual Account only if the Employer consents in writing to permit
such direction. If the Employer consents to Participant direction of
investment, the Employer and each Participant must execute a letter
agreement as a part of this Plan containing such conditions,
limitations and other provisions they deem appropriate before the
Employer will follow any Participant direction as respects the
investment or re-investment of any part of the Participant's
individual Account. The Employer is not liable for any loss, nor is
liable for any breach, resulting from a Participant's direction of the
investment of any part of his individual Account.
24
<PAGE> 59
PLAN DOCUMENT
ARTICLE IX
ADVISORY COMMITTEE -
DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 "MEMBERS' COMPENSATION, EXPENSES"
The Employer must appoint an Advisory Committee to administer the
Plan, the members of which may or may not be Participants in the Plan,
or which may be the Plan Administrator acting alone. The members of
the Advisory Committee will serve without compensation for services as
such, but the Employer will pay all expenses of the Advisory
Committee, including the expense for any bond required under ERISA.
9.02 "TERM"
Each member of the Advisory Committee serves until the appointment of
his successor.
9.03 "POWERS"
In case of a vacancy in the membership of the Advisory Committee, the
remaining members of the Advisory Committee may exercise any and all
of the powers, authority, duties and discretion conferred upon the
Advisory Committee pending the filling of the vacancy.
9.04 "GENERAL"
The Advisory Committee has the following powers and duties:
(A) To select a Secretary, who need not be a member of
the Advisory Committee;
(B) To determine the rights of eligibility of an Employee
to participate in the Plan, the value of a
Participant's Accrued Benefit and the Nonforfeitable
percentage of each Participant's Accrued Benefit;
(C) To adopt rules of procedure and regulations necessary
for the proper and efficient administration of the
Plan provided the rules are not inconsistent with the
terms of this Agreement;
(D) To enforce the terms of the Plan and the rules and
regulations it adopts;
(E) To direct the Trustee as respects the crediting and
distribution of the Trust;
(F) To review and render decisions respecting a claim for
(or denial of a claim for) a benefit under the Plan;
(G) To furnish the Employer with information which the
Employer may require for tax or other purposes;
(H) To engage the service of agents whom it may deem
advisable to assist it with the performance of its
duties;
(I) To establish and maintain a funding standard account
and to make credits and charges to the account to the
extent required by and in accordance with the
provisions of the Code.
The Advisory Committee must exercise all of its powers, duties
and discretion under the Plan in a uniform and
nondiscriminatory manner.
9.05 "FUNDING POLICY"
The Advisory Committee will review, not less often than annually, all
pertinent Employee information and Plan data in order to establish the
funding policy of the Plan and to determine the appropriate methods of
carrying out the Plan's objectives.
9.06 "MANNER OF ACTION"
The decision of a majority of the members appointed and qualified
controls.
9.07 "INTERESTED MEMBER"
No member of the Advisory Committee may decide or determine any matter
concerning the distribution, nature or method of settlement of his own
benefits under the Plan, except in exercising an election available to
that member in his capacity as a Participant, unless the Plan
Administrator is acting alone in the capacity of the Advisory
Committee.
9.08 "INDIVIDUAL ACCOUNTS"
The Advisory Committee will maintain, or direct the Trustee to
maintain, a separate Account, or multiple Accounts, in the name of
each Participant to reflect the Participant's Accrued Benefit under
the Plan.
The Advisory Committee will make its allocations, or request the
Trustee to make its allocations, to the Accounts of the Participants
in accordance with the provisions of Section 9.11. The Advisory
Committee may direct the Trustee to maintain a temporary segregated
investment Account in the name of a Participant to prevent a
distortion of income, gain or loss allocations under Section 9.11. The
Advisory Committee must maintain records of its activities.
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9.09 "VALUE OF PARTICIPANT'S ACCRUED BENEFIT"
The value of each Participant's Accrued Benefit consists of that
proportion of the net worth (at fair market value) of the Employer's
Trust Fund which the net credit balance in his Account (exclusive of
the cash value of incidental benefit insurance contracts) bears to the
total net credit balance in the Accounts (exclusive of the cash value
of the incidental benefit insurance contracts) of all Participants
plus the cash surrender value of any incidental benefit insurance
contracts held by the Employer on the Participant's life.
For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date
immediately preceding the date of the distribution.
9.10 "ALLOCATIONS AND DISTRIBUTION OF NET INCOME GAIN OR LOSS"
A "valuation date" under this Plan is each Accounting Date. As of each
valuation date, the Advisory Committee must adjust Accounts to reflect
net income, gain or loss since the last valuation date. The valuation
period is the period beginning the day after the last valuation date
and ending on the current valuation date.
The assets of the trust will be valued annually at fair market value
as of the last day of the plan year. On such date, the earnings and
losses of the trust will be allocated to each participant's account in
the ratio that such account balance bears to all account balances.
TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply
to all Participant Accounts other than segregated investment Accounts.
The Advisory Committee first will adjust the Participant Accounts, as
those Accounts stood at the beginning of the current valuation period,
for amounts charged during the valuation period to the Accounts in
accordance with Section 9.12 (relating to distributions) and Section
10.01 (relating to insurance premiums), for the cash value of
incidental benefit insurance contracts and for the amount of any
Account which the Trustee has fully distributed since the immediately
preceding valuation date. The Advisory Committee subject to Section
9.12, will allocate the net income, gain or loss pro rata to the
adjusted Participant Accounts. The allocable net income, gain or loss
is the net income (or net loss), including the increase or decrease in
the fair market value of assets, since the last valuation date.
SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs.
ADDITIONAL RULES. An Excess Amount or suspense account
described in Part 2 of Article III does not share in the allocation of
net income, gain or loss described in this Section 9.10. If the
Employer's Plan includes a Code Section 401(k) arrangement, the
Employer may specify in its Adoption Agreement alternate valuation
provisions authorized by that Adoption Agreement. This Section 9.10
applies solely to the allocation of net income, gain or loss of the
Trust. The Advisory Committee will allocate the Employer contributions
in accordance with Article III.
9.11 "INDIVIDUAL STATEMENT"
As soon as practicable after the Accounting Date of each Plan Year,
but within the time prescribed by ERISA and the regulations under
ERISA, the Plan Administrator will deliver to each Participant (and to
each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA
requires be furnished the Participant or Beneficiary. No Participant,
except a member of the Advisory Committee, has the right to inspect
the records reflecting the Account of any other Participant.
9.12 "ACCOUNT CHARGED"
The Advisory Committee will charge all distributions made to a
Participant or to his Beneficiary from his Account against the Account
of the Participant when made.
9.13 "MISSING BENEFICIARY"
If the Employer shall be unable to locate any Beneficiary entitled to
receive payment of any death benefit payable hereunder, after
reasonable search, for a period of two years after such benefit
becomes payable, the amount of such benefit shall cease to be payable
to such Beneficiary, and shall become payable instead to the personal
representative of such former Participant.
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<PAGE> 61
PLAN DOCUMENT
ARTICLE X
PROVISIONS RELATING TO INSURANCE
10.01 "INSURANCE BENEFIT ANNUITY"
The Employer in accordance with the direction of the respective
Participants in accordance with any uniform rules adopted by the
Employer and made known to Participants may elect to invest
contributions to the Plan in incidental life insurance benefits or
one or more annuity contracts distributed by Kemper Financial
Services, Inc. or an affiliate, provided, however, that:
(A) ORDINARY LIFE. The premiums paid for ordinary life
insurance on the life of a Participant must at all times
be less than 50% of the Employer contributions made on
behalf of such Participant. For purposes of these
incidental insurance provisions, ordinary life insurance
contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums.
(B) TERM. The premiums paid for term, universal and all
other life insurance which is not ordinary life insurance
on the life of any Participant may not exceed 25% of the
Employer contributions made on behalf of such
Participant.
(C) COMBINATION. If both ordinary life and term insurance are
purchased on the life of any Participant, the sum of the term
insurance premium plus one-half of the ordinary life premiums
may not exceed 25% of the Employer contributions made on
behalf of such Participant.
(D) ANNUITIES. The terms of any annuity contract purchased
and distributed by the Plan to a Participant shall comply
with the requirements of this Plan.
Such direction of the participant's creates a segregated
asset account. Except as provided in this Section 10.01
and Section 8.10, each participant will have a ratable
interest in all assets of the trust. It will be the
Employer's responsibility to see that the limitations of
this Article X are not exceeded.
10.02 "FORM OF CONTRACT AND PREMIUM"
The Employer shall apply for any contract under this Article X and
each application for contract, and the contracts themselves, shall
nominate and designate the Participant as sole owner, but each
contract shall be held by the Employer and shall be restricted and
not transferable.
The Employer shall pay directly to the insurance company all
amounts pursuant to an election under this Article X and shall
charge the premiums on any such contract(s) against the
contributions by or on behalf of such Participant. After payment
of any premium, the Employer shall remit the balance of such
contributions to the Trustee hereunder. The Employer shall hold
all contracts issued under the Plan and fully account for same to
the Trustee upon written request.
In the event of any conflicts between the terms of this Plan and
the terms of any insurance contracts hereunder, the Plan provisions
shall control.
Any dividends or credits earned on insurance contracts will be
allocated to the participant's account derived from employer
contributions for whose benefit the contract is held.
10.03 "LIMITATION OF LIFE INSURANCE PROTECTION"
The Employer shall not continue any life insurance protection for
any Participant beyond his actual termination of employment.
If the Employer holds any insurance contract(s) on the life of a
Participant when the Participant terminates his employment, subject
to Article VI, the Employer shall transfer the contract(s) to the
Participant endorsed so as to vest in the transferee all right,
title and interest to the contract(s), free and clear of the Plan;
subject, however, to restrictions as to surrender or payment of
benefits as the issuing insurance company may permit and as the
Employer shall direct.
Subject to Article VI, Joint and Survivor Annuity Requirements, the
contracts on a participant's life will be converted to cash or an
annuity or distributed to the participant upon commencement of
benefits.
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ARTICLE XI MISCELLANEOUS
11.01 "EVIDENCE"
Anyone required to give evidence under the terms of the Plan may do
so by certificate, affidavit, document or other information which the
person to act in reliance may consider pertinent, reliable and
genuine, and to have been signed, made or presented by the proper
party or parties. Both the Advisory Committee and the Trustee are
fully protected in acting and relying upon any evidence described
under the immediately preceding sentence.
11.02 "NO RESPONSIBILITY FOR EMPLOYER ACTION"
Neither the Trustee nor the Advisory Committee has any obligation or
responsibility with respect to any action required by the Plan to be
taken by the Employer, any Participant or eligible Employee, or for
the failure of any of the above persons to act or make any payment or
contribution, or to otherwise provide any benefit contemplated under
this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the
Plan, or to determine the correctness of the amount of any Employer
contribution. Neither the Trustee nor the Advisory Committee need
inquire into or be responsible for any action or failure to act on
the part of the others. Any action required of a corporate Employer
must be by its Board of Directors or its designate.
11.03 "FIDUCIARIES NOT INSURERS"
The Trustee, the Advisory Committee, the Plan Administrator and the
Employer in no way guarantee the Trust Fund from loss or
depreciation. The Employer does not guarantee the payment of any
money which may be or becomes due to any person from the Trust Fund.
The liability of the Advisory Committee and the Trustee to make any
payment from the Trust Fund at any time and all times is limited to
the then available assets of the Trust.
11.04 "WAIVER OF NOTICE"
Any person entitled to notice under the Plan may waive the notice.
11.05 "SUCCESSORS"
The Plan is binding upon all persons entitled to benefits under the
Plan, their respective heirs and legal representatives, upon the
Employer, its successors and assigns, and upon the Trustee, the
Advisory Committee, the Plan Administrator and their successors.
11.06 "WORD USAGE"
Words used in the masculine also apply to the feminine where
applicable, and wherever the context of the Employer's Plan dictates,
the plural includes the singular and the singular includes the
plural.
11.07 "EMPLOYER'S RIGHT TO PARTICIPATE"
If the Employer's Plan fails to attain or retain qualification under
section 401 of the Code, the Plan will no longer participate in this
Kemper Simplified Prototype Retirement Plan and will be considered an
individually-designed plan.
11.08 "EMPLOYMENT NOT GUARANTEED"
Nothing contained in this Plan, or with respect to the establishment
of the Trust, or any modification of amendment to the Plan or Trust,
or in the creation of any Account, or the payment of any benefit,
gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the
Employer, or Employee of the Employer, or against the Trustee, or its
agents or employees, or against the Plan Administrator, except as
expressly provided by the Plan, the Trust, ERISA or by a separate
agreement.
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PLAN DOCUMENT
ARTICLE XII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 "EXCLUSIVE BENEFIT"
Any contribution made by the employer because of a mistake of fact
must be returned to the employer within one year of the contribution.
In the event that the Commissioner of Internal Revenue determines
that the plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the employer must be returned to the employer within one year after
the date the initial qualification is denied, but only if the
application for the qualification is made by the time prescribed by
law for filing the employer's return for the taxable year in which
the plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
12.02 "AMENDMENT BY EMPLOYER"
The Employer may change the choice of options in the adoption
agreement and add overriding language in the adoption agreement when
such language is necessary to satisfy Section 415 or Section 416 of
the Code because of the required aggregation of multiple plans, and
add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause
the plan to be treated as individually designed. An employer that
amends the plan for any other reason, including a waiver of the
minimum funding requirement under Section 412(d), will no longer
participate in this master or prototype plan and will be considered
to have an individually designed plan.
No amendment may authorize or permit any of the Trust Fund (other
than the part which is required to pay taxes and administration
expenses) to be used for or diverted to purposes other than for the
exclusive benefit of the Participants or their Beneficiaries or
estates. No amendment may cause or permit any portion of the Trust
Fund to revert to or become a property of the Employer. The Employer
also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the
Advisory Committee without the written consent of the affected
Trustee, the Plan Administrator or the affected member of the
Advisory Committee.
If the plan's vesting schedule is amended, or the plan is amended in
any way that directly or indirectly affects the computation of the
participant's nonforfeitable percentage or if the plan is deemed
amended by an automatic change to or from a top-heavy vesting
schedule, each participant with at least 3 years of service with the
employer may elect, within a reasonable period after the adoption of
the amendment or change, to have the nonforfeitable percentage
computed under the plan without regard to such amendment or change.
For participants who do not have at least one hour of service in any
plan year beginning after December 31, 1988, the preceding sentence
shall be applied by substituting "five years of service" for "three
years of service" where such language appears.
The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end
on the latest of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective; or
(3) 60 days after the participant is issued written notice of
the amendment by the employer or plan administrator.
Furthermore, if the vesting schedule of a plan is amended, in the
case of an employee who is a participant as of the later of the date
such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
employee's right to his employer-derived accrued benefit will not be
less than his percentage computed under the plan without regard to
such amendment.
CODE SECTION 411(D)(6) PROTECTED BENEFITS. An amendment (including
the adoption of this Plan as a restatement of an existing plan) may
not decrease a Participant's Accrued Benefit, except to the extent
permitted under Code Section 412(c)(8), and may not reduce or
eliminate Code Section 411 (d)(6) protected benefits determined
immediately prior to the adoption date (or, if later, the effective
date) of the amendment. An amendment reduces or eliminates Code
Section 411 (d)(6) protected benefits if the amendment has the effect
of either (1) eliminating or reducing an early retirement benefit or
a retirement-type subsidy (as defined in Treasury regulations), or
(2) except as provided by Treasury regulations, eliminating an
optional form of benefit. The Advisory Committee must disregard an
amendment to the extent application of the amendment would fail to
satisfy this paragraph. If the Advisory Committee must disregard an
amendment because the amendment would violate clause (1) or clause
(2), the Advisory Committee must maintain a schedule of the early
retirement option or other optional forms of benefit the Plan must
continue for the affected Participants.
The Employer must make all amendments in writing. Each amendment must
state the date to which it is either retroactively or prospectively
effective. See Section 11.08 for the effect of certain amendments
adopted by the Employer.
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12.03 "AMENDMENT BY PLAN SPONSOR"
The Plan Sponsor, without the Employer's consent, may amend the Plan
and Trust, from time to time, in order to conform the Plan and Trust
to any requirement for qualification of the Plan and Trust under the
Internal Revenue Code. The Plan Sponsor may not amend the Plan in any
manner which would modify any election made by the Employer under the
Plan without the Employer's written consent.
For purposes of sponsoring organization amendments, the mass
submitter shall be recognized as the agent of the sponsoring
organization. If the sponsoring organization does not adopt the
amendments made by the mass submitter, it will no longer be identical
to or a minor modifier of the mass submitter plan.
12.04 "DISCONTINUANCE"
The Employer has the right, at any time, to suspend or discontinue
its contributions under the Plan, and to terminate, at any time, this
Plan and the Trust created under this Agreement. The Plan will
terminate upon the first to occur of the following:
(A) The date terminated by action of the Employer;
(B) The date the Employer is judicially declared bankrupt or
insolvent, unless the proceeding authorizes continued
maintenance of the Plan;
(C) The dissolution, merger, consolidation or reorganization
of the Employer or the sale by the Employer of all or
substantially all of its assets, unless the successor or
purchaser makes provision to continue the Plan, in which
event the successor or purchaser must substitute itself
as the Employer under this Plan.
In the event of a complete discontinuance of contributions under the
plan, the account balance of each affected participant will be
nonforfeitable.
12.05 "MERGER/DIRECT TRANSFER"
The Trustee may not consent to, or be a party to, any merger or
consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless immediately after the merger,
consolidation or transfer (if the plan is then terminated), the
surviving Plan provides each Participant a benefit equal to or
greater than the benefit each Participant would have received had the
Plan terminated immediately before the merger or consolidation or
transfer. The Trustee possesses the specific authority to enter into
merger agreements or direct transfer of assets agreements with the
trustees of other retirement plans described in Code Section 401(a),
including an elective transfer, and to accept the direct transfer of
plan assets, or to transfer plan assets, as a party to any such
agreement.
The Trustee may accept a direct transfer of plan assets on behalf of
an Employee prior to the date the Employee satisfies the Plan's
eligibility conditions. If the Trustee accepts such a direct transfer
of plan assets, the Advisory Committee and Trustee must treat the
Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan.
The Trustee, after August 9,1988, may not consent to, or be a
party to a merger, consolidation or transfer of assets with a defined
benefit plan, except with respect to an elective transfer. The
Trustee will hold, administer and distribute the transferred assets
as a part of the Trust Fund and the Trustee must maintain a separate
Employer contribution Account for the benefit of the Employee on
whose behalf the Trustee accepted the transfer in order to reflect
the value of the transferred assets. Unless a transfer of assets to
this Plan is an elective transfer, the Plan will preserve all Code
Section 411(d)(6) protected benefits with respect to those
transferred assets, in the manner described in Section 13.02. A
transfer is an elective transfer if: (1) the transfer satisfies the
first paragraph of this Section 13.06; (2) the transfer is voluntary,
under a fully informed election by the Participant; (3) the
Participant has an alternative that retains his Code Section
411(d)(6) protected benefits (including an option to leave his
benefit in the transferor plan, if that plan is not terminating); (4)
the transfer satisfies the applicable spousal consent requirements of
the Code; (5) the transferor plan satisfies the joint and survivor
notice requirements of the Code, if the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a
right to immediate distribution from the transferor plan, in lieu of
the elective transfer; (7) the transferred benefit is at least the
greater of the single sum distribution provided by the transferor
plan for which the Participant is eligible or the present value of
the Participant's accrued benefit under the transferor plan payable
at that plan's normal retirement age; (8) the Participant has a 100%
Nonforfeitable interest in the transferred benefit; and (9) the
transfer otherwise satisfies applicable Treasury regulations. An
elective transfer may occur between qualified plans of any type. Any
direct transfer of assets from a defined benefit plan after August 9,
1988, which is not an elective transfer will render the Employer's
Plan individually designed.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Plan
receives a direct transfer (by merger or otherwise) of elective
contributions (or amounts treated as elective contributions) under a
Plan with a Code Section 401(k) arrangement, the distribution
restrictions of Code Sections 401(k)(2) and (10) continue to apply
to those transferred elective contributions.
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<PAGE> 65
PLAN DOCUMENT
12.06 "TERMINATION"
Upon termination of the Plan, the distribution provisions of Article
VI remain operative, with the following exceptions:
(1) If the present value of the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit to him in
lump sum as soon as administratively practicable after
the Plan terminates; and
(2) If the present value of the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500, the Participant or the
Beneficiary, in addition may elect to have the Trustee
commence distribution of his Nonforfeitable Accrued
Benefit as soon as administratively practicable after the
Plan terminates.
To liquidate the Trust, the Advisory Committee will
purchase a deferred annuity contract for each Participant
which protects the Participant's distribution rights
under the Plan, if the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500 and the Participant does
not elect an immediate distribution pursuant to Paragraph
(2). The Trust will continue until the Trustee in
accordance with the direction of the Advisory Committee
has distributed all of the benefits under the Plan.
On each valuation date, the Advisory Committee will
credit any part of a Participant's Accrued Benefit
retained in the Trust with its proportionate share of the
Trust's income, expenses, gains and losses, both realized
and unrealized. Upon termination of the Plan, the Amount,
if any, in a suspense account under Article III will
revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A
resolution or amendment to freeze all future benefit
accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section
12.06.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If
the Employer's Plan includes a Code Section 401(k)
arrangement or if transferred assets described in Section
13.06 are subject to the distribution restrictions of Code
Sections 401(k)(2) and (10), the special distribution
provisions of this Section 12.06 are subject to the
restrictions of this paragraph. The portion of the Participant's
Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code
Section 401(k) arrangement as elective contributions) is
not distributable on account of Plan termination, as
described in this Section 12.06, unless: (a) the
Participant otherwise is entitled under the Plan to a
distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs
without the establishment of a successor plan. A
successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or
by a related employer) at the time of the termination of
the Plan or within the period ending twelve months after
the final distribution of assets. A distribution made
after March 31, 1988, pursuant to clause (b), must be part
of a lump sum distribution to the Participant of his
Nonforfeitable Accrued Benefit.
In the event of the termination or partial termination of
the plan, the account balance of each affected
participant will be nonforfeitable.
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<PAGE> 66
ARTICLE XIII
CODE SECTION 401(k) ARRANGEMENTS
13.01 "ELIGIBILITY"
This Article XIII applies to an Employer's Plan only if the Plan
includes a Code Section 401(k) arrangement.
An employee's eligibility to make Elective Deferrals may not be
conditioned upon the completion of more than one (1) year of service
or the attainment of more than age twenty-one (21). An employee's
eligibility to receive Matching Contributions, Qualified Matching
Contributions, or Qualified Nonelective Contributions may be
conditioned upon the completion of up to two (2) years of service. No
contributions or benefits (other than Matching Contributions or
Qualified Matching Contributions) may be conditioned upon an
employee's Elective Deferrals.
The Employer must specify a reasonable period in the Adoption
Agreement of at least once each calendar year during which a
participant may elect to commence Elective Deferrals. Such election
may not be made retroactively. A participant's election to commence
elective Deferrals must remain in effect until modified or
terminated.
The Employer must also specify in the Adoption Agreement a reasonable
period at least once each calendar year to terminate an election or
to modify the amount or frequency of his or her Elective Deferrals.
13.02 "SALARY REDUCTION AGREEMENT"
The Employer will elect in its Adoption Agreement the terms of the
Code Section 401(k) arrangement under the Plan.
Any Employee eligible to participate in the Plan may file a salary
reduction agreement with the Advisory Committee. The salary reduction
agreement may not be effective earlier than the following date which
occurs last: (i) the Employee's Plan Entry Date (or, in the case of
a reemployed Employee, his reparticipation date under Article II);
(ii) the execution date of the Employee's salary reduction agreement;
(iii) the date the Employer adopts the Code Section 401(k)
arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code Section 401(k) arrangement, as specified
in the Employer's Adoption Agreement. A salary reduction agreement
must specify the amount of Compensation (as defined in Section 1.12)
or percentage of Compensation the Employee wishes to defer. The
salary reduction agreement will apply only to Compensation which
becomes currently available to the Employee after the effective
date of the salary reduction agreement. The Employer will apply a
reduction election to all Compensation (and to increases in such
Compensation) unless the Employee specifies in his salary reduction
agreement to limit the election to certain Compensation. The Employer
will specify in Adoption Agreement Section 3.01 the rules and
restrictions applicable to the Employee's salary reduction
agreements, however, under no circumstances, may a salary reduction
agreement or other deferral mechanism be adopted retroactively.
13.03 "DEFINITIONS"
For purposes of this Article XIII:
(1) "ACTUAL DEFERRAL PERCENTAGE" shall mean, for a specified
group of participants for a Plan Year, the average of the
ratios (calculated separately for each participant in
such group) of (1) the amount of employer contributions
actually paid over to the trust on behalf of such
participant for the Plan Year to (2) the participant's
Compensation for such Plan Year to (whether or not the
employee was a participant for the entire Plan Year).
Employer contributions on behalf of any participant shall
include: (1) any Elective Deferrals made pursuant to the
participant's deferral election, including Excess
Elective Deferrals of Highly Compensated Employees, but
excluding Elective Deferrals that are taken into account
in the Contribution Percentage test (provided the ADP
test is satisfied both with and without exclusion of
these Elective Deferrals); and (2) at the election of the
employer, Qualified Nonelective Contributions and
Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an employee who
would be a participant but for the failure to make
Elective Deferrals shall be treated as a participant on
whose behalf no Elective Deferrals are made.
(2) "AGGREGATE LIMIT" shall mean the sum of (i) 125 percent
of the greater of the ADP of the Nonhighly Compensated
Employees for the Plan Year or the ACP of Nonhighly
Compensated Employees under the plan subject to Code
Section 401(m) for the Plan Year beginning with or
within the Plan Year of the CODA and (ii) the lesser of
200% or two plus the lesser of such ADP or ACP. "Lesser"
is substituted for "greater" in (i) above, and "greater"
is substituted for "lesser" after "two plus the" in (ii),
if it would result in a larger Aggregate Limit.
(3) "AVERAGE CONTRIBUTION PERCENTAGE" shall mean the average
of the Contribution Percentages of the Eligible
Participants in a group.
(4) "CONTRIBUTION PERCENTAGE" shall mean the ratio (expressed
as a percentage) of the participant's Contribution
Percentage Amounts to the participant's Compensation for
the Plan Year (whether or not the employee was a
participant for the entire Plan Year).
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<PAGE> 67
PLAN DOCUMENT
(5) "CONTRIBUTION PERCENTAGE AMOUNTS" shall mean the sum of
the Employee Contributions, Matching Contributions, and
Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP test) made under the
plan on behalf of the participant for the Plan Year. If
so elected in the adoption agreement the employer may
include Qualified Nonelective Contributions in the
Contribution Percentage Amounts. The employer also may
elect to use Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and
continues to be met following the exclusion of those
Elective Deferrals that are used to meet the ACP test.
(6) "ELECTIVE DEFERRALS" shall mean any employer
contributions made to the plan at the election of the
participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary reduction
agreement or other deferral mechanism. With respect to
any taxable year, a participant's Elective Deferral is
the sum of all Employer contributions made on behalf of
such participant pursuant to an election to defer under
any qualified CODA as described in Code Section 401(k),
any simplified employee pension cash or deferred
arrangement as described in Code Section 402(h)(1)(B),
any eligible deferred compensation plan under Code
Section 457, any plan as described under Code Section
501(c)(18), and any employer contributions made on behalf
of a participant for the purchase of an annuity contract
under Code Section 403(b) pursuant to a salary reduction
agreement.
(7) "ELIGIBLE PARTICIPANT" shall mean any employee who is
eligible to make an Employee Contribution, or an Elective
Deferral (if the employer takes such contributions into
account in the calculation of the Contribution
Percentage), or to receive a Matching Contribution
(including forfeitures) or a Qualified Matching
Contribution.
(8) "EXCESS AGGREGATE CONTRIBUTIONS" shall mean, with respect
to any Plan Year, the excess of:
(a) The aggregate Contribution Percentage Amounts
taken into account in computing the numerator of
the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such
Plan Year, over
(b) The maximum Contribution Percentage Amounts
permitted by the ACP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of their
Contribution Percentages beginning with the
highest of such percentages).
(9) "EXCESS CONTRIBUTIONS" shall mean, with respect to any
Plan Year, the excess of:
(a) The aggregate amount of employer contributions
actually taken into account in computing the ADP
of Highly Compensated Employees for such Plan
Year, over
(b) The maximum amount of such contributions
permitted by the ADP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs,
beginning with the highest of such percentages).
(10) "EXCESS ELECTIVE DEFERRALS" shall mean those Elective
Deferrals that are includible in a participant's gross
income under Section 402(g) of the Code to the extent such
participant's Elective Deferrals for a taxable year
exceed the dollar limitation under such Code section.
Excess Elective Deferrals shall be treated as annual
additions under the plan.
(11) "MATCHING CONTRIBUTION" shall mean an employer
contribution made to this or any other defined
contribution plan on behalf of a participant on account
of an Employee Contribution made by such participant, or
on account of a participant's Elective Deferral, under a
plan maintained by the employer.
(12) "QUALIFIED NONELECTIVE CONTRIBUTIONS" shall mean
contributions (other than Matching Contributions or
Qualified Matching Contributions) made by the employer
and allocated to participants' accounts that the
participants may not elect to receive in cash until
distributed from the plan; that are nonforfeitable when
made; and that are distributable only in accordance with
the distribution provisions that are applicable to
Elective Deferrals and Qualified Matching Contributions.
13.04 "ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION"
No participant shall be permitted to have Elective Deferrals made
under this plan, or any other qualified plan maintained by the
Employer, during any taxable year, in excess of the dollar limitation
contained in Section 402(g) of the Code in effect at the beginning of
such taxable year.
13.05 "DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS"
A participant may assign to this plan any Excess Elective Deferrals
made during a taxable year of the participant by notifying the plan
administrator on or before the date specified in the adoption
agreement of the amount of the Excess Elective Deferrals to be
assigned to the plan.
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<PAGE> 68
Notwithstanding any other provision of the plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto,
shall be distributed no later than April 15 to any participant to
whose account Excess Elective Deferrals were assigned for the
preceding year and who claims Excess Elective Deferrals for such
taxable year.
Determination of income or loss: Excess Elective Deferrals shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Elective Deferrals is the sum of:
(1) income or loss allocable to the participant's Elective Deferral
account for the taxable year multiplied by a fraction, the numerator
of which is such participant's Excess Elective Deferrals for the year
and the denominator is the participant's account balance attributable
to Elective Deferrals without regard to any income or loss occurring
during such taxable year; and (2) ten percent of the amount
determined under (1) multiplied by the number of whole calendar
months between the end of the participant's taxable year and the date
of distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
13.06 "ACTUAL DEFERRAL PERCENTAGE TEST"
The Actual Deferral Percentage (hereinafter "ADP") for participants
who are Highly Compensated Employees for each Plan Year and the ADP
for participants who are Nonhighly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(1) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(2) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 2.0, provided that the
ADP for participants who are Highly Compensated Employees
does not exceed the ADP for participants who are
Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. The ADP for any participant who is a Highly
Compensated Employee for the Plan Year and who
is eligible to have Elective Deferrals (and
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test)
allocated to his or her accounts under two or
more arrangements described in Section 401(k)
of the Code, that are maintained by the
employer, shall be determined as if such
Elective Deferrals (and, if applicable, such
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both) were made under
a single arrangement. If a Highly Compensated
Employee participates in two or more cash or
deferred arrangements that have different Plan
Years, all cash or deferred arrangements ending
with or within the same calendar year shall be
treated as a single arrangement.
2. In the event that this plan satisfies the
requirements of Ssections 401(k), 401(a)(4), or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by determin-
ing the ADP of employees as if all such plans
were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(k) of the Code
only if they have the same Plan Year.
3. For purposes of determining the ADP of a
participant who is a five-percent owner or one
of the ten most highly paid Highly Compensated
Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching
Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) and
Compensation of such participant shall include
the Elective Deferrals (and, if applicable
Qualified Nonelective Contributions and
Qualified Matching Contributions, or both) and
Compensation for the Plan Year of Family Members
(as defined in Section 414(g)(6) of the Code).
Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as
separate employees in determining the ADP both
for participants who are Nonhighly Compensated
Employees and for participants who are Highly
Compensated Employees.
4. For purposes of determining the ADP test,
Elective Deferrals, Qualified Nonelective
Contributions and Qualified Matching
Contributions must be made before the last day
of the twelve-month period immediately following
the Plan Year to which contributions relate.
5. The employer shall maintain records sufficient
to demonstrate satisfaction of the ADP test and
the amount of Qualified Nonelective
Contributions of Qualified Matching
Contributions, or both, used in such test.
6. The determination and treatment of the ADP
amounts of any participant shall satisfy such
other requirements as may be prescribed by the
Secretary of the Treasury.
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<PAGE> 69
PLAN DOCUMENT
13.07 "DISTRIBUTION OF EXCESS CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan
Year in which such excess amounts arose, a ten (10) percent excise
tax will be imposed on the employer maintaining the plan with respect
to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such employees. Excess
Contributions shall be allocated to Participants who are subject to
the family member aggregation rules of Section 414(g)(6) of the Code
in the manner prescribed by the regulations.
Excess Contributions (including the amounts recharacterized) shall be
treated as annual additions under the plan.
Determination of Income or Loss: Excess Contributions shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Contributions is the sum of: (1)
income or loss allocable to the participant's Elective Deferral
account (and, if applicable, the Qualified Nonelective Contribution
account or the Qualified Matching Contribution account or both) for
the Plan Year multiplied by a fraction, the numerator of which is
such participant's Excess contributions for the year and the
denominator is the participant's account balance attributable to
Elective Deferrals (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Contributions: Excess Contributions shall be
distributed from the participant's Elective Deferral account and
Qualified Matching Contribution account (if applicable) in proportion
to the participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan Year.
Excess Contributions shall be distributed from the participant's
Qualified Nonelective Contribution account only to the extent that
such Excess Contributions exceed the balance in the participant's
Elective Deferral account and Qualified Matching Contribution
account.
13.08 "MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Matching Contributions to the plan.
13.09 "QUALIFIED MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Qualified Matching Contributions to the plan.
13.10 "LIMITATIONS ON MATCHING CONTRIBUTIONS"
The ACP for participants who are Highly Compensated Employees for
each Plan Year and the ACP for participants who are Nonhighly
Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(A) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(B) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by two (2), provided that
the ACP for participants who are Highly Compensated
Employees does not exceed the ACP for participants who
are Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. Multiple Use: If one or more Highly Compensated
Employees participate in both a CODA and a plan
subject to the ACP test maintained by the
employer and the sum of the ADP or ACP of those
Highly Compensated Employees subject to either
or both tests exceeds the Aggregate Limit, then
the ACP of those Highly Compensated Employees
who also participate in a CODA will be reduced
(beginning with such Highly Compensated Employee
whose ACP is the highest) so that the limit is
not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage
Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP or ACP of the
Highly Compensated Employees are determined
after any corrections required to meet the ADP
or ACP tests. Multiple use does not occur if
either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the
ADP or ACP of the Nonhighly Compensated
Employees.
2. For purposes of this Section, the Contribution
Percentage for any participant who is a Highly
Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his
or her account under two or more plans described
in Section 401(a) of the Code, or arrangements
described in Section 401(k) of the Code that are
maintained by the employer, shall be determined
as if the total of such Contribution Percentage
Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more
cash or deferred arrangements that have
different plan years, all cash or deferred
arrangements ending with or within the same
calendar year shall be treated as a single
arrangement.
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<PAGE> 70
3. In the event that this plan satisfies the
requirements of Sections 401(m), 401(a)(4) or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by
determining the Contribution Percentage of
employees as if all such plans were a single
plan. For plan years beginning after December
31, 1989, plans may be aggregated in order to
satisfy Section 401(m) of the Code only if they
have the same Plan Year.
4. For purposes of determining the Contribution
percentage of a participant who is a
five-percent owner or one of the most highly
paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation
of such participant shall include the
Contribution Percentage Amounts and Compensation
for the Plan Year of Family Members (as defined
in Section 414(g)(6) of the Code). Family
Members, with respect to Highly Compensated
Employees, shall be disregarded as separate
employees in determining the Contribution
Percentage both for participants who are
Nonhighly Compensated Employees and for
participants who are Highly Compensated
Employees.
5. For purposes of determining the Contribution
Percentage test, Employee Contributions are
considered to have been made in the Plan Year in
which contributed to the trust. Matching
Contributions and Qualified Nonelective
Contributions will be considered made for a Plan
Year if made no later than the end of the
twelve-month period beginning on the day after
the close of the Plan Year.
6. The employer shall maintain records sufficient
to demonstrate satisfaction of the ACP test and
the amount of Qualified Nonelective
Contributions or Qualified Matching
Contributions, or both, used in such test.
7. The determination and treatment of the
Contribution Percentage of any participant shall
satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
13.11 "DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan
Year to participants whose accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to participants who are
subject to the family member aggregation rules of Section 414(g)(6)
of the Code in the manner prescribed by the regulations. If such
Excess Aggregate Contributions are distributed more than 2-1/2 months
after the last day of the Plan Year in which such excess amounts
arose, a ten (10) percent excise tax will be imposed on the employer
maintaining the plan with respect to those amounts. Excess Aggregate
Contributions shall be treated as annual additions under the plan.
Determination of Income or Loss: Excess Aggregate Contributions shall
be adjusted for any income or loss up to the date of distribution.
The income or loss allocable to Excess Aggregate Contributions is the
sum of: (1) income or loss allocable to the participant's Employee
Contribution account, Matching Contribution account (if any, and if
all amounts therein are not used in the ADP test) and, if applicable,
Qualified Nonelective Contribution account and Elective Deferral
account for the Plan Year multiplied by a fraction, the numerator of
which is such participant's Excess Aggregate Contributions for the
year and the denominator is the participant's account balance(s)
attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Aggregate Contributions: Excess Aggregate
Contributions shall be distributed on a pro rata basis from the
participant's Matching Contribution account and qualified Matching
Contribution account (and, if applicable, the participant's Qualified
Nonelective Contribution account or Elective Deferral account, or
both).
Such determination shall be made after first determining Excess
Elective Deferrals pursuant to Section 13.03(10) and then
determining Excess Contributions pursuant to Section 13.03(9).
13.12 "QUALIFIED NONELECTIVE CONTRIBUTIONS"
The employer may elect to make Qualified Nonelective Contributions
under the plan on behalf of employees as provided in the adoption
agreement.
In addition, in lieu of distributing Excess Contributions as provided
in Section 13.07 of the plan, or Excess Aggregate Contributions as
provided in Section 13.11 of the plan, and to the extent elected by
the employer in the adoption agreement, the employer may make
Qualified Nonelective Contributions on behalf of Nonhighly
Compensated Employees that are sufficient to satisfy either the
Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
36
<PAGE> 71
PLAN DOCUMENT
13.13 "DISTRIBUTION REQUIREMENTS"
Elective Deferrals, Qualified Nonelective Contributions, and
Qualified Matching Contributions, and income allocable to each are
not distributable to a participant or his or her beneficiary or
beneficiaries, in accordance with such participant's or beneficiary
or beneficiaries election, earlier than upon separation from service,
death, or disability.
Such amounts may also be distributed upon:
1. Termination of the plan without the establishment of
another defined contribution plan.
2. The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within
the meaning of Section 409(d)(2) of the Code) used in a
trade or business of such corporation if such corporation
continues to maintain this plan after the disposition,
but only with respect to employees who continue
employment with the corporation acquiring such assets.
3. The disposition by a corporation to an unrelated entity
of such corporation's interest in a subsidiary (within
the meaning of Section 409(d)(3) of the Code) if such
corporation continues to maintain this plan, but only
with respect to employees who continue employment with
such subsidiary.
4. The attainment of age 59-1/2.
All distributions that may be made pursuant to one or
more of the foregoing distributable events are subject to
the spousal and participant consent requirements (if
applicable) contained in Sections 401(a)(11) and 417 of
the Code.
37
<PAGE> 72
IRS Letters
Serial No. D257426a
Serial No. D257427a
Dated: 3/19/91
<PAGE> 73
AMENDATORY AGREEMENT
Adoption of 401(a)(31) Model Amendment (Revenue Procedure 93-12)
Kemper Growth Fund, as Prototype Plan Sponsor ("Sponsor"), makes this
Amendatory Agreement to the Kemper Retirement Plan Prototype.
WITNESSETH
WHEREAS, it is necessary to amend the Prototype Plan basic plan
document to provide plan participants with the option of electing a direct
transfer of any eligible rollover distribution to an eligible retirement plan;
and
WHEREAS, the Prototype Plan gives the Sponsor authority, without the
approval of any adopting employer, to make amendments necessary to conform the
Prototype Plan to any requirement for qualification under the Internal Revenue
Code.
NOW THEREFORE, in consideration of the above premises, the Sponsor as
designated agent for all sponsoring organizations for purposes of making plan
amendments hereby amends the Prototype Plan to include the following amendment,
as an appendix to the basic plan document. This amendment, which is identical
to the model language in the Appendix of Revenue Procedure 93-12, applies to
any plan maintained by an employer under the Prototype Plan.
APPENDIX TO BASIC PLAN DOCUMENT
ARTICLE VI
6.02(C). THIS ARTICLE APPLIES TO DISTRIBUTIONS MADE ON OR AFTER JANUARY 1,
1993.
Notwithstanding any provision of the plan to the contrary that would
otherwise limit a distributee's election under the Article, a Distributee may
elect, at the time and in the manner prescribed by the plan administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
6.02(D). DEFINITIONS.
(1) ELIGIBLE ROLLOVER DISTRIBUTION: An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is on of a series of substantially equal
periodic payments (not less frequently than annually) make for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(2) ELIGIBLE RETIREMENT PLAN: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(3) DISTRIBUTEE: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving spouse
and the employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.
(4) DIRECT ROLLOVER: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
With respect to each adopting employer's plan maintained under this Prototype
Plan, this amendment is effective as of January 1, 1993.
IN WITNESS WHEREOF, the Sponsor has executed this Amendatory Agreement on the
20th day of January, 1993.
Kemper Growth Fund
By /s/ Paul Murphy
-----------------------------------------------------------
"Sponsor's" Authorized Representative
<PAGE> 74
APPENDIX ARTICLE B
RESOLVED, that Kemper Growth Fund ("Sponsor"), in its capacity as a prototype
sponsoring organization under IRS Revenue Procedure 89-9, amend the Prototype
Plan basic plan document by adopting Appendix Article B, a copy of which is
attached to this resolution. The amendment will be effective for all adopting
employers of the Prototype Plan for plan years beginning after December 31,
1993.
Adopted this seventeenth day of February, 1994.
Kemper Financial Services, Inc.
By: Paul Murphy
-------------------------------------------
*Sponsor's Authorized Representative
ARTICLE B
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93) and is an integral part of the basic plan
document. Section 11.07 applies to any modification or amendment of this
Article.
In addition to other applicable limitations set forth in the plan,
and notwithstanding any other provision of the plan to the contrary, for plan
years beginning on or after January 1, 1994, the annual compensation of each
employee taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
12 months, over which compensation is determined (determination period)
beginning in such calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the determination
period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference
in this plan to the limitation under Section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first plan year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
<PAGE> 75
Kemper Financial Services, Inc.
120 South LaSalle Street
Chicago, IL 60603
<PAGE> 1
EXHIBIT 99.B14.(b)
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (UNDER SECTION 408(a) OF THE
INTERNAL REVENUE CODE)
KEEP FOR YOUR RECORDS.
FORM 5305 DO NOT FILE WITH
INDIVIDUAL RETIREMENT TRUST ACCOUNT INTERNAL REVENUE
(REV. OCTOBER 1992) SERVICE
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
<TABLE>
<S><C>
State of } SS / / Amendment
----------------------------------------------------------------------------
County of
---------------------------------------------------------------------------
Grantor's name Grantor's date of birth
--------------------------------- --------------------------------------
Grantor's address Grantor's social security number
------------------------------ ----------------------------
Trustee's name INVESTORS FIDUCIARY TRUST COMPANY
------------------------------------------------------------------------------------------------
Trustee's address or principal place of business KANSAS CITY, MISSOURI
--------------------------------------------------------------
</TABLE>
The Grantor whose name appears above is establishing an Individual Retirement
Account under section 408(a) to provide for his or her retirement and for the
support of his or her beneficiaries after death. The Trustee named above has
given the Grantor the disclosure statement required under Regulations section
1.406-6. The Grantor has assigned the trust __________ dollars ($_______) in
cash. The Grantor and the Trustee made the following agreement:
ARTICLE I
The Trustee may accept additional cash contributions on behalf of the Grantor
for a tax year of the Grantor. The total cash contributions are limited to
$2,000 for the tax year unless the contribution is a rollover described in
section 402(c) (but only after December 31, 1992), 403(a)(4), 403(b)(8),
408(d)(3), or an employer contribution to a simplified employee pension plan as
described in section 408(1). Rollover contributions before January 1, 1993,
include rollovers described in section 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3) or an employer contribution to a simplified employee
pension plan described in section 408(k).
ARTICLE II
The Grantor's interest in the balance in the trust account is nonforfeitable.
ARTICLE III
1. No part of the trust funds may be invested in life insurance contracts, nor
may the assets of the trust account be commingled with other property except in
a common trust fund or common investment fund (within the meaning of section
408(a)(5).
2. No part of the trust funds may be invested in collectibles (within the
meaning of section 408(m).
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Grantor's interest in the trust account shall be made in
accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1. 401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Grantor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Grantor and
the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Grantor's entire interest in the trust account must be, or begin to be,
distributed by the Grantor's required beginning date, April 1 following the
calendar year end in which the Grantor reaches age 70 1/2. By that date, the
Grantor may elect, in a manner acceptable to the trustee, to have the balance
in the trust account distributed in:
(A) A single sum payment.
(B) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the grantor.
(C) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Grantor and his or her designated beneficiary.
(D) Equal or substantially equal annual payments over a specified period that
may not be longer than the Grantor's life expectancy.
(E) Equal or substantially equal payments over a specified period that may not
be longer than the joint life and last survivor expectancy of the Grantor and
his or her designated beneficiary.
4. If the Grantor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(A) If the Grantor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(B) If the Grantor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Grantor or, if the
Grantor has not so elected, at the election of the beneficiary or
beneficiaries, either
(I) Be distributed by the December 31 of the year containing the fifth
anniversary of the Grantor's death, or
(II) Be distributed in equal or substantially equal payments over the life or
life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Grantor's death. If, however,
the beneficiary is the Grantor's surviving spouse, then this distribution is
not required to begin before December 31 of the year in which the Grantor would
have turned age 70 1/2.
(C) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Grantor's required
beginning date, even though payments may actually have been made before that
date.
(D) If the Grantor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Grantor's entire interest in the trust as of the close of business
on December 31 of the preceding year by the life expectancy of the Grantor (or
the joint life and last survivor expectancy of the Grantor and the Grantor's
designated beneficiary, or the life expectancy of the designated beneficiary,
whichever applies). In the case of distributions under paragraph 3, determine
the initial life expectancy (or joint life and last survivor expectancy) using
the attained ages of the Grantor and designated beneficiary as of their
birthdays in the year the Grantor reaches age 70 1/2. In the case of a
distribution in accordance with paragraph 4(b)(ii), determine life expectancy
using the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
<PAGE> 2
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (CONTINUED)
ARTICLE V
1. The Grantor agrees to provide the Trustee with information necessary for the
Trustee to prepare any reports required under section 408(i) and Regulations
1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Grantor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signature appear below.
ARTICLE VIII
1. DEFINITIONS: "Designated Investment Company" shall mean any Kemper Mutual
Fund, or any other registered investment company with the same investment
advisor or principal underwriter, if certified to the Trustee as being
available for investment pursuant to this trust.
2. INVESTMENT OF ACCOUNT ASSETS: The amount of each contribution shall be
applied to the purchase of shares of a Designated Investment Company at the
price and in the manner in which such shares are then being publicly offered by
such investment company. All dividends and capital gain distributions received
on the shares of a Designated Investment Company other than Kemper Bond
Enhanced Securities Trust shall be reinvested in such shares. Any distributions
from the Kemper Bond Enhanced Securities Trust shall be invested in one of the
other Designated Investment Companies set forth in the prospectus and selected
by the Grantor, or in the absence of a selection will be invested in the Kemper
Money Market Fund-Government Securities Portfolio.
3. DISTRIBUTIONS: Notwithstanding the provisions of Article IV, if the Grantor
or a beneficiary does not choose a method of distribution in accordance with
Article IV, the Trustee is authorized, but is not required, to elect a
distribution option other than a single sum payment, to make distributions
pursuant to such election in kind, and to liquidate sufficient shares of a
Designated Investment Company to withhold federal income tax from distributions
as required by law. Further, the Trustee shall not be responsible for any
distribution or failure to distribute in the absence of written instructions
acceptable to the Trustee from the Trustee from the Grantor or beneficiary in
accordance with Article IV including, but not limited to, any tax or penalty
resulting from such distribution or failure to distribute.
4. AMENDMENT AND TERMINATION: The Grantor may, at any time, and from time to
time, terminate the Trust in whole or in part by delivering to the Trustee a
signed written copy of such termination and the Grantor delegated to the
Trustee the right to amend the Trust (including retroactive amendments) by
written notice to the Grantor mailed to his last address known to the Trustee,
and the Grantor shall be deemed to have consented to any such amendment,
provided that no amendment shall cause or permit any part of the asset of the
Trust Account to be diverted to purposes other than for the exclusive benefit
of the Grantor or beneficiaries, and no amendment shall be made except in
accordance with any applicable laws and regulations affecting this Trust.
5. RESIGNATION OR REMOVAL OF TRUSTEE: The Trustee may resign at any time upon
thirty (30) days of notice in writing to the Grantor, and may be removed by the
Grantor at any time upon thirty (30) days notice in writing to the Trustee.
Upon such resignation or removal, the Grantor shall appoint a successor
Trustee, which successor shall be a "bank" as defined in section 408(n). Upon
receipt by the Trustee of written acceptance of such appointment by the
successor Trustee, the Trustee shall transfer and pay over to such successor
the assets of the Trust Account and all records pertaining thereto. The Trustee
is authorized, however, to reserve such sum of money as it may deem advisable
for payment of all its fees, compensation, costs and expenses, or for payment
of any other liability constituting a charge on or against the assets of the
Trust Account or on or against the Trustee, which any balance of such reserve
remaining after the payment of such items to be paid over to the successor
Trustee. The successor Trustee shall hold the assets paid over to it under
terms similar to those of this Agreement that qualify under the provisions of
the Internal Revenue Code. If within thirty (30) days after the Trustee's
resignation or removal the Grantor has not appointed a successor trustee, which
has accepted with appointment, the Trustee shall appoint such successor itself.
6. TRUSTEE'S ANNUAL FEES: The Grantor shall be charged by the Trustee for its
services here-under in such amount as the Trustee shall establish from time to
time. Sufficient shares may be liquidated from the Trust Account to pay the
fee. The annual fee in effect on the date of this agreement is set forth in the
Application Guide. A different fee may be substituted at any time upon written
notice to the Grantor. A Grantor who does not consent to such new fee should
terminate this agreement pursuant to Paragraph 4 of Article IX within 30 days
of the notice to the new fee. If no such termination is made within 30 days of
the notice of the new fee, the Grantor will be deemed to have consented to the
new fee.
7. STATE LAW REQUIREMENTS: This Trust shall be construed, administered and
enforced according to the laws of the State of Missouri.
8. EXCESS CONTRIBUTIONS: If, because of an erroneous assumption as to earned
income for any other reason, a contribution which is an excess contribution is
made on behalf the Grantor for any year, adjustment of such excess contribution
shall be in accordance with the provisions of this paragraph. The full amount
of such excess contribution and net income attributable thereto shall be
distributed to the Grantor, in cash or kind upon written notice to the Trustee
from the Grantor which states the amount of such excess contribution.
9. INALIENABILITY OF BENEFITS: The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment, execution or levy
of any kind, and any attempt to cause such benefits to be subjected shall not
be recognized, except to such extent as may be required by law.
10. EXCHANGE PRIVILEGE: With respect to any of the Designated Investment
Company shares, the Grantor may, upon submission of written instructions
acceptable to the Trustee, cause such shares to be exchanged for shares of any
other Designated Investment Company meeting the requirements of this Trust upon
the terms and within the limitations imposed by the then current prospectus of
such investment company.
11. DESIGNATION OF BENEFICIARY: The Grantor shall have the right, by written
notice to the Trustee, to designate or change a beneficiary to receive any
benefit to which such Grantor may be entitled in the event of the Grantor's
death prior to the complete distribution of such benefit. If no such designation
is in effect on a Grantor's death, the beneficiary shall be the Grantor's
estate.
12. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS: Neither the Trustee
nor the Designated Investment Company will under any circumstances be
responsible for the timing, purpose or propriety of any contribution or of any
distribution made hereunder, nor shall the Trustee or the Designated Investment
Company incur any liability or responsibility for any tax imposed account of
any such contribution or distribution. Without limiting the generality of the
foregoing, neither the Trustee nor the Designated Investment Company is
obligated to make any distribution absent a specific direction from the Grantor
or the designated beneficiary to do so.
[KEMPER MUTUAL FUNDS LOGO]
INVESTMENT MANAGER:
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER:
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
Trustee Signature INVESTORS FIDUCIARY TRUST COMPANY Grantor's Signature
- --------------------------------------------------------------------------------
IRA-10B 2/95 203932
<PAGE> 3
IRA DISCLOSURE STATEMENT IMPORTANT--PLEASE RETAIN
IRAs: AN INTRODUCTION
WHAT IS AN IRA?
Your Individual Retirement Account (IRA) is a trust created for the exclusive
benefit of you and your beneficiaries. It is created by a written instrument
that meets the following requirements:
- - Contribution restrictions stated in Article I of the trust instrument.
- - Investment restrictions stated in Article III of the trust instrument.
- - Distribution of benefits requirements contained in Article IV of the trust
instrument.
- - The trustee is a bank as defined in the Internal Revenue Code.
- - You will have a non-forfeitable interest in your account.
ESTABLISHING THE PLAN
HOW DO I ESTABLISH MY KEMPER IRA?
Read this disclosure statement and retain it for your files.
Complete and sign the correct application. (2 applications are necessary if
both you and your spouse wish to establish an IRA).
MAKE CHECK PAYABLE TO THE KEMPER FUND OF YOUR CHOICE, AND MAIL COMPLETED
APPLICATION AND CONTRIBUTION TO:
INVESTORS FIDUCIARY TRUST COMPANY (IFTC)
P.O. BOX 419356
KANSAS CITY, MO 64141-6356
MAY I REVOKE MY IRA?
You have the right to revoke your account within seven days of the date on
which your application was signed. To revoke your account write to IFTC at the
address referenced above.
ELIGIBILITY
WHO CAN ADOPT AN IRA?
You may adopt an IRA if you are receiving compensation from employment,
earnings from self-employment or alimony, and have not attained age 70 1/2. You
may also adopt an IRA if you have received a qualifying rollover distribution
from another plan within the preceding 60 days or if you wish to transfer
assets from another IRA. See "Rollover/Transfer of Assets" section on the
following page.
WHAT ABOUT A NON-WORKING SPOUSE?
A spousal IRA allows an individual who qualifies for an IRA and his or her
non-working spouse to set up two IRA accounts: one for each spouse. See
"Contribution Limits" section below.
CONTRIBUTION LIMITS
HOW MUCH CAN I CONTRIBUTE EACH YEAR?
If you are receiving compensation you may contribute the lesser of $2,000 or
100% of your compensation.
For a year in which you are receiving compensation, but your spouse is not, you
can set up an IRA for your spouse and contribute the lesser of: $2,250 or 100%
of your compensation. The maximum contribution must be split between the two
accounts so that no more than $2,000 is placed in either account.
No contribution will be allowed for the year in which you attain age 70 1/2 and
thereafter.
FOR MY IRA, WHAT IS CONSIDERED COMPENSATION?
Compensation is defined as wages, salaries or professional fees, other amounts
received for personal services actually rendered (including income earned from
self-employment), and any taxable alimony received. It does not include earnings
from property such as interest, rents and dividends. If your compensation is
not includable in gross income (such as income earned from sources outside the
United States, it is not treated as compensation in determining the maximum
limitation for the deduction.
WHEN CAN A CONTRIBUTION BE MADE?
Your annual contribution may be made during the taxable year or no later than
the due date for filing your federal income tax return not including extensions.
WHAT HAPPENS IF I OVER-CONTRIBUTE TO MY IRA?
There is a 6% annual excise tax on contributions to an IRA over the annual
contributions limit. However, if you withdraw the excess contribution and
earnings thereon from the IRA before the due date for filing your federal
income tax return (including extensions) for the year of the excess
contribution, the excise tax is not imposed, the withdrawn contribution is not
taxable and the withdrawn earnings are taxable in the year the excess
contribution was made.
If the excess is not withdrawn, you may use the excess as part of next year's
contribution by reducing the next year's contribution by the amount of the
excess. You will, however, be liable for the 6% excise tax on the
over-contributed amount for each year it remains an excess contribution.
HOW DOES MY MARITAL STATUS AFFECT MY IRA?
Since a contribution is available to each eligible individual, both husband
and wife can contribute if each individually is eligible and each adopts a
separate individual retirement savings program. The contribution limitation is
computed separately for each spouse, whether or not they file a joint tax
return.
CAN MY EMPLOYER CONTRIBUTE TO MY IRA?
Yes, but these contributions are included in your gross income as compensation
and must be claimed as a deduction on your federal income tax return, just as
if you had received the money and made the contribution.
DEDUCTION LIMITS
HOW MUCH CAN I DEDUCT EACH YEAR?
If you and your spouse are not covered by a retirement plan at work, the
amount you can deduct is the same as the amount you can contribute (see
"Contribution Limit" above). If you or your spouse are covered by a retirement
plan at work, the $2,000 limit is reduced $10 for each $50 that your adjusted
gross income exceeds:
$40,000 (married filing jointly), $25,000 (single), or $0 (married filing
separately), and the $2,250 limit is reduced $10 for each $44.44 that your
adjusted gross income exceeds $40,000.
DISTRIBUTION FROM YOUR IRA
WHEN CAN I TAKE MONEY OUT OF MY IRA?
You can begin to take money out of your IRA without penalty after age 59 1/2,
but you must begin to take money out by April 1 following the year in which you
attain age 70-1/2.
WHAT IF I TAKE A DISTRIBUTION BEFORE AGE 59 1/2?
There is an additional tax equal to 10% of the taxable amount of a distribution
before age 59 1/2, unless you are disabled or take your distributions as a
series of substantially equal periodic payments over your life or life
expectancy or the joint lives or life expectancies of you and your beneficiary.
The amounts of such periodic payments may not be changed before the later of
five years or at attainment of age 59 1/2.
HOW ARE MY DISTRIBUTIONS TAXED?
The distributions are generally taxed as ordinary income in the year they are
received. Distributions are non-taxable to the extent they represent a return
of non-deductible contributions.
The non-taxable percentage of such a distribution is determined by dividing
the undistributed non-deductible contributions to all your IRAs by the total
value of all your IRAs (including SEPs and rollover IRAs).
DO I HAVE A CHOICE ON HOW TO RECEIVE MY DISTRIBUTIONS UPON RETIREMENT?
Yes, subject to the minimum distribution incidental benefit (MDIB) requirement
described below, distributions may be taken as:
- - Regular payments over the joint lives or life expectancies of you and your
designated beneficiary.
- - An annuity purchased with the money in your IRA payable over the joint lives
or life expectancies of you and your beneficiary.
- - Annuity or regular payments over any period shorter than the above.
- - A lump sum.
WHAT IS THE MINIMUM ANNUAL DISTRIBUTION?
The amount to be distributed for each year (commencing with the year in which
you attain age 70 1/2) must be at least an amount equal to the quotient
obtained by dividing the value of the IRA by your life expectancy or by the
joint and last survivor life expectancy of you and your designated beneficiary,
subject to the MDIB requirement described on the next page. The minimum
distribution for the year in which you attain age 70 1/2 may be deferred until
April 1 of the following year. Note that if you elect to defer the minimum
distribution for the year you attain age 70 1/2 to the following year, you will
be required to take 2 years' minimum distributions in that year. Life expectancy
and joint and last survivor expectancy are computed by use of the tables
contained in IRS Publication 590. For purposes of this computation, the life
expectancy of you or your spouse may be recalculated annually, while the life
expectancy of a nonspouse beneficiary may not be recalculated.
<PAGE> 4
IRA DISCLOSURE STATEMENT (CONTINUED)
WHAT IS THE MINIMUM DISTRIBUTION INCIDENTAL BENEFIT (MDIB) REQUIREMENT?
The MDIB Requirement requires that a death benefit under an IRA be incidental
to the primary purpose of the IRA which is to provide your retirement benefits.
Thus, if your designated beneficiary is more than 10 years younger, you must
assume he or she is exactly 10 years younger than you to determine your joint
and last survivor life expectancy.
WHAT IF I HAVE MORE THAN ONE IRA?
If you have more than one IRA, you may take the total amount of your minimum
distribution amounts from one IRA or you may allocate it among your IRAs.
WHAT IF I TAKE AN AMOUNT LESS THAN DESCRIBED ABOVE?
A 50% excise tax will be imposed on the difference between the minimum payout
required and the amount actually paid, unless the underdistribution was due to
reasonable cause.
WHAT ABOUT FEDERAL INCOME TAX WITHHOLDING?
The Trustee may be required to withhold 10% from any taxable distribution from
an IRA unless you elect no withholding at the time your distributions begin.
Whether or not you allow the Trustee to withhold, you may be required to make
quarterly estimated tax payments.
SPECIAL CONSIDERATIONS
CAN I USE MY IRA AS COLLATERAL FOR A LOAN?
No. If you use any portion of your IRA as security for a loan the portion so
used will be treated as distributed to you.
HAS THIS PLAN BEEN SUBMITTED TO THE IRS FOR APPROVAL?
The use of IRS Form 5305 (included in this packet) makes such submission
unnecessary.
ROLLOVER/TRANSFER OF ASSETS DO DISTRIBUTIONS FROM MY EMPLOYER'S TAX-QUALIFIED
PLAN QUALIFY FOR IRA ROLLOVER TREATMENT?
Yes, part or all of a lump-sum distribution or a series of distributions if
made during one calendar year as the result of termination of employment,
attainment of age 59 1/2, disability, death, or plan termination may be rolled
over into an IRA.
You do not have to roll over the total taxable amount of the distribution, but
whatever portion is not rolled over will be taxed as ordinary income in the
year received and will not qualify for either long-term capital gains or
special averaging. The maximum amount that can be rolled over is the total
distribution minus the dollar amount of any voluntary non-deductible
contributions you made.
Please consult your accountant regarding current IRS regulations on the tax
treatment of rollovers from tax-qualified plans.
WHEN MUST THE ROLLOVER BE COMPLETED?
The check and application must be sent to the IRA trustee within 60 days of
receipt of a qualifying distribution.
CAN I TAKE A TAX DEDUCTION FOR A ROLLOVER?
No. You are not allowed to take a tax deduction for the amount transferred
from a qualified employer's plan or retirement savings program to an IRA.
WHAT IS THE DIFFERENCE BETWEEN A ROLLOVER AND A DIRECT TRANSFER OF ASSETS?
With a rollover, you actually receive the distribution from an IRA or qualified
employer's plan. A direct transfer of assets occurs when the existing trustee or
custodian makes the check payable and sends the distribution directly to the
new trustee or custodian.
A rollover distribution from an IRA may be made to you only once a year. The
one year period begins on the date you receive the IRA distribution. There is
no minimum holding period for a direct transfer of assets from one trustee to
another.
WHAT STEPS DO I NEED TO TAKE TO PROCESS A ROLLOVER OR DIRECT TRANSFER OF
ASSETS?
You can do a rollover by notifying your current IRA trustee or custodian in
writing that you wish to take a distribution from your IRA and roll over to a
new IRA. Once the distribution is received you may either endorse the check over
to the new trustee or deposit the check received and issue a new check for the
amount received to the new trustee and send it along with an IRA Application to
the new trustee.
To accomplish a direct transfer of assets, you simply notify your existing
trustee in writing of your intentions. Then send a copy of the letter along
with an IRA application to the new trustee. Your old trustee will send your
distribution directly to the new trustee.
REPORTING REQUIREMENTS
DOES THE IRA REQUIRE A LOT OF PAPERWORK EACH YEAR?
No, unless you have to pay an excise or penalty tax or you received a
nontaxable distribution or you made a nondeductible contribution (other than a
rollover), no special income tax return is required. If an excise or penalty tax
is due you must file IRS Form 5329 with your Form 1040. If you designate an IRA
contribution as nondeductible you must attach Form 8606 to your 1040 for the
year of the nondeductible contribution and for any year you take a
non-deductible distribution (other than a rollover to another IRA).
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP)
DOES THE KEMPER IRA QUALIFY FOR A SEP?
Yes, but the SEP must be established and maintained by your employer. More
information about establishing a SEP is available from Kemper upon request.
WHAT IS THE MAXIMUM DEDUCTION FOR A SEP-IRA?
The lesser of 15% of your compensation with respect to the sponsoring employer
or $30,000.
FINANCIAL DISCLOSURE
WHAT ELSE DO I NEED TO KNOW ABOUT KEMPER'S IRAs?
Information about the fund or trust you have selected is included in the
appropriate prospectus. The acquisition cost and how the value of your account
changes are described in the prospectus.
A SHARES
If $1,000 is invested in Kemper Technology Fund, Kemper Total Return Fund,
Kemper Growth Fund, Kemper Small Capitalization Equity Fund, Kemper
International Fund or Kemper Blue Chip Fund, the amount of the sales charge
will be $57.50. If $1,000 is invested in Kemper Target Equity Funds, the amount
of the sales charge will be $50. If $1,000 is invested in Kemper High Yield
Fund, Kemper Income and Capital Preservation Fund, Kemper Diversified Income
Fund, Kemper Global Income Fund, Kemper U.S. Mortgage Fund or Kemper U.S.
Government Securities Fund, the amount of the sales charge will be $45. If
$1,000 is invested in Kemper Adjustable Rate U.S. Government Fund or Kemper
Short-Intermediate Government Fund, the amount of the sales charge will be $35.
If $1,000 is invested in Kemper Money Market Fund-Government Securities
Portfolio or Kemper Money Market Fund-Money Market Portfolio, there will be no
sales charge.
B SHARES
If $1,000 is invested in Kemper Mutual Funds B shares, there is no initial
sales charge. B shares are subject to an annual distribution fee and, on
redemption, may be subject to a contingent deferred sales charge and have a
conversion priveledge to A shares after 6 years.
C SHARES
If $1,000 is invested in Kemper Mutual Funds C shares, there is no initial
sales charge. C shares are subject to an annual distribution fee and have no
conversion priveledge.
There is an annual $12 trustee fee for the Kemper Family of Funds. An
individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by IFTC. This fee is subject to
change as provided in Article IX, Paragraph 6 of the trust instrument. These
fees are paid either by a separate check or by the liquidation of sufficient
shares or units. If not paid by a separate check, IFTC will automatically
deduct the annual trustee fee on or about May 1. If an account is opened after
May 1, IFTC will deduct the $12 annual trustee fee on or about December 1 in
the year the account is opened. (See "Application Guide" for more details.)
This fee is subject to change upon notice by IFTC to you as provided in Article
IX, Paragraph 6 of the trust instrument.
The deadline for an IRA contribution is generally April 15 of the year
following the taxable year for which the contribution will apply. IFTC and
Kemper will not be responsible for postal delays or delays resulting from
incomplete applications. Applications received by IFTC postmarked after the
deadline and improperly completed applications will be returned to the sender.
IRA-10A 7/94 [KEMPER MUTUAL FUNDS LOGO]
203921
<PAGE> 5
<TABLE>
<S> <C>
IRA APPLICATION (PLEASE PRINT) FOR ASSISTANCE IN COMPLETING THIS FORM, CALL
KEMPER SHAREHOLDER SERVICES AT 1-800-621-1048.
1. INFORMATION ABOUT YOU For internal use only
Name ___________________________________________________________________________
Address ________________________________________________________________________
City _______________________________ State _____________________ Zip ___________
Daytime Phone Number(_____)_____________________________________________
Social Security Number ________/___________/_________ Date of Birth ____/____/____
2. YOUR BENEFICIARIES (PLEASE INCLUDE SOCIAL SECURITY NUMBERS FOR ALL BENEFICIARIES)
Primary Beneficiary Name _____________________________________ Secondary Beneficiary Name ________________________________________
Address ______________________________________________________ Address ___________________________________________________________
City _____________________________ State __________ Zip ______ City _____________________________ State _______________ Zip ______
Relationship__________________________________________________ Relationship ______________________________________________________
SS#_____________/_____/__________ Date of Birth ____/____/____ SS# _______________ /______ /__________ Date of Birth ____/____/____
3. TYPE OF IRA (CHECK ONLY ONE)
/ / Individual / / Simplified Employee Plan (SEP) / / Spousal
4. TYPE OF TRANSACTION (CHECK ALL BOXES THAT APPLY)
/ / Contribution: (CIRCLE ONE) A. Individual B. Employer (ONLY APPLIES TO SEPS)
/ / Direct Transfer of Assets (PLEASE ATTACH IRA TRANSFER FORM)
/ / Rollover from: (CIRCLE ONE) A. Another Annual B. Another IRA, where the initial contribution C. A Qualified
Contribution IRA was from a qualified retirement plan Retirement Plan
/ / I have reached the age of 59 1/2 and am eligible to take a distribution without tax penalty from my IRA: (CIRCLE ONE)
A. IRA Distribution Form B. Please send my
is attached dividends in cash
5. YOUR INVESTMENT CHOICES ($250 MINIMUM PER FUND TO ESTABLISH AN IRA. $50 IF NUMBER 7 [BANK DIRECT DEPOSIT] SELECTED.)
(SEE FRONT CARD FOR FUND NAMES. NOTE NUMBER 9 BELOW REGARDING RECEIPT OF PROSPECTUS.)
/ / A Shares / / B Shares / / C Shares 199___ 199___
(PLEASE CHOOSE SHARE CLASS) (CIRCLE ONE) (CIRCLE ONE)
Indiv/Employer Indiv/Employer
Contribution Contribution Rollover Transfer
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Trustee Fee (OPTIONAL) $____________
6. TELEPHONE EXCHANGES
I authorize exchanges between Kemper Mutual Funds upon instruction from any person by telephone. / / YES / / NO
NOTE: IF NEITHER BOX IS CHECKED, THE TELEPHONE EXCHANGE PRIVILEGE WILL BE PROVIDED.
7. BANK DIRECT DEPOSIT
I authorize the Fund's agent to draw checks or initiate Automated Clearing House ("ACH") debits against the bank account on the
attached voided check in the amount of $_____ (minimum $50), beginning on the ____ day of _____ month and on the same day of each
month thereafter. If the date falls on a weekend or holiday, funds will be invested on the next business day. The investment will be
applied to the following Fund account(s). A $50 minimum per Fund applies.
Fund Name ______________________________ $_______________ (NOTE: THE BANK ACCOUNT MUST
Fund Name ______________________________ $_______________ HAVE CHECK OR DRAFT WRITING
Fund Name ______________________________ $_______________ PRIVILEGES.)
8. YOUR FINANCIAL REPRESENTATIVE
Representative _____________________________ Name of Firm ________________________________________________________
Address_____________________________________ City __________________________ State __________________ Zip ________
Rep. Daytime Phone (___)___________ Rep.#____________ Dealer #______________ Branch #______________
9. YOUR SIGNATURE BY SIGNING THIS APPLICATION ESTABLISHING AN IRA, THE UNDERSIGNED:
- - Establishes an Individual Retirement Account pursuant to the Employee Retirement Income Security Act of 1974 and in accordance
with all the terms of the Trust Agreement on Form 5305;
- - Appoints Investors Fiduciary Trust Company, or its successors, as Trustee of the account;
- - States that he or she has received, read, accepts and specifically incorporates herein the Trust Agreement on Form 5305 and
Disclosure Statement;
- - Agrees to promptly give instructions to the Trustee necessary to enable the Trustee to carry out its duties under the Trust
Agreement and;
- - Agrees that he or she has received and read the prospectus for the investment(s) selected and that this account will be
subject to the prospectus as amended from time to time.
Under penalties of perjury, I certify that the number shown on this form is my correct social security number, and that I have not
been notified by the IRS that I am subject to back-up withholding. I certify that I have the power and authority to establish this
account and select the privileges requested. Account holders can request the following telephone privilege on this application:
telephone exchange transactions. Please note that the telephone exchange privilege is automatic unless the account holder refuses
it. Neither a Fund nor its agents will be liable for any loss, expense or cost arising out of any telephone request pursuant to
this privilege, including any fraudulent or unauthorized request, and THE ACCOUNT HOLDER WILL BEAR THE RISK OF LOSS, so long as the
Fund or its agent reasonably believes, based upon reasonable verification procedures, that the telephonic instructions are genuine.
The verification procedures include recording instructions, requiring certain identifying information before acting upon
instructions, and sending written confirmations.
Your Signature _________________________________________________ Date ____________________________________________________________
IRA-10 2/95 203911
</TABLE>
<PAGE> 6
IRA APPLICATION GUIDE
1. INFORMATION ABOUT YOU
Fill this section out completely.
2. YOUR BENEFICIARIES
You can change your beneficiaries by writing a letter of instruction to
Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O. Box 419415,
Kansas City, MO 64141-6415. Reference your name, fund, and fund account number.
If you have more than one beneficiary, please identify the primary and
secondary beneficiary.
3. TYPE OF IRA
INDIVIDUAL: A working individual may contribute up to $2,000 or 100% of
compensation, whichever is less.
SIMPLIFIED EMPLOYEE PLAN (SEP): Must be established and maintained by the
employer. The maximum contribution is the lesser of 15% of your compensation
or $30,000. For more information on establishing a SEP, call Kemper
Shareholder Services at 1-800-621-1048.
SPOUSAL: Two applications are necessary if both you and your spouse wish to
establish an IRA. If you're contributing for both you and your non-working
spouse, the maximum contribution is the lesser of 100% of your compensation or
$2,250. The maximum contribution must be split between the two accounts so that
no more than $2,000 is placed in either account.
4. TYPE OF TRANSACTION
DIRECT TRANSFER OF ASSETS: When changing custodians on an existing IRA, the IRA
must be released by the present custodian. To obtain information concerning the
transfer of IRA assets call Kemper Shareholder Services at 1-800-621-1048.
ROLLOVER: With a rollover, you actually receive a distribution from an IRA, or
qualified employer's plan. Once the distribution is received, you may either
endorse the check over to the new trustee or deposit the check received and,
within 60 days of receipt, issue a new check for the amount received to the new
trustee and send it along with an IRA Application to the new trustee.
You may roll over your IRA as many times as you wish. However, each time you do
roll over, the funds must remain with the new trustee for at least 12 months.
(PLEASE NOTE: CONTACT YOUR ACCOUNTANT ABOUT THE TAX CONSEQUENCES OF RECEIVING
A CASH DISTRIBUTION FROM YOUR EMPLOYER'S TAX-QUALIFIED PLAN BEFORE
FORWARDING A CHECK TO KEMPER TO OPEN AN IRA. UNDER CURRENT IRS PROVISIONS, THERE
MAY BE TAX LIABILITY ASSOCIATED WITH TAKING PHYSICAL POSSESSION OF YOUR
DISTRIBUTION, INSTEAD OF AUTOMATICALLY TRANSFERRING YOUR BALANCE INTO A KEMPER
IRA).
5. YOUR INVESTMENT CHOICES
Elect your investment choice(s) from among the Kemper Funds for which you have
received a prospectus. The minimum investment to establish an IRA is $250 per
Fund; the minimum subsequent investment is $50. The minimum initial investment
is $50 per Fund if the Bank Direct Deposit option is selected.
TRUSTEE FEE
There is an annual $12 trustee fee for the Kemper Family of Funds.
An individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by Investors Fiduciary Trust
Company. This fee is subject to change as provided in Article IX of the
Individual Retirement Trust Account Form.
WHEN AND HOW THE $12 FEE IS AUTOMATICALLY DEDUCTED
If the $12 annual trustee fee is not paid by separate check, Investors
Fiduciary Trust Company will automatically deduct the $12 fee from your
account. Annual trustee fees are assessed on a calendar year basis.
If you opened your account prior to May 1st of the calendar year, the fee will
be deducted on May 1st. If you opened your account after May 1st of that
calendar year, the $12 fee will be deducted on December 1st. In every calendar
year after the year in which you opened your account, the fee will be deducted
on May 1st.
WHAT TO DO IF YOU ELECT TO PAY THE $12 ANNUAL FEE DIRECTLY
- - You may pay the first year fee by including $12 with your first contribution
and making the proper entry in Section 5 of the IRA Application.
- - If you elect to send in the $12 annual fee by separate check in subsequent
years, make sure to do so prior to the May 1st automatic deduction. Send a
letter referencing the exact name on your account, the fund name and the
account number. Make your check payable to Investors Fiduciary Trust Company
and mail to Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O.
Box 419356, Kansas City, MO 64141-6356.
6. TELEPHONE EXCHANGES
To make exchanges, call 1-800-621-1048. Please see the prospectus for exchange
privilege limitations. The exchange privilege may be modified, suspended or
terminated by a Fund.
7. BANK DIRECT DEPOSIT
With Bank Direct Deposit, you can make automatic contributions for as little as
$50 from your checking account into your Kemper IRA. There is no service
charge, no checks to write and it's a great way to invest for the future.
8. YOUR FINANCIAL REPRESENTATIVE
You must complete this section if you have a financial representative. The
information is necessary for proper identification of the account and can be
obtained from your representative.
9. YOUR SIGNATURE
Please be sure to sign and date this section.
10. RETURN YOUR APPLICATION
IF NOT A TRANSFER...
Mail the IRA APPLICATION, a check made payable to Kemper Fund of your choice
(and the IRA DISTRIBUTION FORM if applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419356 - KANSAS CITY, MO 64141-6356
FOR TRANSFERS ONLY...
Mail the IRA Application, IRA Transfer Form (and the IRA Distribution form if
applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419222 - KANSAS CITY, MO 64141-6222
FOR MORE INFORMATION
If you need further information, please contact your financial representative
directly or call Kemper Shareholder Services at 1-800-621-1048 7:00 a.m. to
6:00 p.m. Central Time (Monday-Friday) and 9:00 a.m. to 2:00 p.m. (Saturday).
If you have tax or legal questions, contact your tax advisor or any district
office of the IRS.
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 1
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ Stephen B. Timbers Trustee September 14, 1995
---------------------------
<PAGE> 2
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ James E. Akins Trustee September 14, 1995
---------------------------
<PAGE> 3
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ Arthur R. Gottschalk Trustee September 14, 1995
--------------------------
<PAGE> 4
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ Frederick T. Kelsey Trustee 3/2/95
--------------------------
<PAGE> 5
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ David B. Mathis Trustee September 14, 1995
--------------------------
<PAGE> 6
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ Fred B. Renwick Trustee September 14, 1995
---------------------------
<PAGE> 7
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ John B. Tingleff Trustee September 14, 1995
--------------------------
<PAGE> 8
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
--------- ----- ----
/s/ John G. Weithers Trustee September 14, 1995
--------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<SERIES>
<NUMBER> 01
<NAME> KEMPER TARGET EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 89,887
<INVESTMENTS-AT-VALUE> 104,840
<RECEIVABLES> 2,696
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 107,570
<PAYABLE-FOR-SECURITIES> 945
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 1,088
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 87,439
<SHARES-COMMON-STOCK> 9,518
<SHARES-COMMON-PRIOR> 9,725
<ACCUMULATED-NII-CURRENT> 2,029
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,061
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,953
<NET-ASSETS> 106,482
<DIVIDEND-INCOME> 757
<INTEREST-INCOME> 4,318
<OTHER-INCOME> 0
<EXPENSES-NET> 1,002
<NET-INVESTMENT-INCOME> 4,073
<REALIZED-GAINS-CURRENT> 2,405
<APPREC-INCREASE-CURRENT> 9,708
<NET-CHANGE-FROM-OPS> 16,186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,759)
<DISTRIBUTIONS-OF-GAINS> (6,595)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,053
<NUMBER-OF-SHARES-REDEEMED> 1,260
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,718
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (514)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,002)
<AVERAGE-NET-ASSETS> 102,533
<PER-SHARE-NAV-BEGIN> 10.67
<PER-SHARE-NII> .45
<PER-SHARE-GAIN-APPREC> 1.20
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> (.72)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.19
<EXPENSE-RATIO> .010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> KEMPER RETIREMENT FUND SERIES II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 150,713
<INVESTMENTS-AT-VALUE> 172,049
<RECEIVABLES> 2,707
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,776
<PAYABLE-FOR-SECURITIES> 1,147
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 162
<TOTAL-LIABILITIES> 1,439
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 145,275
<SHARES-COMMON-STOCK> 13,394
<SHARES-COMMON-PRIOR> 14,065
<ACCUMULATED-NII-CURRENT> 3,772
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,336
<NET-ASSETS> 173,337
<DIVIDEND-INCOME> 890
<INTEREST-INCOME> 8,423
<OTHER-INCOME> 0
<EXPENSES-NET> 1,620
<NET-INVESTMENT-INCOME> 7,693
<REALIZED-GAINS-CURRENT> 3,240
<APPREC-INCREASE-CURRENT> 14,922
<NET-CHANGE-FROM-OPS> 25,855
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,527)
<DISTRIBUTIONS-OF-GAINS> (8,450)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,415
<NUMBER-OF-SHARES-REDEEMED> 2,086
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 282
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (848)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,620)
<AVERAGE-NET-ASSETS> 168,297
<PER-SHARE-NAV-BEGIN> 12.30
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> 1.25
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> (.64)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.94
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> KEMPER RETIREMENT FUND SERIES III
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 143,179
<INVESTMENTS-AT-VALUE> 124,226
<RECEIVABLES> 1,736
<ASSETS-OTHER> 95
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,057
<PAYABLE-FOR-SECURITIES> 942
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434
<TOTAL-LIABILITIES> 1,376
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105,469
<SHARES-COMMON-STOCK> 11,599
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,485
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,967
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,760
<NET-ASSETS> 124,681
<DIVIDEND-INCOME> 708
<INTEREST-INCOME> 5,497
<OTHER-INCOME> 0
<EXPENSES-NET> (1,202)
<NET-INVESTMENT-INCOME> 5,003
<REALIZED-GAINS-CURRENT> 1,948
<APPREC-INCREASE-CURRENT> 13,385
<NET-CHANGE-FROM-OPS> 20,336
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,019)
<DISTRIBUTIONS-OF-GAINS> (4,317)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (1,919)
<SHARES-REINVESTED> 1,037
<NET-CHANGE-IN-ASSETS> 1,549
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (604)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,202)
<AVERAGE-NET-ASSETS> 121,271
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> .44
<PER-SHARE-GAIN-APPREC> 1.24
<PER-SHARE-DIVIDEND> (.43)
<PER-SHARE-DISTRIBUTIONS> (.37)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.75
<EXPENSE-RATIO> .010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> KEMPER RETIREMENT FUND SERIES IV
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 143,179
<INVESTMENTS-AT-VALUE> 150,355
<RECEIVABLES> 2,541
<ASSETS-OTHER> 576
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 153,472
<PAYABLE-FOR-SECURITIES> 950
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 343
<TOTAL-LIABILITIES> 1,293
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 146,039
<SHARES-COMMON-STOCK> 15,106
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,804
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,840)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,176
<NET-ASSETS> 152,179
<DIVIDEND-INCOME> 751
<INTEREST-INCOME> 6,529
<OTHER-INCOME> 0
<EXPENSES-NET> (1,415)
<NET-INVESTMENT-INCOME> 5,865
<REALIZED-GAINS-CURRENT> (1,684)
<APPREC-INCREASE-CURRENT> 21,482
<NET-CHANGE-FROM-OPS> 25,663
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,860)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (2,191)
<SHARES-REINVESTED> 680
<NET-CHANGE-IN-ASSETS> 5,524
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (731)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,415)
<AVERAGE-NET-ASSETS> 146,616
<PER-SHARE-NAV-BEGIN> 8.83
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> 1.22
<PER-SHARE-DIVIDEND> (.37)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> .010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> KEMPER RETIREMENT FUND SERIES V
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 116,772
<INVESTMENTS-AT-VALUE> 132,526
<RECEIVABLES> 3,553
<ASSETS-OTHER> 71
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 136,150
<PAYABLE-FOR-SECURITIES> 946
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 267
<TOTAL-LIABILITIES> 1,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121,070
<SHARES-COMMON-STOCK> 14,163
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,315
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,202)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,754
<NET-ASSETS> 134,937
<DIVIDEND-INCOME> 603
<INTEREST-INCOME> 4,613
<OTHER-INCOME> 0
<EXPENSES-NET> (1,098)
<NET-INVESTMENT-INCOME> 4,118
<REALIZED-GAINS-CURRENT> (3,553)
<APPREC-INCREASE-CURRENT> 20,561
<NET-CHANGE-FROM-OPS> 21,126
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,553)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,150
<NUMBER-OF-SHARES-REDEEMED> (1,175)
<SHARES-REINVESTED> 299
<NET-CHANGE-IN-ASSETS> 70,662
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (514)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,098)
<AVERAGE-NET-ASSETS> 121,271
<PER-SHARE-NAV-BEGIN> 8.15
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> 1.31
<PER-SHARE-DIVIDEND> (.21)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.53
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> KEMPER RETIREMENT FUND VI
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 6,297
<INVESTMENTS-AT-VALUE> 6,340
<RECEIVABLES> 828
<ASSETS-OTHER> 286
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,454
<PAYABLE-FOR-SECURITIES> 258
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4
<TOTAL-LIABILITIES> 265
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,140
<SHARES-COMMON-STOCK> 776
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 20
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 43
<NET-ASSETS> 7,189
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26
<OTHER-INCOME> 0
<EXPENSES-NET> 6
<NET-INVESTMENT-INCOME> 20
<REALIZED-GAINS-CURRENT> (14)
<APPREC-INCREASE-CURRENT> 43
<NET-CHANGE-FROM-OPS> 49
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 770
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,089
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (3)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (6)
<AVERAGE-NET-ASSETS> 5,072
<PER-SHARE-NAV-BEGIN> 9.0
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> .20
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.26
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> KEMPER WORLDWIDE 2004
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 28,050
<INVESTMENTS-AT-VALUE> 30,990
<RECEIVABLES> 639
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 93
<TOTAL-ASSETS> 31,772
<PAYABLE-FOR-SECURITIES> 960
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63
<TOTAL-LIABILITIES> 1,023
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,207
<SHARES-COMMON-STOCK> 3,082
<SHARES-COMMON-PRIOR> 654
<ACCUMULATED-NII-CURRENT> 491
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (890)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,891
<NET-ASSETS> 30,699
<DIVIDEND-INCOME> 175
<INTEREST-INCOME> 910
<OTHER-INCOME> 0
<EXPENSES-NET> (276)
<NET-INVESTMENT-INCOME> 809
<REALIZED-GAINS-CURRENT> (916)
<APPREC-INCREASE-CURRENT> 2,964
<NET-CHANGE-FROM-OPS> 2,857
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (301)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,657
<NUMBER-OF-SHARES-REDEEMED> 261
<SHARES-REINVESTED> 32
<NET-CHANGE-IN-ASSETS> 24,799
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (129)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (276)
<AVERAGE-NET-ASSETS> 21,218
<PER-SHARE-NAV-BEGIN> 9.02
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> .79
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.96
<EXPENSE-RATIO> .013
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.485.(b)
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
October 16, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Kemper Target Equity Fund
To The Commission:
We are counsel to the above-referenced investment company (the "Fund")
and as such have participated in the preparation and review of Post-Effective
Amendment No. 21 to the Fund's registration statement being filed pursuant to
Rule 485(b) under the Securities Act of 1933. In accordance with paragraph
(b)(4) of Rule 485, we hereby represent that such amendment does not contain
disclosures which would render it ineligible to become effective pursuant to
paragraph (b) thereof.
Very truly yours,
/s/ Vedder, Price, Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
COK:dfd
