Filed electronically with the Securities and Exchange Commission
on January 7, 1999
File No. 33-32430
File No. 811-5969
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_/
Pre-Effective Amendment No. /_/
Post-Effective Amendment No. 2 /X/
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /_/
Amendment No. 5 /X/
Kemper New Europe Fund, Inc.
----------------------------
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue
---------------
New York, NY 10154
------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
--------------
Philip J. Collora
222 South Riverside Plaza
Chicago, Illinois 60606-5808
----------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/_/ Immediately upon filing pursuant to paragraph (b)
/_/ 60 days after filing pursuant to paragraph (a) (1)
/_/ 75 days after filing pursuant to paragraph (a) (2)
/_/ On __________________ pursuant to paragraph (b)
/X/ On March 1, 2000 pursuant to paragraph (a) (3) of Rule 485.
/_/ On __________________ pursuant to paragraph (a) (2) of Rule 485.
If Appropriate, check the following box:
/_/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD(SM)
March 1, 2000
Prospectus
[GRAPHIC OMITTED]
KEMPER GLOBAL/INTERNATIONAL FUNDS
Growth Fund Of Spain
Kemper Asian Growth Fund
Kemper Emerging Markets Growth Fund
Kemper Emerging Markets Income Fund
Kemper Global Blue Chip Fund
Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Growth and Income Fund
Kemper Latin America Fund
Kemper New Europe Fund
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
[LOGO] KEMPER FUNDS
<PAGE>
[GRAPHIC OMITTED]
HOW THE
FUNDS WORK
2 Growth Fund Of Spain
9 Kemper Asian Growth
Fund
15 Kemper Emerging
Markets Growth Fund
21 Kemper Emerging
Markets Income Fund
27 Kemper Global Blue
Chip Fund
33 Kemper Global
Discovery Fund
39 Kemper Global
Income Fund
45 Kemper International
Fund
51 Kemper International
Growth and Income
Fund
57 Kemper Latin America
Fund
63 Kemper New Europe
Fund
69 Other Policies and
Risks
71 Financial Highlights
INVESTING IN
THE FUNDS
73 Choosing A Share
Class
79 How To Buy Shares
80 How To Exchange
Or Sell Shares
81 Policies You
Should
Know About
87 Understanding
Distributions And
Taxes
<PAGE>
How The Funds Work
These funds invest mainly in foreign securities. Some funds invest mainly in
stocks, others mainly in bonds. Each fund focuses on a particular region of the
world or a particular investment theme, and follows its own investment goal.
Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their share
prices will go up and down, so be aware that you could lose money by investing
in them.
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Growth Fund Of Spain
FUND GOAL The fund seeks long-term capital appreciation.
2 GROWTH FUND OF SPAIN
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 65% of total assets in Spanish equities (equities that
are traded mainly on Spanish markets or are issued by companies that are based
in Spain or do more than half of their business there). The fund may invest up
to 35% of total assets in equities of Portuguese and other non-Spanish
companies.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with a history of
above-average growth, attractive prices relative to potential growth and
effective management, among other factors.
Growth orientation. The managers generally look for companies that seem to offer
the potential for sustainable above-average growth.
Top-down analysis. The managers consider the economic outlooks -- both
short-term and long-term -- for various sectors and industries.
The managers may favor securities from different industries and companies at
different times, while still maintaining variety in terms of the industries and
companies represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given industry.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund may invest up to 25% of total assets in unlisted securities (both
equity and debt) and may invest up to 35% of total assets in investment-grade
debt securities denominated in pesetas or U.S. dollars.
GROWTH FUND OF SPAIN 3
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
Investors who believe the Iberian countries (Spain and Portugal) may offer
attractive long-term growth opportunities may want to consider this fund.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how Iberian stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When Iberian stock prices fall, you should
expect the value of your investment to fall as well. The fact that the fund
concentrates on a single geographical region could affect fund performance. For
example, Iberian companies could be hurt by such factors as regional economic
downturns or difficulties in achieving economic unification with Europe.
Similarly, the fact that the fund is not diversified and may invest in
relatively few companies increases fund risk, because any factors affecting a
given company could affect performance.
Iberian stocks tend to be more volatile than their U.S. counterparts, for
reasons that include political and economic uncertainties, less liquidity in the
securities market and a higher risk that essential information may be incomplete
or wrong. Because a stock represents ownership in its issuer, stock prices can
be hurt by poor management, shrinking product demand and other business risks.
These may affect single companies as well as groups of companies. In addition,
changing currency rates could add to the fund's investment losses or reduce its
investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o derivatives could produce disproportionate losses
4 GROWTH FUND OF SPAIN
<PAGE>
o at times, it could be hard to value some investments or to get an
attractive price for them; this risk is higher with unlisted securities
GROWTH FUND OF SPAIN 5
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
The performance of Class A shares shown in the bar chart and performance table
reflects the performance of the fund in closed-end form (without daily sales and
redemptions). The fund's performance may have been lower if it had operated as
an open-end fund during this period.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year* Since 5 Years Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The IBEX 35 Index is a capitalization-weighted index of the 35 most
liquid Spanish stocks traded on the continuous markets. Index returns assume
reinvestment of dividends and, unlike fund returns, do not reflect any fees,
expenses or sales charges.
(1) Inception date for Class A shares is 2/14/90, which was the inception date
for the fund's predecessor, The Growth Fund of Spain, Inc., and for Class
B and C shares is 12/14/98.
* The one year average annual total return reflects the imposition of a 2%
redemption fee.
6 GROWTH FUND OF SPAIN
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Redemption fee** (as % of amount redeemed, if
applicable) 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses**** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** A 2% redemption fee, which is retained by the fund, is imposed upon
redemptions or exchanges of shares held less than one year, with limited
exceptions.
*** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
**** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
GROWTH FUND OF SPAIN 7
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Joan R. Gregory
Lead Portfolio Manager
o Began investment career in 1989
o Joined the advisor in 1992
o Joined the fund team in 1998
Nicholas Bratt
o Began investment career in 1974
o Joined the advisor in 1976
o Joined the fund team in 1998
8 GROWTH FUND OF SPAIN
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Asian Growth Fund
FUND GOAL The fund seeks long-term capital growth.
KEMPER ASIAN GROWTH FUND 9
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 85% of total assets in Asian equities (equities that
are traded mainly on Asian markets or are issued by companies that are based in
Asia or do more than half of their business there). The fund generally focuses
on emerging Asian markets, such as China, Indonesia, Korea and Thailand.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with identifiable
market niches, attractive prices relative to potential growth and sound balance
sheets, among other factors.
Growth orientation. The managers generally look for companies that seem to offer
the potential for sustainable above-average growth.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, with an eye toward identifying countries,
industries and companies that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given country or industry.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund may invest up to [15%] of total assets in debt securities of any issuer
or quality or in non-Asian equities.
10 KEMPER ASIAN GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
This fund may make sense for investors interested in diversifying a growth
portfolio with exposure to developing countries in Asia.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how Asian stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When Asian stock prices fall, you should
expect the value of your investment to fall as well. The fact that the fund
concentrates on a single geographical region could affect fund performance. For
example, Asian companies could be hurt by such factors as regional economic
downturns, currency devaluations or the inability of governments or banking
systems to bring about reforms.
Emerging markets, a category that includes most Asian countries, tend to be more
volatile than developed markets, for reasons ranging from political and economic
uncertainties to poor regulation to a higher risk that essential information may
be incomplete or wrong. Because a stock represents ownership in its issuer,
stock prices can be hurt by poor management, shrinking product demand and other
business risks. These may affect single companies as well as groups of
companies. In addition, changing currency rates could add to the fund's
investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER ASIAN GROWTH FUND 11
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1997 1998 1999
00.00 00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The Morgan Stanley Capital International All Country Asia Free Ex-Japan
Index is a capitalized weighted index that is representative of the equity
securities for the following countries: Hong Kong, Indonesia, Korea (at 20%),
Malaysia, Philippines free, Singapore free and Thailand. Index returns assume
reinvestment of dividends and unlike the fund's returns, do not reflect any
fees, expenses, or sales charges.
(1) Since 10/21/96. Index comparisons begin __/__/__.
12 KEMPER ASIAN GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND 13
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Tien Yu Sieh
Lead Portfolio Manager
o Began investment career in 1990
o Joined the advisor in 1996
o Joined the fund team in 1999
Elizabeth J. Allan
o Began investment career in [YEAR]
o Joined the advisor in 1987
o Joined the fund team in 1998
Theresa Gusman
o Began investment career in 1983
o Joined the advisor in 1992
o Joined the fund team in 1998
14 KEMPER ASIAN GROWTH FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Emerging Markets
Growth Fund
FUND GOAL The fund seeks long-term capital growth.
KEMPER EMERGING MARKETS GROWTH FUND 15
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 65% of total assets in equities from emerging markets,
such as Latin America, Asia, Africa, the Middle East and Eastern Europe.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies that have
exceptional business prospects (due to factors that may range from market
dominance to innovative products or services) and whose stocks are trading at
attractive prices relative to potential growth.
Growth orientation. The managers generally look for companies that seem to offer
the potential for sustainable above-average growth.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, with an eye toward identifying countries,
industries and companies that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given country or industry.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund may invest up to 35% of total assets in developed foreign market
equities, emerging market debt securities or U.S. equities and debt securities,
including junk bonds. Compared to investment-grade bonds, junk bonds generally
pay higher yields and have higher volatility and risk of default.
16 KEMPER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
This fund may make sense for investors interested in diversifying a growth
portfolio with exposure to countries located in emerging markets.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how emerging market stocks perform
- -- something that depends on a large number of factors, including economic,
political and demographic trends. When emerging market stock prices fall, you
should expect the value of your investment to fall as well. The fact that the
fund is not diversified and may invest in relatively few companies increases
fund risk, because any factors affecting a given company could affect
performance. Similarly, if the fund emphasizes a given market, such as Latin
America, factors affecting that market will affect performance.
Emerging markets tend to be more volatile than developed markets, for reasons
ranging from political and economic uncertainties to poor regulation to a higher
risk that essential information may be incomplete or wrong. Because a stock
represents ownership in its issuer, stock prices can be hurt by poor management,
shrinking product demand and other business risks. These may affect single
companies as well as groups of companies. In addition, changing currency rates
could add to the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER EMERGING MARKETS GROWTH FUND 17
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1998 1999
00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The IFC Emerging Markets Free Investable Index is __.
(1) Since 1/8/98. Index comparisons begin __/__/__.
18 KEMPER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER EMERGING MARKETS GROWTH FUND 19
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Joyce E. Cornell
Lead Portfolio Manager
o Began investment career in 1987
o Joined the advisor in 1991
o Joined the fund team in 1998
Andre J. DeSimone
o Began investment career in 1981
o Joined the advisor in 1997
o Joined the fund team in 1998
Theresa Gusman
o Began investment career in 1983
o Joined the advisor in 1992
o Joined the fund team in 1998
Tara C. Kenney
o Began investment career in 1984 [verify]
o Joined the advisor in 1995
o Joined the fund team in 1998
20 KEMPER EMERGING MARKETS GROWTH FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Emerging Markets
Income Fund
FUND GOAL The fund seeks high current income, with long-term capital
appreciation a secondary goal.
KEMPER EMERGING MARKETS INCOME FUND 21
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 65% of total assets in high yield bonds and other debt
securities from governments and corporations in emerging markets, such as Latin
America, Asia, Africa, the Middle East and Eastern Europe. To help manage risk,
the fund invests exclusively in securities that are denominated in, or fully
hedged back to, the U.S. dollar, and does not invest more than 40% of total
assets in any one country. The fund may invest up to 35% of total assets in debt
or equity securities from developed markets and up to 20% of total assets in
U.S. debt securities.
In making their buy and sell decisions, the portfolio managers typically
consider a number of factors, including economic outlooks, interest rate
movements, inflation trends, security characteristics and changes in supply and
demand within global bond markets. In choosing individual bonds, the managers
use independent analysis to look for bonds that have attractive yields and good
credit. The managers may favor securities from different countries and issuers
at different times, while still maintaining variety in terms of countries and
types of issuers represented.
Although the managers may adjust the fund's duration (a measure of sensitivity
to interest rate), they generally intend to keep it between 0.0 and 0.0 years.
- --------------------------------------------------------------------------------
CREDIT QUALITY POLICIES
This fund normally invests at least 65% of total assets in junk bonds, which are
those below the fourth credit grade (i.e., grade BB/Ba and below). Compared to
investment-grade bonds, junk bonds generally pay higher yields and have higher
volatility and risk of default.
The fund could put up to 35% of total assets in bonds with higher credit
quality, or may invest to a lesser degree in non-debt securities, but normally
invests less in them.
22 KEMPER EMERGING MARKETS INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks of Investing in the Fund
This fund is designed for investors who want more aggressive international
diversification for the income component of an investment portfolio.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
For this fund, the main factors are how emerging market economies perform and
credit risk. Because the companies that issue high yield bonds may be in
uncertain financial health, the prices of their bonds can be vulnerable to bad
economic news. In some cases, bonds may decline in credit quality or go into
default. Emerging markets tend to be more volatile than developed markets, for
reasons ranging from political and economic uncertainties to poor regulation to
a higher risk that essential information may be incomplete or wrong.
The fact that the fund is not diversified and may invest in securities of
relatively few issuers increases its risk, because any factors affecting a given
company could affect performance. Similarly, if the fund emphasizes a given
market, such as Latin America, or a given industry, factors affecting that
market or industry will affect performance.
A rise in interest rates generally means a fall in bond prices -- and, in turn,
a fall in the value of your investment. (As a rule, a 1% rise in interest rates
means a 1% fall in value for every year of duration.)
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, issuers, industries or other matters
o some types of bonds could be paid off earlier than expected, which would
hurt the fund's performance
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them.
o currency fluctuations could cause foreign investments to lose value
KEMPER EMERGING MARKETS INCOME FUND 23
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1998 1999
00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The unmanaged JP Morgan Emerging Markets Bond Index Plus (EMBI+) tracks
total returns for traded external debt instruments in the emerging markets.
Included in the index are U.S. dollar and other external-currency-denominated
Brady bonds, loans, Eurobonds, and local market instruments. Index returns
assume reinvestment of dividends and unlike the fund's returns, do not reflect
any fees, expenses or sales charges.
(1) Since 12/31/97. Index comparisons begin __/__/__.
24 KEMPER EMERGING MARKETS INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER EMERGING MARKETS INCOME FUND 25
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
M. Isabel Saltzman
Lead Portfolio Manager
o Began investment career in 1979
o Joined the advisor in 1990
o Joined the fund team in 1997
Susan E. Dahl
o Began investment career in 1987
o Joined the advisor in 1987
o Joined the fund team in 1997
26 KEMPER EMERGING MARKETS INCOME FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Global Blue Chip Fund
FUND GOAL The fund seeks long-term capital growth.
KEMPER GLOBAL BLUE CHIP FUND 27
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least [65%] of total assets in common stocks and other
equities of "blue chip" companies throughout the world. These are large, well
known companies that typically have an established earnings and dividends
history, extensive financial resources, solid positions in their industries and
strong management. Although the fund may invest in any country, it primarily
focuses on countries with developed economies (including the U.S.).
In choosing stocks, the portfolio managers look for those blue-chip companies
that appear likely to benefit from global economic trends or have promising new
technologies or products. The managers also consider a stock's valuation, and
may invest in companies whose stocks appear low compared to other measures of
value as well as stocks whose prices are not low but appear reasonable in light
of their business prospects.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, when its fundamental factors have changed or when adjusting its
exposure to a given country or industry.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in developed countries, it may invest up to 15% of
total assets in debt or equity securities of emerging markets, including
closed-end mutual funds that invest primarily in emerging market debt
securities.
28 KEMPER GLOBAL BLUE CHIP FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
If you are interested in large-cap stocks and want to look beyond U.S. markets,
this fund could be suitable for you.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how U.S. and foreign stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When U.S. and foreign stock prices
fall, especially prices of large company stocks, you should expect the value of
your investment to fall as well.
Foreign stocks tend to be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. Large company stocks may be
less risky than smaller company stocks, but at times may not perform as well.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies. In addition, changing
currency rates could add to the fund's investment losses or reduce its
investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER GLOBAL BLUE CHIP FUND 29
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1998 1999
00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The MSCI (Morgan Stanley Capital International) World Index measures
performance of a range of developed country general stock markets, including the
United States, Canada, Europe, Australia, New Zealand and the Far East. Index
returns assume reinvestment of dividends and unlike the fund's returns, do not
reflect any fees, expenses or sales charges.
(1) Since 12/31/97. Index comparisons begin __/__/__.
30 KEMPER GLOBAL BLUE CHIP FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER GLOBAL BLUE CHIP FUND 31
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Diego Espinosa
Lead Portfolio Manager
o Began investment career in 1991
o Joined the advisor in 1996
o Joined the fund team in 1998
Nicholas Bratt
o Began investment career in 1974
o Joined the advisor in 1976
o Joined the fund team in 1998
William E. Holzer
o Began investment career in 1970
o Joined the advisor in 1980
o Joined the fund team in 1998
32 KEMPER GLOBAL BLUE CHIP FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Global Discovery Fund*
FUND GOAL The fund seeks above-average long-term capital appreciation.
* Kemper Global Discovery Fund is properly known as Global Discovery Fund.
KEMPER GLOBAL DISCOVERY FUND 33
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 65% of its total assets in common stocks and other
equities of small companies throughout the world (companies with market values
similar to the smallest 20% of the Salomon Brothers Broad Market Index). The
fund generally focuses on countries with developed economies (including the
U.S.).
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for companies that appear to have
effective management, strong competitive positioning, vigorous research and
development efforts and sound balance sheets.
Growth orientation. The managers prefer companies with above-average potential
for sustainable earnings growth compared to large companies, and whose market
value appears reasonable in light of their business prospects.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, seeking to identify stocks that may benefit
from them.
The managers may favor different securities at different times, while still
maintaining variety in terms of the countries and industries represented.
The fund will normally sell a stock when the managers believe its price is
unlikely to go much higher, its fundamentals have deteriorated, other
investments offer better opportunities or in the course of adjusting its
emphasis on a given country.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in common stocks of small companies, it may also
invest up to 35% of total assets in equities of large companies or in debt
securities.
34 KEMPER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
This fund may interest long-term investors who want to diversify a large-cap or
domestic portfolio of investments.
There are several factors that could hurt the fund's performance, cause you to
lose money or make the fund perform less well than other investments.
The most important factor with this fund is how U.S. and foreign stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When U.S. and foreign stock prices
fall, you should expect the value of your investment to fall as well.
Foreign stocks tend to be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. These risks tend to be greater
in emerging markets. Compared to large company stocks, small and mid-size stocks
tend to be more volatile, in part because these companies tend to be less
established and the valuation of their stocks often depends on future
expectations. Because a stock represents ownership in its issuer, stock prices
can be hurt by poor management, shrinking product demand and other business
risks. These may affect single companies as well as groups of companies. In
addition, changing currency rates could add to the fund's investment losses or
reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER GLOBAL DISCOVERY FUND 35
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The Salomon Brothers World Equity Extended Market Index is an unmanaged
small capitalization stock universe of 22 countries. Index returns assume
reinvestment of dividends and, unlike fund returns, do not reflect any fees or
expenses.
(1) Since 9/10/91. Index comparisons begin __/__/__.
36 KEMPER GLOBAL DISCOVERY FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes assumes operating expenses
remain the same and that you invested $10,000, earned 5% annual returns and
reinvested all dividends and distributions. This is only an example; actual
expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER GLOBAL DISCOVERY FUND 37
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Gerald J. Moran
Lead Portfolio Manager
o Began investment career in [YEAR]
o Joined the advisor in 1968
o Joined the fund team in 1991
Sewall Hodges
o Began investment career in [YEAR]
o Joined the advisor in 1995
o Joined the fund team in 1996
Steven T. Stokes
o Began investment career in 1986
o Joined the advisor in 1996
o Joined the fund team in 1999
38 KEMPER GLOBAL DISCOVERY FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Global Income Fund
FUND GOAL The fund seeks high current income consistent with prudent
management for total return.
KEMPER GLOBAL INCOME FUND 39
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 65% of total assets in foreign and U.S.
investment-grade bonds and other debt securities. While the fund may invest in
securities issued by any issuer and in any currency, it generally focuses on
issuers in developed markets, such as Australia, Canada, Japan, New Zealand, the
United States and Western Europe, and on securities of other countries that are
denominated in the currencies of these countries or the euro.
In making their buy and sell decisions, the portfolio managers typically
consider a number of factors, including economic outlooks, interest rate
movements, inflation trends, security characteristics and changes in supply and
demand within global bond markets. In choosing individual bonds, the managers
use independent analysis to look for bonds that have attractive yields and good
credit. The managers may favor securities from different countries and issuers
at different times, while still maintaining variety in terms of countries and
issuers represented.
- --------------------------------------------------------------------------------
CREDIT QUALITY POLICIES
This fund normally invests at least 65% of total assets in investment-grade
bonds, which are those in the top four credit grades (i.e., as low as BBB/Baa).
40 KEMPER GLOBAL INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
This fund may make sense for investors seeking a less aggressive approach to
international income investing.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
For this fund, the main factor is global interest rates. A rise in interest
rates generally means a fall in bond prices -- and, in turn, a fall in the value
of your investment. (As a rule, a 1% rise in interest rates means a 1% fall in
value for every year of duration.)
Foreign markets tend to be more volatile than U.S. markets, for reasons ranging
from political and economic uncertainties to poor regulation to a higher risk
that essential information may be incomplete or wrong.
Another major factor is currency exchange rates. When the dollar value of a
foreign currency falls, so does the value of any investments the fund owns that
are denominated in that currency. This is separate from market risk, and may add
to market losses or reduce market gains.
The fact that the fund is not diversified and may invest in securities of
relatively few issuers increases its risk, because any factors affecting a given
company could affect performance. Similarly, if the fund emphasizes a given
market, such as Canada, or a given industry, factors affecting that market or
industry will affect performance.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, issuers, industries or other matters
o a bond could fall in credit quality or go into default
o some types of bonds could be paid off earlier than expected, which would
hurt the fund's performance
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER GLOBAL INCOME FUND 41
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since 5 Years Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The Salomon Smith Barney World Government Bond Index is an unmanaged
index comprised of government bonds from eighteen countries (United States,
Japan, United Kingdom, Germany, France, Canada, the Netherlands, Australia,
Switzerland, Denmark, Austria, Belgium, Finland, Ireland, Italy, Portugal, Spain
and Sweden) with maturities greater than one year. Index returns assume
reinvestment of dividends and, unlike fund returns, do not reflect any fees,
expenses or sales charges.
(1) Inception dates for Class A, B and C shares are 10/1/89, 5/31/94 and
5/31/94, respectively.
42 KEMPER GLOBAL INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND 43
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
Scudder Investments (U.K.) Limited, 1 South Place, London, U.K., an affiliate of
Scudder Kemper Investments, Inc., is the sub-advisor for Kemper Global Income
Fund. Scudder Investments (U.K.) Limited has served as sub-advisor for mutual
funds since December, 1996 and investment advisor for certain institutional
accounts since August, 1998.
Scudder Investments (U.K.) Limited renders investment advisory and management
services with regard to the portion of the fund's portfolio as allocated to
Scudder Investments (U.K.) Limited by Scudder Kemper Investments, Inc. from
time-to-time for management, including services related to foreign securities,
foreign currency transactions and related investments.
For its services, Scudder Investments (U.K.) Limited will receive from Scudder
Kemper Investments, Inc. a monthly fee at the annual rate of 0.30% for Kemper
Global Income Fund of the portion of the average daily net assets of the fund
allocated by the investment manager to the sub-advisor for management.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Jan C. Faller
Co-Lead Portfolio Manager
o Began investment career in 1988
o Joined the advisor in 1999
o Joined the fund team in 1999
Robert Stirling
Co-Lead Portfolio Manager
o Began investment career in [YEAR]
o Joined the advisor in [YEAR]
o Joined the fund team in 1999
Jeremy L. Ragus
o Began investment career in 1977
o Joined the advisor in 1990
o Joined the fund team in 1999
44 KEMPER GLOBAL INCOME FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
International Fund
FUND GOAL The fund seeks total return through a combination of capital growth
and income.
KEMPER INTERNATIONAL FUND 45
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 80% of total assets in foreign securities (securities
issued by foreign-based issuers). The fund generally focuses on common stocks of
established foreign companies. The fund may invest more than 25% of total assets
in any given developed country that the manager believes poses no unique
investment risk.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies that have sound
financial strength, good business prospects and strong competitive positioning
and above-average earnings growth, among other factors.
Top-down analysis. The managers consider the economic outlooks for various
countries and geographical areas, favoring those they believe have sound
economic conditions and open markets.
Analysis of global themes. The managers look for significant changes in the
business environment, with an eye toward identifying industries that may benefit
from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, its underlying investment theme has matured or the reasons for
originally investing no longer apply.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund may invest up to [20%] of net assets in foreign or domestic debt
securities of any credit quality, including junk bonds (i.e., grade BB and
below). Compared to investment-grade bonds, junk bonds generally pay higher
yields and have higher volatility and risk of default.
46 KEMPER INTERNATIONAL FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
Investors who are looking for a broadly diversified international fund may want
to consider this fund.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how foreign stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When foreign stock prices fall, you should
expect the value of your investment to fall as well.
Foreign stocks may at times be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies. In addition, changing currency rates could add to
the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o bond investments could be hurt by rising interest rates or declines in
credit quality
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER INTERNATIONAL FUND 47
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since 5 Years Since 10 Years
- --------------------------------------------------------------------------------
Class A 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The EAFE Index (Morgan Stanley Capital International Europe,
Austral-Asia, Far East Index) is a generally accepted benchmark for performance
of major overseas markets. Index returns assume reinvestment of dividends and,
unlike fund returns, do not reflect any fees, expenses or sales charges.
48 KEMPER INTERNATIONAL FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND 49
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
Scudder Investments (U.K.) Limited, 1 South Place, London, U.K., an affiliate of
Scudder Kemper Investments, Inc., is the sub-advisor for Kemper International
Fund. Scudder Investments (U.K.) Limited has served as sub-advisor for mutual
funds since December, 1996 and investment advisor for certain institutional
accounts since August, 1998.
Scudder Investments (U.K.) Limited renders investment advisory and management
services with regard to the portion of the fund's portfolio as allocated to
Scudder Investments (U.K.) Limited by Scudder Kemper Investments, Inc. from
time-to-time for management, including services related to foreign securities,
foreign currency transactions and related investments.
For its services, Scudder Investments (U.K.) Limited will receive from Scudder
Kemper Investments, Inc. a monthly fee at the annual rate of 0.35% for Kemper
International Fund of the portion of the average daily net assets of the fund
allocated by the investment manager to the sub-advisor for management.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Irene Cheng
Lead Portfolio Manager
o Began investment career in 1985
o Joined the advisor in 1993
o Joined the fund team in 1999
Marc Slendebroek
Began investment career in 1990
o Joined the advisor in 1994
o Joined the fund team in 1998
50 KEMPER INTERNATIONAL FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
International Growth
And Income Fund
FUND GOAL The fund seeks long-term growth of capital and current income.
KEMPER INTERNATIONAL GROWTH AND INCOME FUND 51
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 80% of net assets in foreign equities (equities issued
by foreign-based companies and listed on foreign exchanges). The fund generally
focuses on common stocks of established companies in countries with developed
economies (other than the United States).
In choosing stocks, the portfolio managers begin by screening for yields. Each
month, they examine a universe of about 1,200 stocks, seeking those with
dividends at least 25% above the stock's three-year average or the median for
the stock's local market.
To further narrow the pool of potential stocks, the managers use bottom-up
analysis, looking for companies with sound balance sheets, good business
prospects, strong competitive positioning and effective management. The managers
assemble the fund's portfolio from among the qualifying stocks, drawing on
analysis of economic outlooks for various countries and industries.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when its dividends are 25% lower than the
stock's own three-year average or the median for the stock's local market. It
may also sell a stock when it reaches a target price or when the managers
believe other investments offer better opportunities.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund may invest up to 20% of net assets in foreign debt securities,
primarily investment grade (i.e. in the top four credit grades).
52 KEMPER INTERNATIONAL GROWTH AND INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
Investors who are looking for a broadly diversified international fund with
current income may want to consider this fund.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how foreign stock markets perform --
something that depends on a large number of factors, including economic,
political and demographic trends. When foreign stock prices fall, you should
expect the value of your investment to fall as well.
Foreign stocks may at times be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies. In addition, changing currency rates could add to
the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o to the extent that the fund focuses on income, it may end up avoiding
opportunities in faster-growing industries or companies
o bond investments could be hurt by rising interest rates or declines in
credit quality
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER INTERNATIONAL GROWTH AND INCOME FUND 53
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1998 1999
00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
1 Year Since Inception(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The Morgan Stanley Capital International World+Canada Index is an
unmanaged index of global stock markets, excluding the U.S. Index returns assume
reinvestment of dividends and, unlike fund returns, do not reflect any fees,
expenses or sales charges.
(1) Inception date for Class A, B and C shares is 12/31/97.
54 KEMPER INTERNATIONAL GROWTH AND INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND INCOME FUND 55
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Sheridan P. Reilly
Lead Portfolio Manager
o Began investment career in 1987
o Joined the advisor in 1995
o Joined the fund team in 1998
Irene Cheng
o Began investment career in 1985
o Joined the advisor in 1993
o Joined the fund team in 1998
Lauren C. Lambert
o Began investment career in 1987
o Joined the advisor in 1994
o Joined the fund team in 1999
56 KEMPER INTERNATIONAL GROWTH AND INCOME FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Latin America Fund
FUND GOAL The fund seeks long-term capital appreciation.
KEMPER LATIN AMERICA FUND 57
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 65% of total assets in Latin American equities
(equities that are traded mainly on Latin American markets or are issued by
companies that are based in Latin America or do more than half of their business
there). The fund generally focuses on Argentina, Brazil, Chile, Colombia, Mexico
and Peru.
In choosing stocks, the portfolio managers use a combination of two analytical
disciplines:
Bottom-up research. The managers look for individual companies with competitive
business positions, good technologies, attractive prices relative to potential
growth and sound balance sheets, among other factors. The managers also consider
the quality of management, the impact of government regulations and trade
initiatives and the cost of labor and raw materials.
Analysis of regional themes. The managers look for significant social, economic,
industrial and demographic changes, with an eye toward identifying countries,
industries and companies that may benefit from these changes.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when the managers believe it has reached its
fair value, other investments offer better opportunities or when adjusting its
exposure to a given country or industry.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund may invest up to 35% of total assets in non-Latin American [debt] and
equity securities, including bonds that the managers believe may offer
attractive appreciation and stocks that may benefit from Latin American
developments.
58 KEMPER LATIN AMERICA FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
This fund may interest investors who believe in the long-term growth potential
of stocks from Mexico, Central America, South America and the Caribbean, and can
accept above-average risks.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how Latin American stock markets
perform -- something that depends on a large number of factors, including
economic, political and demographic trends. When Latin American stock prices
fall, you should expect the value of your investment to fall as well. The fact
that the fund concentrates on a single geographical region could affect fund
performance. For example, Latin American companies could be hurt by such factors
as currency devaluations or shifts in government policy. Similarly, the fact
that the fund is not diversified and may invest in relatively few companies
increases its risk, because any factors affecting a given company could affect
performance.
Emerging markets, including Latin American countries, tend to be more volatile
than developed markets, for reasons ranging from political and economic
uncertainties to poor regulation to a higher risk that essential information may
be incomplete or wrong. Stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies. In addition, changing currency rates could add to
the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o bond investments could be hurt by rising interest rates or declines in
credit quality
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER LATIN AMERICA FUND 59
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
1998 1999
00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year Since Life of Class(1)
- --------------------------------------------------------------------------------
Class A 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00
- --------------------------------------------------------------------------------
Class C 00.00 00.00
- --------------------------------------------------------------------------------
Index 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The IFC Latin America Investable Return Index is prepared by the
International Finance Corporation. It is an unmanaged, market
capitalization-weighted representation of stock performance in seven Latin
American markets, and measures the returns of stocks that are legally and
practically available to investors. Index returns assume reinvestment of
dividends and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
(1) Inception date for Class A, B and C shares is 12/31/97.
60 KEMPER LATIN AMERICA FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND 61
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Tara C. Kenney
Lead Portfolio Manager
o Began investment career in 1984 [verify]
o Joined the advisor in 1995
o Joined the fund team in 1996
Edmund B. Games, Jr.
o Began investment career in 1960
o Joined the advisor in 1960
o Joined the fund team in 1992
Paul H. Rogers
o Began investment career in 1985
o Joined the advisor in 1994
o Joined the fund team in 1996
62 KEMPER LATIN AMERICA FUND
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
New Europe Fund
FUND GOAL The fund seeks long-term capital appreciation.
KEMPER NEW EUROPE FUND 63
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Main Strategy
The fund invests at least 65% of total assets in European equities (equities
that are traded mainly on European markets or are issued by companies that are
based in Europe or do more than half of their business there). The fund
generally focuses on common stocks of companies in the more established markets
of Western and Southern Europe.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with a history of
above-average growth and new or dominant products or technologies, among other
factors.
Growth orientation. The managers look for stocks that seem to offer the
potential for sustainable above-average growth and whose market prices are
reasonable in light of their potential growth.
Top-down analysis. The managers consider the outlook for economic, political,
industrial and demographic trends and how they may affect various countries,
sectors and industries.
The managers may favor securities from different countries and industries at
different times, while still maintaining variety in terms of the countries and
industries represented.
The fund will normally sell a stock when it has reached a target price, the
managers believe other investments offer better opportunities or when adjusting
its exposure to a given country or industry.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund may invest up to 20% of total assets in European debt securities of any
credit quality, including junk bonds (i.e., grade BB and below). Compared to
investment-grade bonds, junk bonds generally pay higher yields and have higher
volatility and risk of default.
64 KEMPER NEW EUROPE FUND
<PAGE>
- --------------------------------------------------------------------------------
The Main Risks Of Investing In The Fund
This fund may appeal to investors who seek long-term growth and want to gain
exposure to Europe's established markets.
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor with this fund is how European stock markets perform
- -- something that depends on a large number of factors, including economic,
political and demographic trends. When European stock prices fall, you should
expect the value of your investment to fall as well. The fact that the fund
concentrates on a single geographical region could affect fund performance. For
example, European companies could be hurt by such factors as regional economic
downturns or difficulties in achieving economic unification. Similarly, the fact
that the fund is not diversified and may invest in relatively few companies
increases its risk, because any factors affecting a given company could affect
performance.
European stocks may at times be more volatile than their U.S. counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies. In addition, changing currency rates could add to
the fund's investment losses or reduce its investment gains.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies or other matters
o growth stocks may be out of favor for certain periods
o bond investments could be hurt by rising interest rates or declines in
credit quality
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
KEMPER NEW EUROPE FUND 65
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class M shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
The performance of Class M shares shown in the bar chart and performance table
reflects the performance of the fund in closed-end form (without daily sales and
redemptions). The fund's performance may have been lower if it had operated as
an open-end fund during this period.
For comparison, the table has a broad-based market index (which, unlike the
fund, has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
[The following table was depicted as a bar chart in the printed material.]
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class M shares
- --------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 '00 YTD return as of : 0.00%
Worst quarter: -0.00%, Q0 '00
- --------------------------------------------------------------------------------
Average Annual Total Returns (12/31/1999)
- --------------------------------------------------------------------------------
Since 1 Year* Since 5 Years Since 10 Years
- --------------------------------------------------------------------------------
Class M 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Index 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Index: The Morgan Stanley Capital International Europe Index is an unmanaged
index that is generally representative of the equity securities of the European
markets. Index returns assume reinvestment of dividends and unlike the fund's
returns, do not reflect any fees, expenses or sales charges.
* The one year average annual total return reflects the imposition of a 2%
redemption fee.
66 KEMPER NEW EUROPE FUND
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 0.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) 0.00%* 0.00% 0.00%
- --------------------------------------------------------------------------------
Redemption fee** (as % of amount redeemed, if
applicable) 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund
assets 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses**** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** A 2% redemption fee, which is retained by the fund, is imposed upon
redemptions or exchanges of shares held less than one year, with limited
exceptions.
*** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
**** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
Based on the figures above (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
KEMPER NEW EUROPE FUND 67
<PAGE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154-0010. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee from the fund. For the most recent fiscal year, the actual amount
the fund paid in management fees was 0.00% of its average daily net assets.
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Carol L. Franklin
Lead Portfolio Manager
o Began investment career in 1975
o Joined the advisor in 1981
o Joined the fund team in 1990
Joan R. Gregory
o Began investment career in 1989
o Joined the advisor in 1992
o Joined the fund team in 1992
Marc Slendebroek
o Began investment career in 1990
o Joined the advisor in 1994
o Joined the fund team in 1998
68 KEMPER NEW EUROPE FUND
<PAGE>
- --------------------------------------------------------------------------------
Other Policies And Risks
This prospectus doesn't tell you about every policy or risk of investing in a
fund. For more information, you may want to request a copy of the Statement of
Additional Information (the back cover tells you how to do this).
While the previous pages describe the main points of each fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be rare, each fund's Board could change
that fund's investment goal without seeking shareholder approval.
o As a temporary defensive measure, any of these funds could shift up to
100% of assets into investments such as money market securities. This
could prevent losses, but would mean that the fund would not be pursuing
its goal.
o Scudder Kemper establishes a security's credit quality when it buys the
security, using independent ratings or, for unrated securities, its own
credit ratings. When ratings don't agree, a fund may use the higher
rating. If a security's credit quality falls, the advisor will determine
whether selling it would be in the shareholders' best interests.
o Although the managers are permitted to use various types of derivatives
(contracts whose value is based on, for example, indices, commodities,
currencies or securities), the managers don't intend to use them as
principal investments, and may not use them at all. With derivatives there
is a risk that they could produce disproportionate losses.
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
OTHER POLICIES AND RISKS 69
<PAGE>
Year 2000 and euro readiness
Like all mutual funds, these funds could be affected by the inability of some
computer systems to recognize the year 2000. Also, because they invest in
foreign securities, the funds could be affected by accounting differences,
changes in tax treatment or other issues related to the conversion of certain
European currencies into the euro, which is already underway. Scudder Kemper has
readiness programs designed to address these problems, and is also researching
the readiness of suppliers and business partners as well as issuers of
securities the funds own. Still, there's some risk that one or both of these
problems could materially affect a fund's operations (such as its ability to
calculate net asset value and to handle purchases and redemptions), its
investments or securities markets in general.
70 OTHER POLICIES AND RISKS
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by Ernst & Young LLP, whose report, along with each fund's financial statements,
is included in that fund's annual report (see "Shareholder reports" on the back
cover).
Growth Fund Of Spain
Kemper Asian Growth Fund
Kemper Emerging Markets Growth Fund
Kemper Emerging Markets Income Fund
Kemper Global Blue Chip Fund
Kemper Global Discovery Fund
Kemper Global Income Fund
Kemper International Fund
Kemper International Growth and Income Fund
Kemper Latin America Fund
Kemper New Europe Fund
FINANCIAL HIGHLIGHTS 71
<PAGE>
Investing In The Funds
[GRAPHIC OMITTED]
The following pages tell you about many of the services, choices and
benefits of being a Kemper Funds shareholder. You'll also find information on
how to check the status of your account using the method that's most convenient
for you.
You can find out more about the topics covered here by speaking with your
financial representative or other investment provider, such as a workplace
retirement plan.
<PAGE>
- --------------------------------------------------------------------------------
Choosing A Share Class
In this prospectus, there are three share classes for each fund. Each class has
its own fees and expenses, offering you a choice of cost structures.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
- --------------------------------------- ---------------------------------------
Classes and features Points to help you compare
- --------------------------------------- ---------------------------------------
Class A
o Sales charges of up to 5.75%, o Some investors may be able to
charged when you buy shares reduce or eliminate their sales
charges; see next page
o In most cases, no charges when you
sell shares o Annual operating expenses are
lower than those for Class B or
o No distribution fee Class C
- --------------------------------------- ---------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate
falls to zero after six years
o Deferred sales charge of up to
4.00%, charged when you sell o Shares automatically convert to
shares you bought within the last Class A after six years, which
six years means lower annual expenses going
forward
o 0.75% distribution fee
- --------------------------------------- ---------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is
lower, but your shares never
o Deferred sales charge of 1.00%, convert to Class A, so annual
charged when you sell shares you expenses remain higher
bought within the last year
o 0.75% distribution fee
- --------------------------------------- ---------------------------------------
CHOOSING A SHARE CLASS 73
<PAGE>
Class A shares
All funds, except Kemper Global Income Fund and Kemper Emerging Markets Income
Fund
Class A shares have a sales charge that varies with the amount you invest:
Sales charge Sales charge
as a % of as a % of your
Your investment offering price net investment
- ---------------------------------------------------------
Up to $50,000 5.75% 6.10%
- ---------------------------------------------------------
$50,000-$99,999 4.50 4.71
- ---------------------------------------------------------
$100,000-$249,999 3.50 3.63
- ---------------------------------------------------------
$250,000-$499,999 2.60 2.67
- ---------------------------------------------------------
$500,000-$999,999 2.00 2.04
- ---------------------------------------------------------
$1 million or more See below and next page
- ---------------------------------------------------------
The offering price includes the sales charge.
Class A shares -- Kemper Global Income Fund and Kemper Emerging Markets Income
Fund
Amount of purchase Offering price Amount invested
- ---------------------------------------------------------
Less than $100,000 4.50% 4.71%
- ---------------------------------------------------------
$100,000 but less
than $250,000 3.50 3.63
- ---------------------------------------------------------
$250,000 but less
than $500,000 2.60 2.67
- ---------------------------------------------------------
$500,000 but less
than $1 million 2.00 2.04
- ---------------------------------------------------------
$1 million and over 0.00** 0.00**
- ---------------------------------------------------------
* Rounded to nearest one hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge
as discussed below.
74 CHOOSING A SHARE CLASS
<PAGE>
You may be able to lower your Class A sales charges if:
o you plan to invest at least $50,000 ($100,000 for Kemper Global Income
Fund and Kemper Emerging Markets Income Fund) over the next 24 months
("letter of intent")
o the amount of Kemper shares you already own (including shares in certain
other Kemper funds) plus the amount you're investing now is at least
$50,000 ($100,000 for Kemper Global Income Fund and Kemper Emerging
Markets Income Fund) ("cumulative discount")
o you are investing a total of $50,000 ($100,000 for Kemper Global Income
Fund and Kemper Emerging Markets Income Fund) or more in several Kemper
funds at once ("combined purchases")
The point of these three features is to let you count investments made at other
times for purposes of calculating your present sales charge. Any time you can
use the privileges to "move" your investment into a lower sales charge category
in the table above, it's generally beneficial for you to do so. You can take
advantage of these methods by filling in the appropriate sections of your
application or by speaking with your financial representative.
CHOOSING A SHARE CLASS 75
<PAGE>
You may be able to buy Class A shares without sales charges when you are:
o reinvesting dividends or distributions
o investing through certain workplace retirement plans
o participating in an investment advisory program under which you pay a fee
to an investment advisor or other firm for portfolio management services
There are a number of additional provisions that apply in order to be eligible
for a sales charge waiver. The fund may waive the sales charges for investors in
other situations as well. Your financial representative or Kemper can answer
your questions and help you determine if you are eligible.
If you're investing $1 million or more, either as a lump sum or through one of
the sales charge reduction features described on the previous page, you may be
eligible to buy Class A shares without sales charges. However, you may be
charged a contingent deferred sales charge (CDSC) of 1.00% on any shares you
sell within the first year of owning them, and a similar charge of 0.50% on
shares you sell within the second year of owning them. This CDSC is waived under
certain circumstances (see "Policies You Should Know About"). Your financial
representative or Kemper can answer your questions and help you determine if
you're eligible.
Class A shares may make sense for long-term investors, especially those who are
eligible for reduced or eliminated sales charges.
76 CHOOSING A SHARE CLASS
<PAGE>
Class B shares
With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% is deducted
from fund assets each year. This means the annual expenses for Class B shares
are somewhat higher (and their performance correspondingly lower) compared to
Class A shares, which don't have a 12b-1 fee. After six years, Class B shares
automatically convert to Class A, which has the net effect of lowering the
annual expenses from the seventh year on.
Class B shares have a contingent deferred sales charge (CDSC). This charge
declines over the years you own shares, and disappears completely after six
years of ownership. But for any shares you sell within those six years, you may
be charged as follows:
Year after you bought shares CDSC on shares you sell
- -----------------------------------------------------------
First year 4.00%
- -----------------------------------------------------------
Second or third year 3.00
- -----------------------------------------------------------
Fourth or fifth year 2.00
- -----------------------------------------------------------
Sixth year 1.00
- -----------------------------------------------------------
Seventh year and later None (automatic conversion
to Class A)
- -----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
Class B shares can be a logical choice for long-term investors who would prefer
to see all of their investment go to work right away, and can accept somewhat
higher annual expenses in exchange.
CHOOSING A SHARE CLASS 77
<PAGE>
Class C shares
Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan under which a distribution fee of 0.75% is deducted from fund assets
each year. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a contingent deferred sales charge (CDSC), but only on
shares you sell within one year of buying them:
Year after you bought shares CDSC on shares you sell
- ----------------------------------------------------------
First year 1.00%
- ----------------------------------------------------------
Second year and later None
- ----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.
78 CHOOSING A SHARE CLASS
<PAGE>
- --------------------------------------------------------------------------------
How to Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
- -------------------------------------- ----------------------------------------
First investment Additional investments
- -------------------------------------- ----------------------------------------
$1,000 or more for regular accounts $100 or more for regular accounts
$250 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic
Investment Plan
- -------------------------------------- ----------------------------------------
Through a financial representative
o Contact your representative using o Contact your representative using
method that's most convenient for the method that's most convenient
the you for you
- -------------------------------------- ----------------------------------------
By mail or express mail (see below)
o Fill out and sign an application o Send a check and a Kemper
investment slip to us at the
o Send it to us at the appropriate appropriate address below
address, along with an investment
check o If you don't have an investment
slip, simply include a letter with
your name, account number, the
full name of the fund and the
share class and your investment
instructions
- -------------------------------------- ----------------------------------------
By wire
o Call (800) 621-1048 for o Call (800) 621-1048 for
instructions instructions
- -------------------------------------- ----------------------------------------
By phone
- -- o Call (800) 621-1048 for
instructions
- -------------------------------------- ----------------------------------------
With an automatic investment plan
- -- o To set up regular investments,
call (800) 621-1048
- -------------------------------------- ----------------------------------------
On the internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- -------------------------------------- ----------------------------------------
Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9415
Express, registered, or certified mail:
Kemper Service Company, 811 Main Street, Kansas City, MO 64105-2005
Fax number: 800-818-7526 (for exchanging and selling only)
HOW TO BUY SHARES 79
<PAGE>
- --------------------------------------------------------------------------------
How to Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
- -------------------------------------- ----------------------------------------
Exchanging into another fund Selling shares
- -------------------------------------- ----------------------------------------
$1,000 or more to open a new account Some transactions, including most for
over $50,000, can only be ordered in
$100 or more for exchanges between writing with a signature guarantee;
existing accounts if you're in doubt, see page 00
- -------------------------------------- ----------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by the
method that's most convenient for method that's most convenient for
you you
- -------------------------------------- ----------------------------------------
By phone or wire
o Call (800) 621-1048 for o Call (800) 621-1048 for
instructions instructions
- -------------------------------------- ----------------------------------------
By mail, express mail or fax
(see previous page)
Write a letter that includes: Write a letter that includes:
o the fund, class and account number o the fund, class and account number
you're exchanging out of from which you want to sell shares
o the dollar amount or number of o the dollar amount or number of
shares you want to exchange shares you want to sell
o the name and class of the fund you o your name(s), signature(s) and
want to exchange into address, as they appear on your
account
o your name(s), signature(s) and
address, as they appear on your o a daytime telephone number
account
o a daytime telephone number
- -------------------------------------- ----------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from a o To set up regular cash payments
Kemper fund account, call (800) from a Kemper fund account, call
621-1048 (800) 621-1048
- -------------------------------------- ----------------------------------------
On the internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- -------------------------------------- ----------------------------------------
80 HOW TO EXCHANGE OR SELL SHARES
<PAGE>
- --------------------------------------------------------------------------------
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you
received from them. As a general rule, you should follow the information in
those materials wherever it contradicts the information given here. Please note
that an investment provider may charge its own fees.
Policies about transactions
The funds are open for business on each day the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange (typically 3 p.m. Central time, but sometimes
earlier, as in the case of scheduled half-day trading or unscheduled suspensions
of trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
POLICIES YOU SHOULD KNOW ABOUT 81
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The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www. kemper.com to get up-to-date information, review balances or
even place orders for exchanges.
EXPRESS-Transfer lets you set up a link between a Kemper account and a bank
account. Once this link is in place, you can move money between the two with a
phone call. You'll need to make sure your bank has Automated Clearing House
(ACH) services. Transactions take two to three days to be completed, and there
is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the account
application; to add it to an existing account, call (800) 621-1048.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that, with respect to certain pre-authorized
transactions, as long as we take reasonable steps to ensure that an order
appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The funds can only send or
accept wires of $1,000 or more.
Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.
82 POLICIES YOU SHOULD KNOW ABOUT
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If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.
When you want to sell more than $50,000 worth of shares, or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers and
most banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a contingent deferred sales charge (CDSC), we
calculate the CDSC as a percentage of what you paid for the shares or what you
are selling them for -- whichever results in the lowest charge to you. In
processing orders to sell shares, we turn to the shares with the lowest CDSC
first. Exchanges from one Kemper fund into another don't affect CDSCs: for each
investment you make, the date you first bought Kemper shares is the date we use
to calculate a CDSC on that particular investment.
There are certain cases in which you may be exempt from a CDSC. These include:
o the death or disability of an account owner (including a joint owner)
o withdrawals made through a systematic withdrawal plan
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns of
excess contributions from retirement plans
POLICIES YOU SHOULD KNOW ABOUT 83
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In each of these cases, there are a number of additional provisions that apply
in order to be eligible for a CDSC waiver. Your financial representative or
Kemper can answer your questions and help you determine if you are eligible.
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take advantage of the "reinstatement feature." With
this feature, you can put your money back into the same class of a Kemper fund
at its current NAV and for purposes of sales charges it will be treated as if it
had never left Kemper. You'll be reimbursed (in the form of fund shares) for any
CDSC you paid when you sold. Future CDSC calculations will be based on your
original investment date, rather than your reinstatement date. There is also an
option that lets investors who sold Class B shares buy Class A shares with no
sales charge, although they won't be reimbursed for any CDSC they paid. You can
only use the reinstatement feature once for any given group of shares. To take
advantage of this feature, contact Kemper or your financial representative.
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 10 days) or when unusual circumstances prompt the
SEC to allow further delays. Certain expedited redemption processes may also be
delayed when you are selling recently purchased shares.
84 POLICIES YOU SHOULD KNOW ABOUT
<PAGE>
How the funds calculate share price
For each fund in this prospectus, the price at which you buy shares is as
follows:
Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")
Class B and Class C shares -- net asset value per share, or NAV
To calculate NAV, each share class of each fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
For each fund and share class in this prospectus, the price at which you sell
shares is also the NAV, although a contingent deferred sales charge may be taken
out of the proceeds (see "Choosing A Share Class").
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
POLICIES YOU SHOULD KNOW ABOUT 85
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if we have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened,
we may give you 30 days' notice to provide the correct number
o charge you $9 each calendar quarter if your account balance is below
$1,000 for the entire quarter; this policy doesn't apply to most
retirement accounts or if you have an automatic investment plan
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for
you to liquidate) rather than cash; in most cases, a fund won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the fund's assets, whichever is less
o change, add or withdraw various services, fees and account policies (for
example, we may change or terminate the exchange privilege at any time)
86 POLICIES YOU SHOULD KNOW ABOUT
<PAGE>
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Understanding Distributions And Taxes
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The fund intends to pay dividends and distributions to its shareholders in
November or December, and if necessary may do so at other times as well.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
UNDERSTANDING DISTRIBUTIONS AND TAXES 87
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:
Generally taxed at ordinary income rates
- --------------------------------------------------------------------------------
o short-term capital gains from selling fund shares
- --------------------------------------------------------------------------------
o income dividends you receive from a fund
- --------------------------------------------------------------------------------
o short-term capital gains distributions received from a fund
- --------------------------------------------------------------------------------
Generally taxed at capital gains rates
- --------------------------------------------------------------------------------
o long-term capital gains from selling fund shares
- --------------------------------------------------------------------------------
o long-term capital gains distributions received from a fund
- --------------------------------------------------------------------------------
You may be able to claim a tax credit or deduction for your share of any foreign
taxes your fund pays.
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
If you invest right before the fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.
Corporations may be able to take a dividends- received deduction for a portion
of income dividends they receive.
88 UNDERSTANDING DISTRIBUTIONS AND TAXES
<PAGE>
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To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call (800) 621-1048.
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-6009
www.sec.gov
Tel (800) SEC-0330
Kemper Funds
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
Tel (800) 621-1048
SEC File Numbers
Growth Fund Of Spain 000-000
Kemper Asian Growth Fund 000-000
Kemper Emerging Markets Growth Fund 000-000
Kemper Emerging Markets Income Fund 000-000
Kemper Global Blue Chip Fund 000-000
Global Discovery Fund 000-000
Kemper Global Income Fund 000-000
Kemper International Fund 000-000
Kemper International Growth and Income Fund 000-000
Kemper Latin America Fund 000-000
Kemper New Europe Fund 000-000
Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com E-mail [email protected]
Tel (800) 621-1048
[LOGO] KEMPER FUNDS
Long-term investing in a short-term world(SM)
[Recycle Logo] Printed on recycled paper. XXX-O (00/00) 000000
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
March 1, 2000
KEMPER NEW EUROPE FUND, INC.
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the prospectus of the Kemper New Europe Fund, Inc. (the
"Fund") dated March 1, 2000. The prospectus may be obtained without charge from
the Fund and is also available along with other related materials on the SEC's
Internet web site (http://www.sec.gov). The Fund's audited Semi-Annual Report
dated April 30, 2000 and its audited Annual Report dated October 31, 1999, each
of which either accompanies this Statement of Additional Information or has been
previously provided to the investor to whom this Statement of Additional
Information is being sent, are incorporated by reference. The Fund will furnish
without charge a copy of the Semi-Annual Report and the Annual Report upon
request by calling 1-800-621-1048.
The Fund was a closed-end fund whose shares were listed on the New York
Stock Exchange, Inc. The shareholders of the Fund approved a proposal to
open-end the Fund. The conversion of the Fund to an open-end investment company
occurred on September 3, 1999. This Statement of Additional Information pertains
to the Fund as an open-end investment company.
<PAGE>
TABLE OF CONTENTS
Page
----
INVESTMENT RESTRICTIONS.................................. 1
INVESTMENT OBJECTIVE AND POLICIES........................ 2
CERTAIN INVESTMENT PRACTICES............................. 4
DIVIDENDS AND TAXES...................................... 18
NET ASSET VALUE.......................................... 22
PERFORMANCE.............................................. 23
INVESTMENT MANAGER AND UNDERWRITER....................... 26
PORTFOLIO TRANSACTIONS................................... 30
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES............ 31
REDEMPTION OR REPURCHASE OF SHARES....................... 36
SPECIAL FEATURES......................................... 41
OFFICERS AND DIRECTORS................................... 45
ORGANIZATION OF THE FUND................................. 47
FINANCIAL STATEMENTS..................................... 49
2
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INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions which,
together with the investment objective and fundamental policies of the Fund,
cannot be changed without approval of a "majority" of its outstanding voting
securities. As defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), this means the lesser of (1) 67% of the Fund's shares present at a
meeting where 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 is classified as a non-diversified open-end management company.
The Fund may not:
1. Purchase securities on margin, except such short-term credits as
may be necessary or routine for clearance of transactions and the
maintenance of margin with respect to futures and forward contracts.
2. Make short sales of securities, except short sales against the box.
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow money as permitted under the 1940 Act, as
interpreted or modified by regulatory authority having jurisdiction from
time to time, and may also pledge its assets to secure such borrowings. For
the purposes of this investment restriction, collateral arrangements with
respect to the writing of options or the purchase or sale of futures
contracts are not deemed a pledge of assets or the issuance of a senior
security.
4. Invest more than 25% of the total value of its assets in a
particular industry; provided, however, that the foregoing restriction
shall not be deemed to prohibit the Fund from purchasing the securities of
any issuer pursuant to the exercise of rights distributed to the Fund by
the issuer, except that no such purchase may be made if as a result the
Fund will fail to meet the diversification requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). This restriction does not
apply to securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities, but will apply to foreign government
obligations unless the U.S. Securities and Exchange Commission (the "SEC")
permits their exclusion.
5. Act as underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under applicable securities laws.
6. Buy or sell commodities or commodity contracts or real estate or
interests in real estate, although it may purchase and sell securities that
are secured by real estate or commodities and securities of companies that
invest or deal in real estate or commodities, may purchase and sell futures
contracts and related options on stock indices and currencies, may enter
into forward currency exchange contracts, may write options on stocks and
may purchase and sell options on currencies and stock indexes.
7. Make loans, provided that the Fund may (a) acquire debt securities
as described herein, (b) enter into repurchase agreements and (c) lend
portfolio securities in an amount not to exceed 25% of the Fund's total
assets.
The following additional restrictions are not fundamental policies of
the Fund and may be changed by the Board of Directors.
The Fund may not:
1. Borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by engaging in
reverse repurchase agreements, dollar rolls, or other investments or
transactions described in the Fund's registration statement which may be
deemed to be borrowings.
2. Enter into either of reverse repurchase agreements or dollar rolls
in an amount greater than 5% of its total assets.
3. Purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total assets;
or sell put options, if as a result the aggregate value of the obligations
underlying such put options would exceed 50% of its total assets.
4. Enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate
3
<PAGE>
initial margin with respect to such futures contracts entered into on
behalf of the Fund and the premiums paid for such options on futures
contracts does not exceed 5% of the fair market value of the Fund's total
assets; provided that, in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in computing the
5% limit.
5. Purchase warrants if as a result such securities, taken at the
lower of cost or market value, would represent more than 5% of the value of
the Fund's total assets (for this purpose, warrants acquired in units or
attached to securities will be deemed to have no value).
6. Lend portfolio securities in an amount greater than 5% of its total
assets.
7. Make investments for the purpose of exercising control or management.
Substantial stock ownership may occasionally confer on the Fund the ability
to influence policies of portfolio companies. In addition, the Fund's
management may consult with and advise the management of portfolio companies
with respect to the operating and financial policies of such companies.
8. Participate on a joint and several basis in any trading account in
securities.
9. Purchase any security (other than obligations of the U.S.
government, its agencies or instrumentalities) if, as a result, more than
10% of the Fund's total assets (taken at current value) would then be
invested in securities of any single issuer. The exercise of stock
subscription rights or conversion rights is not deemed to be a purchase for
purposes of this restriction.
10. Invest more than 15% of its net assets in illiquid securities.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital appreciation,
which it seeks to achieve by investing primarily in equity securities of
European companies.
The Fund will invest in both the industrialized nations of Western Europe
and the less wealthy or developed countries in Southern and Eastern Europe. The
Fund will invest in established markets and companies with large capitalizations
as well as newer markets and smaller companies, and the portion of the Fund's
assets invested in each will vary from time to time. The Fund seeks to benefit
from accelerating economic growth transformation and deregulation taking hold in
Europe. These developments involve, among other things, increased privatizations
and corporate restructurings, the reopening of equity markets and economies in
Eastern Europe, further broadening of the European Union, and the implementation
of economic policies to promote non-inflationary growth. The Fund invests in
companies it believes are well placed to benefit from these and other structural
and cyclical changes now underway in this region.
Except as otherwise indicated, the Fund's investment objective and policies
are not fundamental and may be changed without a vote of shareholders. If there
is a change in investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
The Fund will invest, under normal market conditions, at least 65% of its
total assets in the equity securities of European companies. The Fund defines a
European company as: (i) a company organized under the laws of a European
country and that has a principal office in a European country; or (ii) a
company, wherever organized, where at least 50% of the company's non-current
assets, capitalization, gross revenue or profit in its most recent fiscal year
represents (directly or indirectly through subsidiaries) assets or activities
located in Europe; or (iii) a company whose equity securities are traded
principally in European securities markets. The Fund's definition of European
companies may include companies that have characteristics and business
relationships common to companies in other regions. As a result, the value of
the securities of such companies may reflect economic and market forces
applicable to other regions, as well as to Europe. The Fund believes, however,
that investment in such companies will be appropriate in light of the Fund's
investment objective, because Scudder Kemper Investments, Inc. (the "Adviser")
will select among such companies only those which, in its view, have
sufficiently strong exposure to economic and market forces in Europe such that
their value will tend to reflect European developments to a greater extent than
developments in other regions. For example, the Adviser may invest in companies
organized and located in the U.S. or other countries outside of Europe,
including companies having their entire production facilities outside of Europe,
when such companies meet one or more elements of the Fund's definition of
European companies so long as the Adviser believes at the time of investment
that the value of the company's securities will reflect principally conditions
in Europe.
4
<PAGE>
The Fund expects the majority of its equity assets to be invested in the
more established and liquid markets of Western and Southern Europe. These more
established Western and Southern European countries include: Austria, Belgium,
Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. To
enhance return potential, however, the Fund may pursue investment opportunities
in the less wealthy nations of Southern Europe, currently Greece, Portugal and
Turkey, and the former communist countries of Eastern Europe, including
countries once part of the Soviet Union. The Fund may invest in other countries
of Europe when their markets become sufficiently developed, in the opinion of
the Adviser.
The Fund intends to allocate its investments among at least three countries
at all times. The Fund's equity investments may consist of: common stock,
preferred stock (convertible or non-convertible), depositary receipts (sponsored
or unsponsored) and warrants. These may be illiquid securities. Equity
securities may also be purchased through rights. Securities may be listed on
securities exchanges, traded over-the-counter ("OTC")or have no organized
market. In addition, the Fund may engage in strategic transactions, including
derivatives.
The Fund may invest, under normal market conditions, up to 20% of its total
assets in European debt securities. Capital appreciation in debt securities may
arise from a favorable change in relative interest rate levels or in the
creditworthiness of issuers. Within this 20% limit, the Fund may invest in debt
securities which are unrated, rated, or the equivalent of those rated below
investment grade (commonly referred to as "junk bonds"); that is, rated below
Baa by Moody's Investor Service, Inc. ("Moody's") or below BBB by Standard &
Poor's Ratings Service ("S&P"). Such securities may be in default with respect
to payment of principal or interest.
The Fund may invest in when-issued securities, illiquid and restricted
securities and convertible securities and may enter into repurchase agreements
and reverse repurchase agreements. The Fund may also invest in closed-end
investment companies that invest primarily in Europe.
When, in the opinion of the Adviser, market conditions warrant, the Fund
may invest without limit in foreign or U.S. debt instruments as well as cash or
cash equivalents, including foreign and domestic money market instruments,
short-term government and corporate obligations, and repurchase agreements for
temporary defensive purposes and up to 20% to maintain liquidity. In such a
case, the Fund would not be pursuing, and may not achieve, its investment
objective.
Foreign securities such as those purchased by the Fund may be subject to
foreign government taxes which could reduce the yield on such securities,
although a shareholder of the Fund may, subject to certain limitations, be
entitled to claim a credit or deduction for U.S. federal income tax purposes for
his or her proportionate share of such foreign taxes paid by the Fund.
From time to time, the Fund may be a purchaser of restricted debt or equity
securities (i.e., securities which may require registration under the Securities
Act of 1933, as amended (the "1933 Act"), or an exemption therefrom, in order to
be sold in the ordinary course of business) in a private placement. The Fund has
undertaken not to purchase or acquire any such securities if, solely as a result
of such purchase or acquisition, more than 15% of the value of the Fund's net
assets would be invested in illiquid securities.
To a lesser extent, the Fund may also invest in "Specialized Investments"
which consist of equity securities of: (i) privately-held European companies;
(ii) European companies that have recently made initial public offerings of
their shares; (iii) government-owned or -controlled companies that are being
privatized; (iv) smaller publicly-held European companies, i.e., any European
company having a market capitalization of less than $500 million (the Board of
Directors of the Fund may, in the future, reevaluate and increase or decrease
the maximum market capitalization for qualification as a smaller European
company); (v) companies and joint ventures based in Europe; (vi) private
placements and joint venture participations in European companies that may not
be readily marketable; (vii) pooled investment funds that invest principally in
securities in which the Fund may invest, which are considered investment
companies for purposes of the 1940 Act restrictions described below; and (viii)
European companies with private market values perceived by the Adviser to be
substantially in excess of their publicly-traded values.
CERTAIN INVESTMENT PRACTICES
Investing in Foreign Securities
Investors should recognize that investing in foreign securities involves
certain special considerations, including those set forth below, which are not
typically associated with investing in U.S. securities and which may favorably
or unfavorably affect the Fund's
5
<PAGE>
performance. As foreign companies are not generally subject to uniform
accounting and auditing financial reporting standards, practices and
requirements comparable to those applicable to domestic companies, there may be
less publicly available information about a foreign company than about a
domestic company. Many foreign stock markets, while growing in volume of trading
activity, have substantially less volume than the New York Stock Exchange (the
"NYSE"), and securities of some foreign companies are less liquid and more
volatile than securities of domestic companies. Similarly, volume and liquidity
in most foreign bond markets are less than the volume and liquidity in the U.S.
and at times, volatility of price can be greater than in the U.S. Further,
foreign markets have different clearance and settlement procedures and 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. Delays in settlement could result in temporary periods when
assets of the Fund are uninvested and no return is earned thereon. The inability
of the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems either could result 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. Payment for securities without delivery may
be required in certain foreign markets. Fixed commissions on some foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Fund will endeavor to achieve the most favorable net results on its
portfolio transactions. Further, the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgments in foreign courts. There is
generally less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies in foreign countries
than in the U.S. It may be more difficult for the Fund's agents to keep
currently informed about corporate actions such as stock dividends or other
matters which may affect the prices of portfolio securities. Communications
between the U.S. and foreign countries may be less reliable than within the
U.S., thus increasing the risk of delayed settlements of portfolio transactions
or loss of certificates for portfolio securities. In addition, with respect to
certain foreign countries, there is the possibility of nationalization,
expropriation, the imposition of withholding or confiscatory taxes, political,
social, or economic instability, or diplomatic developments which could affect
U.S. investments in those countries. Investments in foreign securities may also
entail certain risks, such as possible currency blockages or transfer
restrictions, and the difficulty of enforcing rights in other countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
Many of the currencies of Eastern European countries have experienced a
steady devaluation relative to Western currencies. Any future devaluation may
have a detrimental impact on any investments made by the Fund in Eastern Europe.
The currencies of most Eastern European countries are not freely convertible
into other currencies and are not internationally traded. The Fund will not
invest its assets in non-convertible fixed income securities denominated in
currencies that are not freely convertible into other currencies at the time the
investment is made.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Although investments in companies domiciled in developing countries
may not be subject to potentially greater risks than investments in developed
countries, the Fund will not invest in any securities of issuers located in
developing countries if the securities, in the judgment of the Adviser, are
speculative.
Emerging Markets. While the Fund's investments in foreign securities will
principally be in developed countries, the Fund may invest in countries
considered by the Adviser to be developing or "emerging" markets. Developing or
emerging markets involve exposure to economic structures that are generally less
diverse and mature than in the U.S., and to political systems that may be less
stable. A developing country 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 U.S., 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 Adviser 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-
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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 U.S. and other more developed countries. Disclosure, regulatory
and accounting standards in many respects are less stringent than in the U.S.
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 U.S.; 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 its Board of Directors.
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 a 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. Investments in foreign securities may include
securities issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. The Fund's investments in the
securities of privatized enterprises 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
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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.
Foreign Currencies. Because investments in foreign securities usually will
involve currencies of foreign countries, and because the Fund may hold foreign
currencies and forward contracts, futures contracts and options on futures
contracts on foreign currencies, the value of the assets of the Fund as measured
in U.S. dollars may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the Fund may incur
costs in connection with conversions between various currencies. Although the
Fund values its assets daily in terms of U.S. dollars, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
It will do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into forward or
futures contracts to purchase or sell foreign currencies.
Depositary Receipts. The Fund may invest directly in securities of emerging
country issuers through sponsored or unsponsored American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs"), International Depositary Receipts
("IDRs") and other types of Depositary Receipts (which, together with ADRs, GDRs
and IDRs are hereinafter referred to as "Depositary Receipts"). Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored Depositary Receipts are not obligated to disclose
material information in the U.S. and, therefore, there may not be a correlation
between such information and the market value of the Depositary Receipts. ADRs
are Depositary Receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
GDRs, IDRs and other types of Depositary Receipts are typically issued by
foreign banks or trust companies, although they also may be issued by U.S. banks
or trust companies, and evidence ownership of underlying securities issued by
either a foreign or a U.S. corporation. Generally, Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. For purposes of
the Fund's investment policies, the Fund's investments in ADRs, GDRs and other
types of Depositary Receipts will be deemed to be investments in the underlying
securities of the European company into which they may be converted. Depositary
Receipts other than those denominated in U.S. dollars will be subject to foreign
currency exchange rate risk. Certain Depositary Receipts may not be listed on an
exchange and therefore may be illiquid securities.
Debt Securities. When the Adviser believes that it is appropriate to do so
in order to achieve the Fund's objective of long-term capital appreciation, the
Fund may invest up to 20% of its total assets in European debt securities,
including bonds of foreign governments, supranational organizations and private
issuers. Portfolio debt investments will be selected on the basis of, among
other things, credit quality, and the fundamental outlooks for currency,
economic and interest rate trends, taking into account the ability to hedge a
degree of currency or local bond price risk.
Subject to the above 20% limit, the Fund may purchase debt securities which
are rated below investment-grade, that is, rated below Baa by Moody's or below
BBB by S&P and unrated securities ("high-yield/high-risk securities"), which
usually entail greater risk (including the possibility of default or bankruptcy
of the issuers of such securities), generally involve greater volatility of
price and risk of principal and income, and may be less liquid than securities
in the higher rating categories. The lower the ratings of such debt securities,
the greater their risks. The Fund may also purchase bonds rated B or lower by
Moody's or S&P, and may invest in securities which are rated C by Moody's or D
by S&P or securities of comparable quality in the Adviser's judgment. Such
securities may be in default with respect to payment of principal or interest,
carry a high degree of risk and are considered speculative. See the Appendix to
this Statement of Additional Information for a more complete description of the
ratings assigned by Moody's and S&P and their respective characteristics.
To the extent developments in emerging markets result in improving credit
fundamentals and rating upgrades for countries in emerging markets, the Adviser
believes that there is the potential for capital appreciation as the improving
fundamentals become reflected in the price of debt instruments. The Adviser also
believes that a country's sovereign credit rating (with respect to foreign
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currency denominated issues) acts as a "ceiling" on the rating of all debt
issuers from that country. Thus, the ratings of private sector companies cannot
be higher than that of their home countries. The Adviser believes, however, that
many companies in emerging market countries, if rated on a stand-alone basis
without regard to the rating of the home country, possess fundamentals that
could justify a higher credit rating, particularly if they are major exporters
and receive the bulk of their revenues in U.S. dollars or other hard currencies.
The Adviser seeks to identify such opportunities and benefit from this type of
market inefficiency.
Trading in debt obligations ("sovereign debt") issued or guaranteed by
foreign governments or their agencies or instrumentalities ("governmental
entities") also involves a high degree of risk. The governmental entity that
controls the repayment of sovereign debt may not be willing or able to repay the
principal and/or interest when due in accordance with the terms of such
obligations. A governmental entity's willingness or ability to repay principal
and interest due in a timely manner may be affected by, among other factors, its
cash flow situation, dependence on expected disbursements from third parties,
the governmental entity's policy towards the International Monetary Fund and the
political constraints to which a governmental entity may be subject. As a
result, governmental entities may default on their sovereign debt. Holders of
sovereign debt may be requested to participate in the rescheduling of such debt
and to extend further loans to governmental entities. There is no bankruptcy
proceeding by which defaulted sovereign debt may be collected in whole or in
part.
High-Yield/High-Risk Securities. As stated above, within the Fund's 20%
limit of investments in European debt securities, the Fund may also invest in
high-yield/high-risk securities.
High-yield, high-risk securities are especially subject to adverse changes
in general economic conditions, to changes in the financial condition of their
issuers and to price fluctuations in response to changes in interest rates. An
economic downturn could disrupt the high-yield market and impair the ability of
issuers to repay principal and interest. Also, an increase in interest rates
would have a greater adverse impact on the value of such obligations than on
higher-quality debt securities. During an economic downturn or period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations. Prices and yields of high-yield securities will fluctuate
over time and, during periods of economic uncertainty, volatility of high-yield
securities may adversely affect the Fund's net asset value. In addition,
investments in high-yield, zero coupon or pay-in-kind bonds, rather than
income-bearing high-yield securities, may be more speculative and may be subject
to greater fluctuations in value due to changes in interest rates.
The trading market for high-yield securities may be thin to the extent that
there is no established retail secondary market. A thin trading market may limit
the ability of the Fund to accurately value high-yield securities in its
portfolio and to dispose of those securities. Adverse publicity and investor
perceptions may decrease the values and liquidity of high-yield securities.
These securities may also involve special registration responsibilities,
liabilities and costs and liquidity and valuation difficulties.
Credit quality in the high-yield securities market can change suddenly and
unexpectedly, and even recently-issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it is
the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the Fund's
investment objective by investment in such securities may be more dependent on
the Adviser's credit analysis than is the case for higher quality securities.
Should the rating of a portfolio security be downgraded, the Adviser will
determine whether it is in the best interest of the Fund to retain or dispose of
such security.
Small Companies. The Fund may invest its assets in the securities of small
companies. Investments in small companies involve considerations that are not
applicable to investing in securities of established, larger-capitalization
issuers, including reduced and less reliable information about issuers and
markets, less stringent financial disclosure requirements and accounting
standards, illiquidity of securities, higher brokerage commissions and fees and
greater market risk in general. In addition, these securities involve greater
risks since they may have limited marketability and, thus, may be more volatile.
Because such companies normally have fewer shares outstanding than larger
companies, it may be more difficult for the Fund to buy or sell significant
amounts of such shares without an unfavorable impact on prevailing prices. These
companies may have limited product lines, markets or financial resources and may
lack management depth. In addition, these companies are typically subject to a
greater degree of changes in earnings and business prospectus than are larger,
more established companies.
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Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below for a variety of
purposes, such as hedging various market risks, managing the effective maturity
or duration of fixed-income securities in the Fund's portfolio, or enhancing
potential gain. These strategies may be executed through the use of derivative
contracts.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other instruments, purchase and
sell futures contracts and options thereon, enter into various transactions such
as swaps, caps, floors, collars, currency forward contracts, currency futures
contracts, currency swaps or options on currencies, or currency futures and
various other currency transactions (collectively, all the above are called
"Strategic Transactions"). In addition, strategic transactions may also include
new techniques, instruments or strategies that are permitted as regulatory
changes occur. Strategic Transactions may be used without limit (subject to
certain limitations imposed by the 1940 Act) to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a substitute for purchasing or selling particular
securities. Some Strategic Transactions may also be used to enhance potential
gain although no more than 5% of the Fund's assets will be committed to
Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions will not be used
to alter fundamental investment purposes and characteristics of the Fund, and
the Fund will segregate assets (or as provided by applicable regulations, enter
into certain offsetting positions) to cover its obligations under options,
futures and swaps to limit leveraging of the Fund.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the
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use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of Strategic Transactions would reduce
net asset value, and possibly income, and such losses can be greater than if the
Strategic Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
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OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with U.S.
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers" or broker/dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of A-1 from S&P or P-1 from
Moody's or an equivalent rating from any nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit quality by the Adviser. The staff of the
SEC currently takes the position that OTC options purchased by the Fund, and
portfolio securities "covering" the amount of the Fund's obligation pursuant to
an OTC option sold by it (the cost of the sell-back plus the in-the-money
amount, if any) are illiquid, and are subject to the Fund's limitation on
investing no more than 15% of its net assets in illiquid securities.
If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments that are traded on U.S. and foreign
securities exchanges and in the over-the-counter markets, and on securities
indices, currencies and futures contracts. All calls sold by the Fund must be
"covered" (i.e., the Fund must own the securities or futures contract subject to
the call) or must meet the asset segregation requirements described below as
long as the call is outstanding. Even though the Fund will receive the option
premium to help protect it against loss, a call sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument and
may require the Fund to hold a security or instrument which it might otherwise
have sold.
The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above
securities in its portfolio), and on securities indices, currencies and futures
contracts other than futures on individual corporate debt and individual equity
securities. The Fund will not sell put options if, as a result, more than 50% of
the Fund's total assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to
futures and options thereon. In selling put options, there is a risk that the
Fund may be required to buy the underlying security at a disadvantageous price
above the market price.
General Characteristics of Futures. The Fund may enter into futures contracts or
purchase or sell put and call options on such futures as a hedge against
anticipated interest rate, currency or equity market changes, and for duration
management, risk management and return enhancement purposes. Futures are
generally bought and sold on the commodities exchanges where they are listed
with payment of initial and variation margin as described below. The sale of a
futures contract creates a firm obligation by the Fund, as seller, to deliver to
the buyer the specific type of financial instrument called for in the contract
at a specific future time for a specified price (or, with respect to index
futures and Eurodollar instruments, the net cash amount). Options on futures
contracts are similar to options on securities except that an option on a
futures contract gives the purchaser the right in return for the premium paid to
assume a position in a futures contract and obligates the seller to deliver such
position.
The Fund's use of futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the rules
and regulations of the Commodity Futures Trading Commission and will be entered
into for bona fide hedging, risk management (including duration management) or
other portfolio and return enhancement management purposes. Typically,
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maintaining a futures contract or selling an option thereon requires the Fund to
deposit with a financial intermediary as security for its obligations an amount
of cash or other specified assets (initial margin) which initially is typically
1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets (variation margin) may be required to
be deposited thereafter on a daily basis as the mark to market value of the
contract fluctuates. The purchase of an option on financial futures involves
payment of a premium for the option without any further obligation on the part
of the Fund. If the Fund exercises an option on a futures contract it will be
obligated to post initial margin (and potential subsequent variation margin) for
the resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price, nor that delivery will
occur.
The Fund will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of the Fund's total assets (taken at current value); however, in
the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. The Fund may engage in currency transactions with
Counterparties primarily in order to hedge, or manage the risk of the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
exchange listed currency futures, exchange listed and OTC options on currencies,
and currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
interest rate swap, which is described below. The Fund may enter into currency
transactions with Counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or (except
for OTC currency options) are determined to be of equivalent credit quality by
the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps generally
will be limited to hedging involving either specific transactions or portfolio
positions except as described below. Transaction hedging is entering into a
currency transaction with respect to specific assets or liabilities of the Fund,
which will generally arise in connection with the purchase or sale of its
portfolio securities or the receipt of income therefrom. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency.
The Fund generally will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
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To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Fund is engaging in proxy hedging. If the
Fund enters into a currency hedging transaction, the Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency, index and other swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as the Fund will segregate
assets (or enter into offsetting positions) to cover its obligations under
swaps, the Adviser and the Fund believe such obligations do not constitute
senior securities under the 1940 Act and, accordingly, will not treat them as
being subject to its borrowing restrictions. The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from a NRSRO or is determined to be of equivalent credit quality by the
Adviser. If there is a default by the Counterparty, the Fund may have
contractual remedies pursuant to the agreements related to
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the transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid assets at least equal to
the current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by the Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by the Fund on an index will require the Fund to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid assets denominated in that currency equal to the Fund's obligations or to
segregate cash or liquid assets equal to the amount of the Fund's obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of cash or liquid
assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by the Fund, or the in-the-money amount
plus any sell-back formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC issued and exchange listed options sold by the Fund other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement and the Fund will segregate an
amount of cash or liquid assets equal to the full value of the option. OTC
options settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options settling
with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating cash or liquid assets sufficient to meet its obligation to purchase
or provide securities or currencies, or to pay the amount owed at the expiration
of an index-based futures contract. Such liquid assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
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With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid assets having a value
equal to the accrued excess. Caps, floors and collars require segregation of
assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating cash or liquid assets if the
Fund held a futures or forward contract, it could purchase a put option on the
same futures or forward contract with a strike price as high or higher than the
price of the contract held. Other Strategic Transactions may also be offset in
combinations. If the offsetting transaction terminates at the time of or after
the primary transaction no segregation is required, but if it terminates prior
to such time, cash or liquid assets equal to any remaining obligation would need
to be segregated.
Convertible Securities. The Fund may invest in convertible securities which
are bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks. Investments in convertible securities can
provide income through interest and dividend payment and/or an opportunity for
capital appreciation by virtue of their conversion or exchange features.
The convertible securities in which the Fund may invest may be converted or
exchanged at a stated or determinable exchange ratio into underlying shares of
common stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions, or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock increases,
although typically not as much as the underlying common stock. While no
securities investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same issuer.
As fixed income securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all fixed income securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may default
on their obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stocks of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.
Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes (LYONs). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the purchase price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks as they usually are issued with shorter maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.
Repurchase Agreements. The Fund may enter into repurchase agreements with
member banks of the Federal Reserve System, any foreign bank or with any
domestic or foreign broker-dealer which is recognized as a reporting government
securities dealer if the creditworthiness of the bank or broker-dealer has been
determined by the Adviser to be at least as high as that of other obligations
the Fund may purchase.
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A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities kept at least equal to the repurchase
price on a daily basis. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price upon repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the Obligation itself. Obligations
will be held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan
from the Fund to the seller of the Obligation subject to the repurchase
agreement and is therefore subject to the Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, the Fund may encounter delay and incur costs
before being able to sell the security. Delays may involve loss of interest or
decline in price of the Obligation. If the court characterizes the transaction
as a loan and the Fund has not perfected a security interest in the Obligation,
the Fund may be required to return the Obligation to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured creditor, the
Fund would be at risk of losing some or all of the principal and income involved
in the transaction. As with any unsecured debt instrument purchased for the
Fund, the Adviser seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
Obligation, in which case the Fund may incur a loss if the proceeds to the Fund
of the sale to a third party are less than the repurchase price. However, if the
market value of the Obligation subject to the repurchase agreement becomes less
than the repurchase price (including interest), the Fund will direct the seller
of the Obligation to deliver additional securities so that the market value of
all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Fund will be unsuccessful in seeking
to enforce the seller's contractual obligation to deliver additional securities.
A repurchase agreement with foreign banks may be available with respect to
government securities of the particular foreign jurisdiction, and such
repurchase agreements involve risks similar to repurchase agreements with U.S.
entities.
Borrowing. The fund may not borrow money, except as permitted under Federal
law. The Fund will borrow only when the Adviser believes that borrowing will
benefit the Fund after taking into account considerations such as the costs of
the borrowing. The Fund does not expect to borrow for investment purposes, to
increase return or leverage the portfolio. Borrowing by the Fund will involve
special risk considerations. Although the principal of the fund's borrowings
will be fixed, the Fund's assets may change in value during the time a borrowing
is outstanding, thus increasing exposure to capital risk.
Illiquid Securities. The Fund may occasionally purchase securities other
than in the open market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open market, the
securities so purchased are often "restricted securities" or "not readily
marketable," i.e., securities which cannot be sold to the public without
registration under the 1933 Act or the availability of an exemption from
registration (such as Rules 144 or 144A) or because they are subject to other
legal or contractual delays in or restrictions on resale.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the 1933 Act. The Fund may be deemed to be an "underwriter" for
purposes of the 1933 Act when selling restricted securities to the public, and
in such event the Fund may be liable to purchasers of such securities if such
sale is made in violation of the 1933 Act or if the registration statement
prepared by the issuer, or the prospectus forming a part of it, is materially
inaccurate or misleading.
The Fund may invest up to 15% of its total net assets in illiquid
securities.
Investment Company Securities. The Fund may acquire securities of other
investment companies to the extent consistent with its investment objective and
subject to the limitations of the 1940 Act. The Fund will indirectly bear its
proportionate share of any management fees and other expenses paid by such other
investment companies.
For example, the Fund may invest in a variety of investment companies which seek
to track the composition and performance of specific indexes or a specific
portion of an index. These index-based investments hold substantially all of
their assets in securities representing their specific index. Accordingly, the
main risk of investing in index-based investments is the same as investing in a
portfolio of equity securities comprising the index. The market prices of
index-based investments will fluctuate in accordance with
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both changes in the market value of their underlying portfolio securities and
due to supply and demand for the instruments on the exchanges on which they are
traded (which may result in their trading at a discount or premium to their
NAVs). Index-based investments may not replicate exactly the performance of
their specified index because of transaction costs and because of the temporary
unavailability of certain component securities of the index.
Examples of index-based investments include:
SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary Receipts," are
based on the S&P 500 Composite Stock Price Index. They are issued by the SPDR
Trust, a unit investment trust that holds shares of substantially all the
companies in the S&P 500 in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.
MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They are
issued by the MidCap SPDR Trust, a unit investment trust that holds a portfolio
of securities consisting of substantially all of the common stocks in the S&P
MidCap 400 Index in substantially the same weighting and seeks to closely track
the price performance and dividend yield of the Index.
Select Sector SPDRs(R): Select Sector SPDRs are based on a particular sector or
group of industries that are represented by a specified Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end management investment company with nine
portfolios that each seeks to closely track the price performance and dividend
yield of a particular Select Sector Index.
DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM). They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.
Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are
issued by the Nasdaq-100 Trust, a unit investment trust that holds a portfolio
consisting of substantially all of the securities, in substantially the same
weighting, as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.
WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are based on 17
country-specific Morgan Stanley Capital International Indexes. They are issued
by the WEBs Index Fund, Inc., an open-end management investment company that
seeks to generally correspond to the price and yield performance of a specific
Morgan Stanley Capital International Index.
When-Issued Securities. The Fund may from time to time purchase equity and
debt securities on a "when-issued" or "forward delivery" basis. The price of
such securities, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the when-issued or
forward delivery securities takes place at a later date. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. To the extent that assets of the Fund are
held in cash pending the settlement of a purchase of securities, the Fund would
earn no income; however, it is the Fund's intention to be fully invested to the
extent practicable and subject to the policies stated above. While when-issued
or forward delivery securities may be sold prior to the settlement date, the
Fund intends to purchase such securities with the purpose of actually acquiring
them unless a sale appears desirable for investment reasons. At the time the
Fund makes the commitment to purchase a security on a when-issued or forward
delivery basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The market value of the when-issued
or forward delivery securities may be more or less than the purchase price. The
Fund does not believe that its net asset value or income will be adversely
affected by its purchase of securities on a when-issued or forward delivery
basis.
Lending of Portfolio Securities. The Fund may seek to increase its income
by lending portfolio securities. Under present regulatory policies, including
those of the Board of Governors of the Federal Reserve System and the SEC, such
loans may be made to member firms of the NYSE, and would be required to be
secured continuously by collateral in cash, U.S. Government securities or other
high grade debt obligations maintained on a current basis at an amount at least
equal to the market value and accrued interest of the securities loaned. The
Fund would have the right to call a loan and obtain the securities loaned on no
more than five days' notice. During the existence of a loan, the Fund would
continue to receive the equivalent of the interest paid by the issuer on the
securities loaned and would also receive compensation based on the investment of
the collateral. 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 Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which can be earned currently from securities loans
of this type justifies the attendant risk. If the Fund determines to make
securities loans, the value of the securities loaned will not exceed 5% of the
value of the Fund's total assets at the time any loan
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is made.
Short Sales Against-The-Box. The Fund may make short sales against-the-box
for the purpose of, but not limited to, deferring realization of loss when
deemed advantageous 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 sold short or securities convertible into or
exchangeable for, without payment of any further consideration, securities 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.
If the Fund effects a short sale of securities at a time when it has an
unrealized gain on the securities, it may be required to recognize that gain as
if it had actually sold the securities (as a "constructive sale") on the date it
effects the short sale. However, such constructive sale treatment may not apply
if the Fund closes out the short sale with securities other than the appreciated
securities held at the time of the short sale and if certain other conditions
are satisfied. Uncertainty regarding the tax consequences of effecting short
sales may limit the extent to which the Fund may effect short sales.
Interfund Borrowing and Lending Program. The Corporation's Board of
Directors has approved the filing of an application for exemptive relief with
the SEC which would permit the Fund to participate in an interfund lending
program among certain investment companies advised by the Adviser. If the Fund
receives the requested relief, the interfund lending program would allow the
participating funds to borrow money from and loan money to each other for
temporary or emergency purposes. The program would be subject to a number of
conditions designed to ensure fair and equitable treatment of all participating
funds, including the following: (1) no fund may borrow money through the program
unless it receives a more favorable interest rate than a rate approximating the
lowest interest rate at which bank loans would be available to any of the
participating funds under a loan agreement; and (2) no fund may lend money
through the program unless it receives a more favorable return than that
available from an investment in repurchase agreements and, to the extent
applicable, money market cash sweep arrangements. In addition, a fund would
participate in the program only if and to the extent that such participation is
consistent with the fund's investment objectives and policies (for instance,
money market funds would normally participate only as lenders and tax exempt
funds only as borrowers). Interfund loans and borrowings would extend overnight,
but could have a maximum duration of seven days. Loans could be called on one
day's notice. A fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a lending
fund could result in a lost investment opportunity or additional costs. The
program is subject to the oversight and periodic review of the Boards of the
participating funds. To the extent the Fund is actually engaged in borrowing
through the interfund lending program, the Fund, as a matter of non-fundamental
policy, may not borrow for other than temporary or emergency purposes (and not
for leveraging)[, except that the Fund may engage in reverse repurchase
agreements [and dollar rolls] for any purpose]*.
DIVIDENDS AND TAXES
Dividends. The Fund normally distributes dividends of net investment income
and any net realized short-term and long-term capital gains at least annually.
The level of income dividends per share (as a percentage of net asset value) may
be lower for Class B and Class C shares than for Class A and M shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
The Fund may vary at any time 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 Directors of the Fund 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 Code. Income dividends and capital
gain dividends, if any, of the Fund will be credited to shareholder accounts in
full and fractional Fund shares of the same class at net asset value except
that, upon written request to the Shareholder Service Agent, a shareholder may
select one of the following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net
asset value; or
(2) To receive income and capital gain dividends in cash.
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<PAGE>
Any dividends of the Fund that are reinvested normally will be reinvested
in Fund shares of the same class. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have dividends of the Fund
invested without a sales charge in shares of the same class of another Kemper
Fund at the net asset value of such class of such other fund. See "Special
Features -- Class A Shares -- Combined Purchases" for a list of such other
Kemper Funds. To use this privilege of investing dividends of the Fund in shares
of another Kemper Fund, shareholders must maintain a minimum account value of
$1,000 in the Fund distributing the dividends. The Fund reinvests dividend
checks (and future dividends) in shares of the same class of the same Fund if
checks are returned as undeliverable. Dividends and other distributions in the
aggregate amount of $10 or less are automatically reinvested in shares of the
same class of the same Fund unless the shareholder requests that such policy not
be applied to the shareholder's account.
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 in the
manner required by the Code. Such qualification does not involve governmental
supervision or management of investment practices or policy.
To so qualify, the Fund is required to distribute to its shareholders at
least 90% of its investment company taxable income (including net short-term
capital gain) (the "90% Distribution Requirement").
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 meet the 90% Distribution Requirement and to prevent imposition of the 4%
excise tax.
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.
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.
A dividend received shortly after the purchase of shares reduces the net
asset value of the shares by the amount of the dividend and, although in effect
a return of capital, will be taxable to the shareholder.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a pro rata share of federal income taxes paid by
the Fund on such gains as a credit against federal income tax liability, and
will be entitled to increase the adjusted tax basis on Fund shares by the
difference between such gains and the tax credit.
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 herein under "Special Features -- Class A Shares -- Combined
Purchases" (other than shares of Kemper Cash Reserves Fund not acquired by
exchange from another Kemper Mutual Fund) may reinvest the amount redeemed at
net asset value at the time of the reinvestment in shares of the Fund or in
shares of the other Kemper Mutual Funds within six months of the redemption as
described herein under "Redemption or Repurchase of Shares -- Reinvestment
Privilege." If redeemed shares were held less than 91 days, then the lesser of
(a) the sales charge waived on the reinvested shares, or (b) the sales charge
incurred on the redeemed shares, is included in the basis of the reinvested
shares and is not included in the basis of the redeemed shares.
If a shareholder realizes a loss on the redemption or exchange of the
Fund's shares and reinvests in shares of the same Fund within 30 days before or
after the redemption or exchange, the transactions may be subject to the wash
sale rules resulting in a postponement of the recognition of such loss for
federal income tax purposes. An exchange of the Fund's shares for shares of
another fund is treated as a redemption and reinvestment for federal income tax
purposes upon which gain or loss may be recognized.
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<PAGE>
Investment income derived from foreign securities may be subject to foreign
income taxes withheld at the source. Because the amount of the Fund's
investments in various countries will change from time to time, it is not
possible to determine the effective rate of such taxes in advance. The Fund may
elect for U.S. income tax purposes to treat foreign income taxes paid by it as
paid by its shareholders if: (i) the Fund qualifies as a regulated investment
company, (ii) certain asset and distribution requirements are satisfied, and
(iii) more than 50% of the Fund's total assets at the close of its fiscal year
consists of stock or securities of foreign corporations. The Fund may qualify
for and make this election in some, but not necessarily all, of its taxable
years. If the Fund were to make an election, shareholders of the Fund would be
required to take into account an amount equal to their pro rata portions of such
foreign taxes in computing their taxable income and then treat an amount equal
to those foreign taxes as a U.S. federal income tax deduction or as a foreign
tax credit against their U.S. federal income taxes. Shortly after any year for
which it makes such an election, the Fund will report to its shareholders the
amount per share of such foreign income tax that must be included in each
shareholder's gross income and the amount which will be available for the
deduction or credit. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions. Certain limitations will be imposed
on the extent to which the credit (but not the deduction) for foreign taxes may
be claimed.
The Fund may invest in shares of certain foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). If
the Fund receives a so-called "excess distribution" with respect to PFIC stock,
the Fund itself may be subject to a tax on a portion of the excess distribution.
Certain distributions from a PFIC as well as gains from the sale of the PFIC
shares are treated as "excess distributions." In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The Fund will be subject to
tax on the portion, if any, of an excess distribution that is allocated to prior
Fund taxable years, and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Excess distributions allocated
to the current taxable year are characterized as ordinary income even though,
absent application of the PFIC rules, certain excess distributions (such as a
gain on a sale of PFIC shares) might have been classified as capital gain.
The Fund may make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U.S. federal income taxation.
At the end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign company's stock exceeds the Fund's adjusted basis in these shares. Mark
to market losses would be deductible, as ordinary losses, to the extent of any
net mark to market gains included in income in prior years. The effect of the
election would be to treat excess distributions and gain on dispositions as
ordinary income which is not subject to a fund level tax when distributed to
shareholders as a dividend. Alternatively, the Fund may elect to include as
income and gain its share of the ordinary earnings and net capital gain of
certain foreign investment companies in lieu of being taxed in the manner
described above.
The Fund's Strategic Transactions will be subject to special tax rules.
Equity options (including covered call options on portfolio stock) and OTC
options on debt securities written or purchased by the Fund will be subject to
tax under Section 1234 of the Code. In general, no loss is recognized by the
Fund upon payment of a premium in connection with the purchase of a put or call
option. The character of any gain or loss recognized (i.e., long-term or
short-term) will generally depend, in the case of a lapse or sale of the option,
on the Fund's holding period for the option, and in the case of an exercise of a
put option, on the Fund's holding period for the underlying stock. If the Fund
writes a put or call option, no gain is recognized upon its receipt of a
premium. If the option lapses or is closed out, any gain or loss is treated as a
short-term capital gain or loss. If a call option is exercised, any resulting
gain or loss is a short-term or long-term capital gain or loss depending on the
holding period of the underlying stock. The exercise of a put option written by
the Fund is not a taxable transaction for the Fund.
Many futures contracts and certain foreign currency forward contracts
entered into by the Fund and all listed non-equity options written or purchased
by the Fund (including options on futures contracts and options on broad-based
stock indices) will be governed by Section 1256 of the Code. In general, gain or
loss attributable to the lapse, exercise or closing out of any such position
generally will be treated as 60% long-term and 40% short-term capital gain or
loss, and on the last trading day of the Fund's fiscal year, all outstanding
Section 1256 positions will be marked to market (i.e. treated as if such
positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term. Under
Section 988 of the Code, discussed below, foreign currency gain or loss from
foreign currency-related forward contracts and similar financial instruments
entered into or acquired by the Fund will be treated as ordinary income.
Positions of the Fund which consist of at least one stock and at least one
other position with respect to a related security which substantially diminishes
the Fund's risk of loss with respect to such stock could be treated as a
"straddle" which is governed by Section 1092 of the Code, the operation of which
may cause deferral of losses, adjustments in the holding periods of stock or
securities and
26
<PAGE>
conversion of short-term capital losses into long-term capital losses. An
exception to these straddle rules exists for certain "qualified covered call
options" on stock written by the Fund.
Positions of the Fund which consist of at least one position not governed
by Section 1256 and at least one futures or forward contract or non-equity
option governed by Section 1256 which substantially diminishes the Fund's risk
of loss with respect to such other position will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. The Fund intends to monitor its transactions in
options and futures and may make certain tax elections in connection with these
investments.
Under certain circumstances, the purchase of a put option or the entry into
a futures contract to sell a security may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying security or a substantially identical security in the Fund's
portfolio. Moreover, recent tax law changes may require the Fund to recognize
gain (but not loss) from a constructive sale of certain "appreciated financial
positions" if the Fund enters into a short sale, offsetting notional principal
contract, futures or forward contract transaction with respect to the
appreciated position or substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are interests (including
options, futures and forward contracts and short sales) in stock, partnership
interests, certain actively traded trust instruments and certain debt
instruments.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, and on disposition of certain options, futures contracts and
forward contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of the Fund's investment company taxable income
to be distributed to its shareholders as ordinary income.
Under the backup withholding provisions, distributions of taxable income
and capital gains and proceeds from the redemption or exchange of the shares of
a regulated investment company may be subject to withholding of federal income
tax at the rate of 31% in the case of non-exempt shareholders who fail to
furnish the investment company with their taxpayer identification numbers and
with required certifications regarding their status under the federal income tax
law. Withholding may also be required if the Fund is notified by the IRS or a
broker that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. corporations, partnerships, trusts and estates. Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisors about the application of the
provisions of tax law described in this Statement of Additional Information in
light of their particular tax situations.
NET ASSET VALUE
The net asset value per share of the Fund is the value of one share and is
determined separately for each class by dividing the value of the Fund's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will generally be lower than that of the Class A and M shares of the
Fund because of the higher expenses borne by the Class B and Class C shares. The
net asset value of shares of the Fund is computed as of the close of regular
trading (the "value time") on the NYSE on each day the NYSE is open for trading.
The NYSE is scheduled to be closed on the following holidays: New Year's Day,
Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence
27
<PAGE>
Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities for which market quotations are readily available are
generally valued at market value as of the value time in the manner described
below. All other securities may be valued at fair value as determined in good
faith by or under the direction of the Board of Directors.
Securities listed primarily on foreign exchanges may trade on days when the
Fund's net asset value is not computed; and therefore, the net asset value of
the Fund may be significantly affected on days when investors have no access to
the Fund.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Stock Market Inc.
("Nasdaq") is valued at its most recent sale price. Lacking any sales, the
security is valued at the most recent bid quotation. The value of an equity
security not quoted on Nasdaq, but traded in another OTC market, is its most
recent sale price. Lacking any sales, the security is valued at the Calculated
Mean. Lacking a Calculated Mean, the security is valued at the most recent bid
quotation.
Debt securities are valued at prices supplied by a pricing agent(s) which
reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board of Directors believes approximates market value. If it is not possible
to value a particular debt security pursuant to these valuation methods, the
value of such security is the most recent bid quotation supplied by a bona fide
marketmaker. If it is not possible to value a particular debt security pursuant
to the above methods, the Adviser of the Fund may calculate the price of that
debt security, subject to limitations established by the Board of Directors.
An exchange-traded options contract on securities, currencies, futures and
other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded OTC is
valued at the most recent bid quotation in the case of a purchased options
contract and at the most recent asked quotation in the case of a written options
contract. Futures contracts are valued at the most recent settlement price.
Foreign currency exchange forward contracts are valued at the value of the
underlying currency at the prevailing exchange rate on the valuation date.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the OTC market, quotations are taken from the market in which
the security is traded most extensively.
If, in the opinion of the Valuation Committee of the Board of Directors,
the value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee, most
fairly reflects market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in terms
of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
PERFORMANCE
The Fund may advertise several types of performance information for a class
of shares, including "average annual total return" and "total return."
Performance information will be computed separately for each class. Each of
these figures is based upon historical results and is not representative of the
future performance of any class of the Fund. If fees or expenses are being
waived or absorbed by the Adviser, the Fund may also advertise performance
information before and after the effect of the fee waiver or expense absorption.
The Fund's average annual total return quotation is computed in accordance
with a standardized method prescribed by rules of the SEC. The average annual
total return for the Fund for a specific period is found by first taking a
hypothetical $1,000 investment ("initial investment") in the Fund's shares on
the first day of the period, adjusting to deduct the maximum sales charge (in
the case of
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<PAGE>
Class A shares), and computing the "redeemable value" of that investment at the
end of the period. The redeemable value in the case of Class B or Class C shares
include the effect of the applicable contingent deferred sales charge that may
be imposed at the end of the period. The redeemable value in the case of Class M
shares may or may not include the effect of any applicable redemption fee. 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 figures 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 and Prospectus. Total return performance for a
specific period is calculated by first taking a hypothetical investment
("initial investment") in the Fund's shares on the first day of the period,
either adjusting or not adjusting to deduct the maximum sales charge (in the
case of Class A shares), and computing the "ending value" of that investment at
the end of the period. The total return percentage is then determined by
subtracting the initial investment from the ending value and dividing the
remainder by the initial investment and expressing the result as a percentage.
The ending value in the case of Class B, Class C and Class M shares may or may
not include the effect of the applicable contingent deferred sales charge that
may be imposed at the end of the period or any applicable redemption fee. The
calculation assumes that all income and capital gains dividends paid by the Fund
have been reinvested at net asset value on the reinvestment dates during the
period. Total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Total return calculations that do not
include the effect of the sales charge for Class A shares or the contingent
deferred sales charge for Class B or C shares or redemption fee for Class M
shares would be reduced if such charges were included.
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 for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
The Fund's performance figures are based upon historical results and are
not representative of future performance. The Fund's Class A shares are sold at
net asset value plus a maximum sales charge of 5.75% of the offering price.
Class B and C shares are sold at net asset value. Redemption of Class B shares
may be subject to a contingent deferred sales charge that is 4% in the first
year following the purchase, declines by a specified percentage each year
thereafter and becomes zero after six years. Redemption of Class C shares may be
subject to a 1% contingent deferred sales charge in the first year following
purchase. Redemptions and exchanges of Class M shares (including redemptions
in-kind) will be subject to a 2% redemption fee. Average annual total return
figures do, and total return figures may, include the effect of the contingent
deferred sales charge for the Class B and C shares that may be imposed at the
end of the period in question and the applicable redemption fee imposed on Class
M shares. Performance figures for the Class B, C and M shares not including the
effect of the applicable contingent deferred sales charge or redemption fee
would be reduced if it were included. 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 Fund's performance may be compared to that of the Morgan Stanley
Capital International (MSCI) Europe Index and may also be compared to the
performance of other mutual funds or mutual fund indexes with similar objectives
and policies as reported by independent mutual fund reporting services such as
Lipper Analytical Services, Inc. ("Lipper") and other independent organizations.
Lipper performance calculations are based upon changes in net asset value with
all dividends reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The
Wall Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago
Tribune, USA Today, Institutional Investor and Registered Representative.
Also, investors may want to compare the historical returns of various
investments, performance indexes of those investments or economic indicators,
including but not limited to stocks, bonds, certificates of deposit and other
bank products, 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. Performance of
U.S. Treasury obligations may be based upon, among other
29
<PAGE>
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. Economic indicators may include, without limitation, indicators of
market rate trends and cost of funds, such as Federal Home Loan Bank Board 11th
District Cost of Funds Index ("COFI").
Investors may want to compare the performance of the Fund to that of money
market funds. Money market funds seek to maintain a stable net asset value and
yield fluctuates. Information regarding the performance of money market funds
may be based upon, among other things, IBC/Donoghue's Money Fund Averages(R)
(All Taxable). As reported by IBC/Donoghue's, all investment results represent
total return (annualized results for the period net of management fees and
expenses) and one year investment results are effective annual yields assuming
reinvestment of dividends.
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 returns and net asset value will fluctuate and 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. Redemption of Class B shares and Class C
shares may be subject to a contingent deferred sales charge as described above.
Redemption and exchanges of Class M shares (including redemptions in-kind) are
subject to a 2% fee as described above. Additional information about the Fund's
performance also appears in its Annual Report to Shareholders, which is
available without charge from the Fund.
The Fund converted to open-end status and combined, as the surviving
entity, with the Kemper Europe Fund, on September 3, 1999 (the
"Reorganization"). The Fund's former closed-end share class was renamed Class M
shares upon the Reorganization. The figures below show performance information
prior to the Reorganization for Class M shares for periods ended December 31,
1999. Class A, B and C shares are newly offered and therefore have no available
performance information. Comparative information with respect to the MSCI Index
is also included. There are differences and similarities between the investments
which the Fund may purchase and the investments measured by the MSCI Index. The
net asset value and returns of the Fund will fluctuate. No adjustment has been
made for taxes payable on dividends. The periods indicated were ones of
fluctuating securities prices and interest rates.
Average Annual Total Returns
<TABLE>
<CAPTION>
MSCI
Europe
For periods ended December 31, 1999 Class M(1) Index(2)
------------------------------------ ------------ --------
<S> <C> <C>
One Year............................ % %
Five Years.......................... % %
Since Inception(3).................. % %
</TABLE>
- ----------
(1) The one year average annual total return reflects the imposition of a 2%
redemption fee.
(2) The Morgan Stanley Capital International Europe Index is an unmanaged index
that is generally representative of the equity securities of the European
markets. Index returns assume reinvestment of dividends and unlike the
Fund's returns, do not reflect any fees, expenses or sales charges.
(3) Inception date for Class M Shares is February 16, 1990.
The following table compares the performance of the Class M shares of the
Fund over various periods ended December 31, 1999, with that of other mutual
funds within the category described below according to data reported by Lipper.
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 Mutual Fund
Performance Analysis
Western European Funds
----------------------
<S> <C>
One Year (Period ended 12/31/99) #4 of 13 Funds
Five Years (Period ended #5 of 13 Funds
12/31/99)......................
</TABLE>
The Lipper Western European Funds category includes funds that concentrate
their investments in equity securities with primary
30
<PAGE>
trading markets or operations concentrated in Western European regions or in a
single country within these regions.
Again, the historical performance figures reflected above represent the
operations of the Fund in closed-end form. If the Fund had operated as an
open-end fund during those periods, the performance of the Fund would likely
have been different and possibly lower.
INVESTMENT MANAGER AND UNDERWRITER
Investment Manager. Scudder Kemper Investments, Inc. ("the Adviser"), 345
Park Avenue, New York, New York, is the Fund's investment manager. The Adviser
is approximately 70% owned directly and indirectly by Zurich Financial Services,
a global insurance and financial services company. The balance of the Adviser is
owned by its officers and employees. Pursuant to an investment management
agreement, the Adviser acts as the Fund's investment adviser, manages its
investments, administers its business affairs, furnishes office facilities and
equipment, provides clerical and administrative services, and permits any of its
officers or employees to serve without compensation as directors or officers of
the Fund 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 directors (except those who are
affiliated with officers or employees of the Adviser), independent auditors,
counsel, custodian and transfer agent and the cost of share certificates,
reports and notices to shareholders, brokerage commissions or transaction costs,
costs of calculating net asset value and maintaining all accounting records
related thereto, taxes and membership dues. The Fund bears the expenses of
registration of its shares with the SEC, while Kemper Distributors, Inc.
("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.
The investment management agreement provides that the Adviser 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
the Adviser in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under the agreement.
The Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually by a majority of
the directors who are not parties to such agreement or interested persons of any
such party except in their capacity as directors of the Fund and by the
shareholders of the Fund subject thereto or the Board of Directors. The Fund's
investment management agreement may be terminated at any time upon 60 days'
notice by either party, or by a majority vote of the outstanding shares of the
Fund subject thereto, and will terminate automatically upon assignment.
Responsibility for overall management of the Fund rests with its Board of
Directors and officers. Professional investment supervision is provided by the
Adviser.
On December 31, 1997, pursuant to the terms of an agreement, Scudder,
Stevens & Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed
a new global organization by combining Scudder with Zurich Kemper Investments,
Inc., a former subsidiary of Zurich and the former investment manager to the
Fund, and Scudder changed its name to Scudder Kemper Investments, Inc. As a
result of the transaction, Zurich owned approximately 70% of the Adviser, with
the balance owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70%
interest in the Adviser) and the financial services businesses of B.A.T.
Industries p.l.c. ("B.A.T") were combined to form a new global insurance and
financial services company known as Zurich Financial Services, Inc. By way of a
dual holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
Upon consummation of this transaction, the Fund's existing investment
management agreement with the Adviser was deemed to have been assigned and,
therefore, terminated. The Board therefore approved a new investment management
agreement with the Adviser, which was substantially identical to the prior
investment management agreement of the Fund in closed-end form, except for the
date of execution and termination. This agreement became effective upon the
termination of the then current investment management agreement and was approved
by shareholders at a special meeting which concluded in December 1998.
A new investment management agreement was approved by the Board of
Directors and subsequently by the shareholders of the Fund at the annual meeting
held on July 20, 1999, in connection with the proposal to convert the Fund to
open-end status and to combine the Fund with the Kemper Europe Fund. This new
agreement reflects the implementation of lower advisory fees and other changes
to conform the agreement to those in place for other open-end funds in the
Kemper family of funds. A summary of the terms of the new agreement is provided
above.
31
<PAGE>
The Fund pays Scudder Kemper an investment management fee, payable monthly,
at 1/12 of the annual rates shown below:
<TABLE>
<CAPTION>
Annual Management
Average Daily Net Assets of the Fund Fee Rates
------------------------------------- -------------
<S> <C>
$0 -- $250 million................... 0.75%
$250 million -- $1 billion........... 0.72
$1 billion -- $2.5 billion........... 0.70
$2.5 billion -- $5 billion........... 0.68
$5 billio -- $7.5 billion........... 0.65
$7.5 billion -- $10 billion.......... 0.64
$10 billion -- $12.5 billion......... 0.63
Over $12.5 billion.................. 0.62
</TABLE>
The expenses of the Fund, and of other investment companies investing in
foreign securities, can be expected to be higher than for investment companies
investing primarily in domestic securities since the costs of operation are
higher, including custody and transaction costs for foreign securities and
investment management fees.
The investment management fees incurred by the Fund for its last three
fiscal years are shown in the table below. These fees are based on the Fund's
former fee schedule as a closed-end entity and are based on the Fund's average
weekly net assets. The investment management fees to be paid by the fund in
open-end form will be lower.
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997 Fiscal 1996
----------- ----------- -----------
<S> <C> <C>
$ $ $
</TABLE>
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share of the Fund
and maintaining all accounting records related thereto. As a closed-end
investment company, the Fund was not charged any fees for the services provided
by SFAC. As an open-end investment company, however, the Fund will incur an
annual accounting service fee that is based on the actual services provided, but
is expected to equal approximately .10% of the average daily net assets of the
Fund.
Principal Underwriter. Pursuant to an underwriting and distribution
services agreements ("distribution agreement"), Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606, an affiliate of
the Adviser, is the principal underwriter and distributor for the shares of the
Fund and acts as agent of the Fund in the continuous offering of its shares. KDI
bears all of its expenses of providing services pursuant to the distribution
agreement, including the payment of any commissions. The Fund 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.
The distribution agreement continues in effect from year to year so long as
such continuance is approved for each relevant class at least annually by a vote
of the Board of Directors of the Fund, including the Directors who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the agreement. The agreement automatically terminates in the event
of its assignment and may be terminated for a class at any time without penalty
by the Fund or by KDI upon 60 days' notice. Termination by the Fund with respect
to a class may be by vote of a majority of the Board of Directors, or a majority
of the Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
1940 Act. The agreement may not be amended for a class to increase the fee to be
paid by the Fund with respect to such class without approval by a majority of
the outstanding voting securities of such class of the Fund and all material
amendments must in any event be approved by the Board of Directors in the manner
described above with respect to the continuation of the agreement. The
provisions concerning the continuation, amendment and termination of the
distribution agreement are on a class by class basis.
Class A Shares. KDI receives no compensation from the Fund as principal
underwriter for Class A shares and pays all expenses of distribution of the
Fund's Class A shares under the distribution agreement not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of the Fund's shares.
Class B Shares. For its services under the distribution agreement, KDI
receives a fee from the Fund under a Rule 12b-1 Plan, payable monthly, at the
annual rate of 0.75% of average daily net assets of the Fund attributable to
Class B shares. This fee is accrued daily as an expense of Class B shares. KDI
also receives any contingent deferred sales charges. See "Redemption or
Repurchase of
32
<PAGE>
Shares -- Contingent Deferred Sales Charge -- Class B Shares." KDI currently
compensates firms for sales of Class B shares at a commission rate of 3.75%.
Class C Shares. For its services under the distribution agreement, KDI
receives a fee from the Fund under a Rule 12b-1 Plan, payable monthly, at the
annual rate of 0.75% of average daily net assets of the Fund attributable to
Class C shares. This fee is accrued daily as an expense of Class C shares. KDI
currently advances to firms the first year distribution fee at a rate of 0.75%
of the purchase price of Class C shares. For periods after the first year, KDI
currently pays firms for sales of Class C shares a distribution fee, payable
quarterly, at an annual rate of 0.75% of net assets attributable to Class C
shares maintained and serviced by the firm and the fee continues until
terminated by KDI or the Fund. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares -- Contingent Deferred Sales
Charges -- Class C Shares".
Class M Shares. KDI receives no compensation from the Fund as principal
underwriter for Class M shares.
Class B Shares and Class C Shares. The Fund has adopted a plan under Rule
12b-1 of the Act (the "Plan") that provides for fees payable as an expense of
the Class B shares and Class C shares that are used by KDI to pay for
distribution and services for those classes. Because 12b-1 fees are paid out of
Fund assets on an ongoing basis, they will, over time, increase the cost of an
investment and cost more than other types of sales charges.
If the Plan is terminated in accordance with its terms, the obligation of
the Fund to make payments to KDI pursuant to the Plan will cease and the Fund
will not be required to make any payments past the termination date. Thus, there
is no legal obligation for the Fund to pay any expenses incurred by KDI in
excess of its fees under a Plan, if for any reason the Plan is terminated in
accordance with its terms. Future fees under a Plan may or may not be sufficient
to reimburse KDI for its expenses incurred.
Administrative Services. Administrative services are provided to the Fund
under an administrative services agreement ("administrative agreement") with
KDI. KDI bears all its expenses of providing services pursuant to the
administrative agreement between KDI and the Fund, including the payment of
service fees. For the services under the administrative agreement, the Fund pays
KDI an administrative services fee, payable monthly, at the annual rate of up to
0.25% of average daily net assets of Class A, B, C and M shares of the Fund.
KDI enters into related arrangements with various broker-dealers and other
service or administrative firms ("firms"), that provide services and facilities
for their customers or clients who are investors of the Fund. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding the Fund, assistance to
clients in changing dividend and investment options, account designations and
addresses and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. With respect to Class A and
Class M shares, KDI pays each firm a service fee, normally payable quarterly, at
an annual rate of up to 0.25% (calculated monthly and normally paid quarterly)
of the net assets attributable to Class A shares maintained and serviced by the
firm and the fee continues until terminated by KDI and the Fund. With respect to
Class B shares and Class C shares, KDI currently advances to firms the first
year service fee at a rate of up to 0.25% of the purchase price of such shares.
For periods after the first year, KDI currently intends to pay firms a service
fee at an annual rate of up to 0.25% (calculated monthly and normally paid
quarterly) of the net assets attributable to Class B and Class C shares
maintained and serviced by the firm and the fee continues until terminated by
KDI or the Fund. Firms to which service fees may be paid include broker-dealers
affiliated with KDI.
Prior to the date of this Statement of Additional Information, the Fund has
not paid any administrative services fees.
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 will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record. The Board of Directors of the
Fund, in its discretion, may approve basing the fee to KDI on all Fund assets in
the future.
Certain Directors or officers of the Fund are also directors or officers of
the Adviser, or KDI as indicated under "Officers and Directors."
33
<PAGE>
Custodian, Transfer Agent and Shareholder Service Agent. Brown Brothers
Harriman & Co. (the "Custodian"), 40 Water Street, Boston, Massachusetts 02109,
has custody of all securities and cash of the Fund. The Custodian attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Fund. Investors Fiduciary Trust Company
("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, is the Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of the Adviser, 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 as transfer
agent, and pays to KSvC, annual account fees of $10.00 ($18.00 for retirement
accounts) plus set up charges, annual fees associated with the contingent
deferred sales charge (Class B only), an asset-based fee of 0.08% and
out-of-pocket reimbursement. IFTC's fee is reduced by certain earnings credits
in favor of the Fund.
Independent Auditors and Reports to Shareholders. The Funds' 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 Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements. Prior to July 20, 1999,
PricewaterhouseCoopers LLP served as independent auditors to the Fund.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund.
PORTFOLIO TRANSACTIONS
34
<PAGE>
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and
sale of securities for the Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Fund to reported commissions paid by
others. The Adviser routinely reviews commission rates, execution and settlement
services performed and makes internal and external comparisons.
The Fund's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or the
Fund. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions, if applicable, for
the Fund to pay a brokerage commission in excess of that which another broker
might charge for executing the same transaction on account of execution services
and the receipt of research services. The Adviser has negotiated arrangements,
which are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services,
to the Adviser or the Fund in exchange for the direction by the Adviser of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Adviser may place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of the Fund. In effecting transactions
in over-the-counter securities, orders are placed with the principal market
makers for the security being traded unless, after exercising care, it appears
that more favorable results are available elsewhere.
The Fund's average portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio securities
owned during the year, excluding all securities with maturities or expiration
dates at the time of acquisition of one year or less. A higher rate involves
greater brokerage transaction expenses to the Fund and may result in the
realization of net capital gains, which would be taxable to shareholders when
distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objective.
The table below shows total brokerage commissions paid by the Fund for the
last three fiscal periods and for the most recent fiscal year, the percentage
thereof that was allocated to firms based upon research information provided.
<TABLE>
<CAPTION>
Allocated to
Firms Based on
Research in
Fiscal 1999 Fiscal 1999 Fiscal 1998 Fiscal 1997
------------- ----------- -----------------------
<S> <C> <C>
$ $ $
</TABLE>
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES
35
<PAGE>
PURCHASE OF SHARES
Alternative Purchase Arrangements. Class A shares of the Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase and do not convert into another class. Class M shares
represent the initial class of shares of the Fund and are no longer offered.
Class M shares are subject to a 2% fee on exchanges and redemptions (including
redemptions in-kind). Class M Shares expire one year from the date of this
Statement of Additional Information. When placing purchase orders, investors
must specify whether the order is for Class A, Class B or Class C shares.
The primary distinctions among the classes of the Fund's shares lie in
their initial and contingent deferred sales charge structures and in their
ongoing expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
36
<PAGE>
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(As A % of Average
Sales Charge Daily Net Assets) Other Information
---------------------------- ---------------------- --------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge None Initial sales charge waived
of 5.75% of the public offering or reduced for certain purchases
price
Class B Maximum contingent deferred 0.75% Shares convert to Class A
sales charge of 4% of redemption shares six years after issuance
proceeds; declines to zero after
six years
Class C Contingent deferred sales 0.75% No conversion feature
charge of 1% of redemption proceeds
for redemptions made during first
year after purchase
Class M None; Class M shares are not None Subject to 2% fee on all
offered for sale redemptions (including
redemptions in-kind) and
exchanges; all "large"
redemption requests
(i.e., $500,000 or
greater) will be redeemed
in-kind; Class M shares will
convert into Class A shares
of the Fund one year from the
date of this Statement of
Additional Information
</TABLE>
The minimum initial investment for the Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an IRA is $250
and the minimum subsequent investment is $50. Under an automatic investment
plan, such as Bank Direct Deposit, Payroll Direct Deposit or Government Direct
Deposit, the minimum initial and subsequent investment is $50. These minimum
amounts may be changed at any time in management's discretion.
Share certificates will not be issued unless requested in writing and may
not be available for certain types of account registrations. It is recommended
that investors not request share certificates unless needed for a specific
purpose. You cannot redeem shares by telephone or wire transfer or use the
telephone exchange privilege if share certificates have been issued. A lost or
destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).
Initial Sales Charge Alternative -- Class A Shares. The public offering
price of Class A shares for purchasers of the Fund choosing the initial sales
charge alternative is the net asset value plus a sales charge, as set forth
below.
<TABLE>
<CAPTION>
Sales Charge
Allowed To
Dealers As A
As A Percentage Of As A Percentage Of Percentage Of
Amount of Purchase Offering Price Net Asset Value* Offering Price
------------------------------ ------------------ ------------------ --------------
<S> <C> <C> <C>
Less than $50,000............. 5.75% 6.10% 5.20%
$50,000 but less than $100,000 4.50 4.71 4.00
$100,000 but less than $250,000 3.50 3.63 3.00
$250,000 but less than $500,000 2.60 2.67 2.25
$500,000 but less than $1 2.00 2.04 1.75
million.......................
$1 million and over........... 0.00** 0.00** ***
</TABLE>
- ----------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
*** Commission is payable by KDI as discussed below.
The Fund receives the entire net asset value of all Class A shares sold.
KDI, the Fund's principal underwriter, retains the sales charge on sales of
Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth
37
<PAGE>
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 1933 Act.
Class A shares of the Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in the Fund or other Kemper Mutual
Funds listed under "Special Features -- Class A Shares -- Combined Purchases"
totals at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district provided in each case
that such plan has not less than 200 eligible employees (the "Large Order NAV
Purchase Privilege"). Redemption within two years of shares purchased under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred sales
charge. See "Redemption or Repurchase of Shares -- Contingent Deferred Sales
Charge -- Large Order NAV Purchase Privilege."
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of the Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer sponsored
employee benefit plans using the subaccount recordkeeping system made available
through KSvC. For purposes of determining the appropriate commission percentage
to be applied to a particular sale, KDI will consider the cumulative amount
invested by the purchaser in the Fund and other Kemper Mutual Funds listed under
"Special Features -- Class A Shares -- Combined Purchases," including purchases
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features referred to above. The privilege of purchasing Class A shares
of the Fund at net asset value under the Large Order NAV Purchase Privilege is
not available if another net asset value purchase privilege also applies.
Class A shares of the Fund or any other Kemper Mutual Fund listed under
"Special Features -- Class A Shares -- Combined Purchases" may be purchased at
net asset value in any amount by members of the plaintiff class in the
proceeding known as Howard and Audrey Tabankin, et al. v. Kemper Short-Term
Global Income Fund, et al., Case No. 93 C 5231 (N.D.Il). This privilege is
generally non-transferable and continues for the lifetime of individual class
members and for a ten year period for non-individual class members. To make a
purchase at net asset value under this privilege, the investor must, at the time
of purchase, submit a written request that the purchase be processed at net
asset value pursuant to this privilege specifically identifying the purchaser as
a member of the "Tabankin Class." Shares purchased under this privilege will be
maintained in a separate account that includes only shares purchased under this
privilege. For more details concerning this privilege, class members should
refer to the Notice of (1) Proposed Settlement with Defendants; and (2) Hearing
to Determine Fairness of Proposed Settlement dated August 31, 1995, issued in
connection with the aforementioned court proceeding. For sales of Fund shares at
net asset value pursuant to this privilege, KDI may in its discretion pay
investment dealers and other financial services firms a concession, payable
quarterly, at an annual rate of up to 0.25% of net assets attributable to such
shares maintained and serviced by the firm. A firm becomes eligible for the
concession based upon assets in accounts attributable to shares purchased under
this privilege in the month after the month of purchase and the concession
continues until terminated by KDI. The privilege of purchasing Class A shares of
the Fund at net asset value under this privilege is not available if another net
asset value purchase privilege also applies.
Class A shares may be sold at net asset value in any amount to: (a)
officers, directors, trustees, employees (including retirees) and sales
representatives of the Fund, its Adviser, its principal underwriter or certain
affiliated companies, for themselves or members of their families; (b)
registered representatives and employees of broker-dealers having selling group
agreements with KDI and officers, directors and employees of service agents of
the Fund, for themselves or their spouses or dependent children; (c)
shareholders who owned shares of Kemper Value Series, Inc. ("KVS") on September
8, 1995, and have continuously owned shares of KVS (or a Kemper Fund acquired by
exchange of KVS shares) since that date, for themselves or members of their
families; and (d) any trust or pension, profit sharing or other benefit plan for
only such persons. Class A shares may be sold at net asset value in any amount
to selected employees (including their spouses and dependent children) of banks
and other financial services firms that provide administrative services related
to order placement and payment to facilitate transactions in shares of the Fund
for their clients pursuant to an agreement with KDI or one of its affiliates.
Only those employees of such banks and other firms who as part of their usual
duties provide services related to transactions in Fund shares may purchase Fund
Class A shares at net asset value hereunder. Class A shares may also be sold at
net asset value in any amount to unit investment trusts sponsored by Ranson &
Associates, Inc. In addition, unitholders of unit investment trusts sponsored by
Ranson & Associates, Inc. or its predecessors may purchase Fund Class A shares
at net asset value through reinvestment programs described herein of such trusts
that have such programs. Class A shares of the Fund
38
<PAGE>
may be sold at net asset value through certain investment advisers registered
under the 1940 Act and other financial services firms acting solely as agents
for their clients, that adhere to certain standards established by KDI,
including a requirement that such shares be sold for the benefit of their
clients participating in an investment advisory program or agency commission
program under which such clients pay a fee to the investment adviser or other
firm for portfolio management or agency brokerage services. Such shares are sold
for investment purposes and on the condition that they will not be resold except
through redemption or repurchase by the Fund. The Fund may also issue Class A
shares at net asset value in connection with the acquisition of the assets of or
merger or consolidation with another investment company, or to shareholders in
connection with the investment or reinvestment of income and capital gain
dividends.
Class A shares of the Fund may be purchased at net asset value by persons
who purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.
Class A shares of the Fund may be purchased at net asset value in any
amount by certain professionals who assist in the promotion of Kemper Funds
pursuant to personal services contracts with KDI, for themselves or members of
their families. KDI in its discretion may compensate financial services firms
for sales of Class A shares under this privilege at a commission rate of 0.50%
of the amount of Class A shares purchased.
Class A shares of the Fund may be purchased at net asset value by persons
who purchase shares of the Fund through KDI as part of an automated billing and
wage deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
Deferred Sales Charge Alternative -- Class B Shares. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares -- Contingent Deferred
Sales Charge -- Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of the Fund will automatically convert to Class A shares of
the Fund six years after issuance on the basis of the relative net asset value
per share. The purpose of the conversion feature is to relieve holders of Class
B shares from the distribution services fee when they have been outstanding long
enough for KDI to have been compensated for distribution related expenses. For
purposes of conversion to Class A shares, shares purchased through the
reinvestment of dividends and other distributions paid with respect to Class B
shares in a shareholder's Fund account will be converted to Class A shares on a
pro rata basis.
Purchase of Class C Shares. The public offering price of the Class C shares
of the Fund is the next determined net asset value. No initial sales charge is
imposed. Since Class C shares are sold without an initial sales charge, the full
amount of the investor's purchase payment will be invested in Class C shares for
his or her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares -- Contingent Deferred Sales Charge --
Class C Shares." KDI currently advances to firms the first year distribution fee
at the rate of 0.75% of the purchase price of such shares. For periods after the
first year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."
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Which Arrangement Is Better For You? The decision as to which class of
shares provides a more suitable investment for an investor depends on a number
of factors, including the amount and intended length of the investment.
Investors making investments that qualify for reduced sales charges might
consider Class A shares. Investors who prefer not to pay an initial sales charge
and who plan to hold their investment for more than six years might consider
Class B shares. Investors who prefer not to pay an initial sales charge but who
plan to redeem their shares within six years might consider Class C shares.
Orders for Class B shares or Class C shares for $500,000 or more will be
declined. Orders for Class B shares or Class C shares by employer sponsored
employee benefit plans using the subaccount record keeping system made available
through the KSvC will be invested instead in Class A shares at net asset value
where the combined subaccount value in the Fund or other Kemper Mutual Funds
listed under "Special Features -- Class A Shares -- Combined Purchases" is in
excess of $5 million including purchases pursuant to the "Combined Purchases,"
"Letter of Intent" and "Cumulative Discount" features described under "Special
Features." For more information about the above sales arrangements, consult your
financial representative or KDI. Financial services firms may receive different
compensation depending upon which class of shares they sell.
General. Banks and other financial services firms may provide
administrative services related to order placement and payment to facilitate
transactions in shares of the Fund for their clients, and KDI may pay them a
transaction fee up to the level of the discount or commission allowable or
payable to dealers as described above. Banks currently are prohibited under the
Glass-Steagall Act from providing certain underwriting or distribution services.
Banks or other financial services firms may be subject to various state laws
regarding the services described above and may be required to register as
dealers pursuant to state law. If banking firms were prohibited from acting in
any capacity or providing any of the described services, management would
consider what action, if any, would be appropriate. KDI does not believe that
termination of a relationship with a bank would result in any material adverse
consequences to the Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on the
amount of shares of the Fund sold by the firm under the following conditions:
(i) the purchased shares are held in a Kemper IRA account, (ii) the shares are
purchased as a direct "roll over" of a distribution from a qualified retirement
plan account maintained on a participant subaccount record keeping system
provided by KSvC, (iii) the registered representative placing the trade is a
member of ProStar, a group of persons designated by KDI in acknowledgment of
their dedication to the employee benefit plan area and (iv) the purchase is not
otherwise subject to a commission.
In addition to the discounts or commissions described above, KDI will, from
time to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash to firms that sell shares of the Fund. In some
instances, such discounts, commissions or other incentives will be offered only
to certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Fund or other funds underwritten by
KDI.
Orders for the purchase of shares of the Fund will be confirmed at a price
based on the net asset value of the Fund 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 ("trade date"). The
Fund reserves the right to determine the net asset value more frequently than
once a day if deemed desirable. Dealers and other financial services firms are
obligated to transmit orders promptly. Collection may take significantly longer
for a check drawn on a foreign bank than for a check drawn on a domestic bank.
Therefore, if an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected before shares will be purchased.
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, repurchase 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
40
<PAGE>
for these services.
The Fund reserves the right to withdraw all or any part of the offering
made by the prospectus and this statement of additional information and to
reject purchase orders. Also, from time to time, the Fund may temporarily
suspend the offering of any class of its shares to new investors. During the
period of such suspension, persons who are already shareholders of such class of
the Fund normally are permitted to continue to purchase additional shares of
such class and to have dividends reinvested.
Shareholders should direct their inquiries to KSvC, 811 Main Street, Kansas
City, Missouri 64105-2005 or to the firm from which they received this statement
of additional information.
As described herein, 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, with respect to Class A shares, an initial sales charge. The
minimum initial investment is $1,000 and the minimum subsequent investment is
$100 but such minimum amounts may be changed at any time. An order for the
purchase of shares that is accompanied by a check drawn on a foreign bank (other
than a check drawn on a Canadian bank in U.S. Dollars) will not be considered in
proper form and will not be processed unless and until the Fund determines that
it has received payment of the proceeds of the check. The time required for such
a determination will vary and cannot be determined in advance. 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.
The Fund has authorized certain members of the National Association of
Securities Dealers, Inc. ("NASD"), other than KDI to accept purchase and
redemption orders for the Fund's shares. Those brokers may also designate other
parties to accept purchase and redemption orders on the Fund's behalf. Orders
for purchase or redemption will be deemed to have been received by the Fund when
such brokers or their authorized designees accept the orders. Subject to the
terms of the contract between the Fund and the broker, ordinarily orders will be
priced as the Fund's net asset value next computed after acceptance by such
brokers or their authorized designees. Further, if purchases or redemptions of
the Fund's shares are arranged and settlement is made at an investor's election
through any other authorized NASD member, that member may, at its discretion,
charge a fee for that service. The Board of Directors of the Fund and KDI each
has the right to limit the amount of purchases by, and to refuse to sell to, any
person. The Board and KDI may suspend or terminate the offering of shares of the
Fund at any time for any reason.
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 sending a written request with
signatures guaranteed to Kemper Mutual Funds, Attention: Redemption Department,
P.O. Box 419557, Kansas City, Missouri 64141-6557. When certificates for shares
have been issued, they must be mailed to or deposited with the Shareholder
Service Agent, along with a duly endorsed stock power and accompanied by a
written request for redemption. Redemption requests and a stock power must be
endorsed by the account holder with signatures guaranteed by a commercial bank,
trust company, savings and loan association, federal savings bank, member firm
of a national securities exchange or other eligible financial institution. The
redemption request and stock power must be signed exactly as the account is
registered including any special capacity of the registered owner. Additional
documentation may be requested, and a signature guarantee is normally required,
from institutional and fiduciary account holders, such as corporations,
custodians (e.g., under the Uniform Transfers to Minors Act), executors,
administrators, trustees or guardians.
The redemption price for shares of the Fund will be the net asset value per
share of the Fund next determined following receipt by the Shareholder Service
Agent of a properly executed request with any required documents as described
above. Payment for shares redeemed will be made in cash as promptly as
practicable but in no event later than seven days after receipt of a properly
executed request accompanied by any outstanding share certificates in proper
form for transfer. When the Fund is asked to redeem shares for which it may not
have yet received good payment (i.e., purchases by check, EXPRESS-Transfer or
Bank Direct Deposit), it may delay transmittal of redemption proceeds until it
has determined that collected funds have been received for the purchase of such
shares, which will be up to 10 days from receipt by the Fund of the purchase
amount. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase of Shares -- Initial Sales
Charge Alternative -- Class A Shares") and the redemption of Class B shares
within six years may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge -- Class B Shares" below) and the redemption
of Class C shares within the first year following purchase may be subject to a
contingent deferred sales charge (see "Contingent Deferred Sales Charge -- Class
C Shares" below).
Upon the redemption or exchange of Class M shares of the Fund (including
redemptions in-kind), a fee of 2% of the current net
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<PAGE>
asset value of the shares will be assessed and retained by the Fund for the
benefit of the remaining shareholders. This fee is intended to discourage short
term trading in a vehicle intended for long term investment. The fee is not a
deferred sales charge, is not a commission paid to the investment manager or its
subsidiaries, and does not benefit the investment manager in any way. The Fund
reserves the right to modify the terms of or terminate this fee at any time. The
2% fee applies to redemptions from the Fund and exchanges to other Kemper Mutual
Funds by Class M shareholders. The fee is applied to the shares being redeemed
or exchanged in the order in which they were purchased.
Because of the high cost of maintaining small accounts, the Fund may assess
a quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
IRAs or employer sponsored employee benefit plans using the subaccount record
keeping system made available through the Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. The Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephone instructions are genuine. The shareholder will bear the risk of loss
including loss resulting from fraudulent or unauthorized transactions, so long
as the reasonable verification procedures are followed. The verification
procedures include recording instructions, requiring certain identifying
information before acting upon instructions and sending written confirmations.
Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge or applicable redemption fee)
are $50,000 or less and the proceeds are payable to the shareholder of record at
the address of record, normally a telephone request or a written request by any
one account holder without a signature guarantee is sufficient for redemptions
by individual or joint account holders, and trust, executor, guardian and
custodial account holders provided the trustee, executor, or guardian or
custodian is named in the account registration. Other institutional account
holders may exercise this special privilege of redeeming shares by telephone
request or written request without signature guarantee subject to the same
conditions as individual account holders and subject to the limitations on
liability described under "General" above, provided that this privilege has been
pre-authorized by the institutional account holder or guardian account holder by
written instruction to the Shareholder Service Agent with signatures guaranteed.
Telephone requests may be made by calling 1-800-621-1048. Shares purchased by
check or through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed
under this privilege of redeeming shares by telephone request until such shares
have been owned for at least 10 days. This privilege of redeeming shares by
telephone request or by written request without a signature guarantee may not be
used to redeem shares held in certificated form and may not be used if the
shareholder's account has had an address change within 30 days of the redemption
request. During periods when it is difficult to contact the Shareholder Service
Agent by telephone, it may be difficult to use the telephone redemption
privilege, although investors can still redeem by mail. The Fund reserves the
right to terminate or modify this privilege at any time.
Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which the Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value next determined after receipt of a request by KDI.
However, requests for repurchases received by dealers or other firms prior to
the determination of net asset value (see "Net Asset Value") and received by KDI
prior to the close of KDI's business day will be confirmed at the net asset
value effective on that day. The offer to repurchase may be suspended at any
time. Requirements as to stock powers, certificates, payments and delay of
payments are the same as for redemptions.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of the Fund can be redeemed and proceeds sent by federal
wire transfer to a single previously designated account. Requests received by
the Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value effective on
that day and normally the proceeds will be sent to the designated account the
following business day. Delivery of the proceeds of a wire redemption request of
$250,000 or more may be delayed by the Fund for up to seven days if Scudder
Kemper 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
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<PAGE>
account holder is responsible for any charges imposed by the account holder's
firm or bank. There is a $1,000 wire redemption minimum (including any
contingent deferred sales charge or redemption fee). To change the designated
account to receive wire redemption proceeds, send a written request to the
Shareholder Service Agent with signatures guaranteed as described above or
contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed by wire transfer until such shares have been owned for at least 10
days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
wire transfer redemption privilege. The Fund reserves the right to terminate or
modify this privilege at any time.
Contingent Deferred Sales Charge -- Large Order NAV Purchase Privilege. A
contingent deferred sales charge may be imposed upon the redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if they
are redeemed during the second year following purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent or its affiliates;
(c) redemption of shares of a shareholder (including a registered joint owner)
who has died; (d) redemption of shares of a shareholder (including a registered
joint owner) who after purchase of the shares being redeemed becomes totally
disabled (as evidenced by a determination by the federal Social Security
Administration); (e) redemptions under the Fund's Systematic Withdrawal Plan at
a maximum of 10% per year of the net asset value of the account; and (f)
redemptions of shares whose dealer of record at the time of the investment
notifies KDI that the dealer waives the commission applicable to such Large
Order NAV Purchase.
Contingent Deferred Sales Charge -- Class B Shares. A contingent deferred
sales charge may be imposed upon redemption of Class B shares. There is no such
charge upon redemption of any share appreciation or reinvested dividends on
Class B shares. The charge is computed at the following rates applied to the
value of the shares redeemed excluding amounts not subject to the charge.
<TABLE>
<CAPTION>
Contingent Deferred
Year of Redemption After Purchase Sales Charge
------------------------------------ ----------------
<S> <C>
First............................. 4%
Second............................ 3%
Third............................. 3%
Fourth............................ 2%
Fifth............................. 2%
Sixth............................. 1%
</TABLE>
The contingent deferred sales charge will be waived: (a) in the event of
the total disability (as evidenced by a determination by the federal Social
Security Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special Features
- -- Systematic Withdrawal Plan" below), (d) for redemptions made pursuant to any
IRA systematic withdrawal based on the shareholder's life expectancy including,
but not limited to, substantially equal periodic payments described in Code
Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for, redemptions to satisfy
required minimum distributions after age 70 1/2 from an IRA account (with the
maximum amount subject to this waiver being based only upon the shareholder's
Kemper IRA accounts). The contingent deferred sales charge will also be waived
in connection with the following redemptions of shares held by employer
sponsored employee benefit plans maintained on the subaccount record keeping
system made available by the Shareholder Service Agent: (a) redemptions to
satisfy participant loan advances (note that loan repayments constitute new
purchases for purposes of the contingent deferred sales charge and the
conversion privilege), (b) redemptions in connection with retirement
distributions (limited at any one time to 10% of the total value of plan assets
invested in the Fund), (c) redemptions in connection with distributions
qualifying under the hardship provisions of the Code and (d) redemptions
representing returns of excess contributions to such plans.
Contingent Deferred Sales Charge -- Class C Shares. A contingent deferred
sales charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
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<PAGE>
redemptions made pursuant to a systematic withdrawal plan (limited to 10% of the
net asset value of the account during the first year, see "Special Features --
Systematic Withdrawal Plan"), (d) for redemptions made pursuant to any IRA
systematic withdrawal based on the shareholder's life expectancy including, but
not limited to, substantially equal periodic payments described in Code Section
72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to satisfy required
minimum distributions after age 70 1/2 from an IRA account (with the maximum
amount subject to this waiver being based only upon the shareholder's Kemper IRA
accounts), (f) for any participant-directed redemption of shares held by
employer sponsored employee benefit plans maintained on the subaccount record
keeping system made available by the Shareholder Service Agent and (g)
redemption of shares by an employer sponsored employee benefit plan that offers
funds in addition to Kemper Funds and whose dealer of record has waived the
advance of the first year administrative service and distribution fees
applicable to such shares and agrees to receive such fees quarterly.
Contingent Deferred Sales Charge -- General. The following example will
illustrate the operation of the contingent deferred sales charge. Assume that an
investor makes a single purchase of $10,000 of the Fund's Class B shares and
that 16 months later the value of the shares has grown by $1,000 through
reinvested dividends and by an additional $1,000 in appreciation to a total of
$12,000. If the investor were then to redeem the entire $12,000 in share value,
the contingent deferred sales charge would be payable only with respect to
$10,000 because neither the $1,000 of reinvested dividends nor the $1,000 of
share appreciation is subject to the charge. The charge would be at the rate of
3% ($300) because it was in the second year after the purchase was made.
The rate of the contingent deferred sales charge is determined by the
length of the period of ownership. Investments are tracked on a monthly basis.
The period of ownership for this purpose begins the first day of the month in
which the order for the investment is received. For example, an investment made
in March 1999 will be eligible for the second year's charge if redeemed on or
after March 1, 2000. In the event no specific order is requested, the redemption
will be made first from shares representing reinvested dividends and then from
the earliest purchase of shares. KDI receives any contingent deferred sales
charge directly.
Reinvestment Privilege. A shareholder who has redeemed Class A shares of
the Fund or any other Kemper Mutual Fund listed under "Special Features -- Class
A Shares -- Combined Purchases" (other than shares of Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
the Fund or of the other listed Kemper Mutual Funds. A shareholder of the Fund
or any other Kemper Mutual Fund who redeems Class A shares purchased under the
Large Order NAV Purchase Privilege (see "Purchase of Shares -- Initial Sales
Charge Alternative -- Class A Shares"), Class B shares or Class C shares and
incurs a contingent deferred sales charge may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares,
Class B shares or Class C shares, as the case may be, of the Fund or 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 who has redeemed shares may reinvest up to the full
amount redeemed, less any applicable contingent deferred sales charge that may
have been imposed upon the redemption of such shares, at net asset value in
Class A shares of the Fund or of the other Kemper Mutual Funds listed under
"Special Features -- Class A Shares -- Combined Purchases." Purchases through
the reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Mutual
Funds available for sale in the shareholder's state of residence as listed under
"Special Features -- Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of Fund
shares, the reinvestment in the same Fund may be subject to the "wash sale"
rules if made within 30 days of the redemption, resulting in a postponement of
the recognition of such loss for federal income tax purposes. The reinvestment
privilege may be terminated or modified at any time.
Redemption In-Kind. The Fund has adopted the following redemption policy in
an attempt to avoid the imposition of adverse tax consequences on remaining
shareholders that may be caused by certain large-scale redemptions. In
conformity with Rule 18f-1 under the 1940 Act, the Fund reserves the right to
redeem its shares, with respect to any one shareholder during any 90-day period,
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund at the beginning of the period. As an operating policy, the Fund reserves
the right to satisfy redemption requests in excess of such amount by
distributing portfolio securities in lieu of cash. This policy may be modified
or terminated at any time by the Board of Directors. As to Class M shareholders,
the Fund will honor any request for redemptions by making payment in whole or in
part in readily marketable securities to the extent those redemptions exceed
$500,000 during any 90-day period within the one year period following the
Fund's conversion to open-end status. Any securities distributed in-kind would
be valued in accordance with the Fund's policies used to determine net asset
value, and would be selected pursuant to procedures adopted by the Board of
Directors to help ensure that such redemptions are effected in a manner that is
fair and equitable to all shareholders. The redeeming shareholder will bear the
risk of fluctuations in value of the in-kind redemption proceeds after the trade
date for the redemption. Shareholders who receive portfolio securities in
redemption of Fund shares will be required to make arrangements for the transfer
of custody of such securities to the shareholder's account and must communicate
relevant custody information to the Fund prior to the effectiveness of a
redemption request. Redemption requests subject to the Fund's redemption in-
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<PAGE>
kind policy will not be considered in good order unless such information is
provided. As discussed below, a redeeming shareholder will bear all costs
associated with the in-kind distribution of portfolio securities. Shareholders
receiving securities in-kind may, when selling them, receive less than the
redemption value of such securities and would also incur certain transaction
costs. Such a redemption would not be as liquid as a redemption entirely in
cash.
Redeeming shareholders will bear any costs of delivery and transfer of the
portfolio securities received in an in-kind redemption (generally, certain
transfer taxes and custodial expenses), and such costs will be deducted from
their redemption proceeds. Redeeming shareholders will also bear the costs of
re-registering the securities, as the securities delivered will be registered in
the Fund's name or the nominee names of the Fund's custodians. The actual per
share expenses for redeeming shareholders of effecting an in-kind redemption and
of any subsequent liquidation by the shareholder of the portfolio securities
received will depend on a number of factors, including the number of shares
redeemed, the Fund's portfolio composition at the time and market conditions
prevailing during the liquidation process. The Fund gives no assurances of such
expenses, and shareholders whose redemptions are effected in-kind may bear
expenses in excess of 1% of the net asset value of the shares of the Fund
redeemed. These expenses are in addition to any applicable redemption fee or
contingent deferred sales charge.
The Fund has received an exemptive order from the SEC to permit in-kind
redemption transactions to be effected by shareholders who may be deemed to be
affiliated with the Fund because they own 5% or more of the Fund's outstanding
voting securities.
SPECIAL FEATURES
Class A Shares -- Combined Purchases. The Fund's Class A shares may be
purchased at the rate applicable to the discount bracket attained by combining
concurrent investments in Class A shares of any of the following funds: Kemper
Technology Fund, Kemper Total Return Fund, Kemper Growth Fund, Kemper Small
Capitalization Equity Fund, Kemper Income and Capital Preservation Fund, Kemper
Municipal Bond Fund, Kemper Strategic Income Fund, Kemper High Yield Series,
Kemper U.S. Government Securities Fund, Kemper International Fund, Kemper State
Tax-Free Income Series, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper
Target Equity Fund (series are subject to a limited offering period), Kemper
Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund, Kemper U.S.
Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper Value Series,
Inc., Kemper Value Plus Growth Fund, Kemper Horizon Fund, Kemper Europe Fund,
Inc., Kemper Asian Growth Fund, Kemper Aggressive Growth Fund, Kemper
Global/International Series, Inc., Kemper Equity Trust, Kemper Income Trust,
Kemper Funds Trust and Kemper Securities Trust ("Kemper Mutual Funds"). Except
as noted below, there is no combined purchase credit for direct purchases of
shares of Zurich Money Funds, Cash Equivalent Fund, Tax-Exempt California Money
Market Fund, Cash Account Trust, Investors Municipal Cash Fund or Investors Cash
Trust ("Money Market Funds"), which are not considered "Kemper Mutual Funds" for
purposes hereof. For purposes of the Combined Purchases feature described above
as well as for the Letter of Intent and Cumulative Discount features described
below, employer sponsored employee benefit plans using the subaccount record
keeping system made available through the Shareholder Service Agent may include:
(a) Money Market Funds as "Kemper Mutual Funds", (b) all classes of shares of
any Kemper Mutual Fund and (c) the value of any other plan investments, such as
guaranteed investment contracts and employer stock, maintained on such
subaccount record keeping system.
Class A Shares -- Letter Of Intent. The same reduced sales charges for
Class A shares, as shown in the applicable prospectus, also apply to the
aggregate amount of purchases of such Kemper Mutual Funds listed above made by
any purchaser within a 24-month period under a written Letter of Intent
("Letter") provided by KDI. The Letter, which imposes no obligation to purchase
or sell additional Class A shares, provides for a price adjustment depending
upon the actual amount purchased within such period. The Letter provides that
the first purchase following execution of the Letter must be at least 5% of the
amount of the intended purchase, and that 5% of the amount of the intended
purchase normally will be held in escrow in the form of shares pending
completion of the intended purchase. If the total investments under the Letter
are less than the intended amount and thereby qualify only for a higher sales
charge than actually paid, the appropriate number of escrowed shares are
redeemed and the proceeds used toward satisfaction of the obligation to pay the
increased sales charge. The Letter for an employer sponsored employee benefit
plan maintained on the subaccount record keeping system available through the
Shareholder Service Agent may have special provisions regarding payment of any
increased sales charge resulting from a failure to complete the intended
purchase under the Letter. A shareholder may include the value (at the maximum
offering price) of all shares of such Kemper Mutual Funds held of record as of
the initial purchase date under the Letter as an "accumulation credit" toward
the completion of the Letter, but no price adjustment will be made on such
shares. Only investments in Class A shares of a Fund are included for this
privilege.
Class A Shares -- Cumulative Discount. The Fund's Class A shares also may
be purchased at the rate applicable to the discount bracket attained by adding
to the cost of Fund shares being purchased the value of all Class A shares of
the above mentioned Kemper Mutual Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already
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<PAGE>
owned by the investor.
Class A Shares -- Availability Of Quantity Discounts. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
Exchange Privilege. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below. Shareholders of Class M
shares may also exchange their shares for Class A shares of other Kemper Mutual
Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features -- Class A Shares -- Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds and Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the offering period for such
series as described in the applicable prospectus or statement of additional
information. Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account Trust, Investors Municipal Cash Fund and Investors Cash Trust are
available on exchange but only through a financial services firm having a
services agreement with KDI.
Class A shares of the Fund purchased under the Large Order NAV Purchase
Privilege may be exchanged for Class A shares of another Kemper Mutual Fund or a
Money Market Fund under the exchange privilege described above without paying
any contingent deferred sales charge at the time of exchange. If the Class A
shares received on exchange are redeemed thereafter, a contingent deferred sales
charge may be imposed in accordance with the foregoing requirements provided
that the shares redeemed will retain their original cost and purchase date for
purposes of the contingent deferred sales charge.
Class B Shares. Class B shares of the Fund and Class B shares of any other
Kemper Mutual Fund listed under "Special Features -- Class A Shares -- Combined
Purchases" may be exchanged for each other at their relative net asset values.
Class B shares may be exchanged without any contingent deferred sales charge
being imposed at the time of exchange. For purposes of the contingent deferred
sales charge that may be imposed upon the redemption of the Class B shares
received on exchange, amounts exchanged retain their original cost and purchase
date.
Class C Shares. Class C shares of the Fund and Class C shares of any other
Kemper Mutual Fund listed under "Special Features -- Class A Shares -- Combined
Purchases" may be exchanged for each other at their relative net asset values.
Class C shares may be exchanged without a contingent deferred sales charge being
imposed at the time of exchange. For determining whether there is a contingent
deferred sales charge that may be imposed upon the redemption of the Class C
shares received by exchange, the cost and purchase date of the shares that were
originally purchased and exchanged are retained.
Class M Shares. Class M shares of the Fund may be exchanged for Class A
Shares of any other Kemper Mutual Fund listed under "Special Features -- Class A
Shares -- Combined Purchases", subject to a 2% fee. Class M shareholders may not
exchange shares in an amount that would trigger an in-kind redemption (see
above).
General. Shares of a Kemper Mutual Fund with a value in excess of
$1,000,000 or less (except Kemper Cash Reserves Fund) acquired by exchange from
another Kemper Mutual Fund, or from a Money Market Fund, may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Period").
The Fund reserves the right to invoke the 15-Day Hold Policy for exchanges of
$1,000,000 or less if, in the investment manager's judgment, the exchange
activity may have an adverse effect on the Fund. In particular, a pattern of
exchanges that coincides with a "market timing" strategy may be disruptive to
the Fund and therefor may be subject to the 15-Day Hold Policy.
For purposes of determining whether the 15 Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, direction or advice, including without limitation, accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. The total value of shares being exchanged must
at least equal the minimum investment requirement of the Kemper Fund into which
they are being exchanged. Exchanges are made based on relative dollar values of
the shares involved in the exchange. There is no service fee for an exchange;
however, dealers or other firms may charge for their services in effecting
exchange transactions. Exchanges will be effected by redemption of shares of the
fund held and purchase of shares of the other fund. For federal income tax
purposes, any such exchange constitutes a sale upon which a gain or loss may be
realized, depending upon whether the
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<PAGE>
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 KSvC,
Attention: Exchange Department, P.O. Box 419557, Kansas City, Missouri
64141-6557, or by telephone if the shareholder has given authorization. Once the
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048, subject to the limitations on liability under
"Redemption or Repurchase of Shares -- General." Any share certificates must be
deposited prior to any exchange of such shares. During periods when it is
difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to implement the telephone exchange privilege. The exchange privilege
is not a right and may be suspended, terminated or modified at any time.
Exchanges may only be made for Kemper Funds that are eligible for sale in the
shareholder's state of residence. Currently Tax-Exempt California Money Market
Fund is available for sale only in California and the portfolios of Investors
Municipal Cash Fund are available for sale only in certain states.
Systematic Exchange Privilege. The owner of $1,000 or more of any class of
the shares of a Kemper Mutual Fund or Money Market Fund may authorize the
automatic exchange of a specified amount ($100 minimum) of such shares for
shares of the same class of another such Kemper Fund. If selected, exchanges
will be made automatically until the privilege is terminated by the shareholder
or the other Kemper Fund. Exchanges are subject to the terms and conditions
described above under "Exchange Privilege," except that the $1,000 minimum
investment requirement for the Kemper Fund acquired on exchange is not
applicable. This privilege may not be used for the exchange of shares held in
certificated form.
EXPRESS-Transfer. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $5,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from ANY PERSON to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares -- General." Once enrolled
in EXPRESS-Transfer, a shareholder can initiate a transaction by calling Kemper
Shareholder Services toll free at 1-800-621-1048 Monday through Friday, 8:00
a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege by
sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as IRAs.
Bank Direct Deposit. A shareholder may purchase additional Fund shares
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, investments are made automatically (minimum $50, maximum $50,000) from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account. By enrolling in Bank Direct Deposit, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
Clearing House debits against the designated account at a bank or other
financial institution. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting the Shareholder
Service Agent for appropriate forms. A shareholder may terminate his or her plan
by sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination by a shareholder will become effective within thirty
days after the Shareholder Service Agent has received the request. The Fund may
immediately terminate a shareholder's plan in the event that any item is unpaid
by the shareholder's financial institution. The Fund may terminate or modify
this privilege at any time.
Payroll Direct Deposit and Government Direct Deposit. A shareholder may
invest in the Fund through Payroll Direct Deposit or Government Direct Deposit.
Under these programs, all or a portion of a shareholder's net pay or government
check is automatically invested in the Fund account each payment period. A
shareholder may terminate participation in these programs by giving written
notice to the shareholder's employer or government agency, as appropriate. (A
reasonable time to act is required.) The Fund is not responsible for the
efficiency of the employer or government agency making the payment or any
financial institutions transmitting payments.
Systematic Withdrawal Plan. The owner of $5,000 or more of a class of the
Fund's shares at the offering price (net asset value plus, in the case of Class
A shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount up to $50,000 to be paid to the owner or
a designated payee monthly, quarterly, semiannually or annually. The $5,000
minimum account size is not applicable to IRAs. The minimum periodic payment is
$100. The maximum annual rate at which Class B shares may be redeemed (and Class
A shares purchased under the Large Order NAV Purchase Privilege and Class C
shares in their first year following the purchase) under a systematic withdrawal
plan is 10% of the net asset value of the account. Shares are
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<PAGE>
redeemed so that the payee will receive payment approximately the first of the
month. Any income and capital gain dividends will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested and fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the account.
The purchase of Class A shares while participating in a systematic
withdrawal plan 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 Funds will not knowingly permit additional
investments of less than $2,000 if the investor is at the same time making
systematic withdrawals. KDI will waive the contingent deferred sales charge on
redemption of Class A shares purchased under the Large Order NAV Purchase
Privilege, Class B shares and Class C shares made pursuant to a systematic
withdrawal plan. The right is reserved to amend the systematic withdrawal plan
on 30 days' notice. The plan may be terminated at any time by the investor or
the Funds.
Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
o Traditional, Roth and Education IRAs with IFTC as custodian. This
includes Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE") IRA accounts and Simplified Employee Pension Plan ("SEP") IRA
accounts and prototype documents.
o 403(b)(7) Custodial Accounts also with IFTC as custodian. This type of
plan is available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be adopted
by employers. The maximum annual contribution per participant is the
lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and
materials for establishing them are available from the Shareholder Service Agent
upon request. The brochures for plans with IFTC as custodian describe the
current fees payable to IFTC for its services as custodian. Investors should
consult with their own tax advisers before establishing a retirement plan.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of the Fund will be redeemed by the Fund at the applicable net asset
value per share of such Fund as described in the Fund's prospectus.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B or Class C shares by certain classes of persons or
through certain types of transactions as described herein are provided because
of anticipated 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 NYSE is closed other than customary
weekend and holiday closings or during any period in which trading on the NYSE
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 SEC may by order permit for the
protection of the Fund's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the IRS or other
assurance acceptable to the Fund to the effect that (a) the assessment of the
distribution services fee with respect to Class B shares and not Class A shares
does not result in the Fund's dividends constituting "preferential dividends"
under the Code, and (b) that the conversion of Class B shares to Class A shares
does not constitute a taxable event under the Code. The conversion of Class B
shares to Class A shares may be suspended if such assurance is not available. In
that event, no further conversions of Class B shares would occur, and shares
might continue to be subject to the distribution services fee for an indefinite
period that may extend beyond the proposed conversion date as described herein.
OFFICERS AND DIRECTORS
The officers and directors of the Fund, their birthdates, their principal
occupations, addresses, and their affiliations, if any, with the Adviser and KDI
are listed below. All persons named as directors also serve in similar
capacities for other funds managed by the
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<PAGE>
Adviser.
Directors.
James E. Akins (10/15/26), Director, 2904 Garfield Terrace N.W.,
Washington, D.C.; Consultant on International, Political and Economic Affairs;
formerly, a career United States Foreign Service Officer; Energy Adviser for the
White House; United States Ambassador to Saudi Arabia, 1973-1976.
Arthur R. Gottschalk (2/13/25), Director, 10642 Brookridge Drive,
Frankfort, Illinois; Retired; formerly, President, Illinois Manufacturers
Association; Trustee, Illinois Masonic Medical Center; formerly, Illinois State
Senator; formerly, Vice President, The Reuben H. Donnelley Corp.; formerly,
attorney.
Frederick T. Kelsey (4/25/27), Director, 738 York Court, Northbrook,
Illinois; Retired; formerly, consultant to Goldman, Sachs & Co.; formerly,
President, Treasurer and Trustee of Institutional Liquid Assets and its
affiliated mutual funds; Trustee of the Northern Institutional Funds; formerly,
Trustee of the Pilot Funds.
Fred B. Renwick (2/1/30), Director, 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director;
TIFF Industrial Program, Inc.; Director, The Warburg Home Foundation; Chairman,
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment Committee; formerly, member of the Investment Committee
of Atlanta University Board of Trustees; formerly, Director of Board of Pensions
Evangelical Lutheran Church in America.
*Thomas W. Littauer (4/26/55), Director and Vice President, Two
International Place, Boston, Massachusetts; Managing Director, Scudder Kemper;
formerly, Head of Broker Dealer Division of an unaffiliated investment
management firm during 1997; prior thereto, President of Client Management
Services of an unaffiliated investment management firm from 1991 to 1996.
John G. Weithers (8/8/33), Director, 311 Spring Lake, Hinsdale, Illinois;
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company; President of the
Members of the Corporation and Trustee, DePaul University.
Officers
*Cornelia M. Small (7/28/44), Chairman, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
*Mark S. Casady (9/21/60), President, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
*Philip J. Collora (11/15/45), Vice President and Secretary, 222 South
Riverside Plaza, Chicago, Illinois; Senior Vice President, Scudder Kemper.
*Ann M. McCreary (11/6/56), Vice President, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
*Kathryn L. Quirk (12/3/52), Vice President, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
*Linda J. Wondrack (9/12/64), Vice President, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper.
*John R. Hebble (6/27/58), Treasurer, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
*Brenda Lyons (2/21/63), Assistant Treasurer, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper.
*Carol L. Franklin (12/3/52), Vice President, 345 Park Avenue, New York,
New York; Managing Director, Scudder Kemper
*Joan R. Gregory (8/4/45), Vice President, 345 Park Avenue, New York, New
York; Vice President, Scudder Kemper.
*Marc Slendebroek (12/8/64), Vice President, 345 Park Avenue, New York, New
York; Vice President, Scudder Kemper.
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*Caroline Pearson (4/1/62), Assistant Secretary, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper.
*Maureen E. Kane (2/14/62), Assistant Secretary, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper.
- ----------
* Interested persons of the Fund as defined in the 1940 Act.
The directors and officers who are "interested persons" as designated above
receive no compensation from the Fund. The tables below shows amounts estimated
to be paid or accrued to those directors who are not designated "interested
persons" during the Fund's first full fiscal year following its reorganization
to open-end status except that the information in the last column is for
calendar year 1999.
<TABLE>
<CAPTION>
Total Compensation From
Estimated Aggregate Kemper Fund Complex Paid
Compensation To Board
Name of Director From Fund Members(2)
--------------------- ------------------- ------------------
<S> <C> <C>
James E. Akins....... $ $
Arthur R. Gottschalk(1) $ $
Frederick T. Kelsey.. $ $
Fred B. Renwick...... $ $
John G. Weithers..... $ $
</TABLE>
- ----------
(1) Includes deferred fees pursuant to deferred compensation agreements with
certain Kemper Funds. Deferred amounts accrue interest monthly at a rate
equal to the yield of Zurich Money Funds -- Zurich Money Market Fund.
(2) Includes compensation for service on the Boards of 15 Kemper Funds with 55
fund portfolios. Each Director currently serves as a board member of 15
Kemper funds with 55 fund portfolios.
As of January 1, 2000, the directors and officers as a group owned less
than 1% of the then outstanding shares of the Fund and no person owned of record
more than 5% of the outstanding shares of any class of the Fund, except as shown
below:
Name and Address Class Percentage
---------------- ----- ----------
ORGANIZATION OF THE FUND
The Fund was organized as a Maryland corporation on November 22, 1989. The
Fund began operations on February 9, 1990 as a closed-end management investment
company. On July 20, 1999, the Fund's shareholders approved the conversion of
the Fund to an open-end investment company. As a result of the conversion and
the reorganization with Kemper Europe Fund, the Fund changed its name to "Kemper
New Europe Fund, Inc." and issued newly designated Class A, Class B and Class C
shares to the shareholders of Kemper Europe Fund and Class M shares to its
existing shareholders. Class M shares will automatically convert to Class A
shares one year after the date of this Statement of Additional Information.
Currently, the Fund offers three classes of shares. These are Class A,
Class B and Class C shares, which have different expenses, which may affect
performance. Class M shares of the Fund are no longer offered. Shares of the
Fund have equal noncumulative voting rights except that Class B and Class C
shares have separate and exclusive voting rights with respect to the Fund's Rule
12b-1 Plan. Shares of each class also have equal rights with respect to
dividends, assets and liquidation of the Fund subject to any preferences (such
as resulting from different Rule 12b-1 distribution fees), rights or privileges
of any classes of shares of the Fund. Shares are fully paid and nonassessable
when issued, are transferable without restriction and have no preemptive rights.
Class B Shares will convert to Class A Shares six years after issuance and Class
M shares will convert to Class A Shares one year after the date of this
Statement of Additional Information.
The Fund has provisions in its Charter that could have the effect of
limiting the ability of other entities or persons to acquire
50
<PAGE>
control of the Fund, to cause it to engage in certain transactions or to modify
its structure. These provisions were included in the Fund's original Charter as
a closed-end fund and require a 75% vote of the shareholders in order to be
amended.
The Board of Directors is divided into three classes, each class having a
term of three years. The Fund holds annual shareholders meetings to elect
directors whose terms expire that year. This provision could delay for up to two
years the replacement of a majority of the Board of Directors. A director may be
removed from office only for cause and only by a vote of the holders of at least
75% of the shares of the Fund entitled to be voted on the matter.
In addition, the affirmative vote of 75% of the directors and the holders
of 75% of the shares of the Fund are required to authorize any of the following
transactions:
(i) merger, consolidation or share exchange of the Fund with or into any
other person;
(ii) issuance or transfer by the Fund (in one or a series of transactions
in any 12 month period) of any securities of the Fund to any person or entity
for cash, securities or other property (or combination thereof) having an
aggregate fair market value of $1,000,000 or more excluding (x) sales of
securities of the Fund in connection with a public offering, (y) issuances of
securities of the Fund issued pursuant to a dividend reinvestment plan adopted
by the Fund and (z) issuances of securities of the Fund upon the exercise of any
stock subscription rights distributed by the Fund;
(iii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Fund (in one or a series of transactions in any 12 month
period) to or with any person or entity of any assets of the Fund having an
aggregate fair market value of $1,000,000 or more except for portfolio
transactions effected by the Fund in the ordinary course of its business
(transactions within clauses (i), (ii) and (iii) above being known individually
as a "Business Combination");
(iv) any proposal as to the voluntary liquidation or dissolution of the
Fund; and
(v) any shareholder proposal as to specific investment decisions made or to
be made with respect to the Fund's assets.
However, a 75% shareholder vote will not be required with respect to the
foregoing transactions (other than those set forth in (v) above) if they are
approved by a vote of 75% of the "Continuing Directors" (as defined below), in
which case a vote of the holders of a majority of the outstanding shares of the
Fund will be required, or, in the case of (i), (ii) or (iii) above, if certain
conditions regarding the consideration paid by such corporation, person or
entity are satisfied and, in those cases, the lesser state law voting
requirements, if any, will apply. A "Continuing Director" is any member of the
Board of Directors of the Fund who (i) is not a person or affiliate of a person
(other than an investment company advised by the Fund's initial investment
manager or any of its affiliates) who enters or proposes to enter into a
Business Combination with the Fund (an "Interested Party") and (ii) who has been
a member of the Board of Directors of the Fund for a period of at least 12
months, or is a successor of a Continuing Director who is unaffiliated with an
Interested Party and is recommended to succeed a Continuing Director by a
majority of the Continuing Directors then on the Board of Directors of the Fund.
The Fund's By-Laws contain provisions the effect of which is to prevent matters,
including nominations of directors, from being considered at shareholder
meetings where the Fund has not received sufficient prior notice of the matters.
The Fund's Articles provide that the presence at a shareholder meeting in
person or by proxy of at least one-third of the shares entitled to vote on a
matter shall constitute a quorum. Thus, a meeting of shareholders of the Fund
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 directors and ratification of the selection of
independent auditors. Investors in the Fund are entitled to one vote for each
full share held and fractional votes for fractional shares held. Shareholders of
the Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements.
FINANCIAL STATEMENTS
The Fund's audited Semi-Annual Report dated April 30, 1999 and its audited
Annual Report dated October 31, 1999, each of which either accompanies this
Statement of Additional Information or has been previously provided to the
investor to whom this Statement of Additional Information is being sent, are
incorporated herein by reference with respect to all information regarding the
Fund included therein. The Fund will furnish without charge a copy of the
Semi-Annual Report and the Annual Report upon request by calling 1-800-621-1048.
51
<PAGE>
APPENDIX
The following is a description of the ratings given by S&P and Moody's to
corporate bonds.
Ratings of Corporate Bonds
S&P:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong Debt rated AA has a very strong
capacity to pay interest and repay principal and differs from the highest rated
issues only in small degree. Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB-- rating.
Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest, and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-- rating. The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC-- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating Cl is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present winch make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have
52
<PAGE>
speculative characteristics as well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated
B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
53
<PAGE>
KEMPER NEW EUROPE FUND, INC.
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
-------- ---------
<S> <C> <C>
(a) (1) Articles of Incorporation
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(2) Articles of Amendment, dated January 4, 1990
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(3) Articles of Amendment, dated February 2, 1990
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(4) Amended and Restated Articles of Incorporated, dated September 3,
1999
(Filed herein)
(5) Articles of Amendment, dated
September 3, 1999 (Filed herein)
(b) (1) Amended and Restated By-laws
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(2) Amendment to By-laws, dated June 27, 1990
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(3) Amendment to By-laws, dated April 12, 1991
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(4) Amendment to By-laws, dated May 22, 1992
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(5) Amendment to By-laws, dated July 28, 1992
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(6) Amendment to By-laws, dated July 19, 1993
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(7) Amendment to By-laws, dated January 12, 1995
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(8) Amendment to By-laws, dated October 30, 1996
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
1
<PAGE>
(9) Amendment to By-laws, dated September 29, 1997
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(10) Amendment to By-laws, dated April 27, 1999
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
(11) Amended and Restated By-laws, dated September 3, 1999
(Filed herein)
(c) Form of Shares Certificates
(To be filed by amendment)
(d) Investment Advisory Agreement with Scudder Kemper Investments, Inc.
(Filed herein)
(e) Underwriting and Distribution Services Agreement with Kemper Distributors,
Inc.
(Filed herein)
(f) Inapplicable
(g) Custodian Agreement with Brown Brothers Harriman & Co, Fee Schedule and
Amendment
(Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A, filed April 28, 1999)
(h) (1) Transfer Agency and Service Agreement with Investors Fiduciary Trust Company
(Filed herein)
(h) (2) Administrative Services Agreement with Kemper Distributors, Inc.
(Filed herein)
(h) (3) Fund Accounting Services Agreement with Scudder Fund Accounting Corporation
(Filed herein)
(i) Legal Opinion
(To be filed by amendment)
(j) Consent of Independent Accountants
(To be filed by amendment)
(k) Not applicable.
(l) Not applicable.
(m) (1) Rule 12b-1 Plan for Class B Shares
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed June 8, 1999)
(m) (2) Rule 12b-1 Plan for Class C Shares
(Incorporated by reference to Registrant's Registration Statement on Form N-
2
<PAGE>
1A, filed June 8, 1999)
(n) Inapplicable
(o) Rule 18f-3 Plan
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed April 28, 1999)
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
Item 25. Indemnification.
- -------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Item 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
3
<PAGE>
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
4
<PAGE>
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
James L. Greenawalt President
Thomas W. Littauer Director, Chief Executive Officer Trustee
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer and Vice President
James J. McGovern Chief Financial Officer and Vice
President
Linda J. Wondrack Vice President and Chief Compliance Vice President
Officer
Paula Gaccione Vice President
Michael E. Harrington Vice President
Robert A. Rudell Vice President
William M. Thomas Vice President
Todd N. Gierke Assistant Treasurer
Philip J. Collora Assistant Secretary Secretary and Vice President
Paul J. Elmlinger Assistant Secretary
5
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Diane E. Ratekin Assistant Secretary
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109 or, in the case of
records concerning transfer agency functions, at the offices of Investors
Fiduciary Trust Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105
and of the shareholder service agent, Kemper Service Company, 811 Main Street,
Kansas City, Missouri 64105.
Item 29. Management Services.
- -------- --------------------
Inapplicable.
Item 30. Undertakings.
- -------- -------------
Inapplicable.
6
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(a) 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 23rd day
of December, 1999.
KEMPER NEW EUROPE FUND, INC.
By /s/ Mark s. Casady
---------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on December 23, 1999 on behalf of
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
/s/James E. Akins
-------------------------------------------
James E. Akins Director
/s/James R. Edgar
-------------------------------------------
James R. Edgar Director
/s/Arthur R. Gottschalk
-------------------------------------------
Arthur R. Gottschalk Director
-------------------------------------------
Frederick T. Kelsey Director
/s/Thomas W. Littauer
-------------------------------------------
Thomas W. Littauer Director
/s/Fred B. Renwick
-------------------------------------------
Fred B. Renwick Director
-------------------------------------------
John G. Weithers Director
-------------------------------------------
John R. Hebble Treasurer (Principle Financial and
Accounting Officer)
</TABLE>
By: /s/Philip J. Collora
Philip J. Collora
<PAGE>
File No. 33-32430
File No. 811-5969
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 2
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 5
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Kemper Funds Trust
<PAGE>
Kemper FUNDS TRUST
EXHIBIT INDEX
Exhibit (a)(4)
Exhibit (a)(5)
Exhibit (b)(11)
Exhibit (d)
Exhibit (e)
Exhibit (h)(1)
Exhibit (h)(2)
Exhibit (h)(3)
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
SCUDDER NEW EUROPE FUND, INC.
Scudder New Europe Fund, Inc. a Maryland corporation, having its
principal office in Maryland in Baltimore City (hereinafter called the
"Corporation") hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
ARTICLE I: The Charter of the Corporation is amended and as so amended
is restated in its entirety by striking out Article First through Twelfth and
inserting in lieu thereof the following:
"FIRST: The undersigned, Joshua M. Levine, whose address is One
-----
Citicorp Center, 153 East 53rd Street, New York, New York 10022, being at least
eighteen years of age, acting as incorporator, does hereby form a corporation
under the Maryland General Corporation Law.
SECOND: The name of the Corporation is Kemper Europe Fund, Inc. (the
-------
"Corporation").
THIRD: The purposes for which the Corporation is formed are to operate
-----
and carry out the business of an open-end management investment company under
the Investment Company Act of 1940, as amended, and generally to exercise and
enjoy all of the powers, rights and privileges granted to, or conferred upon,
corporations by the Maryland General Corporation Law.
FOURTH: The post office address of the principal office of the
------
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
300 East Lombard Street, Baltimore, Maryland 21202. The name and address of the
resident agent of the
<PAGE>
Corporation in the State of Maryland is The Corporation Trust Incorporated, 300
East Lombard Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of capital stock which the
-----
Corporation shall have authority to issue is five hundred million (500,000,000),
all of which shall be Common Stock having a par value of one-tenth of one cent
($0.001) per share and an aggregate par value of five hundred thousand dollars
($500,000). Until such time as the Board of Directors shall provide otherwise in
accordance with paragraph (1)(d) of Article Seventh hereof, two hundred million
(200,000,000) of the authorized shares of Common Stock of the Corporation are
classified as Class A Common Stock, one hundred million (100,000,000) of such
shares are classified as Class B Common Stock, one hundred million (100,000,000)
of such shares are classified as Class C Common Stock and one hundred million
(100,000,000) of such shares are classified as Class M Common Stock. Each share
(including for this purpose a fraction of a share) of Common Stock issued and
outstanding immediately prior to these Articles of Amendment and Restatement
becoming effective, shall, at such effective time, be reclassified
automatically, and without any action or choice on the part of the holder, into
a share (or the same fraction of a share) of Class M Common Stock.
(2) As more fully set forth hereafter, the assets and liabilities and
the income and expenses attributable to each class of the Corporation's stock
shall be determined separately from those of each other class of the
Corporation's stock and, accordingly, the net asset value, the dividends and
distributions payable to stockholders, and the amounts distributable in the
event of liquidation or dissolution of the Corporation to stockholders of the
Corporation's stock may vary from class to class.
(3) The assets of the Corporation attributable to each of the Class A
Common Stock, the Class B Common Stock, the Class C
2
<PAGE>
Common Stock and the Class MCommon Stock shall be invested in the same
investment portfolio of the Corporation.
(4) The allocations of investment income and losses and capital gains
and losses and expenses and liabilities of the Corporation among each of the
classes of Common Stock of the Corporation shall be determined by the Board of
Directors in a manner that is consistent with the Investment Company Act of
1940, as amended. The determination of the Board of Directors shall be
conclusive as to the allocation of investment income and losses, capital gains
and losses, expenses and liabilities (including accrued expenses and reserves)
and assets to a particular class or classes.
(5) Shares of each class of stock shall be entitled to such dividends
or distributions, in stock or in cash or both, as may be declared from time to
time by the Board of Directors with respect to such class. Specifically, and
without limiting the generality of the foregoing, the dividends and
distributions of investment income and capital gains with respect to each class
of stock may vary with respect to each such class to reflect differing
allocations of the expenses of the Corporation among the holders of the classes
and any resultant differences among the net asset values per share of the
classes, to such extent and for such purposes as the Board of Directors may deem
appropriate. The Board of Directors may provide that dividends and distributions
on the Class M Common Stock may be paid or reinvested in shares of Class A
Common Stock. The Board of Directors may provide that dividends and
distributions shall be payable only with respect to those shares of stock that
have been held of record continuously by the stockholder for a specified period,
not to exceed 72 hours, prior to the record date of the dividend or
distribution.
(6) On each matter submitted to a vote of the stockholders, each holder
of a share of stock shall be entitled to one vote for each such share standing
in such holder's name upon the books of the Corporation regardless of the class
thereof, and all shares of all classes shall vote together as a single class;
provided,
3
<PAGE>
however, that (i) when the Maryland General Corporation Law or the Investment
Company Act of 1940, as amended, requires that a class vote separately with
respect to a given matter, the separate voting requirements of the applicable
law shall govern with respect to the affected class or classes:(ii) in the event
that the separate vote requirement referred to in (i) above applies with respect
to one or more classes, then, subject to (iii) below, the shares of all other
classes shall vote as one single class; and (iii) as to any matter, which, in
the judgment of the Board of Directors (which shall be conclusive and binding
for all purposes), does not affect the interests of a particular class, such
class shall not be entitled to any vote and only the holders of shares of the
affected class or classes shall be entitled to vote.
(7) In the event of the liquidation or dissolution of the Corporation,
stockholders of each class of the Corporation's stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to stockholders, but other than general assets not attributable to
any particular class of stock, the assets attributable to the class less the
liabilities allocated to that class; and the assets so distributable to the
stockholders shall be distributed among the stockholders in proportion to the
number of shares of the class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not attributable to
any particular class of stock, and such assets are available for distribution,
the distribution shall be made to the holders of all classes in proportion to
the net asset value of the respective classes or as otherwise determined by the
Board of Directors.
(8) To the extent permitted by law, each holder of shares of the
Corporation's stock shall be entitled to require the Corporation to redeem all
or any part of the shares of stock of the Corporation standing in the name of
the holder on the books of the Corporation, and all shares of stock issued by
the Corporation shall be subject to redemption by the Corporation, at
4
<PAGE>
the redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article Seventh, less the
amount of any applicable redemption charge, deferred sales charge or other
amount imposed by the Board of Directors (to the extent consistent with
applicable law), subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption or postpone the date of payment
of the redemption price in accordance with provisions of applicable law. The
proceeds of the redemption of a share (including a fractional share) of any
class of stock of the Corporation shall be reduced by the amount of any
redemption charge, deferred sales charge or other amount payable on such
redemption pursuant to the terms of issuance of such shares or otherwise imposed
by the Board of Directors. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right at
any time, at the Corporation's option, to redeem, in whole or in part, the
shares owned by any holder of stock of the Corporation (i) if the redemption is,
in the opinion of the Board of Directors of the Corporation, desirable in order
to prevent the Corporation from being deemed a "personal holding company" within
the meaning of the Internal Revenue Code of 1986, as amended, or (ii) if the
value of the shares in the account maintained by the Corporation or its transfer
agent for any class of stock for the stockholder is below an amount determined
from time to time by the Board of Directors of the Corporation (the "Minimum
Account Balance") and (a) the stockholder has been given notice of the
redemption and has failed to make additional purchases of shares in an amount
sufficient to bring the value in his account to at least the Minimum Account
Balance before the redemption is effected by the Corporation or (b) the
redemption is with respect to fees to be paid by the stockholder to the
Corporation for failing to maintain the Minimum Account Balance or (iii) the
Board of Directors has otherwise determined that it is in the best interests of
the Corporation to redeem the shares.
5
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Notwithstanding any other provision of this Article FIFTH(8), if certificates
representing the redeemed shares have been issued, the redemption price need not
be paid by the Corporation until such certificates are presented in proper form
for transfer to the Corporation or the agent of the Corporation appointed for
such purpose; however, the redemption shall be effective in accordance with the
action of the Board of Directors, regardless of whether or not such presentation
has been made. Payment of the redemption price shall be made in cash by the
Corporation at the time and in the manner as may be determined from time to time
by the Board of Directors of the Corporation unless, in the opinion of the Board
of Directors, which shall be conclusive, conditions exist that make payment
wholly in cash unwise or undesirable; in such event the Corporation may make
payment wholly or partly by securities or other property included in the assets
allocable to the class of the shares for which redemption is being sought, the
value of which shall be determined as provided herein.
(9) At such times as may be determined by the Board of Directors (or
with the authorization of the Board of Directors, by the officers of the
Corporation) in accordance with the Investment Company Act of 1940, as amended,
applicable rules and regulations thereunder and applicable rules and regulations
of the National Association of Securities Dealers, Inc. and from time to time
reflected in the registration statement of the Corporation (the "Corporation's
Registration Statement"), shares of a particular class of stock of the
Corporation may be automatically converted into shares of another class of stock
of the Corporation based on the relative net asset values of such classes at the
time of conversion, subject, however, to any conditions of conversion that may
be imposed by the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions of such
conversion may vary within and among the classes to the extent determined by the
Board of Directors (or with the
6
<PAGE>
authorization of the Board of Directors, by the officers of the Corporation) and
set forth in the Corporation's Registration Statement. Without limiting the
generality of the foregoing, each share (or fraction of a share) of Class M
Common Stock that is issued and outstanding as of the one year anniversary date
of the date on which these Articles of Amendment and Restatement become
effective shall be converted automatically, without any action or choice on the
part of the holder, into a share (or such fractional share), of Class A Common
Stock of the Corporation based on relative net asset values at the time of
conversion, and outstanding certificates previously representing the issued and
outstanding shares of Class M Common Stock shall thereafter represent Class A
Common Stock in the resulting number of whole shares.
(10) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of stock having proportionately to the respective
fractions represented thereby all the rights to vote, the right to receive
dividends and distributions, and the right to participate upon liquidation of
the Corporation, but excluding the right, if any, to receive a stock certificate
representing fractional shares.
(11) No stockholder shall be entitled to any preemptive right other
than as the Board of Directors may establish.
SIXTH: (a) The number of Directors of the Corporation shall be three,
-----
which number shall be increased or decreased from time to time in the manner
provided in the By-Laws of the Corporation, provided that the number of
Directors shall not be less than three, nor more than twelve. A director may be
removed from office only for cause and only by the vote of 75% of the votes
entitled to be cast for the election of directors.
(b) Beginning with the first annual meeting of the stockholders held
after the initial public offering of the shares of the Corporation, the
Directors shall be divided into three classes, and shall be designated as Class
I, Class II and Class
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III Directors, respectively. The Class I Directors elected at such initial
annual meeting shall serve for a term of office expiring at the next succeeding
annual stockholders meeting. The Class II Directors elected at such initial
annual meeting shall serve for a term of office expiring at the second
succeeding annual stockholders meeting. The Class III Directors elected at such
initial annual meeting shall serve for a term of office expiring at the third
succeeding annual stockholders meeting. After expiration of the terms of office
specified for the Directors elected at such initial annual meeting, the
Directors of each class shall serve for terms of three (3) years, or, when
filling a vacancy, for the unexpired portion of such term and until their
successors are elected and have qualified. If the number of Directors is
changed, any increase or decrease shall be apportioned among the classes by the
Board of Directors so as to maintain the number of Directors in each class as
nearly as possible, but in no event shall a decrease in the number of Directors
shorten the term of any incumbent Director.
(c) The names of the directors who shall act until the first annual
meeting or until their successors are duly chosen and qualify are:
George S. Johnston
Nicholas Bratt
Juris Padegs
SEVENTH: The following provisions are inserted for the purpose of
-------
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
(1) In addition to its other powers explicitly or implicitly granted
under the Charter of the Corporation, by law or otherwise, the Board of
Directors of the Corporation:
(a) shall have the power to make, alter or repeal the By-Laws
of the Corporation except as otherwise required by the Investment
Company Act of 1940, as amended;
(b) may from time to time determine whether, to what extent,
at what times and places, and under what conditions
8
<PAGE>
and regulations the accounts and books of the Corporation, or any of
them, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account, book or
document of the Corporation except as conferred by statute or as
authorized by resolution of the Board of Directors of the Corporation;
(c) is empowered to authorize, without stockholder approval,
the issuance and sale from time to time of shares of stock of any class
of the Corporation whether now or hereafter authorized and securities
convertible into shares of stock of the Corporation of any class or
classes, whether now or hereafter authorized, for such consideration as
the Board may deem advisable;
(d) is authorized to classify or to reclassify, from time to
time, any unissued shares of stock of the Corporation, whether now or
hereafter authorized, by setting, changing or eliminating the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms and conditions of
or rights to require redemption for the stock. The provisions of these
Articles of Amendment and Restatement (including those in Article FIFTH
hereof) shall apply to each class of stock unless otherwise provided by
the Board of Directors prior to issuance of any shares of that class;
(e) is empowered to authorize and issue, without stockholder
approval, unsecured obligations of the Corporation, and subject to
Article Eighth of these Articles of Amendment and Restatement, secured
obligations of the Corporation, as the Board of Directors may
determine, and to authorize and cause to be executed mortgages and
liens upon the real or personal property of the Corporation;
(f) Notwithstanding anything in this Charter to the contrary,
is authorized to establish in its absolute discretion the basis or
method for determining the value of the assets attributable to any
class, the value of the liabilities attributable to any class and the
net asset
9
<PAGE>
value of each share of any class of the Corporation's stock; and
(g) is authorized to determine in accordance with generally
accepted accounting principles and practices what constitutes net
profits, earnings, surplus or net assets in excess of capital, and to
determine what accounting periods shall be used by the Corporation for
any purpose; to set apart out of any funds of the Corporation reserves
for such purposes as it shall determine and to abolish the same; to
declare and pay any dividends and distributions in cash, securities or
other property from surplus or any other funds legally available
therefor, at such intervals as it shall determine; to declare dividends
or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of
the effectiveness of such declarations; and to establish payment dates
for dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations
thereof.
(2) Notwithstanding any provision of the Maryland General Corporation
Law requiring a greater proportion than a majority of the votes of all classes
or of any class of the Corporation's stock entitled to be cast in order to take
or authorize any action, any such action shall be effective and valid if taken
or authorized by the affirmative vote of a majority of the aggregate number of
votes entitled to be cast thereon subject to any applicable requirements of the
Investment Company Act of 1940, as amended, as from time to time in effect, or
rules or orders of the Securities and Exchange Commission or any successor
thereto.
(3) The presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast (without regard to
class) shall constitute a quorum at any meeting of the stockholders, except with
respect to any matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or more classes of
stock, in which case the presence in person or by proxy of the
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<PAGE>
holders of shares entitled to cast one-third of the votes entitled to be cast by
each class entitled to vote as a class on the matter shall constitute a quorum.
(4) Any determination made in good faith by or pursuant to the
direction of the Board of Directors, as to the amount of the assets, debts,
obligations, or liabilities of the Corporation, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or cancellation of
any reserves or charges (whether or not any debt, obligation, or liability for
which such reserves or charges shall have been created shall be then or
thereafter required to be paid or discharged), as to the value of or the method
of valuing any investment owned or held by the Corporation, as to market value
or fair value of any investment or fair value of any other asset of the
Corporation, as to the allocation of any asset of the Corporation to a
particular class or classes of the Corporation's stock, as to the charging of
any liability or expense of the Corporation to a particular class or classes of
the Corporation's stock, as to the number of shares of the Corporation
outstanding, as to the estimated expense to the Corporation in connection with
purchases of its shares, as to the ability to liquidate investments in orderly
fashion, or as to any other matters relating to the issue, sale, redemption or
other acquisition or disposition of investments or shares of the Corporation,
shall be final and conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of the Corporation
are issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
EIGHTH: Special Vote of Stockholders.
------- -----------------------------
(a) Except as otherwise provided in this Article Eighth, at least 75%
of the votes entitled to be cast by stockholders, in addition to the affirmative
vote of 75% of the Board of
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Directors, shall be necessary to effect any of the following actions:
(i) any amendment to these Articles to make the Corporation's
Common Stock a "redeemable security" (as such term is defined in the Investment
Company Act of 1940, as amended) unless the Continuing Directors (as hereinafter
defined) of the Corporation, by a vote of at least 75% of such Directors,
approve such amendment in which case the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation entitled to vote thereon
shall be required;
(ii) any stockholder proposal as to specific investment
decisions made or to be made with respect to the Corporation's assets;
(iii) any proposal as to the voluntary liquidation or
dissolution of the Corporation unless the Continuing Directors of the
Corporation, by a vote of at least 75% of such Directors, approve such proposal
in which case the affirmative vote of the holders of a majority of the
outstanding shares of the Corporation entitled to vote thereon shall be
required; or
(iv) any Business Combination (as hereinafter defined) unless
either the condition in clause (A) below is satisfied or all of the conditions
in clauses (B), (C), (D), (E) and (F) below are satisfied:
(A) The Business Combination shall have been approved
by a vote of at least 75% of the Continuing Directors in which case the
affirmative vote of the holders of a majority of the outstanding shares of the
Corporation entitled to vote thereon shall be required.
(B) The aggregate amount of cash and the Fair Market
Value (as hereinafter defined), as of the date of the consummation of the
Business Combination, of consideration other than cash to be received per share
by holders of any class of outstanding Voting Stock (as hereinafter defined) in
such Business Combination shall be at least equal to the higher of the
following:
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<PAGE>
(x) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers fees) paid by
an Interested Party (as hereinafter defined) for any shares of such Voting Stock
acquired by it (aa) within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination (the
"Announcement Date") or (bb)(i) in the Threshold Transaction (as hereinafter
defined), or (ii) in any period between the Threshold Transaction and the
consummation of the Business Combination, whichever is higher; and
(y) the net asset value per share of such
Voting Stock on the Announcement Date or on the date of the Threshold
Transaction, whichever is higher.
(C) The consideration to be received by holders of
the particular class of outstanding Voting Stock shall be in cash or in the same
form as the Interested Party has previously paid for shares of any class of
Voting Stock. If the Interested Party has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class of Voting Stock previously acquired by
it.
(D) After the occurrence of the Threshold
Transaction, and prior to the consummation of such Business Combination, such
Interested Party shall not have become the beneficial owner of any additional
shares of Voting Stock except by virtue of the Threshold Transaction.
(E) After the occurrence of the Threshold
Transaction, such Interested Party shall not have received the benefit, directly
or indirectly (except proportionately as a shareholder of the Corporation), of
any loans, advances, guarantees, pledges or other financial assistance or any
tax credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
13
<PAGE>
(F) A proxy or information statement describing the
proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder (or any subsequent provisions
replacing such Acts, rules or regulations) shall be prepared and mailed by the
Interested Party, at such Interested Party's expense, to the shareholders of the
Corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Acts or subsequent provisions).
(b) For the purposes of this Article Eighth:
(i) "Business Combination" shall mean any of the transactions
described or referred to in any one or more of the following subparagraphs:
(A) any merger, consolidation or share exchange of
the Corporation with or into any other person;
(B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions in
any 12 month period) to or with any other person of any assets of the
Corporation having an aggregate Fair Market Value of $1,000,000 or more except
for portfolio transactions of the Corporation effected in the ordinary course of
the Corporation's business;
(C) the issuance or transfer by the Corporation (in
one transaction or a series of transactions in any 12 month period) of any
securities of the Corporation to any other person in exchange for cash,
securities or other property (or a combination thereof) having an aggregate Fair
Market Value of $1,000,000 or more excluding (x) sales of any securities of the
Corporation in connection with a public offering thereof, (y) issuances of any
securities of the Corporation pursuant to a dividend reinvestment plan adopted
by the Corporation and (z) issuances of any securities of the Corporation upon
the exercise of any stock subscription rights distributed by the Corporation;
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<PAGE>
(ii) "Continuing Director" means any member of the Board of
Directors of the Corporation who is not an Interested Party or an Affiliate of
an Interested Party and has been a member of the Board of Directors for a period
of at least 12 months, or is a successor of a Continuing Director who is
unaffiliated with an Interested Party and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors.
(iii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment manager or
any of its Affiliates, which enters, or proposes to enter, into a Business
Combination with the Corporation.
(iv) "Person" shall mean an individual, a corporation, a trust
or a partnership.
(v) "Voting Stock" shall mean capital stock of the Corporation
entitled to vote generally in the election of directors.
(vi) A person shall be a "beneficial owner" of any Voting
Stock:
(A) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns, directly or indirectly;
or
(B) which such person or any of its Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or
(C) which is beneficially owned, directly or
indirectly, by any other person with which such person or any of its Affiliates
or Associates has any Agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
(vii) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule l2b-1 of the
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<PAGE>
General Rules and Regulations under the Securities Exchange Act of 1934.
(viii) "Fair Market Value" means:
(A) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the relevant date of a
share of such stock on the New York Stock Exchange, or if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the relevant date on the National Association of Securities
Dealers, Inc. Automated Quotation Systems (NASDAQ) or any system then in use, or
if no such quotations are available, the fair market value on the relevant date
of the share of such stock as determined by 75% of the Continuing Directors in
good faith, and
(B) in the case of property other than cash or stock,
the fair market value of such property on the relevant date as determined by 75%
of the Contracting Directors in good faith.
(ix) "Threshold Transaction" means the transaction by or as a
result of which an Interested Party first becomes the beneficial owner of Voting
Stock.
(x) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received"
as used in subparagraph (a)(iv)(B) above shall include the shares of Common
Stock and/or the shares of any other class of outstanding Voting Stock retained
by the holders of such shares.
(xi) Continuing Directors of the Corporation, acting by a vote
of 75%, shall have the power and duty to determine, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine (a) the
number of shares of Voting Stock beneficially owned by any person, (b) whether a
person is an Affiliate or Associate of another, (c) whether the
16
<PAGE>
requirements of subparagraph (a)(iv) above have been met with respect to any
Business Combination, and (d) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation in any Business Combination has, an
aggregate Fair Market Value of $1,000,000 or more.
NINTH: Pre-Emptive Rights. No holder of the Common stock of the
------ -------------------
Corporation or of any other class of stock or securities which may hereafter be
created shall be entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of stock of any class, or of
rights or options to purchase any stock, or of securities convertible into, or
carrying rights or options to purchase, stock of any class, whether now or
hereafter authorized or whether issued for a consideration other than money or
by way of a dividend or otherwise, and all such rights are hereby waived by each
holder of Common Stock and of any other class of stock which may hereafter be
created.
TENTH: Reservation of Right to Amend. From time to time any of the
------ ------------------------------
provisions of this Charter may be amended, altered or repealed (including any
amendment which changes the terms of any of the outstanding stock by
classification, reclassification or otherwise) and all rights at any time
conferred upon the stockholders of the Corporation by this Charter are granted
subject to the provisions of this Article TENTH. With the exception of Articles
THIRD, SIXTH, EIGHTH, NINTH, this Article TENTH and Article ELEVENTH, any of the
provisions of this Charter may be amended, altered or repealed upon the vote of
a majority of the votes entitled to be cast by stockholders. The provisions of
Articles SIXTH, EIGHTH, NINTH, this Article TENTH and Article ELEVENTH may be
amended, altered or repealed only upon the vote of at least 75% of the votes
entitled to be cast by stockholders. The provisions of Article Third may be
amended, altered or repealed only upon the vote of at least 75% of the votes
entitled
17
<PAGE>
to be cast by stockholders, unless, pursuant to Article EIGHTH Section (a)(i),
the Continuing Directors of the Corporation, by a vote of at least 75% of such
Directors, approve such amendment in which case the affirmative vote of a
majority of the votes entitled to be cast by stockholders shall be required.
ELEVENTH: Duration. Subject to the provisions of Article
-------- ---------
Eighth(a)(iii), the duration of the Corporation shall be perpetual.
TWELFTH: (1) To the full extent that limitations on the liability of
-------
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not that person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the full extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the full extent permitted by the Maryland General
Corporation Law.
(3) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he or she 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 or
her office.
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<PAGE>
(4) References to the Maryland General Corporation Law in this Article
are to that law as from time to time amended. No amendment to the Charter of the
Corporation shall affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment."
ARTICLE II. Each share (including for this purpose a fraction
of a share) of Common Stock issued and outstanding immediately prior to these
Articles of Amendment and Restatement becoming effective, shall, at such
effective time, be reclassified automatically, and without any action or choice
on the part of the holder, into a share (or the same fraction of a share) of
Class M Common Stock. Outstanding certificates representing issued and
outstanding shares of Common Stock immediately prior to these Articles of
Amendment and Restatement becoming effective, shall upon these Articles of
Amendment and Restatement becoming effective be deemed to represent the same
number of shares of Class M Common Stock. Certificates representing shares of
the Class M Common Stock resulting from the aforesaid reclassification need not
be issued until certificates representing the shares of Common Stock so
reclassified, if issued, have been received by the Corporation or its agent duly
endorsed for transfer with the request that a new certificate be provided. The
Class A Common Stock, Class B Common Stock, Class C Common Stock and Class M
Common Stock shall have the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as set forth in the Charter of the Corporation as
herein amended and restated.
ARTICLE III: The Corporation desires to amend and restate its
Charter as currently in effect. The provisions set forth in these Articles of
Amendment and Restatement are all of the provisions of the Charter currently in
effect as herein amended. The current address of the principal office of the
Corporation, and the name and address of the Corporation's current resident
agent are as set forth herein. The number of
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<PAGE>
directors is currently set at six and their names are James E. Akins, Arthur R.
Gottschalk, Frederick T. Kelsey, Fred B. Renwick, Thomas W. Littauer and John G.
Weithers.
ARTICLE IV: The amendment and restatement of the Charter of
the Corporation as hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders.
ARTICLE V: The total number of shares of capital stock that
the Corporation had authority to issue immediately prior to these Articles of
Amendment and Restatement becoming effective was one hundred million
(100,000,000) shares of the par value of one cent ($.01) per share and of the
aggregate par value of one million dollars ($1,000,000 ) all of which shares
were designated Common Stock. The total number of shares of capital stock that
the Corporation has authority to issue upon these Articles of Amendment and
Restatement becoming effective is five hundred million (500,000,000) shares, all
of the par value of one-tenth of one cent ($.001) per share, and of the
aggregate par value of five hundred thousand dollars ($500,000). Two hundred
million (200,000,000) of such shares are designated as Class A Common Stock, one
hundred million (100,000,000) of such shares are designated as Class B Common
Stock, one hundred million (100,000,000) of such shares are designated as Class
C Common Stock and one hundred million (100,000,000) of such shares are
designated as Class M Common Stock.
ARTICLE VI: These Articles of Amendment and Restatement shall
become effective on September 3, 1999 at 4:00 p.m. Eastern Time.
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IN WITNESS WHEREOF, Scudder New Europe Fund, Inc. has caused
these Articles of Amendment and Restatement to be signed in its name and on its
behalf by its Vice President, Bruce H. Goldfarb, and witnessed by its Secretary,
John Millette, as of _________________, 1999.
The Vice acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Corporation and states that to the
best of his knowledge, information and belief, the matters and facts set forth
in these Articles with respect to the authorization and approval of this
amendment and restatement of the Corporation's Charter are true in all material
respects and that this statement is made under penalties of perjury.
By:/s/Bruce H. Goldfarb
---------------------
Vice President
Witness:
/s/John Millette
- ---------------------------
Secretary
21
KEMPER EUROPE FUND, INC.
ARTICLES OF AMENDMENT
Kemper Europe Fund, Inc. (the "Corporation"), a corporation organized
and existing under and by virtue of the Maryland Corporation Law, hereby
certifies to the Maryland State Department of Assessments and Taxation that:
FIRST: Article SECOND of the Charter of the Corporation is amended to
read as follows:
"SECOND: The name of the Corporation is Kemper New Europe Fund, Inc.
(the "Corporation")."
SECOND: The above amendment to the Charter was unanimously approved by
the Board of Directors. The amendment is limited to a change expressly permitted
by ss. 2-605 of the Maryland General Corporation Law to be made without action
by the stockholders and the Corporation is registered as an open-end company
under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed these Articles of Amendment on behalf of the Corporation and do hereby
acknowledge that these Articles of Amendment are the act and deed of the
Corporation and that, to the best of their knowledge, information and belief,
the matters and facts contained herein with respect to authorization and
approval are true in all material respects, under penalties of perjury.
DATE: September 3, 1999 /s/Bruce H. Goldfarb
-------------------------------
Bruce H. Goldfarb
Vice President and Assistant Secretary
ATTEST:
/s/John Millette
- ---------------------
John Millette
Secretary
- --------------------------------------------------------------------------------
KEMPER EUROPE FUND, INC.
A Maryland Corporation
AMENDED
AND
RESTATED
BY-LAWS
September 3, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I. NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL
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Section 1.1. Principal Offices.....................................................................1
Section 1.2. Seal..................................................................................1
ARTICLE II. STOCKHOLDERS
Section 2.1. Annual Meetings.......................................................................2
Section 2.2. Special Meetings......................................................................2
Section 2.3. Notice of Meetings....................................................................3
Section 2.4. Notice of Stockholder Business........................................................3
Section 2.5. Stockholder Business not Eligible for Consideration...................................5
Section 2.6. Quorum................................................................................6
Section 2.7. Adjourned Meetings....................................................................7
Section 2.8. Voting................................................................................7
Section 2.9. Stockholders Entitled to Vote.........................................................8
Section 2.10. Proxies...............................................................................8
Section 2.11. Voting and Inspectors.................................................................9
Section 2.12. Action Without Meeting...............................................................10
ARTICLE III. BOARD OF DIRECTORS
Section 3.1. Powers...............................................................................10
Section 3.2. Power to Issue and Sell Stock........................................................11
Section 3.3. Power to Declare Dividends...........................................................11
Section 3.4. Number and Term......................................................................12
Section 3.5. Director Nominations.................................................................13
Section 3.6. Election.............................................................................15
Section 3.7. Vacancies and Newly Created Directorships............................................15
Section 3.8. Removal..............................................................................16
Section 3.9. Regular Meetings.....................................................................16
Section 3.10. Special Meetings.....................................................................17
Section 3.11. Waiver of Notice.....................................................................17
Section 3.12. Quorum and Voting....................................................................17
Section 3.13. Action Without a Meeting.............................................................18
Section 3.14. Compensation of Directors............................................................18
ARTICLE IV. COMMITTEES
Section 4.1. Organization.........................................................................19
Section 4.2. Executive Committee..................................................................19
Section 4.3. Other Committees.....................................................................20
Section 4.4. Proceedings and Quorum...............................................................20
ARTICLE V. OFFICERS
Section 5.1. General..............................................................................20
Section 5.2. Election, Tenure and Qualifications..................................................21
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Section 5.3. Removal and Resignation..............................................................21
Section 5.4. Chairman of the Board................................................................22
Section 5.5. Vice Chairman of the Board...........................................................22
Section 5.6. President............................................................................22
Section 5.7. Vice President.......................................................................23
Section 5.8. Treasurer and Assistant Treasurers...................................................23
Section 5.9. Secretary and Assistant Secretaries..................................................24
Section 5.10. Subordinate Officers.................................................................25
Section 5.11. Remuneration.........................................................................25
Section 5.12. Surety Bonds.........................................................................25
ARTICLE VI. NET ASSET VALUE
Section 6.1. Valuation of Assets..................................................................26
ARTICLE VII. CAPITAL STOCK
Section 7.1. Certificates of Stock................................................................26
Section 7.2. Transfer of Shares...................................................................27
Section 7.3. Stock Ledgers........................................................................28
Section 7.4. Fixing of Record Date................................................................28
Section 7.5. Lost, Stolen or Destroyed Certificates...............................................28
ARTICLE VIII. FISCAL YEAR
Section 8.1. Fiscal Year..........................................................................29
ARTICLE IX. INDEMNIFICATION AND INSURANCE
Section 9.1. Indemnification of Directors, Officers and Members of the Advisory Board.............30
Section 9.2. Advances.............................................................................31
Section 9.3. Procedure............................................................................32
Section 9.4. Indemnification of Employees and Agents..............................................32
Section 9.5. Other Rights.........................................................................33
Section 9.6. Insurance............................................................................33
Section 9.7. Constituent, Resulting or Surviving Corporations.....................................34
ARTICLE X. AMENDMENTS
Section 10.1. General..............................................................................34
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(ii)
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AMENDED AND RESTATED
BY-LAWS
of
KEMPER EUROPE FUND, INC.
(A MARYLAND CORPORATION)
ARTICLE I.
NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL
Section 1.1. Principal Offices. The principal office of Kemper Europe
Fund, Inc. (the "Corporation") in the State of Maryland shall be located in
Baltimore, Maryland. The Corporation may, in addition, establish and maintain
such other offices and places of business as the Board of Directors may, from
time to time, determine.
Section 1.2. Seal. The corporate seal of the Corporation shall be
circular in form and shall bear the name of the Corporation, the year of its
incorporation, and the word "Maryland". The form of the seal shall be subject to
alteration by the Board of Directors and the seal may be used by causing it or a
facsimile to be impressed or affixed or printed or otherwise reproduced. Any
officer or Director of the Corporation shall have authority to affix the
corporate seal of the Corporation to any document requiring the same. If the
Corporation is required to place its corporate seal to a document, it shall be
sufficient to place the word "(seal)" adjacent to the signature of the person
authorized to sign the document on behalf of the Corporation.
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ARTICLE II.
STOCKHOLDERS
Section 2.1. Annual Meetings. An annual meeting of stockholders for the
election of Directors and the transaction of such other business as may properly
come before the meeting shall be held in July. The meeting will be held at such
place within the United States as the Board of Directors shall select.
Section 2.2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Charter, may be held at any place within the United States, and
may be called at any time by the Board of Directors or by the President, and
shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
entitled to cast at least 25% of the votes entitled to be cast at the meeting
upon payment by such stockholders to the Corporation of the reasonably estimated
cost of preparing and mailing a notice of the meeting (which estimated cost
shall be provided to such stockholders by the Secretary of the Corporation).
Notwithstanding the foregoing, unless requested by stockholders entitled to cast
a majority of the votes entitled to be cast at the meeting, a special meeting of
the stockholders need not be called at the request of stockholders to consider
any matter which is substantially the same as a matter voted on at any special
meeting of the stockholders held during the preceding 12 (twelve) months. A
special meeting of the stockholders shall also be called by the
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Board of Directors for the purpose of voting upon the question of removal of any
Director when requested in writing to do so by stockholders holding at least 10%
of the outstanding shares of the Corporation. A written request shall state the
purpose or purposes of the proposed meeting.
Section 2.3. Notice of Meetings. The Secretary shall cause notice of
the place, date and hour, and, in the case of a special meeting or if otherwise
required by law, the purpose or purposes for which the meeting is called, to be
mailed, not less than 10 nor more than 90 days before the date of the meeting,
to each stockholder entitled to notice and to vote at such meeting at his
address as it appears on the records of the Corporation at the time of such
mailing. Notice of any stockholders' meeting need not be given to any
stockholder who shall sign a written waiver of such notice whether before or
after the time of such meeting, which waiver shall be filed with the record of
such meeting, or to any stockholder who is present at such meeting in person or
by proxy.
Section 2.4. Notice of Stockholder Business.
(a) At any annual or special meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual or special meeting, the
business must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
properly brought before the meeting by or at the
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direction of the Board of Directors or (iii) otherwise properly brought before
the meeting by a stockholder.
(b) For business to be properly brought before an annual or special
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, any such notice
must be delivered to or mailed and received at the principal executive offices
of the Corporation not later than 60 days prior to the date of the meeting;
provided, however, that if less than 70 days notice or prior public disclosure
of the date of the meeting is given or made to stockholders, any such notice by
a stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which notice of the date of the
annual or special meeting was given or such public disclosure was made.
(c) Any such notice by a stockholder shall set forth as to each matter
the stockholder proposes to bring before the annual or special meeting (i) a
brief description of the business desired to be brought before the annual or
special meeting and the reasons for conducting such business at the annual or
special meeting, (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (iii) the class and number of
shares of the capital stock of the Corporation which are beneficially owned by
the stockholder, and (iv) any material interest of the stockholder in such
business.
(d) Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any annual or special
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meeting except in accordance with the procedures set forth in this Section 2.4.
The Chairman of the annual or special meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 2.4,
and if he should so determine, he shall so declare to the meeting that any such
business not properly brought before the meeting shall not be considered or
transacted.
Section 2.5. Stockholder Business not Eligible for Consideration.
(a) Notwithstanding anything in these By-Laws to the contrary, any
proposal that is otherwise properly brought before an annual or special meeting
by a stockholder will not be eligible for consideration by the stockholders at
such annual or special meeting if such proposal is substantially the same as a
matter properly brought before such annual or special meeting by or at the
direction of the Board of Directors of the Corporation. The chairman of such
annual or special meeting shall, if the facts warrant, determine and declare
that a stockholder proposal is substantially the same as a matter properly
brought before the meeting by or at the direction of the Board of Directors,
and, if he should so determine, he shall so declare to the meeting and any such
stockholder proposal shall not be considered at the meeting.
(b) This Section 2.5. shall not be construed or applied to make
ineligible for consideration by the stockholders at any annual or special
meeting any stockholder proposal
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required to be included in the Corporation's proxy statement relating to such
meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, or any
successor rule thereto.
Section 2.6. Quorum. The presence at any stockholders' meeting in
person or by proxy, of stockholders entitled to cast at least one-third of the
votes entitled to be cast thereat shall be necessary and sufficient to
constitute a quorum for the transaction of business, except that where any
provision of law or the Charter permits or requires that stockholders of any
class of Common Stock of the Corporation shall vote as a class, one-third of the
votes entitled to be cast by said class shall constitute a quorum. In the
absence of a quorum, the holders of a majority of shares entitled to vote at the
meeting and present in person or by proxy, or, if no stockholder entitled to
vote is present in person or by proxy, any officer present entitled to preside
or act as Secretary of such meeting, may adjourn the meeting sine die or from
time to time without further notice to a date not more than 120 days after the
original record date. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
Section 2.7. Adjourned Meetings. A meeting of stockholders convened on
the date for which it was called (including one adjourned to achieve a quorum as
above provided in Section 2.6 of this Article) may be adjourned from time to
time
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without further notice other than by announcement at the meeting to a date not
more than 120 days after the original record date, and any business may be
transacted at any adjourned meeting which could have been transacted at the
meeting as originally called.
Section 2.8. Voting. At each stockholders' meeting, each stockholder
entitled to vote shall be entitled to one vote for each share of stock of the
Corporation validly issued and outstanding and standing in his name on the books
of the Corporation on the record date fixed in accordance with Section 7.4 of
Article VII hereof; provided, however, that when required by the Investment
Company Act of 1940, as amended (the "1940 Act"), or the laws of the State of
Maryland or when the Board of Directors has determined that the matter affects
only the interest of one class of stock, matters may be submitted only to a vote
of the stockholders of that particular class, and each stockholder thereof shall
be entitled to votes equal to the shares of stock of that class registered in
the stockholder's name on the books of the Corporation. Except as otherwise
specifically provided in the Charter or these By-Laws or as required by law, as
amended from time to time, all matters shall be decided by a vote of the
majority of the votes validly cast, except for the election of directors which
shall be by a plurality of votes cast. The vote upon any question shall be by
ballot whenever requested by any person entitled to vote, but, unless such a
request is made, voting may be conducted in any way approved at the meeting.
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Section 2.9. Stockholders Entitled to Vote. If the Board of Directors
sets a record date for the determination of stockholders entitled to notice of
or to vote at any stockholders' meeting in accordance with Section 7.4 of
Article VII hereof, each stockholder of the Corporation entitled to vote on the
matter shall be entitled to vote, in person or by proxy, each share of stock
standing in his name on the books of the Corporation on such record date. If no
record date has been fixed, the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be determined in accordance with the Maryland General Corporation Law.
Section 2.10. Proxies. Any stockholder entitled to vote at any meeting
of stockholders may vote either in person or by proxy. Unless a proxy provides
otherwise, it is not valid more than eleven months after its date. Every proxy
shall be in writing and signed by the stockholder or his authorized agent or be
in such other form as may be permitted by the Maryland General Corporation Law,
including electronic transmissions from the stockholder or his authorized agent.
Authorization may be given orally, in writing, by telephone, by electronic
transmission, or by other means of communication. A copy, facsimile transmission
or other reproduction of a writing or transmission may be substituted for the
original writing or transmission for any purpose for which the original writing
or transmission could be used. Every proxy shall be dated, but need not be
sealed, witnessed or acknowledged. All proxies shall be delivered to the
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Secretary of the Corporation, or to the person acting as Secretary of the
Meeting being voted. A proxy purporting to be executed by or on behalf of a
stockholder shall be valid unless challenged at or prior to its exercise.
Section 2.11. Voting and Inspectors. The Board of Directors may, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting or at any adjournment of the meeting. If the inspectors shall not be
so appointed or if any of them shall fail to appear or act, the Chairman of the
meeting may, and on the request of any stockholder entitled to vote at the
meeting shall, appoint inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath to execute faithfully the
duties of inspector at the meeting with strict impartiality and according to the
best of his ability. The inspectors shall determine the number of shares
outstanding and the voting power of each share, the number of shares represented
at the meeting, the existence of a quorum and the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do those acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the Chairman of the meeting or any stockholder entitled to vote at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by
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them. No director or candidate for the office of director shall act as
inspector of an election of directors. Inspectors need not be stockholders of
the Corporation.
Section 2.12. Action Without Meeting. Any action to be taken by
stockholders may be taken without a meeting if (a) all stockholders entitled to
vote on the matter consent to the action in writing, (b) all stockholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent and (c) said consents and waivers are filed with
the records of the meetings of stockholders. Such consent shall be treated for
all purposes as a vote at the meeting.
ARTICLE III.
BOARD OF DIRECTORS
Section 3.1. Powers. The property, affairs, and business of the
Corporation shall be managed by the Board of Directors, which may exercise all
the powers of the Corporation except those powers vested solely in the
stockholders of the Corporation by statute, by the Charter or by these By-Laws.
Section 3.2. Power to Issue and Sell Stock. The Board of Directors may
from time to time authorize the issuance and sale of any of the Corporation's
authorized shares to such persons and for such consideration as the Board of
Directors may deem advisable.
Section 3.3. Power to Declare Dividends.
(a) The Board of Directors, from time to time as they may deem
advisable to the extent permitted by applicable law, may declare and pay
dividends in cash or other property of the
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Corporation, out of any source available for dividends, to the stockholders
according to their respective rights and interests.
(b) The Board of Directors shall cause to be accompanied by a written
statement any dividend payment wholly or partly from any source other than
(i) the Corporation's accumulated undistributed net income
(determined in accordance with generally accepted accounting principles
and the rules and regulations of the Securities and Exchange Commission
then in effect) and not including profits or losses realized upon the
sale of securities or other properties; or
(ii) the Corporation's net income so determined for the
current or preceding fiscal year Such statement shall adequately
disclose the source or sources of such payment and the basis of
calculation, and shall be in such form as the Securities and Exchange
Commission may prescribe.
(c) Notwithstanding the above provisions of this Section 3.3, the Board
of Directors may at any time declare and distribute among the stockholders a
stock dividend out of the Corporation's authorized but unissued shares of stock
to the extent permitted by applicable law, including any shares previously
purchased by the Corporation.
Section 3.4. Number and Term. The Board of Directors shall consist of
not fewer than three, nor more than twelve Directors, as specified by resolution
of the majority of the
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entire Board of Directors, provided that at least 40% of the entire Board of
Directors shall be persons who are not interested persons of the Corporation as
defined in the 1940 Act. Beginning with the first annual meeting of the
stockholders held after the initial public offering of the shares of the Fund,
the Directors shall be divided into three classes, and shall be designated as
Class I, Class II and Class III Directors, respectively. The Class I Directors
elected at such initial annual meeting shall serve for a term of office expiring
at the next succeeding annual stockholders meeting following such initial annual
meeting. The Class II Directors elected at such initial annual meeting shall
serve for a term of office expiring at the second succeeding annual stockholders
meeting following such initial annual meeting. The Class III Directors elected
at such initial annual meeting shall serve for a term of office expiring at the
third succeeding annual stockholders meeting following such initial annual
meeting. After expiration of the terms of office specified for the Directors
elected at such initial annual meeting, the Directors of each class shall serve
for terms of three (3) years, or, when filling a vacancy, for the unexpired
portion of such term and until their successors are elected and have qualified.
If the number of Directors is changed, any increase or decrease shall be
apportioned among the classes by the Board of Directors so as to maintain the
number of Directors in each class as nearly as possible, but in no event shall a
decrease in the number of Directors shorten the term of any incumbent Director.
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Section 3.5. Director Nominations.
(a) Only persons who are nominated in accordance with the procedures
set forth in this Section 3.5 shall be eligible for election or re-election as
Directors. Nominations of persons for election or re-election to the Board of
Directors of the corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors or by any stockholder of the Corporation
who is entitled to vote for the election of such nominee at the meeting and who
complies with the notice procedures set forth in this Section 3.5.
(b) Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice delivered in
writing to the Secretary of the Corporation. To be timely, any such notice by a
stockholder must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 days prior to the
meeting; provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, any such
notice by a stockholder to be timely must be so received not later than the
close of business on the 10th day following the day on which notice of the date
of the meeting was given or such public disclosure was made.
(c) Any such notice by a stockholder shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or re-election as
a Director, (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the class
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and number of shares of the capital stock of Corporation which are beneficially
owned by such person and (D) any other information relating to such person that
is required to be disclosed in solicitations of proxies for the election of
Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934
or any successor regulation thereto (including without limitation such persons'
written consent to being named in the proxy statement as a nominee and to
serving as a Director if elected and whether any person intends to seek
reimbursement from the Corporation of the expenses of any solicitation of
proxies should such person be elected a Director of the Corporation); and (ii)
as to the stockholder giving the notice (A) the name and address, as they appear
on the Corporation's books, of such stockholder and (B) the class and number of
shares of the capital stock of the Corporation which are beneficially owned by
such stockholder. At the request of the Board of Directors any person nominated
by the Board of Directors for election as a Director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
(d) If a notice by a stockholder is required to be given pursuant to
this Section 3.5, no person shall be entitled to receive reimbursement from the
Corporation of the expenses of a solicitation of proxies for the election as a
Director of a person named in such notice unless such notice states that such
reimbursement will be sought from the Corporation. The Chairman
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of the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-Laws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded for all purposes.
Section 3.6. Election. At the first annual meeting of stockholders and
each annual meeting thereafter, the Directors to be elected at that meeting
shall be elected by vote of the holders of a plurality of the votes cast
thereon.
Section 3.7. Vacancies and Newly Created Directorships. If any
vacancies shall occur in the Board of Directors by reason of death, resignation,
removal or otherwise, or if the authorized number of Directors shall be
increased, the Directors then in office shall continue to act, and such
vacancies (if not previously filled by the stockholders) may be filled by a vote
of a majority of the Directors then in office, although less than a quorum,
except that a newly created Directorship may be filled only by a majority vote
of the entire Board of Directors: provided, however, that immediately after
filling such vacancy, at least two-thirds (2/3) of the Directors then holding
office shall have been elected to such office by the stockholders of the
Corporation. In the event that at any time less than a majority of the Directors
of the Corporation holding office at that time were elected by the stockholders,
a meeting of the stockholders shall be held promptly and in any event within 60
days for the purpose of electing Directors to fill any existing vacancies in the
Board of Directors unless the
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Securities and Exchange Commission shall by order extend such period. Any
Director elected or appointed to fill a vacancy shall hold office until a
successor has been chosen and qualifies or until his earlier death, resignation
or removal.
Section 3.8. Removal. A Director may be removed from office only for
cause and only by the vote of 75% of the votes entitled to be cast for the
election of Directors.
Section 3.9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors. Members of the Board of Directors or any committee
designated thereby may participate in a meeting of such Board or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and participation by such means shall constitute presence in person at a
meeting.
Section 3.10. Special Meetings. Special meetings of the Board of
Directors may be called by two or more Directors of the Corporation or by the
Chairman of the Board or the President. Notice of special meetings stating the
time and place shall be (a) mailed to each Director at his residence or regular
place of business at least three days before the day an which a special meeting
is to be held or (b) delivered to him personally or by telephone, facsimile
transmission or other standard form of telecommunication, at least one day
before the meeting.
Section 3.11. Waiver of Notice. No notice of any meeting need be given
to any Director who is present at the
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meeting or who waives notice of such meeting in writing (which waiver shall be
filed with the records of such meeting), whether before or after the time of the
meeting.
Section 3.12. Quorum and Voting. At all meetings of the Board of
Directors, the presence of one-third (but not fewer than two unless there be
only one Director) of the entire Board of Directors shall constitute a quorum
for the action of business. In the absence of a quorum, a majority of the
Directors present may adjourn the meeting, from time to time, until a quorum
shall be present. The action of a majority of the Directors present at a meeting
at which a quorum is present shall be the action of the Board of Directors,
unless the concurrence of a greater proportion is required for such action by
law, by the Charter or by these By-Laws; provided, however, that no action shall
be taken without the affirmative vote of 75% of the Directors with respect to
any action referred to in Article Eighth of the Charter.
Section 3.13. Action Without a Meeting. Subject to the provisions of
the 1940 Act, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
a written consent to such action is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee..
Section 3.14. Compensation of Directors. Directors shall be entitled to
receive such compensation from the
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Corporation for their services as may from time to time be determined by
resolution of the Board of Directors.
ARTICLE IV.
COMMITTEES
Section 4.1. Organization. By resolution adopted by the Board of
Directors, the Board may designate one or more committees, including an
Executive Committee that shall consist of not less than one or more Directors.
The Chairmen of such committees shall be elected by the Board of Directors. Each
member of a committee shall be a Director and shall hold office at the pleasure
of the Board. The Board of Directors shall have the power at any time to change
the members of such committees and to fill vacancies in the committees. The
Board may delegate to these committees any of its powers, except those which by
law may not be delegated to a committee. If the Board of Directors has given
general authorization for the issuance of stock providing for or establishing a
method or procedure for determining the maximum number of shares to be issued, a
committee of the Board, in accordance with that general authorization or any
stock option or other plan or program adopted by the Board, may authorize and
fix the terms of stock subject to classification and reclassification and the
terms on which any stock may be issued including all terms and conditions
required or permitted to be established or authorized by the Board of Directors
under Section 3.2 of these By-Laws
Section 4.2. Executive Committee. Unless otherwise provided by
resolution of the Board of Directors, when the Board
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of Directors is not in session the Executive Committee shall have and may
exercise all powers of the Board of Directors in the management of the business
and affairs of the Corporation that may lawfully be exercised by an Executive
Committee. The Chairman of the Board, if any, and the President shall be members
of the Executive Committee.
Section 4.3. Other Committees. The Board of Directors may appoint other
committees which shall have such powers and perform such duties as may be
delegated from time to time by the Board.
Section 4.4. Proceedings and Quorum. Each committee may adopt such
rules and regulations governing its proceedings, quorum and manner of acting as
it shall deem proper and desirable. In the event any member of any committee is
absent from any meeting, the members thereof present at the meeting, whether or
not they constitute a quorum, may appoint a member of the Board of Directors to
act in the place of such absent member.
ARTICLE V.
OFFICERS
Section 5.1. General. The officers of the Corporation shall be a
President, a Secretary and a Treasurer, and may include one or more Vice
Presidents, Assistant Secretaries or Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.10
of this Article V. The Board of Directors may elect, but shall not be required
to elect, a Chairman of the Board.
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Section 5.2. Election, Tenure and Qualifications. The officers of the
Corporation, except those appointed as provided in Section 5.10 of this Article
V, shall be elected by the Board of Directors annually at its annual meeting. If
any officers are not chosen at any annual meeting, such officers may be chosen
at any subsequent regular or special meeting of the Board. Except as otherwise
provided in this Article V, each officer chosen by the Board of Directors shall
hold office until the next annual meeting of the Board of Directors and until
his successor shall have been elected and qualified. Any person may hold one or
more offices of the Corporation except the same person may not concurrently hold
the offices of President and Vice President. A person who holds more than one
office may not act in more than one capacity to execute, acknowledge or verify
an instrument required by law to be executed, acknowledged or verified. The
Chairman of the Board, if any, shall be elected from among the Directors of the
Corporation and may hold such office only so long as he continues to be a
Director. No other officer need be a Director.
Section 5.3. Removal and Resignation. Any officer of the Corporation
may be removed by the Board of Directors with or without cause at any time. Any
officer may resign his office at any time by delivering a written notice to the
Board of Directors, the President, the Secretary, or any Assistant Secretary.
Unless otherwise specified therein, such resignation shall take effect upon
delivery
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Section 5.4. Chairman of the Board. The Chairman of the Board, if there
be such an officer, shall be the senior officer of the Corporation, shall
preside at all stockholders' meetings and at all meetings of the Board of
Directors and shall be ex officio a member of all committees of the Board of
Directors other than the audit committee and any nominating committee. He shall
have such powers and perform such other duties as may be assigned to him from
time to time by the Board of Directors.
Section 5.5. Vice Chairman of the Board. The Vice Chairman of the
Board, if any, shall consult with the Chairman as to the policies of the
Corporation and as to the agendas to be presented at the meetings of the Board
of Directors. In the absence of the Chairman of the Board and the President, he
shall preside at meetings of the Board of Directors. He shall have such powers
and perform such other duties as may be assigned to him from time to time by the
Chairman.
Section 5.6. President. The President shall be the chief executive
officer of the Corporation and, in the absence of the Chairman of the Board or
if no Chairman of the Board has been chosen, he shall preside at all
stockholders' meetings and at all meetings of the Board of Directors and shall
in general exercise the powers and perform the duties of the Chairman of the
Board. Subject to the supervision of the Board of Directors, he shall have
general charge of the business, affairs, and property of the Corporation and
general supervision over its officers, employees and agents. Except as the Board
of Directors may otherwise
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order, he may sign in the name and on behalf of the Corporation all deeds,
bonds, contracts or agreements. He shall exercise such other powers and perform
such other duties as from time to time may be assigned to him by the Board of
Directors.
Section 5.7. Vice President. The Board of Directors may from time to
time elect one or more Vice Presidents who shall have such powers and perform
such duties as from time to time may be assigned to them by the Board of
Directors or the President. At the request, or in the absence or disability, of
the President, the Vice President (or, if there are two or more Vice Presidents,
then the senior of the Vice Presidents present and able to act) may perform all
the duties of the President and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.
Section 5.8. Treasurer and Assistant Treasurers. The Treasurer shall be
the principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He shall render to the
Board of Directors, whenever directed by the Board, an account of the financial
condition of the Corporation and of all his transactions as Treasurer; and as
soon as possible after the close of each financial year he shall make and submit
to the Board of Directors a like report for such financial year. He shall
perform all acts incidental to the
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Office of Treasurer, subject to the control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, he may perform all the duties of the Treasurer.
Section 5.9. Secretary and Assistant Secretaries. The Secretary shall
attend to the giving and serving of all notices of the Corporation and shall
record all proceedings of the meetings of the stockholders and Directors in
books to be kept for that purpose. He shall keep in safe custody the seal of the
Corporation, and shall have charge of the records of the Corporation, including
the stock books and such other books and papers as the Board of Directors may
direct and such books, reports, certificates and other documents required by law
to be kept, all of which shall at all reasonable times be open to inspection by
any Director. He shall perform such other duties as appertain to his office or
as may be required by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, he may perform all the duties of the Secretary.
Section 5.10. Subordinate Officers. The Board of Directors from time to
time may appoint such other officers or agents as it may deem advisable, each of
whom shall have such title, hold office for such period, have such authority and
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perform such duties as the Board of Directors may determine. The Board of
Directors from time to tine may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 5.11. Remuneration. The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors, except that the Board of Directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents appointed in accordance
with the provisions of Section 5.10 of this Article V.
Section 5.12. Surety Bonds. The Board of Directors may require any
officer or agent of the Corporation to execute a bond (including, without
limitation, any bond required by the 1940 Act, and the rules and regulations of
the Securities and Exchange Commission) to the Corporation in such sum and with
such surety or sureties as the Board of Directors may determine, conditioned
upon the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting of any of the Corporation's
property, funds or securities that may come into his hands.
ARTICLE VI.
NET ASSET VALUE
Section 6.1. Valuation of Assets. The value of the Corporation's net
assets shall be determined at such times and by such method as shall be
established from time to time by time
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Board of Directors. Such method shall be reduced to writing and maintained in
the Corporation's permanent records.
ARTICLE VII.
CAPITAL STOCK
Section 7.1. Certificates of Stock. Each holder of stock of the
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation, to have a certificate or certificates, in
a form approved by the Board, representing the number of shares of the
particular class of stock of the Corporation owned by him; provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by or in the name of
the Corporation by the Chairman of the Board, President or a Vice President and
by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and sealed with the seal of the Corporation. Any or all of the
signatures or the seal on the certificate may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate shall be issued, it may be
issued by the Corporation with the same effect as if such officer, transfer
agent or registrar were still in office at the date of issue.
Section 7.2. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed
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and filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for the shares properly
endorsed or accompanied by a duly executed stock transfer power and the payment
of all taxes thereon. Except as otherwise provided by law, the Corporation shall
be entitled to recognize the exclusive right of a person in whose name any share
or shares stand on the record of stockholders as the owner of the share or
shares for all purposes, including, without limitation, the rights to receive
dividends or other distributions and to vote as the owner, and the Corporation
shall not be bound to recognize any equitable or legal claim to or interest in
any such share or shares on the part of any other person.
Section 7.3. Stock Ledgers. The Stock Ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the
Corporation or, if the Corporation employs a transfer agent, at the offices of
the transfer agent of the Corporation.
Section 7.4. Fixing of Record Date. The Board of Directors may fix in
advance a date as a record date for the determination of the stockholders
entitled to notice of or to vote at any stockholders' meeting or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion or
exchange of stock,
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or for the purpose of any other lawful action, provided that (1) such record
date may not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days prior to the date on which the
particular action requiring such determination will be taken; and (2) in the
case of a meeting of stockholders the record date shall be at least 10 days
before the date of the meeting.
Section 7.5. Lost, Stolen or Destroyed Certificates. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of its theft, loss, destruction or mutilation and the
Corporation may issue a new certificate of stock in the place of any certificate
issued by it that has been alleged to have been stolen, lost or destroyed or
that shall have been mutilated. The Board may, in its discretion, require the
owner (or his legal representative) of a stolen, lost, destroyed or mutilated
certificate to give to the Corporation a bond in a sum, limited or unlimited,
and in a form and with any surety or sureties, as the Board in its absolute
discretion shall determine or to indemnify the Corporation against any claim
that may be made against it on account of the alleged theft, loss, destruction
or the mutilation of any such certificate, or issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Board of Directors, in its
absolute discretion, may refuse to issue any such new certificate, except
pursuant to legal proceedings under the Maryland General Corporation Law.
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ARTICLE VIII.
FISCAL YEAR
-----------
Section 8.1. Fiscal Year. The fiscal year of the Corporation shall,
unless otherwise ordered by the Board of Directors, be twelve calendar months
ending on the 31st day of October.
ARTICLE IX.
INDEMNIFICATION AND INSURANCE
Section 9.1. Indemnification of Directors, Officers and Members of the
Advisory Board. Any person who was or is a party or is threatened to be made a
party in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is a current or former director, officer or member of any
Advisory Board of the Corporation, or is or was serving while a director,
officer or member of any Advisory Board of the Corporation at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by the Corporation against
judgments, penalties, fines, excise taxes, settlements and reasonable expenses
(including attorneys' fees) actually incurred by such person in connection with
such action, suit or proceeding to the full extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933, as amended (the
"Securities Act"), and the 1940 Act, as such statutes are now or hereafter in
force, except that such
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indemnity shall not protect any such person against any liability to the
Corporation or any stockholder thereof to which such person 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
("disabling conduct").
Section 9.2. Advances. Any current or former director, officer or
member of any Advisory Board of the Corporation claiming indemnification within
the scope of this Article IX shall be entitled to advances from the Corporation
for payment of the reasonable expenses incurred by him in connection with
proceedings to which he is a party in the manner and to the full extent
permissible under the Maryland General Corporation Law, the Securities Act and
the 1940 Act, as such statutes are now or hereafter in force; provided however,
that the person seeking indemnification shall provide to the Corporation a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and a written
undertaking to repay any such advance unless it is ultimately determined that he
is entitled to indemnification, and provided further that at least one of the
following additional conditions is met: (a) the person seeking indemnification
shall provide a security in form and amount acceptable to the Corporation for
his undertaking; (b) the Corporation is insured against losses arising by reason
of the advance; or (c) a majority of a quorum of directors of the Corporation
who are neither "interested persons" as defined in
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Section 2(a)(19) of the 1940 Act, nor parties to the proceeding ("disinterested
non-party directors"), or independent legal counsel, in a written opinion, shall
determine, based on a review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.
Section 9.3. Procedure. At the request of any current or former
director, officer or Advisory Board member, or any employee or agent whom the
Corporation proposes to indemnify, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, the Securities Act and the 1940 Act, as such statutes are now
or hereafter in force, whether the standards required by this Article IX have
been met; provided, however, that indemnification shall be made only following:
(a) a final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of disabling conduct; or (b) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct by, (i) the vote of
a majority of a quorum of disinterested non-party directors, or (ii) an
independent legal counsel in a written opinion.
Section 9.4. Indemnification of Employees and Agents. Employees and
agents who are not officers, directors or Advisory Board members of the
Corporation may be indemnified, and
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reasonable expenses may be advanced to such employees or agents, in accordance
with the procedures set forth in this Article IX to the extent permissible under
the 1940 Act, the Securities Act and Maryland General Corporation Law, as such
statutes are now or hereafter in force, to the extent, consistent with the
foregoing, as may be provided by action of the Board of Directors or by
contract.
Section 9.5. Other Rights. The indemnification provided by this Article
IX shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 9.6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, Advisory Board member, employee or agent of the Corporation,
or who, while a director, officer, Advisory Board member, employee or agent of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture,
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trust, enterprise or employee benefit plan, against any liability asserted
against and incurred by him in any such capacity, or arising out of his status
as such, provided that no insurance may be obtained by the Corporation for
liabilities against which it would not have the power to indemnify him under
this Article IX or applicable law.
Section 9.7. Constituent, Resulting or Surviving Corporations. For the
purposes of this Article IX, references to the "Corporation" shall include all
constituent corporations absorbed in a consolidation or merger as well the
resulting or surviving corporation so that any person who is or was a director,
officer, employee or agent of a constituent corporation or is or was serving at
the request of a constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under this Article IX with respect
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
ARTICLE X.
AMENDMENTS
----------
Section 10.1. General. Except as provided in the next succeeding
sentence and in the Charter, all By-Laws of the Corporation whether adopted by
the Board of Directors or the stockholders shall be subject to amendment,
alteration or repeal, and new By-Laws may be made, by the affirmative vote of a
majority of either: (a) the holders of record of the outstanding shares of stock
of the Corporation entitled to vote, at any
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annual or special meeting, the notice or waiver of notice of which shall have
specified or summarized the proposed amendment, alteration, repeal or new
By-Law; or (b) the Directors, at any regular or special meeting the notice or
waiver of notice of which shall have specified or summarized the proposed
amendment, alteration, repeal or new By-Law. The provisions of Article II,
Section 2.4 and Article III, Sections 3.4 and 3.5 of these By-laws shall be
subject to amendment, alterations or repeal by the affirmative vote of either:
(i) the holders of record of 75% of the outstanding shares of stock of the
Corporation entitled to vote, at any annual or special meeting, the notice or
waiver of notice of which shall have specified or summarized the proposed
amendment, alteration or repeal or (ii) 75% of the Continuing Directors (as such
term is defined in Article EIGHTH of the Corporation's Charter), at any regular
or special meeting the notice of waiver of notice of which shall have specified
or summarized the proposed amendment, alteration or repeal.
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INVESTMENT MANAGEMENT AGREEMENT
Kemper New Europe Fund, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
September 3, 1999
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper New Europe Fund, Inc.
Ladies and Gentlemen:
KEMPER NEW EUROPE FUND, INC. (the "Fund") has been established as a Maryland
corporation to engage in the business of an investment company. Pursuant to the
Fund's Articles of Incorporation, as amended and restated from time to time (the
"Articles"), the Board of Directors is authorized to issue the Fund's shares of
Common Stock (the "Shares") in separate series or classes. The Board of
Directors has authorized five classes of shares. Additional series or classes
may be established from time to time by action of the Directors.
The Fund has selected you to act as the investment manager of the Fund and to
provide certain other services, as more fully set forth below, and you have
indicated that you are willing to act as such investment manager and to perform
such services under the terms and conditions hereinafter set forth. Accordingly,
the Fund agrees with you as follows:
1. Delivery of Documents. The Fund engages in the business of investing and
reinvesting its assets in the manner and in accordance with the investment
objectives, policies and restrictions specified in the currently effective
Prospectus (the "Prospectus") and Statement of Additional Information (the
"SAI") included in the Fund's Registration Statement on Form N-1A, as amended
from time to time (the "Registration Statement") filed by the Fund under the
Investment Company Act of 1940, as amended, (the "1940 Act") and the Securities
Act of 1933, as amended. Copies of the documents referred to in the preceding
sentence have been furnished to you by the Fund. The Fund has also furnished you
with copies properly certified or authenticated of each of the following
additional documents related to the Fund:
(a) The Articles, as amended and restated to date.
(b) By-Laws of the Fund as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Directors of the Fund and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
The Fund will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986,
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as amended, (the "Code") relating to regulated investment companies and all
rules and regulations thereunder; and all other applicable federal and state
laws and regulations of which you have knowledge; subject always to policies and
instructions adopted by the Fund's Board of Directors. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the investment analysis
and research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Fund. You shall also make available to the
Fund promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Fund in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Fund's Board of Directors periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Fund's officers or Board of Directors shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Fund administrative services necessary
for operating as an open-end investment company and not provided by persons not
parties to this Agreement including, but not limited to, preparing reports to
and meeting materials for the Fund's Board of Directors and reports and notices
to Fund shareholders; supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission (the
"SEC") and other regulatory and self-regulatory organizations, including, but
not limited to, preliminary and definitive proxy materials, post-effective
amendments to the Registration Statement, semi-annual reports on Form N-SAR and
notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and filing of
the Fund's federal, state and local tax returns; preparing and filing the Fund's
federal excise tax return pursuant to Section 4982 of the Code; providing
assistance with investor and public relations matters; monitoring the valuation
of portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Fund as it may reasonably request in the conduct of
the its business, subject to the direction and control of the Fund's Board of
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Directors. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Directors,
officers and executive employees of the Fund (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Fund, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Fund; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Fund is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Fund business) of Directors, officers and
employees of the Fund who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Fund; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Fund shall have adopted a plan in conformity with Rule 12b-1 under the 1940
Act providing that the Fund (or some other party) shall assume some or all of
such expenses. You shall be required to pay such of the foregoing sales expenses
as are not required to be paid by the principal underwriter pursuant to the
underwriting agreement or are not permitted to be paid by the Fund (or some
other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Fund
shall pay you in United States Dollars on the last day of each month the unpaid
balance of a fee equal to the excess of (a) 1/12 of .75 of 1 percent of the
average daily net assets as defined below of the Fund for such month; provided
that, for any calendar month during which the average of such values exceeds
$250,000,000, the fee payable for that month based on the portion of the average
of such values in excess of $250,000,000 shall be 1/12 of .72 of 1 percent of
such portion; provided that, for any calendar month during which the average of
such values exceeds $1,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $1,000,000,000 shall be 1/12
of .70 of 1 percent of such portion; provided that, for any calendar month
during which the average of such values exceeds $2,500,000,000, the fee
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<PAGE>
payable for that month based on the portion of the average of such values in
excess of $2,500,000,000 shall be 1/12 of .68 of 1 percent of such portion;
provided that, for any calendar month during which the average of such values
exceeds $5,000,000,000, the fee payable for that month based on the portion of
the average of such values in excess of $5,000,000,000 shall be 1/12 of .65 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $7,500,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $7,500,000,000
shall be 1/12 of .64 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $10,000,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $10,000,000,000 shall be 1/12 of .63 of 1 percent of such
portion; and provided that, for any calendar month during which the average of
such values exceeds $12,500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $12,500,000,000 shall be 1/12
of .62 of 1 percent of such portion; over any compensation waived by you from
time to time (as more fully described below). You shall be entitled to receive
during any month such interim payments of your fee hereunder as you shall
request, provided that no such payment shall exceed 75 percent of the amount of
your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Fund. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Fund agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates,
4
<PAGE>
provided that nothing in this Agreement shall be deemed to protect or purport to
protect you against any liability to the Fund or its shareholders to which you
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until September 30, 2000, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Fund's Board of Directors on 60 days' written
notice to you, or by you on 60 days' written notice to the Fund. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the State of
New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
5
<PAGE>
KEMPER NEW EUROPE FUND, INC.
By: /s/Mark S. Casady
----------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/Thomas W. Littauer
----------------------------
Managing Director
6
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 3rd day of September, 1999, between KEMPER NEW EUROPE FUND,
INC., a Maryland corporation (the "Fund"), and KEMPER DISTRIBUTORS, INC., a
Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as agent for distribution of
shares of beneficial interest (hereinafter called "shares") of the Fund in
jurisdictions wherein shares of the Fund may legally be offered for sale;
provided, however, that the Fund in its absolute discretion may (a) issue or
sell shares directly to holders of shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; or (b) issue or
sell shares at net asset value to the shareholders of any other investment
company, for which KDI shall act as exclusive distributor, who wish to exchange
all or a portion of their investment in shares of such other investment company
for shares of the Fund. KDI shall appoint various financial service firms
("Firms") to provide distribution services to investors. The Firms shall provide
such office space and equipment, telephone facilities, personnel, literature
distribution, advertising and promotion as is necessary or beneficial for
providing information and distribution services to existing and potential
clients of the Firms. KDI may also provide some of the above services for the
Fund.
KDI accepts such appointment as distributor and principal underwriter
and agrees to render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless expressly
provided herein or otherwise authorized, shall have no authority to act for or
represent the Fund in any way. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will,
pursuant to separate written contracts, appoint various Firms to provide
advertising, promotion and other distribution services contemplated hereunder
directly to or for the benefit of existing and potential shareholders who may be
clients of such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell such
part of the authorized shares of the Fund remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
("Securities Act"), at prices determined as hereinafter provided and on terms
hereinafter set forth, all subject to applicable federal and state laws and
regulations and to the Fund's organizational documents.
<PAGE>
2. KDI shall sell shares of the Fund to or through qualified Firms in
such manner, not inconsistent with the provisions hereof and the then effective
registration statement (and related prospectus) of the Fund under the Securities
Act, as KDI may determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the Fund without
prior consent of the Fund. In addition to sales made by it as agent of the Fund,
KDI may, in its discretion, also sell shares of the Fund as principal to persons
with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold
by KDI shall be so offered or sold at a price per share determined in accordance
with the then current prospectus. The price the Fund shall receive for all
shares purchased from it shall be the net asset value used in determining the
public offering price applicable to the sale of such shares. Any excess of the
sales price over the net asset value of the shares of the Fund sold by KDI as
agent shall be retained by KDI as a commission for its services hereunder. KDI
may compensate Firms for sales of shares at the commission levels provided in
the Fund's prospectus from time to time. KDI may pay other commissions, fees or
concessions to Firms, any may pay them to others in its discretion, in such
amounts as KDI shall determine from time to time. KDI shall be entitled to
receive and retain any applicable contingent deferred sales charge as described
in the Fund's prospectus. KDI shall also receive any distribution services fee
payable by the Fund as provided in the Fund's Amended and Restated 12b-1 Plan,
as amended from time to time (the "Plan").
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price or net asset value, as
applicable, of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered
under the Securities Act for sale as herein contemplated such shares as KDI
shall reasonably request and as the Securities and Exchange Commission shall
permit to be so registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms to
issue and deliver on behalf of the Fund such confirmations of sales made by it
pursuant to this Agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund the amount due
the Fund for the sale of such shares. Certificates shall be issued or shares
registered on the transfer books of the Fund in such names and denominations as
KDI may specify.
2
<PAGE>
6. KDI shall order shares of the Fund from the Fund only to the extent
that it shall have received purchase orders therefor. KDI will not make, or
authorize Firms or others to make (a) any short sales of shares of the Fund; or
(b) any sales of such shares to any Board member or officer of the Fund or to
any officer or Board member of KDI or of any corporation or association
furnishing investment advisory, managerial or supervisory services to the Fund,
or to any corporation or association, unless such sales are made in accordance
with the then current prospectus relating to the sale of such shares. KDI, as
agent of and for the account of the Fund, may repurchase the shares of the Fund
at such prices and upon such terms and conditions as shall be specified in the
current prospectus of the Fund. In selling or reacquiring shares of the Fund for
the account of the Fund, KDI will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or reacquisition,
as the case may be, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by KDI or any employee,
representative or agent of KDI. KDI will observe and be bound by all the
provisions of the Fund's organizational documents (and of any fundamental
policies adopted by the Fund pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), notice of which shall have been given to KDI) which
at the time in any way require, limit, restrict, prohibit or otherwise regulate
any action on the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by KDI under
this Agreement or the Plan. The Fund will pay or cause to be paid expenses
(including the fees and disbursements of its own counsel) of any registration of
the Fund and its shares under the United States securities laws and expenses
incident to the issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent. KDI will pay
all expenses (other than expenses which one or more Firms may bear pursuant to
any agreement with KDI) incident to the sale and distribution of the shares
issued or sold hereunder, including, without limiting the generality of the
foregoing, all (a) expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other literature,
advertising and selling aids in connection with the offering of the shares for
sale (except that such expenses need not include expenses incurred by the Fund
in connection with the preparation, typesetting, printing and distribution of
any registration statement or prospectus, report or other communication to
shareholders in their capacity as such), (b) expenses of advertising in
connection with such offering and (c) expenses (other than the Fund's auditing
expenses) of qualifying or continuing the qualification of the shares for sale
and, in connection therewith, of qualifying or continuing the qualification of
the Fund as a dealer or broker under the laws of such states as may be
designated by KDI under the conditions herein specified. No transfer taxes, if
any, which may be payable in connection with the issue or delivery or shares
sold as herein contemplated or of the certificates for such shares shall be
borne by the Fund, and KDI will indemnify and hold harmless the Fund against
liability for all such transfer taxes.
8. This Agreement shall become effective on the date hereof and shall
continue until September 30, 1999; and shall continue from year to year
thereafter only so long as such continuance is approved in the manner required
by the Investment Company Act.
3
<PAGE>
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by KDI on sixty (60) days' written notice to the other party. The
Fund may effect termination with respect to any class of any series of the Fund
by a vote of (i) a majority of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement, or in any other agreement related to the
Plan, or (ii) a majority of the outstanding voting securities of such series or
class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon KDI's failure to fulfill
any of its obligations hereunder.
All material amendments to this Agreement must be approved by a vote of
a majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as
set forth in the Plan. Termination of this Agreement shall not affect the right
of KDI to receive payments on any unpaid balance of the compensation earned
prior to such termination, as set forth in the Plan.
Notwithstanding anything in this Agreement to the contrary, KDI shall
be contractually bound hereunder by the terms of any publicly announced waiver
of or cap on the compensation received for its distribution services under the
Plan or by the terms of any written document provided to the Board of Directors
of the Fund announcing a waiver or cap, as if such waiver or cap were fully set
forth herein.
9. KDI will not use or distribute, or authorize the use, distribution
or dissemination by Firms or others in connection with the sale of Fund shares
any statements other than those contained in the Fund's current prospectus,
except such supplemental literature or advertising as shall be lawful under
federal and state securities laws and regulations. KDI will furnish the Fund
with copies of all such material.
10. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
12. This Agreement shall be construed in accordance with applicable
federal law and with the laws of The Commonwealth of Massachusetts.
4
<PAGE>
13. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all prior agreements between the
parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be
executed as of the day and year first above written.
KEMPER NEW EUROPE FUND, INC.
By: /s/Mark S. Casady
--------------------
Mark S. Casady
President
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
----------------------
James L. Greenawalt
President
5
AGENCY AGREEMENT
AGREEMENT dated the 3rd day of September, 1999, by and between KEMPER NEW EUROPE
FUND, INC., a Maryland corporation having its principal place of business at 222
South Riverside, Chicago, Illinois ("Fund"), and INVESTORS FIDUCIARY TRUST
COMPANY, a state chartered trust company organized and existing under the laws
of the State of Missouri having its principal place of business at 127 West 10th
Street, Kansas City, Missouri 64105 ("IFTC").
WHEREAS, Fund wants to appoint IFTC as Transfer Agent and Dividend Disbursing
Agent, and IFTC wants to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Documents to be Filed with Appointment.
---------------------------------------
In connection with the appointment of IFTC as Transfer Agent
and Dividend Disbursing Agent for Fund, there will be filed
with IFTC the following documents:
A. A certified copy of the resolutions of the Board of
Directors of Fund appointing IFTC as Transfer Agent
and Dividend Disbursing Agent, approving the form of
this Agreement, and designating certain persons to
give written instructions and requests on behalf of
Fund.
B. A certified copy of the Articles of Incorporation of
Fund.
C. A certified copy of the Bylaws of Fund.
D. Copies of Registration Statements filed with the
Securities and Exchange Commission.
E. Specimens of all forms of outstanding share
certificates as approved by the Board of Directors of
Fund, with a certificate of the Secretary of Fund as
to such approval.
F. Specimens of the signatures of the officers of the
Fund authorized to sign share certificates and
individuals authorized to sign written instructions
and requests on behalf of the Fund.
G. An opinion of counsel for Fund:
(1) With respect to Fund's organization and
existence under the laws of The State of
Maryland.
<PAGE>
(2) With respect to the status of all shares of
Fund covered by this appointment under the
Securities Act of 1933, and any other
applicable federal or state statute.
(3) To the effect that all issued shares are,
and all unissued shares will be when issued,
validly issued, fully paid and
non-assessable.
2. Certain Representations and Warranties of IFTC. IFTC
----------------------------------------------
represents and warrants to Fund that:
A. It is a trust company duly organized and existing and
in good standing under the laws of the State of
Missouri.
B. It is duly qualified to carry on its business in the
State of Missouri.
C. It is empowered under applicable laws and by its
Articles of Incorporation and Bylaws to enter into
and perform the services contemplated in this
Agreement.
D. All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement.
E. It has and will continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.
F. It is, and will continue to be, registered as a
transfer agent under the Securities Exchange Act of
1934.
3. Certain Representations and Warranties of Fund. Fund
----------------------------------------------
represents and warrants to IFTC that:
A. It is a corporation duly organized and existing and
in good standing under the laws of the State of
Maryland.
B. It is an investment company registered under the
Investment Company Act of 1940.
C. A registration statement under the Securities Act of
1933 has been filed and will be effective with
respect to all shares of Fund being offered for sale
at any time and from time to time.
D. All requisite steps have been or will be taken to
register Fund's shares for sale in all applicable
states, including the District of Columbia.
2
<PAGE>
E. Fund and its Directors are empowered under applicable
laws and by the Fund's Articles of Incorporation and
Bylaws to enter into and perform this Agreement.
4. Scope of Appointment.
--------------------
A. Subject to the conditions set forth in this
Agreement, Fund hereby employs and appoints IFTC as
Transfer Agent and Dividend Disbursing Agent
effective the date hereof.
B. IFTC hereby accepts such employment and appointment
and agrees that it will act as Fund's Transfer Agent
and Dividend Disbursing Agent. IFTC agrees that it
will also act as agent in connection with Fund's
periodic withdrawal payment accounts and other
open-account or similar plans for shareholders, if
any.
C. IFTC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and
obligations hereunder in accordance with industry
practice.
D. Fund agrees to use all reasonable efforts to deliver
to IFTC in Kansas City, Missouri, as soon as they are
available, all its shareholder account records.
E. Subject to the provisions of Sections 20 and 21
hereof, IFTC agrees that it will perform all the
usual and ordinary services of Transfer Agent and
Dividend Disbursing Agent and as agent for the
various shareholder accounts, including, without
limitation, the following: issuing, transferring and
cancelling share certificates, maintaining all
shareholder accounts, preparing shareholder meeting
lists, mailing proxies, receiving and tabulating
proxies, mailing shareholder reports and
prospectuses, withholding federal income taxes,
preparing and mailing checks for disbursement of
income and capital gains dividends, preparing and
filing all required U.S. Treasury Department
information returns for all shareholders, preparing
and mailing confirmation forms to shareholders and
dealers with respect to all purchases and
liquidations of Fund shares and other transactions in
shareholder accounts for which confirmations are
required, recording reinvestments of dividends and
distributions in Fund shares, recording redemptions
of Fund shares and preparing and mailing checks for
payments upon redemption and for disbursements to
systematic withdrawal plan shareholders.
5. Compensation and Expenses.
-------------------------
A. In consideration for the services provided hereunder
by IFTC as Transfer Agent and Dividend Disbursing
Agent, Fund will pay to IFTC from time to time
compensation as agreed upon for all services rendered
as Agent, and
3
<PAGE>
also, all its reasonable out-of-pocket expenses and
other disbursements incurred in connection with the
agency. Such compensation will be set forth in a
separate schedule to be agreed to by Fund and IFTC.
The initial agreement regarding compensation is
attached as Exhibit A.
B. Fund agrees to promptly reimburse IFTC for all
reasonable out-of-pocket expenses or advances
incurred by IFTC in connection with the performance
of services under this Agreement including, but not
limited to, postage (and first class mail insurance
in connection with mailing share certificates),
envelopes, check forms, continuous forms, forms for
reports and statements, stationery, and other similar
items, telephone and telegraph charges incurred in
answering inquiries from dealers or shareholders,
microfilm used each year to record the previous
year's transactions in shareholder accounts and
computer tapes used for permanent storage of records
and cost of insertion of materials in mailing
envelopes by outside firms. IFTC may, at its option,
arrange to have various service providers submit
invoices directly to the Fund for payment of
out-of-pocket expenses reimbursable hereunder.
C.
Service Company shall be contractually bound
hereunder by the terms of any publicly announced fee
cap or waiver of its fee or by the terms of any
written document provided to the Board of Directors
of the Fund announcing a fee cap or waiver of its
fee, or any limitation of the Fund's expenses, as if
such fee cap, fee waiver or expense limitation were
fully set forth herein.
6. Efficient Operation of IFTC System.
----------------------------------
A. In connection with the performance of its services
under this Agreement, IFTC is responsible for the
accurate and efficient functioning of its system at
all times, including:
(1) The accuracy of the entries in IFTC's
records reflecting purchase and redemption
orders and other instructions received by
IFTC from dealers, shareholders, Fund or its
principal underwriter.
(2) The timely availability and the accuracy of
shareholder lists, shareholder account
verifications, confirmations and other
shareholder account information to be
produced from IFTC's records or data.
(3) The accurate and timely issuance of dividend
and distribution checks in accordance with
instructions received from Fund.
(4) The accuracy of redemption transactions and
payments in accordance with redemption
instructions received from dealers,
shareholders or Fund or other authorized
persons.
4
<PAGE>
(5) The deposit daily in Fund's appropriate
special bank account of all checks and
payments received from dealers or
shareholders for investment in shares.
(6) The requiring of proper forms of
instructions, signatures and signature
guarantees and any necessary documents
supporting the rightfulness of transfers,
redemptions and other shareholder account
transactions, all in conformance with IFTC's
present procedures with such changes as may
be deemed reasonably appropriate by IFTC or
as may be reasonably approved by or on
behalf of Fund.
(7) The maintenance of a current duplicate set
of Fund's essential or required records, as
agreed upon from time to time by Fund and
IFTC, at a secure distant location, in form
available and usable forthwith in the event
of any breakdown or disaster disrupting its
main operation.
7. Indemnification.
---------------
A. Fund shall indemnify and hold IFTC harmless from and
against any and all claims, actions, suits, losses,
damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or
attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with the
agency relationship created by this Agreement,
provided that IFTC has acted in good faith, without
negligence and without willful misconduct.
B. IFTC shall indemnify and hold Fund harmless from and
against any and all claims, actions, suits, losses,
damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or
attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with the
agency relationship created by this Agreement,
provided that IFTC has not acted in good faith,
without negligence and without willful misconduct.
C. In order that the indemnification provisions
contained in this Section 7 shall apply, upon the
assertion of a claim for which either party (the
"Indemnifying Party") may be required to provide
indemnification hereunder, the party seeking
indemnification (the "Indemnitee") shall promptly
notify the Indemnifying Party of such assertion, and
shall keep such party advised with respect to all
developments concerning such claim. The Indemnifying
Party shall be entitled to assume control of the
defense and the negotiations, if any, regarding
settlement of the claim. If the Indemnifying Party
assumes control, the Indemnitee shall have the option
to participate in the defense and negotiations of
such claim at its own expense. The Indemnitee shall
in no event confess, admit to, compromise, or settle
any claim for which the Indemnifying Party may be
required to indemnify it
5
<PAGE>
except with the prior written consent of the
Indemnifying Party, which shall not be unreasonably
withheld.
8. Certain Covenants of IFTC and Fund.
----------------------------------
A. All requisite steps will be taken by Fund from time
to time when and as necessary to register the Fund's
shares for sale in all states in which Fund's shares
shall at the time be offered for sale and require
registration. If at any time Fund receives notice of
any stop order or other proceeding in any such state
affecting such registration or the sale of Fund's
shares, or of any stop order or other proceeding
under the Federal securities laws affecting the sale
of Fund's shares, Fund will give prompt notice
thereof to IFTC.
B. IFTC hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to
Fund for safekeeping of share certificates, check
forms, and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
Further, IFTC agrees to carry insurance, as specified
in Exhibit B hereto, with insurers reasonably
acceptable to Fund and in minimum amounts that are
reasonably acceptable to Fund, which will not be
changed without the consent of Fund, which consent
shall not be unreasonably withheld, and which will be
expanded in coverage or increased in amounts from
time to time if and when reasonably requested by
Fund. If IFTC determines that it is unable to obtain
any such insurance upon commercially reasonable
terms, it shall promptly so advise Fund in writing.
In such event, Fund shall have the right to terminate
this Agreement upon 30 days notice.
C. To the extent required by Section 31 of the
Investment Company Act of 1940 and Rules thereunder,
IFTC agrees that all records maintained by IFTC
relating to the services to be performed by IFTC
under this Agreement are the property of Fund and
will be preserved and will be surrendered promptly to
Fund on request.
D. IFTC agrees to furnish Fund semi-annual reports of
its financial condition, consisting of a balance
sheet, earnings statement and any other reasonably
available financial information reasonably requested
by Fund. The annual financial statements will be
certified by IFTC's certified public accountants.
E. IFTC represents and agrees that it will use all
reasonable efforts to keep current on the trends of
the investment company industry relating to
shareholder services and will use all reasonable
efforts to continue to modernize and improve its
system without additional cost to Fund.
F. IFTC will permit Fund and its authorized
representatives to make periodic inspections of its
operations at reasonable times during business hours.
6
<PAGE>
G. If IFTC is prevented from complying, either totally
or in part, with any of the terms or provisions of
this Agreement, by reason of fire, flood, storm,
strike, lockout or other labor trouble, riot, war,
rebellion, accidents, acts of God, equipment, utility
or transmission failure or damage, and/or any other
cause or casualty beyond the reasonable control of
IFTC, whether similar to the foregoing matters or
not, then upon written notice to Fund, the
requirements of this Agreement that are affected by
such disability, to the extent so affected, shall be
suspended during the period of such disability;
provided, however, that IFTC shall make reasonable
effort to remove such disability as soon as possible.
During such period, Fund may seek alternate sources
of service without liability hereunder; and IFTC will
use all reasonable efforts to assist Fund to obtain
alternate sources of service. IFTC shall have no
liability to Fund for nonperformance because of the
reasons set forth in this Section 8.G; but if a
disability that, in Fund's reasonable belief,
materially affects IFTC's ability to perform its
obligations under this Agreement continues for a
period of 30 days, then Fund shall have the right to
terminate this Agreement upon 10 days written notice
to IFTC.
9. Adjustment. In case of any recapitalization, readjustment or
----------
other change in the structure of Fund requiring a change in
the form of share certificates, IFTC will issue or register
certificates in the new form in exchange for, or in transfer
of, the outstanding certificates in the old form, upon
receiving the following:
A. Written instructions from an officer of Fund.
B. Certified copy of any amendment to the Articles of
Incorporation or other document effecting the change.
C. Certified copy of any order or consent of each
governmental or regulatory authority required by law
for the issuance of the shares in the new form, and
an opinion of counsel that no order or consent of any
other government or regulatory authority is required.
D. Specimens of the new certificates in the form
approved by the Board of Directors of Fund, with a
certificate of the Secretary of Fund as to such
approval.
E. Opinion of counsel for Fund:
(1) With respect to the status of the shares of
Fund in the new form under the Securities
Act of 1933, and any other applicable
federal or state laws.
(2) To the effect that the issued shares in the
new form are, and all unissued shares will
be when issued, validly issued, fully paid
and non-assessable.
7
<PAGE>
10. Share Certificates. Fund will furnish IFTC with a sufficient
------------------
supply of blank share certificates and from time to time will
renew such supply upon the request of IFTC. Such certificates
will be signed manually or by facsimile signatures of the
officers of Fund authorized by law and Fund's Bylaws to sign
share certificates and, if required, will bear the trust seal
or facsimile thereof.
11. Death, Resignation or Removal of Signing Officer. Fund will
------------------------------------------------
file promptly with IFTC written notice of any change in the
officers authorized to sign share certificates, written
instructions or requests, together with two signature cards
bearing the specimen signature of each newly authorized
officer, all as certified by an appropriate officer of the
Fund. In case any officer of Fund who will have signed
manually or whose facsimile signature will have been affixed
to blank share certificates will die, resign, or be removed
prior to the issuance of such certificates, IFTC may issue or
register such share certificates as the share certificates of
Fund notwithstanding such death, resignation, or removal,
until specifically directed to the contrary by Fund in
writing. In the absence of such direction, Fund will file
promptly with IFTC such approval, adoption, or ratification as
may be required by law.
12. Future Amendments of Articles of Incorporation and Bylaws.
---------------------------------------------------------
Fund will promptly file with IFTC copies of all material
amendments to its Articles of Incorporation and Bylaws and
Registration Statement made after the date of this Agreement.
13. Instructions, Opinion of Counsel and Signatures. At any time
-----------------------------------------------
IFTC may apply to any officer of Fund for instructions, and
may consult with legal counsel for Fund at the expense of
Fund, or with its own legal counsel at its own expense, with
respect to any matter arising in connection with the agency;
and it will not be liable for any action taken or omitted by
it in good faith in reliance upon such instructions or upon
the opinion of such counsel. IFTC is authorized to act on the
orders, directions or instructions of such persons as the
Board of Directors of Fund shall from time to time designate
by resolution. IFTC will be protected in acting upon any paper
or document, including any orders, directions or instructions,
reasonably believed by it to be genuine and to have been
signed by the proper person or persons; and IFTC will not be
held to have notice of any change of authority of any person
so authorized by Fund until receipt of written notice thereof
from Fund. IFTC will also be protected in recognizing share
certificates that it reasonably believes to bear the proper
manual or facsimile signatures of the officers of Fund, and
the proper countersignature of any former Transfer Agent or
Registrar, or of a Co-Transfer Agent or Co-Registrar.
14. Papers Subject to Approval of Counsel. The acceptance by IFTC
-------------------------------------
of its appointment as Transfer Agent and Dividend Disbursing
Agent, and all documents filed in connection with such
appointment and thereafter in connection with the agencies,
will be subject to the approval of legal counsel for IFTC,
which approval will not be unreasonably withheld.
8
<PAGE>
15. Certification of Documents. The required copy of the Articles
--------------------------
of Incorporation of Fund and copies of all amendments thereto
will be certified by the appropriate official of The State of
Maryland; and if such Articles of Incorporation and amendments
are required by law to be also filed with a county, city or
other officer or official body, a certificate of such filing
will appear on the certified copy submitted to IFTC. A copy of
the order or consent of each governmental or regulatory
authority required by law for the issuance of Fund shares will
be certified by the Secretary or Clerk of such governmental or
regulatory authority, under proper seal of such authority. The
copy of the Bylaws and copies of all amendments thereto and
copies of resolutions of the Board of Directors of Fund will
be certified by the Secretary or an Assistant Secretary of
Fund.
16. Records. IFTC will maintain customary records in connection
-------
with its agency, and particularly will maintain those records
required to be maintained pursuant to sub-paragraph (2)(iv) of
paragraph (b) of Rule 31a-1 under the Investment Company Act
of 1940, if any.
17. Disposition of Books, Records and Cancelled Certificates. IFTC
--------------------------------------------------------
will send periodically to Fund, or to where designated by the
Secretary or an Assistant Secretary of Fund, all books,
documents, and all records no longer deemed needed for current
purposes and share certificates which have been cancelled in
transfer or in exchange, upon the understanding that such
books, documents, records, and share certificates will not be
destroyed by Fund without the consent of IFTC (which consent
will not be unreasonably withheld), but will be safely stored
for possible future reference.
18. Provisions Relating to IFTC as Transfer Agent.
---------------------------------------------
A. IFTC will make original issues of share certificates
upon written request of an officer of Fund and upon
being furnished with a certified copy of a resolution
of the Board of Directors authorizing such original
issue, an opinion of counsel as outlined in Section
1.G or 9.E of this Agreement, the certificates
required by Section 10 of this Agreement and any
other documents required by Section 1 or 9 of this
Agreement.
B. Before making any original issue of certificates,
Fund will furnish IFTC with sufficient funds to pay
any taxes required on the original issue of the
shares. Fund will furnish IFTC such evidence as may
be required by IFTC to show the actual value of the
shares. If no taxes are payable, IFTC will upon
request be furnished with an opinion of outside
counsel to that effect.
C. Shares will be transferred and new certificates
issued in transfer, or shares accepted for redemption
and funds remitted therefor, upon surrender of the
old certificates in form deemed by IFTC properly
endorsed for transfer or redemption accompanied by
such documents as IFTC may deem necessary
9
<PAGE>
to evidence the authority of the person making the
transfer or redemption, and bearing satisfactory
evidence of the payment of any applicable share
transfer taxes. IFTC reserves the right to refuse to
transfer or redeem shares until it is satisfied that
the endorsement or signature on the certificate or
any other document is valid and genuine, and for that
purpose it may require a guarantee of signature by
such persons as may from time to time be specified in
the prospectus related to such shares or otherwise
authorized by Fund. IFTC also reserves the right to
refuse to transfer or redeem shares until it is
satisfied that the requested transfer or redemption
is legally authorized, and it will incur no liability
for the refusal in good faith to make transfers or
redemptions which, in its judgment, are improper,
unauthorized, or otherwise not rightful. IFTC may, in
effecting transfers or redemptions, rely upon
Simplification Acts or other statutes which protect
it and Fund in not requiring complete fiduciary
documentation.
D. When mail is used for delivery of share certificates,
IFTC will forward share certificates in
"nonnegotiable" form as provided by Fund by first
class mail, all such mail deliveries to be covered
while in transit to the addressee by insurance
arranged for by IFTC.
E. IFTC will issue and mail subscription warrants and
certificates provided by Fund and representing share
dividends, exchanges or split-ups, or act as
Conversion Agent upon receiving written instructions
from any officer of Fund and such other documents as
IFTC deems necessary.
F. IFTC will issue, transfer, and split-up certificates
upon receiving written instructions from an officer
of Fund and such other documents as IFTC may deem
necessary.
G. IFTC may issue new certificates in place of
certificates represented to have been lost,
destroyed, stolen or otherwise wrongfully taken, upon
receiving indemnity satisfactory to IFTC, and may
issue new certificates in exchange for, and upon
surrender of, mutilated certificates. Any such
issuance shall be in accordance with the provisions
of law governing such matter and any procedures
adopted by the Board of Directors of the Fund of
which IFTC has notice.
H. IFTC will supply a shareholder's list to Fund
properly certified by an officer of IFTC for any
shareholder meeting upon receiving a request from an
officer of Fund. It will also supply lists at such
other times as may be reasonably requested by an
officer of Fund.
I. Upon receipt of written instructions of an officer of
Fund, IFTC will address and mail notices to
shareholders.
10
<PAGE>
J. In case of any request or demand for the inspection
of the share books of Fund or any other books of Fund
in the possession of IFTC, IFTC will endeavor to
notify Fund and to secure instructions as to
permitting or refusing such inspection. IFTC reserves
the right, however, to exhibit the share books or
other books to any person in case it is advised by
its counsel that it may be held responsible for the
failure to exhibit the share books or other books to
such person.
19. Provisions Relating to Dividend Disbursing Agency.
-------------------------------------------------
A. IFTC will, at the expense of Fund, provide a special
form of check containing the imprint of any device or
other matter desired by Fund. Said checks must,
however, be of a form and size convenient for use by
IFTC.
B. If Fund wants to include additional printed matter,
financial statements, etc., with the dividend checks,
the same will be furnished to IFTC within a
reasonable time prior to the date of mailing of the
dividend checks, at the expense of Fund.
C. If Fund wants its distributions mailed in any special
form of envelopes, sufficient supply of the same will
be furnished to IFTC but the size and form of said
envelopes will be subject to the approval of IFTC. If
stamped envelopes are used, they must be furnished by
Fund; or, if postage stamps are to be affixed to the
envelopes, the stamps or the cash necessary for such
stamps must be furnished by Fund.
D. IFTC will maintain one or more deposit accounts as
Agent for Fund, into which the funds for payment of
dividends, distributions, redemptions or other
disbursements provided for hereunder will be
deposited, and against which checks will be drawn.
20. Termination of Agreement.
------------------------
A. This Agreement may be terminated by either party upon
sixty (60) days prior written notice to the other
party.
B. Fund, in addition to any other rights and remedies,
shall have the right to terminate this Agreement
forthwith upon the occurrence at any time of any of
the following events:
(1) Any interruption or cessation of operations
by IFTC or its assigns which materially
interferes with the business operation of
Fund.
(2) The bankruptcy of IFTC or its assigns or the
appointment of a receiver for IFTC or its
assigns.
11
<PAGE>
(3) Any merger, consolidation or sale of
substantially all the assets of IFTC or its
assigns.
(4) The acquisition of a controlling interest in
IFTC or its assigns, by any broker, dealer,
investment adviser or investment company
except as may presently exist.
(5) Failure by IFTC or its assigns to perform
its duties in accordance with this
Agreement, which failure materially
adversely affects the business operations of
Fund and which failure continues for thirty
(30) days after written notice from Fund.
(6) The registration of IFTC or its assigns as a
transfer agent under the Securities Exchange
Act of 1934 is revoked, terminated or
suspended for any reason.
C. In the event of termination, Fund will promptly pay
IFTC all amounts due to IFTC hereunder. Upon
termination of this Agreement, IFTC shall deliver all
shareholder and account records pertaining to Fund
either to Fund or as directed in writing by Fund.
21. Assignment.
----------
A. Except for the assignment of responsibilities
pursuant to the Services Agreement ("Services
Agreement") between IFTC and Kemper Service Company
("KSVC"), which Fund has approved, neither this
Agreement nor any rights or obligations hereunder may
be assigned by IFTC without the written consent of
Fund; provided, however, no assignment will relieve
IFTC of any of its obligations hereunder.
B. This Agreement including, without limitation, the
provisions of Section 7 will inure to the benefit of
and be binding upon the parties and their respective
successors and assigns including KSVC pursuant to the
aforesaid Services Agreement.
C. KSVC is authorized by Fund to use the system services
of DST Systems, Inc.
22. Confidentiality.
---------------
A. Except as provided in the last sentence of Section
18.J hereof, or as otherwise required by law, IFTC
will keep confidential all records of and information
in its possession relating to Fund or its
shareholders or shareholder accounts and will not
disclose the same to any person except at the request
or with the consent of Fund.
12
<PAGE>
B. Except as otherwise required by law, Fund will keep
confidential all financial statements and other
financial records (other than statements and records
relating solely to Fund's business dealings with
IFTC) and all manuals, systems and other technical
information and data, not publicly disclosed,
relating to IFTC's operations and programs furnished
to it by IFTC pursuant to this Agreement and will not
disclose the same to any person except at the request
or with the consent of IFTC. Notwithstanding anything
to the contrary in this Section 22.B, if an attempt
is made pursuant to subpoena or other legal process
to require Fund to disclose or produce any of the
aforementioned manuals, systems or other technical
information and data, Fund shall give IFTC prompt
notice thereof prior to disclosure or production so
that IFTC may, at its expense, resist such attempt.
23. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties by either party herein
contained will survive the execution and delivery of this
Agreement.
24. Miscellaneous.
-------------
A. This Agreement is executed and delivered in the State
of Illinois and shall be governed by the laws of said
state.
B. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by both parties
hereto.
C. The captions in this Agreement are included for
convenience of reference only, and in no way define
or limit any of the provisions hereof or otherwise
affect their construction or effect.
D. This Agreement shall become effective as of the date
hereof.
E. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed
an original but all of which together shall
constitute one and the same instrument.
F. If any part, term or provision of this Agreement is
held by the courts to be illegal, in conflict with
any law or otherwise invalid, the remaining portion
or portions shall be considered severable and not be
affected, and the rights and obligations of the
parties shall be construed and enforced as if the
Agreement did not contain the particular part, term
or provision held to be illegal or invalid.
13
<PAGE>
G. This Agreement, together with the Fee Schedule, is
the entire contract between the parties relating to
the subject matter hereof and supersedes all prior
agreements between the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officer as of the day and year first set forth
above.
KEMPER NEW EUROPE FUND, INC.
By: /s/Mark S. Casady
------------------------------
Title: President
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/Stephen R. Hilliard
------------------------------
Title: Executive Vice President
14
<PAGE>
EXHIBIT B
---------
IFTC INSURANCE COVERAGE
-----------------------
DESCRIPTION OF POLICY:
Fidelity Bond
Covers losses caused by dishonesty of employees, physical loss
of securities on or outside of premises while in possession of
authorized person, loss caused by forgery or alteration of
checks or similar instruments.
Errors and Omissions Insurance
Covers claims made for actual or alleged negligent acts,
errors or omissions committed in the performance of transfer
agency services.
Mail Insurance (applies to all full service operations)
Provides indemnity for the following types of securities lost
in the mails: Non-negotiable securities mailed to
domestic locations via registered mail.
Non-negotiable securities mailed to domestic
locations via first-class or certified mail.
Non-negotiable securities mailed to foreign locations
via registered mail. Negotiable securities mailed to
all locations via registered mail.
15
<PAGE>
TRANSFER AGENCY FEE SCHEDULE SUPPLEMENT
For purposes of the following limitation, "Class Expenses" are expenses
identified as attributable to a particular class of the Fund and charged
directly to the class. Class Expenses are limited to the following: registration
fees, directors' or trustees' fees, expenses of periodic meetings of directors,
trustees or shareholders, transfer agency fees, legal and accounting fees (other
than fees for income tax return preparation or income tax advice), and costs of
shareholder communications required by law (e.g., the preparation and mailing of
prospectuses and proxy statements). Class Expenses specifically do not include
Rule 12b-1 fees and administrative service fees. Transfer agency fees and
expenses will be limited for any class of the Fund to the extent necessary to
ensure that the Class Expenses allocated to each share of a class of the Fund
for a fiscal year will differ from the Class Expenses allocated to each share of
any other class of the Fund by less than 50 basis points (.50%) of the average
daily net asset value per share of the class of shares with the smallest average
net asset value (adjusted as necessary for classes in effect for a partial
year). For a Fund with multiple series, the foregoing shall be applied to each
series separately.
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this 3rd day of September, 1999, by and between KEMPER NEW
EUROPE FUND, INC., a Maryland corporation (the "Fund"), and KEMPER DISTRIBUTORS,
INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to provide information and administrative
services for the benefit of the Fund and its shareholders. In this regard, KDI
shall appoint various broker-dealer firms and other service or administrative
firms ("Firms") to provide related services and facilities for persons who are
investors in the Fund ("investors"). The Firms shall provide such office space
and equipment, telephone facilities, personnel or other services as may be
necessary or beneficial for providing information and services to investors in
the Fund. Such services and assistance may include, but are not limited to,
establishing and maintaining accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund and its
special features, assistance to investors in changing dividend and investment
options, account designations and addresses, and such other administrative
services as the Fund or KDI may reasonably request. Firms may include affiliates
of KDI. KDI may also provide some of the above services for the Fund directly.
KDI accepts such appointment and agrees during such period to render such
services and to assume the obligations herein set forth for the compensation
herein provided. KDI shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. In carrying out its duties and
responsibilities hereunder, KDI will appoint various Firms to provide
administrative and other services described herein directly to or for the
benefit of investors in the Fund. Such Firms shall at all times be deemed to be
independent contractors retained by KDI and not the Fund. KDI and not the Fund
will be responsible for the payment of compensation to such Firms for such
services.
2. For the administrative services and facilities described in Section 1, the
Fund will pay to KDI at the end of each calendar month an administrative service
fee computed at an annual rate of up to 0.25 of 1% of the average daily net
assets of the Fund (except assets attributable to Class I Shares). The initial
fee schedule is set forth as Appendix I hereto. The administrative service fee
will be calculated separately for each class of each series of the Fund as an
expense of each such class; provided, however, no administrative service fee
shall be payable with respect to Class I Shares. For the month and year in which
this Agreement becomes effective or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement is in effect
during such month and year, respectively. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others.
2
<PAGE>
KDI shall be contractually bound hereunder by the terms of any publicly
announced fee cap or waiver of its fee or by the terms of any written document
provided to the Board of Directors of the Fund announcing a fee cap or waiver of
its fee, or any limitation of the Fund's expenses, as if such fee cap, fee
waiver or expense limitation were fully set forth herein.
The net asset value for each share of the Fund shall be calculated in accordance
with the provisions of the Fund's current prospectus. On each day when net asset
value is not calculated, the net asset value of a share of the Fund shall be
deemed to be the net asset value of such a share as of the close of business on
the last day on which such calculation was made for the purpose of the foregoing
computations.
3. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by KDI under this Agreement.
4. This Agreement may be terminated at any time without the payment of any
penalty by the Fund or by KDI on sixty (60) days written notice to the other
party. Termination of this Agreement shall not affect the right of KDI to
receive payments on any unpaid balance of the compensation described in Section
2 hereof earned prior to such termination. This Agreement may not be amended for
any class of any series of the Fund to increase the amount to be paid to KDI for
services hereunder above .25 of 1% of the average daily net assets of such class
without the vote of a majority of the outstanding voting securities of such
class. All material amendments to this Agreement must in any event be approved
by vote of the Board of the Fund.
5. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
6. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
7. This Agreement shall be construed in accordance with applicable federal law
and the laws of the State of Illinois.
[SIGNATURES APPEAR ON THE NEXT PAGE]
2
<PAGE>
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
KEMPER NEW EUROPE FUND, INC.
By: /s/Mark S. Casady
--------------------
Mark S. Casady
President
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
----------------------
James L. Greenawalt
President
3
<PAGE>
APPENDIX I
KEMPER NEW EUROPE FUND, INC.
FEE SCHEDULE FOR ADMINISTRATIVE SERVICES AGREEMENT
Pursuant to Section 2 of the Administrative Services Agreement to which this
Appendix is attached, the Fund and KDI agree that the administrative service fee
will be computed at an annual rate of .25 of 1% (the "Fee Rate") based upon
assets with respect to which a Firm provides administrative services.
KEMPER NEW EUROPE FUND, INC.
By: /s/Mark S. Casady
--------------------
Mark S. Casady
President
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
--------------------
James L. Greenawalt
President
Dated: September 3, 1999
4
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 3rd day of September, 1999 between Kemper New
Europe Fund (the "Fund"), a registered open-end management investment company
with its principal place of business in Chicago, Illinois, and Scudder Fund
Accounting Corporation, with its principal place of business in Boston,
Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Fund has need to determine its net asset value which service FUND
ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Fund as provided in the
prospectus of the Fund and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records and
other documents as are required of the Fund under Section 31 of
the Investment Company Act of 1940 (the "1940 Act") and Rules
31a-1, 31a-2 and 31a-3 thereunder, applicable federal and state
laws and any other law or administrative rules or procedures
which may be applicable to the Fund on behalf of the Fund, other
than those accounts, books and financial records required to be
maintained by the Fund's investment adviser, custodian or
transfer agent and/or books and records maintained by all other
service providers necessary for the Fund to conduct its business
as a registered open-end management investment company. All such
books and records shall be the property of the Fund and shall at
all times during regular business hours be open for inspection
by, and shall be surrendered promptly upon request of, duly
authorized officers of the Fund. All such books and records shall
at all times during regular business hours be open for
inspection, upon request of duly authorized officers of the Fund,
by employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other proper
bookkeeping entries as are necessary for determining that day's
net asset value and net income.
c. Render statements or copies of records as from time to time are
reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by the
Fund or by any regulatory body with jurisdiction over the Fund.
e. Compute the Fund's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of the
net asset value per share, the public offering price and/or its
daily dividend rates and money market yields.
<PAGE>
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Directors of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING; and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Directors of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use
in advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily Dividend
Rates and Yields
FUND ACCOUNTING shall compute the Fund's net asset value, including
net income, in a manner consistent with the specific provisions of the
Registration Statement. Such computation shall be made as of the time
or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money
market yields, if applicable, in accordance with the methodology set
forth in the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Fund's books of account and making the necessary
computations FUND ACCOUNTING shall be entitled to receive, and may
rely upon, information furnished it by means of Proper Instructions,
including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Fund;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available; d. If applicable, the manner of
computation of the public offering price and such other
computations as may be necessary;
e. Transactions in Fund securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Directors.
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<PAGE>
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Fund and shall
be without liability for any action taken or thing done in good faith
in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Directors. The Fund
shall cause oral instructions to be confirmed in writing. Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices as from time to time agreed
to by an authorized officer of the Fund and FUND ACCOUNTING.
The Fund agrees to furnish to the appropriate person(s) within FUND
ACCOUNTING a copy of the Registration Statement as in effect from time
to time. FUND ACCOUNTING may conclusively rely on the Fund's most
recently delivered Registration Statement for all purposes under this
Agreement and shall not be liable to the Fund in acting in reliance
thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund or its shareholders to which FUND
ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time
be agreed upon in writing by the two parties. FUND ACCOUNTING shall be
entitled, if agreed to by the Fund to recover its reasonable
telephone, courier or delivery service, and all other reasonable
out-of-pocket, expenses as incurred, including, without limitation,
reasonable attorneys' fees and reasonable fees for pricing services.
FUND ACCOUNTING shall be contractually bound hereunder by the terms of
any publicly announced fee cap or waiver of its fee or by the terms of
any written document provided to the Board of Directors of the Fund
announcing a fee cap or waiver of its fee, or any limitation
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<PAGE>
of the Fund's expenses, as if such fee cap, fee waiver or expense
limitation were fully set forth herein.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by an
instrument in writing delivered or mailed to the other party. Such
termination shall take effect not sooner than sixty (60) days after
the date of delivery or mailing of such notice of termination. Any
termination date is to be no earlier than four months from the
effective date hereof. Upon termination, FUND ACCOUNTING will turn
over to the Fund or its designee and cease to retain in FUND
ACCOUNTING files, records of the calculations of net asset value and
all other records pertaining to its services hereunder; provided,
however, FUND ACCOUNTING in its discretion may make and retain copies
of any and all such records and documents which it determines
appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund.
Section 10. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn.: Vice President
If to the Fund: Kemper New Europe Fund, Inc.
222 South Riverside Plaza
Chicago, IL 60606
Attn.: President, Secretary or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Directors.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the
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<PAGE>
provisions of this Agreement as in their joint opinions may be
consistent with this Agreement. Any such interpretive or additional
provisions shall be in writing, signed by both parties and annexed
hereto, but no such provisions shall be deemed to be an amendment of
this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of The Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
written above.
KEMPER NEW EUROPE FUND, INC.,
By: /s/Mark S. Casady
--------------------
Mark S. Casady
President
SCUDDER FUND ACCOUNTING CORPORATION
By: /s/John R. Hebble
-------------------
John R. Hebble
5
