<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 1998.
1933 ACT REGISTRATION NO. 333-13681
1940 ACT REGISTRATION NO. 811-07855
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 3 [X]
</TABLE>
(Check appropriate box or boxes)
------------------
KEMPER AGGRESSIVE GROWTH FUND
(Exact name of Registrant as Specified in Charter)
<TABLE>
<S> <C>
222 South Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 781-1121
Philip J. Collora, Vice President, Secretary and Treasurer With a copy to:
Kemper Aggressive Growth Fund Cathy G. O'Kelly
222 South Riverside Plaza David A. Sturms
Chicago, Illinois 60606 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
</TABLE>
It is proposed that this filing will become effective (check appropriate
box).
[ ] immediately upon filing pursuant to paragraph (b)
[X] on February 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
================================================================================
<PAGE> 2
KEMPER AGGRESSIVE GROWTH FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
------------ ----------------------
<S> <C> <C>
1. Cover Page.............................. Cover Page
2. Synopsis................................ Summary; Summary of Expenses; Supplement to
Prospectus
3. Condensed Financial Information......... Financial Highlights; Performance; Supplement to
Prospectus
4. General Description of Registrant....... Summary; Investment Objectives, Policies and Risk
Factors; Capital Structure
5. Management of the Fund.................. Summary; Investment Manager and
Underwriter
5A. Management's Discussion of Fund
Performance............................. Performance
6. Capital Stock and Other Securities...... Summary; Dividends and Taxes; Purchase of Shares;
Capital Structure
7. Purchase of Securities Being Offered.... Summary; Investment Manager and Underwriter; Net
Asset Value; Purchase of Shares; Special Features;
Supplement to Prospectus
8. Redemption or Repurchase................ Summary; Redemption or Repurchase of Shares;
Supplement to Prospectus
9. Pending Legal Proceedings............... Inapplicable
</TABLE>
<PAGE> 3
KEMPER EQUITY FUNDS
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 1, 1998
CLASS I SHARES
KEMPER AGGRESSIVE GROWTH FUND
KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER QUANTITATIVE EQUITY FUND
KEMPER SMALL CAPITALIZATION EQUITY FUND
KEMPER TECHNOLOGY FUND
KEMPER TOTAL RETURN FUND
KEMPER VALUE+GROWTH FUND
Kemper Aggressive Growth Fund ("Aggressive Growth Fund"), Kemper Blue Chip Fund
(the "Blue Chip Fund"), Kemper Growth Fund (the "Growth Fund"), Kemper
Quantitative Equity Fund (the "Quantitative Fund"), Kemper Small Capitalization
Equity Fund (the "Small Cap Fund"), Kemper Technology Fund (the "Technology
Fund"), Kemper Total Return Fund (the "Total Return Fund") and Kemper
Value+Growth Fund (the "Value+Growth" Fund) (collectively, the "Funds")
currently offer four classes of shares to provide investors with different
purchasing options. These are Class A, Class B and Class C shares, which are
described in the prospectus, and Class I shares, which are described in the
prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of Scudder Kemper Investments, Inc.
("Scudder Kemper") and its affiliates; and (b) the following investment advisory
clients of Scudder Kemper and its investment advisory affiliates that invest at
least $1 million in a Fund: (1) unaffiliated benefit plans, such as qualified
retirement plans (other than individual retirement accounts and self-directed
retirement plans); (2) unaffiliated banks and insurance companies purchasing for
their own accounts; and (3) endowment funds of unaffiliated non-profit
organizations. Class I shares currently are available for purchase only from
Kemper Distributors, Inc., principal underwriter for the Funds. Share
certificates are not available for Class I shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge schedules and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services fee
charged to Class I shares. As a result of the relatively lower expenses for
Class I shares, the level of income dividends per share (as a percentage of net
asset value) and, therefore, the overall investment return, will be higher for
Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL FUNDS) CLASS I
---------------------------------------------------------- -------
<S> <C>
Maximum Sales Charge on Purchases
(as a percentage of offering price)....................... None
Maximum Sales Charge on Reinvested Dividends................ None
Redemption Fees............................................. None
Exchange Fee................................................ None
Deferred Sales Charge (as a percentage of redemption
proceeds)................................................. None
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
AGGRESSIVE BLUE SMALL TOTAL VALUE+
ANNUAL FUND GROWTH CHIP GROWTH QUANTITATIVE CAP TECHNOLOGY RETURN GROWTH
OPERATING EXPENSES FUND FUND FUND FUND FUND FUND FUND FUND
(AS A PERCENTAGE OF AVERAGE NET ASSETS) ---------- ---- ------ ------------ ----- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees........................ .68% .57% .54% .58% .35% .55% .53% .72%
12b-1 Fees............................. None None None None None None None None
Other Expenses......................... .20% .13% .16% .68% .18% .19% .18% .20%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses............... .88% .70% .70% 1.26% .53% .74% .71% .92%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a Aggressive Growth $ 9 $28 $49 $108
$1,000 investment, assuming (1) 5% annual return and Blue Chip $ 7 $22 $39 $ 87
(2) redemption at the end of each time period: Growth $ 7 $22 $39 $ 87
Quantitative $13 $40 $69 $152
Small Cap $ 5 $17 $30 $ 66
Technology $ 8 $24 $41 $ 92
Total Return $ 7 $23 $40 $ 88
Value+Growth $ 9 $29 $51 $113
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in Class I shares of a Fund will
bear directly or indirectly. The base management fee for the Aggressive Growth
Fund and the Small Cap Fund is .65%. The base management fee is subject to an
upward or downward performance adjustment whereby the management fee will be
between .45% and .85% for the Aggressive Growth Fund and between .35% and .95%
for the Small Cap Fund. For the Aggressive Growth Fund and the Small Cap Fund,
the table reflects the base management fee for the prior fiscal year after such
adjustment. Since no Class I shares for the Aggressive Growth Fund and the
Value+Growth Fund have been issued as of the Funds' fiscal year ends, "Other
Expenses" shown above is an estimate. See "Investment Manager and Underwriter"
in the prospectus.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE> 5
FINANCIAL HIGHLIGHTS
KEMPER BLUE CHIP FUND
<TABLE>
<CAPTION>
NOVEMBER 22,
YEAR ENDED 1995 TO
OCTOBER 31, OCTOBER 31,
1997 1996
----------- ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $17.18 15.30
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .32 .36
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain 3.58 2.96
- ----------------------------------------------------------------------------------------
Total from investment operations 3.90 3.32
- ----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .23 .24
- ----------------------------------------------------------------------------------------
Distribution from net realized gain 3.13 1.20
- ----------------------------------------------------------------------------------------
Total dividends 3.36 1.44
- ----------------------------------------------------------------------------------------
Net asset value, end of period $17.72 17.18
- ----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.89% 21.89
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .70% 1.31
- ----------------------------------------------------------------------------------------
Net investment income 1.56% 1.33
- ----------------------------------------------------------------------------------------
</TABLE>
KEMPER GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, JULY 3 TO
-------------------- SEPTEMBER 30,
1997 1996 1995
------ ----- -------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $17.26 16.09 14.80
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .08 .19 .03
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.61 2.74 1.26
- --------------------------------------------------------------------------------------------------
Total from investment operations 2.69 2.93 1.29
- --------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .08 --
- --------------------------------------------------------------------------------------------------
Distribution from net realized gain 4.35 1.68 --
- --------------------------------------------------------------------------------------------------
Total dividends 4.35 1.76 --
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $15.60 17.26 16.09
- --------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 20.51% 20.19 8.72
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .70% .64 .59
- --------------------------------------------------------------------------------------------------
Net investment income .43% 1.08 .92
- --------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
KEMPER QUANTITATIVE EQUITY FUND
<TABLE>
<CAPTION>
SEPTEMBER 9
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.14 9.67
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.01) --
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain 2.14 1.47
- -----------------------------------------------------------------------------------------
Total from investment operations 2.13 1.47
- -----------------------------------------------------------------------------------------
Less distribution from net realized gain .19 --
- -----------------------------------------------------------------------------------------
Net asset value, end of period $13.08 11.14
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.48% 15.20
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses absorbed by the Fund 1.26% 1.08
- -----------------------------------------------------------------------------------------
Net investment loss (.17)% (.05)
- -----------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 1.26% 2.23
- -----------------------------------------------------------------------------------------
Net investment loss (.17)% (1.20)
- -----------------------------------------------------------------------------------------
</TABLE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, JULY 3 TO
-------------- SEPTEMBER 30,
1997 1996 1995
------ ----- -------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 7.05 7.15 6.27
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .01 .01 --
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.58 .94 .88
- --------------------------------------------------------------------------------------------
Total from investment operations 1.59 .95 .88
- --------------------------------------------------------------------------------------------
Less distribution from net realized gain .57 1.05 --
- --------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.07 7.05 7.15
- --------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 24.89% 16.76 14.04
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .53% .66 .79
- --------------------------------------------------------------------------------------------
Net investment income (loss) .17% .16 (.14)
- --------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
KEMPER TECHNOLOGY FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, JULY 3 TO
---------------------- OCTOBER 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $13.20 14.64 12.72
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.04) (.07) (.02)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.14 .76 1.94
- -----------------------------------------------------------------------------------------------------
Total from investment operations 2.10 .69 1.92
- -----------------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.11 2.13 --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $13.19 13.20 14.64
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.23% 8.06 15.09
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .74% .76 .65
- -----------------------------------------------------------------------------------------------------
Net investment loss (.27)% (.49) (.33)
- -----------------------------------------------------------------------------------------------------
</TABLE>
KEMPER TOTAL RETURN FUND
<TABLE>
<CAPTION>
JULY 3 TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.27 10.61 10.07
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .36 .32 .10
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.55 1.23 .52
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.91 1.55 .62
- -----------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .36 .39 .08
- -----------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.49 .50 --
- -----------------------------------------------------------------------------------------------------
Total dividends 1.85 .89 .08
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $11.33 11.27 10.61
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.40% 15.64 6.21
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .71% .72 .61
- -----------------------------------------------------------------------------------------------------
Net investment income 3.22% 3.09 2.97
- -----------------------------------------------------------------------------------------------------
</TABLE>
Note: For the Quantitative Fund, the investment manager agreed to temporarily
waive or absorb certain operating expenses of the Fund. The other ratios
to average net assets are computed without this expense waiver or
absorption.
5
<PAGE> 8
No financial information is presented for Class I shares of the Aggressive
Growth Fund or the Value+Growth Fund since no Class I shares have been issued as
of the Funds' fiscal year ends.
SPECIAL FEATURES
Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Zurich Money Funds--Zurich Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper and its affiliates and (ii) Class I shares of
any other "Kemper Mutual Fund" listed under "Special Features--Class A
Shares--Combined Purchases" in the prospectus. Conversely, shareholders of
Zurich Money Funds--Zurich Money Market Fund who have purchased shares because
they are participants in tax-exempt retirement plans of Scudder Kemper and its
affiliates may exchange their shares for Class I shares of "Kemper Mutual Funds"
to the extent that they are available through their plan. Exchanges will be made
at the relative net asset values of the shares. Exchanges are subject to the
limitations set forth in the prospectus under "Special Features--Exchange
Privilege--General."
February 1, 1998
KEF - 1I (2/98)
6
<PAGE> 9
<TABLE>
<S> <C>
TABLE OF CONTENTS
- -----------------------------------------------
Summary 1
- -----------------------------------------------
Summary of Expenses 3
- -----------------------------------------------
Financial Highlights 6
- -----------------------------------------------
Investment Objectives, Policies and Risk
Factors 15
- -----------------------------------------------
Investment Manager and Underwriter 29
- -----------------------------------------------
Dividends and Taxes 33
- -----------------------------------------------
Net Asset Value 35
- -----------------------------------------------
Purchase of Shares 35
- -----------------------------------------------
Redemption or Repurchase of Shares 41
- -----------------------------------------------
Special Features 45
- -----------------------------------------------
Performance 49
- -----------------------------------------------
Capital Structure 50
- -----------------------------------------------
</TABLE>
This combined prospectus of the Kemper Equity Funds contains information about
each of the Funds that you should know before investing and should be retained
for future reference. A Statement of Additional Information dated February 1,
1998, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. It is available upon request without charge
from the Funds at the address or telephone number on this cover or the firm from
which this prospectus was obtained. Kemper Value+Growth Fund is also known as
Kemper Value Plus Growth Fund.
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN A
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
[Kemper Funds Logo]
KEMPER
EQUITY
FUNDS
PROSPECTUS FEBRUARY 1, 1998
KEMPER EQUITY FUNDS
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This prospectus describes a choice of eight equity and balanced mutual funds
managed by Scudder Kemper Investments, Inc.
KEMPER AGGRESSIVE GROWTH FUND
KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER QUANTITATIVE EQUITY FUND
KEMPER SMALL CAPITALIZATION EQUITY FUND
KEMPER TECHNOLOGY FUND
KEMPER TOTAL RETURN FUND
KEMPER VALUE+GROWTH FUND
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 10
KEMPER EQUITY FUNDS
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVES. The eight open-end, management investment companies (the
"Funds") covered in this combined prospectus are as follows:
KEMPER AGGRESSIVE GROWTH FUND (the "Aggressive Growth Fund") seeks capital
appreciation through the use of aggressive investment techniques.
KEMPER BLUE CHIP FUND (the "Blue Chip Fund") seeks growth of capital and of
income.
KEMPER GROWTH FUND (the "Growth Fund") seeks growth of capital through
professional management and diversification of investment securities having
potential for capital appreciation.
KEMPER QUANTITATIVE EQUITY FUND (the "Quantitative Fund") seeks growth of
capital and reduction of risk through professional management of a diversified
portfolio of equity securities.
KEMPER SMALL CAPITALIZATION EQUITY FUND (the "Small Cap Fund") seeks maximum
appreciation of investors' capital.
KEMPER TECHNOLOGY FUND (the "Technology Fund") seeks growth of capital.
KEMPER TOTAL RETURN FUND (the "Total Return Fund") seeks to obtain the highest
total return, a combination of income and capital appreciation, consistent with
reasonable risk.
KEMPER VALUE+GROWTH FUND (the "Value+Growth Fund") seeks growth of capital
through professional management of a portfolio of growth and value stocks.
Each Fund, except the Aggressive Growth Fund, is a diversified investment
company. The Aggressive Growth Fund is a non-diversified investment company. The
Funds may purchase put and call options, engage in financial futures
transactions, invest in foreign securities, engage in related foreign currency
transactions and lend portfolio securities. The Aggressive Growth, Technology
and Quantitative Funds may also write (sell) put and call options. The Funds may
invest up to 25% of total assets in foreign securities. See "Investment
Objectives, Policies and Risk Factors."
RISK FACTORS. There is no assurance that the investment objective of any Fund
will be achieved and investment in each Fund includes risks that vary in kind
and degree depending upon the investment policies of that Fund. The returns and
net asset value of each Fund will fluctuate. Investment by the Small Cap Fund
primarily in smaller companies and the Technology Fund in smaller emerging
growth technology companies involve greater risk than investment in larger, more
established companies. The flexible investment strategy employed by the
Aggressive Growth Fund and its non-diversified status involve greater risk than
typical diversified equity mutual funds. Foreign investments by the Funds
involve risk and opportunity considerations not typically associated with
investing in U.S. companies. The U.S. Dollar value of a foreign security tends
to decrease when the value of the U.S. Dollar rises against the foreign currency
in which the security is denominated and tends to increase when the value of the
U.S. Dollar falls against such currency. Thus, the U.S. Dollar value of foreign
securities in a Fund's portfolio, and the Fund's net asset value, may change in
response to changes in currency exchange rates even though the value of the
foreign securities in local currency terms may not have changed. While a Fund's
investments in foreign securities will principally be in developed countries,
the Fund may invest a portion of its assets in developing or "emerging" markets,
which involve exposure to economic structures that are generally less diverse
and mature than in the United States, and to political systems that may be less
stable. A portion of the assets of the Total Return Fund may be invested in
lower rated or unrated high yield bonds which entail greater risk of loss of
principal and interest than higher rated fixed income securities. There are
special risks associated with options, financial futures and foreign currency
transactions and other derivatives and there is no assurance that use of those
investment techniques will be successful. See "Investment Objectives, Policies
and Risk Factors."
1
<PAGE> 11
PURCHASES AND REDEMPTIONS. Each Fund provides investors with the option of
purchasing shares in the following ways:
Class A Shares..............
Offered at net asset value plus a maximum sales
charge of 5.75% of the offering price. Reduced sales
charges apply to purchases of $50,000 or more. Class
A shares purchased at net asset value under the Large
Order NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge if redeemed within
one year of purchase and a .50% contingent deferred
sales charge if redeemed during the second year of
purchase.
Class B Shares..............
Offered at net asset value, subject to a Rule 12b-1
distribution fee and a contingent deferred sales
charge that declines from 4% to zero on certain
redemptions made within six years of purchase. Class
B shares automatically convert into Class A shares
(which have lower ongoing expenses) six years after
purchase.
Class C Shares..............
Offered at net asset value without an initial sales
charge, but subject to a Rule 12b-1 distribution fee
and a 1% contingent deferred sales charge on
redemptions made within one year of purchase. Class C
shares do not convert into another class.
Each class of shares represents interests in the same portfolio of investments
of a Fund. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value, which may be
more or less than original cost, subject to any applicable contingent deferred
sales charge. See "Purchase of Shares" and "Redemption or Repurchase of Shares."
INVESTMENT MANAGER AND UNDERWRITER. Scudder Kemper Investments, Inc. ("Scudder
Kemper") serves as investment manager for each Fund. Scudder Kemper is paid a
monthly investment management fee by each Fund based upon average daily net
assets of that Fund at an annual rate that differs for each Fund, and, in the
case of the Aggressive Growth and Small Cap Funds, subject to a performance
adjustment. Kemper Distributors, Inc. ("KDI"), a wholly owned subsidiary of
Scudder Kemper, is principal underwriter and administrator for each Fund. For
Class B shares and Class C shares, KDI receives a Rule 12b-1 distribution fee of
.75% of average daily net assets. KDI also receives the amount of any contingent
deferred sales charges paid on the redemption of shares. Administrative services
are provided to shareholders under administrative services agreements with KDI.
Each Fund pays an administrative services fee at the annual rate of up to .25%
of average daily net assets of Class A, B and C shares of the Fund, which KDI
pays to various broker-dealer firms and other service or administrative firms.
See "Investment Manager and Underwriter."
DIVIDENDS. Each Fund normally distributes dividends of net investment income as
follows: annually for the Aggressive Growth, Growth, Quantitative, Small Cap,
Technology and Value+Growth Funds; semi-annually for the Blue Chip Fund; and
quarterly for the Total Return Fund. Each Fund distributes any net realized
short-term and long-term capital gains at least annually. Income and capital
gain dividends of a Fund are automatically reinvested in additional shares of
that Fund, without a sales charge, unless the shareholder makes a different
election. See "Dividends and Taxes."
GENERAL. In the opinion of the staff of the Securities and Exchange Commission,
the use of this combined prospectus may make each Fund liable for any
misstatement or omission in this prospectus regardless of the particular Fund to
which it pertains.
2
<PAGE> 12
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
(APPLICABLE TO ALL FUNDS)(1) ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases (as a
percentage of offering price)................ 5.75%(2) None None
Maximum Sales Charge on Reinvested Dividends... None None None
Redemption Fees................................ None None None
Exchange Fee................................... None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)......................... None(3) 4% during the first 1% during the
year, 3% during the first year
second and third years,
2% during the fourth and
fifth years and 1% in
the sixth year
</TABLE>
- -------------------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details. The table does not include the $9.00 quarterly small
account fee. See "Redemption or Repurchase of Shares."
(2) Reduced sales charges apply to purchases of $50,000 or more. See "Purchase
of Shares -- Initial Sales Charge Alternative -- Class A Shares."
(3) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% the first year and .50% the second year. See "Purchase of
Shares -- Initial Sales Charge Alternative -- Class A Shares."
3
<PAGE> 13
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
AGGRESSIVE TOTAL VALUE+
GROWTH BLUE CHIP GROWTH QUANTITATIVE SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND
---------- --------- ------ ------------ --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Management Fees......... .68% .57% .54% .58% .35% .55% .53% .72%
12b-1 Fees.............. None None None None None None None None
Other Expenses.......... .81% .62% .52% .87% .55% .34% .48% .69%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating
Expenses.............. 1.49% 1.19% 1.06% 1.45% .90% .89% 1.01% 1.41%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE TOTAL VALUE+
GROWTH BLUE CHIP GROWTH QUANTITATIVE SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND
---------- --------- ------ ------------ --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Management Fees......... .68% .57% .54% .58% .35% .55% .53% .72%
12b-1 Fees(4)........... .75% .75% .75% .75% .75% .75% .75% .75%
Other Expenses.......... .98% .74% .84% .94% 1.04% .55% .67% .80%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating
Expenses.............. 2.41% 2.06% 2.13% 2.27% 2.14% 1.85% 1.95% 2.27%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE TOTAL VALUE+
GROWTH BLUE CHIP GROWTH QUANTITATIVE SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND
---------- --------- ------ ------------ --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Management Fees......... .68% .57% .54% .58% .35% .55% .53% .72%
12b-1 Fees(5)........... .75% .75% .75% .75% .75% .75% .75% .75%
Other Expenses.......... .76% .68% .70% .83% .85% .52% .62% .68%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating
Expenses.............. 2.19% 2.00% 1.99% 2.16% 1.95% 1.82% 1.90% 2.15%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- -------------------------
(4) Long-term shareholders may pay more than the economic equivalent of the
maximum initial sales charges permitted by the National Association of
Securities Dealers, although KDI believes that is unlikely because of the
automatic conversion feature described under "Purchase of Shares -- Deferred
Sales Charge Alternative -- Class B Shares."
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
You would pay the following expenses on a Aggressive Growth $72 $102 $134 $225
$1,000 investment, assuming (1) 5% annual Blue Chip $69 $ 93 $119 $194
return and (2) redemption at the end of Growth $68 $ 89 $113 $179
each time period: Quantitative $71 $101 $132 $221
Small Cap $66 $ 85 $104 $162
Technology $66 $ 84 $104 $161
Total Return $67 $ 88 $110 $174
Value+Growth $71 $100 $130 $217
</TABLE>
4
<PAGE> 14
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES(7)
You would pay the following expenses on Aggressive Growth $64 $105 $149 $231
a $1,000 investment, assuming (1) 5% Blue Chip $61 $ 95 $131 $196
annual return and (2) redemption at the Growth $62 $ 97 $134 $194
end of each time period: Quantitative $63 $101 $142 $221
Small Cap $62 $ 97 $135 $186
Technology $59 $ 88 $120 $169
Total Return $60 $ 92 $125 $181
Value+Growth $63 $101 $141 $219
You would pay the following expenses on Aggressive Growth $24 $ 75 $129 $231
the same investment, assuming no Blue Chip $21 $ 65 $111 $196
redemption: Growth $22 $ 67 $114 $194
Quantitative $23 $ 71 $122 $221
Small Cap $22 $ 67 $115 $186
Technology $19 $ 58 $100 $169
Total Return $20 $ 61 $105 $181
Value+Growth $23 $ 71 $122 $219
CLASS C SHARES(8)
You would pay the following expenses on Aggressive Growth $32 $ 69 $117 $252
a $1,000 investment, assuming (1) 5% Blue Chip $30 $ 63 $108 $233
annual return and (2) redemption at the Growth $30 $ 62 $107 $232
end of each time period: Quantitative $32 $ 68 $116 $249
Small Cap $30 $ 61 $105 $227
Technology $28 $ 57 $ 99 $214
Total Return $29 $ 60 $103 $222
Value+Growth $32 $ 67 $115 $248
You would pay the following expenses on Aggressive Growth $22 $ 69 $117 $252
the same investment, assuming no Blue Chip $20 $ 63 $108 $233
redemption: Growth $20 $ 62 $107 $232
Quantitative $22 $ 68 $116 $249
Small Cap $20 $ 61 $105 $227
Technology $18 $ 57 $ 99 $214
Total Return $19 $ 60 $103 $222
Value+Growth $22 $ 67 $115 $248
</TABLE>
- -------------------------
(7) Assumes conversion to Class A shares six years after purchase. The
contingent deferred sales charge was applied as follows: 1 year (4%), 3
years (3%), 5 years (2%) and 10 years (0%). See "Redemption or Repurchase of
Shares -- Contingent Deferred Sales Charge -- Class B Shares" for more
information regarding the calculation of the contingent deferred sales
charge.
(8) The contingent deferred sales charge was applied as follows: 1 year (1%), 3,
5 and 10 years (0%). See "Redemption or Repurchase of Shares -- Contingent
Deferred Sales Charge -- Class C Shares."
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information. The
base management fee for the Aggressive Growth Fund and the Small Cap Fund is
.65%. The base management is subject to a maximum upward or downward performance
adjustment whereby the management fee will be between .45% and .85% for the
Aggressive Growth Fund and between .35% and .95% for the Small Cap Fund. For the
Aggressive Growth Fund and the Small Cap Fund, the table reflects the base
management fee for the prior fiscal year after such adjustment.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 15
FINANCIAL HIGHLIGHTS
The tables below show financial information for each Fund expressed in terms of
one share outstanding throughout the period. The information in the tables for
each Fund is covered by the report of the Fund's independent auditors. The
report for each Fund is contained in its Registration Statement and is available
from that Fund. The financial statements contained in each Fund's 1997 Annual
Report to Shareholders are incorporated herein by reference and may be obtained
by writing or calling that Fund.
AGGRESSIVE GROWTH FUND
For the period from December 31, 1996 (commencement of operations) to September
30, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.50 9.50 9.50
- --------------------------------------------------------------------- ------- -------
Income from investment operations:
Net investment loss (.02) (.08) (.07)
- --------------------------------------------------------------------- ------- -------
Net realized and unrealized gain 3.12 3.10 3.10
- --------------------------------------------------------------------- ------- -------
Total from investment operations 3.10 3.02 3.03
- --------------------------------------------------------------------- ------- -------
Net asset value, end of period $12.60 12.52 12.53
- --------------------------------------------------------------------- ------- -------
TOTAL RETURN (NOT ANNUALIZED) 32.63% 31.79 31.89
- --------------------------------------------------------------------- ------- -------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 1.49% 2.41 2.19
- --------------------------------------------------------------------- ------- -------
Net investment loss (.35)% (1.27) (1.05)
- --------------------------------------------------------------------- ------- -------
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of period $11,609,000
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 364%
- -----------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions $.0588
- -----------------------------------------------------------------------------------------------
</TABLE>
BLUE CHIP FUND
<TABLE>
<CAPTION>
NOV. 23,
1987 TO
YEAR ENDED OCTOBER 31, OCT. 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
----------------------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $17.14 14.87 12.33 13.88 12.72 13.24 9.65 10.07 8.41 9.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .18 .22 .19 .19 .18 .18 .11 .13 .18 .35
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 3.70 3.45 2.57 (.71) 1.13 .41 3.63 (.45) 1.78 (.80)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.88 3.67 2.76 (.52) 1.31 .59 3.74 (.32) 1.96 (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .21 .20 .20 .19 .15 .14 .15 .10 .30 .14
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 3.13 1.20 .02 .84 -- .97 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends 3.34 1.40 .22 1.03 .15 1.11 .15 .10 .30 .14
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.68 17.14 14.87 12.33 13.88 12.72 13.24 9.65 10.07 8.41
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.78% 26.72 22.74 (3.82) 10.35 4.76 39.19 (3.23) 24.08 (4.99)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 1.19% 1.26 1.30 1.48 1.25 1.46 1.66 1.91 2.08 1.83
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.07% 1.40 1.47 1.50 1.28 1.63 .88 1.28 1.99 4.47
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 16
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------ ------------------------------------------
YEAR ENDED MAY 31 TO YEAR ENDED MAY 31 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994 1997 1996 1995 1994
------ ----------- ----- ----------- ------ ----------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $17.09 14.82 12.29 12.30 17.15 14.88 12.32 12.30
- -------------------------------------------------------------------------------- ------------------------------------------
Income from investment operations:
Net investment income .04 .10 .09 .06 .03 .10 .07 .09
- -------------------------------------------------------------------------------- ------------------------------------------
Net realized and unrealized gain
(loss) 3.67 3.45 2.56 (.01) 3.71 3.45 2.62 (.01)
- -------------------------------------------------------------------------------- ------------------------------------------
Total from investment operations 3.71 3.55 2.65 .05 3.74 3.55 2.69 .08
- -------------------------------------------------------------------------------- ------------------------------------------
Less dividends:
Distribution from net investment
income .06 .08 .10 .06 .07 .08 .11 .06
- -------------------------------------------------------------------------------- ------------------------------------------
Distribution from net realized
gain 3.13 1.20 .02 -- 3.13 1.20 .02 --
- -------------------------------------------------------------------------------- ------------------------------------------
Total dividends 3.19 1.28 .12 .06 3.20 1.28 .13 .06
- -------------------------------------------------------------------------------- ------------------------------------------
Net asset value, end of period $17.61 17.09 14.82 12.29 17.69 17.15 14.88 12.32
- -------------------------------------------------------------------------------- ------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 25.62% 25.82 21.76 .42 25.71 25.75 22.04 .67
- -------------------------------------------------------------------------------- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Expenses 2.06% 2.08 2.06 2.43 2.00 2.05 2.01 2.33
- -------------------------------------------------------------------------------- ------------------------------------------
Net investment income .20% .58 .71 .33 .26 .61 .76 .43
- ---------------------------------------------------------------------------- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NOV. 23, 1987
YEAR ENDED OCTOBER 31, TO
1997 1996 1995 1994 1993 1992 1991 1990 1989 OCT. 31, 1988
ALL CLASSES ------------------------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of
period (in thousands) $446,891 256,172 168,266 153,172 196,327 182,553 61,146 32,172 26,164 20,421
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(annualized) 183% 166 117 131 222 178 162 93 89 326
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the years
ended October 31, 1997 and 1996 were $.0593 and $.0587, respectively.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 17
GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $17.21 16.07 12.93 15.33 13.09 13.14 9.00 9.79 7.61 13.73
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- .12 .05 .01 .01 .03 .06 .18 .17 .23
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.61 2.74 3.27 (1.41) 2.29 .71 4.57 (.79) 2.24 (2.83)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.61 2.86 3.32 (1.40) 2.30 .74 4.63 (.61) 2.41 (2.60)
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .04 -- -- .03 .05 .11 .18 .23 .21
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 4.35 1.68 .18 1.00 .03 .74 .38 -- -- 3.31
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends 4.35 1.72 .18 1.00 .06 .79 .49 .18 .23 3.52
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $15.47 17.21 16.07 12.93 15.33 13.09 13.14 9.00 9.79 7.61
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 19.97% 19.62 26.07 (9.39) 17.60 5.55 54.13 (6.37) 32.60 (15.15)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.06% 1.07 1.17 1.09 1.00 1.03 1.04 .89 .83 .82
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .07% .65 .43 .24 .06 .32 .59 1.84 2.11 3.38
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, MAY 31 TO SEPTEMBER 30, MAY 31 TO
------------------------ SEPTEMBER 30, ----------------------- SEPTEMBER 30,
1997 1996 1995 1994 1997 1996 1995 1994
------ ----- ----- ------------- ----- ----- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $16.82 15.85 12.88 13.10 16.87 15.87 12.88 13.09
- ------------------------------------------------------------------------------ ---------------------------------------
Income from investment operations:
Net investment loss (.16) (.09) (.08) (.03) (.13) (.06) (.07) (.02)
- ------------------------------------------------------------------------------ ---------------------------------------
Net realized and unrealized gain
(loss) 2.52 2.74 3.23 (.19) 2.52 2.74 3.24 (.19)
- ------------------------------------------------------------------------------ ---------------------------------------
Total from investment operations 2.36 2.65 3.15 (.22) 2.39 2.68 3.17 (.21)
- ------------------------------------------------------------------------------ ---------------------------------------
Less distribution from net realized
gain 4.35 1.68 .18 -- 4.35 1.68 .18 --
- ------------------------------------------------------------------------------ ---------------------------------------
Net asset value, end of period $14.83 16.82 15.85 12.88 14.91 16.87 15.87 12.88
- ------------------------------------------------------------------------------ ---------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.68% 18.47 24.83 (1.68) 18.87 18.65 24.99 (1.60)
- ------------------------------------------------------------------------------ ---------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Expenses 2.13% 2.05 2.17 2.11 1.99 1.95 2.03 2.09
- ------------------------------------------------------------------------------ ---------------------------------------
Net investment loss (1.00)% (.33) (.57) (.76) (.86) (.23) (.43) (.67)
- ------------------------------------------------------------------------------ ---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
ALL CLASSES 1997 1996 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) $2,827,565 2,738,303 2,503,301 2,255,977 1,826,961 1,419,292 613,245
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate 201% 150 67 115 139 83 143
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
ALL CLASSES 1990 1989 1988
------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) 307,555 335,998 285,485
- -------------------------------------------------------
Portfolio turnover
rate 194 160 61
- -------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transaction for the years ended
September 30, 1997 and 1996 were $.0569 and $.0560, respectively.
- --------------------------------------------------------------------------------
8
<PAGE> 18
QUANTITATIVE FUND
<TABLE>
<CAPTION>
FEBRUARY 15
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
CLASS A SHARES ------------ ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.12 9.50
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.03) --
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.13 1.62
- ------------------------------------------------------------------------------------------------
Total from investment operations 2.10 1.62
- ------------------------------------------------------------------------------------------------
Less distribution from net realized gain .19 --
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $13.03 11.12
- ------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.25% 17.05
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses absorbed by the Fund 1.45% 1.48
- ------------------------------------------------------------------------------------------------
Net investment loss (.36)% (.16)
- ------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 1.45% 2.26
- ------------------------------------------------------------------------------------------------
Net investment loss (.36)% (.94)
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ ------------------------------
FEBRUARY 15 FEBRUARY 15
YEAR ENDED TO YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1997 1996 1997 1996
CLASS B AND C SHARES ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.04 9.50 11.05 9.50
- ---------------------------------------------------------------------------------- -----------------------------
Income from investment operations:
Net investment loss (.08) (.04) (.04) (.04)
- ---------------------------------------------------------------------------------- -----------------------------
Net realized and unrealized gain 2.07 1.58 2.04 1.59
- ---------------------------------------------------------------------------------- -----------------------------
Total from investment operations 1.99 1.54 2.00 1.55
- ---------------------------------------------------------------------------------- -----------------------------
Less distribution from net realized gain .19 -- .19 --
- ---------------------------------------------------------------------------------- -----------------------------
Net asset value, end of period $12.84 11.04 12.86 11.05
- ---------------------------------------------------------------------------------- -----------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.37% 16.21 18.45% 16.32
- ---------------------------------------------------------------------------------- -----------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses absorbed by the Fund 2.27% 2.32 2.16% 2.33
- ---------------------------------------------------------------------------------- -----------------------------
Net investment loss (1.18)% (1.00) (1.07)% (1.01)
- ---------------------------------------------------------------------------------- -----------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 2.27% 3.15 2.16% 3.12
- ---------------------------------------------------------------------------------- -----------------------------
Net investment loss (1.18)% (1.83) (1.07)% (1.80)
- ---------------------------------------------------------------------------------- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 15
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
ALL CLASSES ------------ ------------
<S> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of period $11,217,000 4,596,000
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 84% 72
- ------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the periods
ended November 30, 1997 and 1996 were $.0597 and $.0555, respectively.
- --------------------------------------------------------------------------------
9
<PAGE> 19
SMALL CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996(A) 1995(A) 1994 1993 1992(A) 1991 1990 1989 1988
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 7.01 7.14 5.81 6.45 5.25 5.35 3.79 4.71 3.66 6.69
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.01) (.02) (.01) (.01) (.02) (.02) .02 .05 .10 .05
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 1.55 .94 1.68 (.27) 1.71 .40 1.89 (.86) 1.00 (1.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.54 .92 1.67 (.28) 1.69 .38 1.91 (.81) 1.10 (1.40)
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income -- -- -- -- -- .01 .06 .11 .05 .13
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .57 1.05 .34 .36 .49 .47 .29 -- -- 1.50
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .57 1.05 .34 .36 .49 .48 .35 .11 .05 1.63
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 7.98 7.01 7.14 5.81 6.45 5.25 5.35 3.79 4.71 3.66
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 24.29% 16.33 30.88 (4.31) 34.11 7.02 55.16 (17.52) 30.58 (17.34)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .90% 1.08 1.14 1.34 1.03 1.28 1.25 .86 .64 .72
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.20)% (.26) (.18) (.76) (.43) (.43) .27 1.22 2.55 1.42
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------- ---------------------------
YEAR ENDED MAY 31 TO YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995 1994 1997 1996 1995
---- ---- ---- ------------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 6.81 7.03 5.78 5.65 6.80 7.02 5.77
- -------------------------------------------------------------------------------------- ---------------------------
Income from investment
operations:
Net investment loss (.10) (.09) (.07) (.02) (.09) (.09) (.07)
- -------------------------------------------------------------------------------------- ---------------------------
Net realized and unrealized
gain 1.50 .92 1.66 .15 1.49 .92 1.66
- -------------------------------------------------------------------------------------- ---------------------------
Total from investment operations 1.40 .83 1.59 .13 1.40 .83 1.59
- -------------------------------------------------------------------------------------- ---------------------------
Less distribution from net
realized gain .57 1.05 .34 -- .57 1.05 .34
- -------------------------------------------------------------------------------------- ---------------------------
Net asset value, end of period $ 7.64 6.81 7.03 5.78 7.63 6.80 7.02
- -------------------------------------------------------------------------------------- ---------------------------
TOTAL RETURN (NOT ANNUALIZED) 22.83% 15.13 29.59 2.30 22.87 15.16 29.65
- -------------------------------------------------------------------------------------- ---------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Expenses 2.14% 2.15 2.17 2.29 1.95 2.15 2.10
- -------------------------------------------------------------------------------------- ---------------------------
Net investment loss (1.44)% (1.33) (1.21) (1.38) (1.25) (1.33) (1.14)
- ----------------------------------------------------------------------------- ---------------------------
<CAPTION>
CLASS C
-------------
MAY 31 TO
SEPTEMBER 30,
1994
-------------
<S> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period 5.65
- ---------------------------------
Income from investment
operations:
Net investment loss (.03)
- ---------------------------------
Net realized and unrealized
gain .15
- ---------------------------------
Total from investment operations .12
- ---------------------------------
Less distribution from net
realized gain --
- ---------------------------------
Net asset value, end of period 5.77
- ---------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.12
- ---------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Expenses 2.10
- ---------------------------------
Net investment loss (1.21)
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
ALL CLASSES 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) $1,095,478 934,075 839,905 631,607 510,060 329,116 289,345 179,092 286,411 284,426
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 102% 85 102 58 82 73 126 107 100 90
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the years
ended September 30, 1997 and 1996 were $.0573 and $.0557, respectively.
- --------------------------------------------------------------------------------
10
<PAGE> 20
TECHNOLOGY FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997(A) 1996(A) 1995(A) 1994(A) 1993(A) 1992 1991 1990 1989 1988
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $13.16 14.63 11.50 10.68 9.95 12.42 9.37 10.19 9.39 11.76
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.06) (.08) (.03) -- (.01) .01 .13 .22 .26 .18
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 2.14 .74 4.66 1.49 2.03 .04 3.35 (.45) 1.28 .07
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.08 .66 4.63 1.49 2.02 .05 3.48 (.23) 1.54 .25
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income -- -- -- -- -- .03 .20 .29 .23 .12
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 2.11 2.13 1.50 .67 1.29 2.49 .23 .30 .51 2.50
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends 2.11 2.13 1.50 .67 1.29 2.52 .43 .59 .74 2.62
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $13.13 13.16 14.63 11.50 10.68 9.95 12.42 9.37 10.19 9.39
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 17.11% 7.83 47.30 14.95 21.76 .32 38.58 (2.51) 18.19 3.84
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .89% .89 .88 .89 .81 .82 .81 .71 .69 .69
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.42)% (.62) (.23) .05 (.06) .07 1.24 2.23 2.92 2.26
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------- ---------------------------------------------
YEAR ENDED MAY 31, TO YEAR ENDED MAY 31, TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997(A) 1996(A) 1995(A) 1994 1997(A) 1996(A) 1995(A) 1994
------- ----------- ------- ----------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period $12.77 14.39 11.45 9.99 12.85 14.45 11.45 9.99
- ------------------------------------------------------------------------------ ---------------------------------------------
Income from investment
operations:
Net investment loss (.18) (.19) (.15) (.05) (.17) (.18) (.15) (.05)
- ------------------------------------------------------------------------------ ---------------------------------------------
Net realized and unrealized
gain 2.06 .70 4.59 1.51 2.07 .71 4.65 1.51
- ------------------------------------------------------------------------------ ---------------------------------------------
Total from investment
operations 1.88 .51 4.44 1.46 1.90 .53 4.50 1.46
- ------------------------------------------------------------------------------ ---------------------------------------------
Less distribution from net
realized gain 2.11 2.13 1.50 -- 2.11 2.13 1.50 --
- ------------------------------------------------------------------------------ ---------------------------------------------
Net asset value, end of period $12.54 12.77 14.39 11.45 12.64 12.85 14.45 11.45
- ------------------------------------------------------------------------------ ---------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 15.91% 6.76 45.65 14.61 15.98 6.88 46.23 14.61
- ------------------------------------------------------------------------------ ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Expenses 1.85% 1.87 1.82 1.99 1.82 1.82 1.76 1.83
- ------------------------------------------------------------------------------ ---------------------------------------------
Net investment loss (1.38)% (1.60) (1.17) (1.08) (1.35) (1.55) (1.11) (.92)
- ---------------------------------------------------------------------------- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
ALL CLASSES 1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) $1,209,723 1,062,813 1,017,955 713,654 612,604 559,279 606,295
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 192% 121 105 81 95 95 81
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
ALL CLASSES 1990 1989 1988
---------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) 472,992 532,760 513,800
- ----------------------------------------------------------
Portfolio turnover rate 25 39 11
- ----------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the years
ended October 31, 1997 and 1996 were $.0583 and $.0558, respectively.
- --------------------------------------------------------------------------------
11
<PAGE> 21
TOTAL RETURN FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $11.28 10.60 9.10 11.23 10.07 10.07 7.78 8.34 7.34 7.24
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .31 .28 .29 .19 .30 .22 .36 .46 .37 .36
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.57 1.24 1.46 (1.01) 1.54 .37 2.42 (.64) 1.04 .23
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.88 1.52 1.75 (.82) 1.84 .59 2.78 (.18) 1.41 .59
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .33 .34 .25 .23 .24 .29 .49 .38 .41 .29
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.49 .50 -- 1.08 .44 .30 -- -- -- .20
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends 1.82 .84 .25 1.31 .68 .59 .49 .38 .41 .49
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.34 11.28 10.60 9.10 11.23 10.07 10.07 7.78 8.34 7.34
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 18.95% 15.34 19.46 (7.92) 19.08 6.09 37.20 (2.31) 20.00 8.75
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.01% 1.05 1.12 1.13 1.02 1.06 1.03 .87 .79 .78
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.92% 2.76 3.00 2.34 2.94 2.23 3.96 5.87 4.76 5.10
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------- --------------------------------------
YEAR ENDED MAY 31 TO YEAR ENDED MAY 31 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994 1997 1996 1995 1994
--------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.27 10.59 9.09 9.24 11.28 10.61 9.09 9.24
- ------------------------------------------------------------------------------------ --------------------------------------
Income from investment operations:
Net investment income .22 .19 .20 .06 .22 .20 .21 .06
- ------------------------------------------------------------------------------------ --------------------------------------
Net realized and unrealized gain (loss) 1.55 1.23 1.46 (.16) 1.56 1.22 1.48 (.16)
- ------------------------------------------------------------------------------------ --------------------------------------
Total from investment operations 1.77 1.42 1.66 (.10) 1.78 1.42 1.69 (.10)
- ------------------------------------------------------------------------------------ --------------------------------------
Less dividends:
Distribution from net investment income .22 .24 .16 .05 .23 .25 .17 .05
- ------------------------------------------------------------------------------------ --------------------------------------
Distribution from net realized gain 1.49 .50 -- -- 1.49 .50 -- --
- ------------------------------------------------------------------------------------ --------------------------------------
Total dividends 1.71 .74 .16 .05 1.72 .75 .17 .05
- ------------------------------------------------------------------------------------ --------------------------------------
Net asset value, end of period $11.33 11.27 10.59 9.09 11.34 11.28 10.61 9.09
- ------------------------------------------------------------------------------------ --------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.86% 14.28 18.42 (1.06) 17.92 14.31 18.76 (1.05)
- ------------------------------------------------------------------------------------ --------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Expenses 1.95% 1.99 2.05 2.03 1.90 1.89 1.86 2.00
- ------------------------------------------------------------------------------------ --------------------------------------
Net investment income 1.98% 1.82 2.07 1.57 2.03 1.92 2.26 1.60
- ------------------------------------------------------------------------------------ --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
ALL CLASSES 1997 1996 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year (in
thousands) $3,241,383 3,020,798 2,926,542 2,864,322 1,509,687 1,212,896 998,465
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 122% 85 142 121 180 150 157
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
ALL CLASSES 1990 1989 1988
------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year (in
thousands) 781,417 937,804 976,972
- -------------------------------------------------------------------
Portfolio turnover rate 157 130 187
- -------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the years
ended October 31, 1997 and 1996 were $.0578 and $.0580, respectively.
- --------------------------------------------------------------------------------
12
<PAGE> 22
VALUE+GROWTH FUND
<TABLE>
<CAPTION>
OCTOBER 16
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996 1995
CLASS A SHARES ------ ----- ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.95 10.02 9.50
- ----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .02 .05 .02
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.48 2.88 .50
- ----------------------------------------------------------------------------------------------
Total from investment operations 2.50 2.93 .52
- ----------------------------------------------------------------------------------------------
Less distribution from net realized gain .83 --
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $14.62 12.95 10.02
- ----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 20.83% 29.24 5.47
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses absorbed by the Fund 1.41% 1.47 1.35
- ----------------------------------------------------------------------------------------------
Net investment income .35% .43 2.25
- ----------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 1.41% 1.59 --
- ----------------------------------------------------------------------------------------------
Net investment income .35% .31 --
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 16 YEAR ENDED OCTOBER 16
YEAR ENDED TO NOVEMBER 30, TO
NOVEMBER 30, NOVEMBER 30, -------------- NOVEMBER 30,
1997 1996 1995 1997 1996 1995
CLASS B AND C SHARES ------ ----- ------------ ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.83 10.02 9.50 12.84 10.01 9.50
- ---------------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income (loss) (.07) (.04) .02 (.05) (.04) .01
- ---------------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain 2.44 2.85 .50 2.41 2.87 .50
- ---------------------------------------------------------------------------------------- ------------------------------
Total from investment operations 2.37 2.81 .52 2.36 2.83 .51
- ---------------------------------------------------------------------------------------- ------------------------------
Less distribution from net realized gain .83 -- -- .83 -- --
- ---------------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $14.37 12.83 10.02 14.37 12.84 10.01
- ---------------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.96% 28.04 5.47 19.86 28.27 5.37
- ---------------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses absorbed by the Fund 2.27% 2.27 2.10 2.15 2.22 2.07
- ---------------------------------------------------------------------------------------- ------------------------------
Net investment income (loss) (.51)% (.37) 1.50 (.39) (.32) 1.53
- ---------------------------------------------------------------------------------------- ------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 2.32% 2.44 -- 2.16 2.35 --
- ---------------------------------------------------------------------------------------- ------------------------------
Net investment loss (.56)% (.54) -- (.40) (.45) --
- ---------------------------------------------------------------------------------------- ------------------------------
</TABLE>
13
<PAGE> 23
<TABLE>
<CAPTION>
OCTOBER 16
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996 1995
------- ------- ------------
<S> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $97,741 39,092 5,851
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 82 --
- ----------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the years
ended November 30, 1997 and 1996 were $.0578 and $.0571, respectively.
- --------------------------------------------------------------------------------
Notes:
(a) Per share data were determined based on average shares outstanding.
(b) For Quantitative Equity Fund and Value+Growth Fund, the investment manager
agreed to temporarily waive or absorb certain operating expenses of the
Funds. The other ratios to average net assets are computed without this
expense waiver or absorption.
Total return does not reflect the effect of any sales charges. The Funds are
organized as separate Massachusetts business trusts.
14
<PAGE> 24
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The following information sets forth each Fund's investment objective and
policies. Each Fund's returns and net asset value will fluctuate and there is no
assurance that any Fund will meet its objective.
AGGRESSIVE GROWTH FUND. The Aggressive Growth Fund is a non-diversified
investment company that seeks capital appreciation through the use of aggressive
investment techniques. In seeking to achieve its objective, the Fund invests
primarily in equity securities of U.S. companies that the investment manager
believes offer the best opportunities for capital appreciation at any given
time. The investment manager pursues a flexible investment strategy in the
selection of securities, not limited to any particular investment sector,
industry or company size; and it may, depending upon market circumstances,
emphasize the securities of small, medium or large-sized companies from time to
time. The Fund may invest a significant portion of its assets in initial public
offerings ("IPOs"), which are typically securities of small, unseasoned issuers.
In addition, since the Fund is a non-diversified investment company, when
attractive investments are identified, the investment manager may establish
relatively large individual positions, sometimes representing more than 5% of
total assets. See "Special Risk Factors--Non-Diversified" below. Therefore, the
Fund has broader latitude in its selection of securities than a typical equity
mutual fund. There is no assurance that the management strategy for the Fund
will be successful or that the Fund will achieve its objective.
The investment manager uses a disciplined approach to stock selection and
fundamental research to help it identify quality "growth" companies whose stocks
are selling at reasonable prices. Growth stocks are stocks of companies whose
earnings per share are expected by the investment manager to grow faster than
the market average. Growth stocks tend to trade at higher price to earnings
(P/E) ratios than the general market, but the investment manager believes that
the potential of such stocks for above average earnings more than justifies
their price. The investment manager relies heavily upon the fundamental analysis
and research of its large research staff, and will generally seek to invest in
growth companies whose value may not be fully recognized by the market at large.
Such companies may be:
- - Expected to achieve accelerating earnings growth, perhaps due to strong demand
for their products or services;
- - Undervalued, based upon price/earnings ratios, price/book value ratios and
other measures;
- - Undergoing financial restructuring;
- - Involved in takeover or arbitrage situations;
- - Expected to benefit from evolving market cycles or changing economic
conditions; or
- - Representing special situations, such as changes in management or favorable
regulatory developments.
Because of the flexible nature of the Fund's investment policies, the Fund may
have a higher portfolio turnover than a typical equity mutual fund. See
"Additional Investment Information" below. To some extent, the Fund may trade in
securities for the short term. In addition, the investment manager may use
market volatility in an attempt to capitalize on apparently unwarranted price
fluctuations, both to purchase or increase undervalued positions and to sell or
reduce overvalued holdings. For example, during market declines, the Fund may
add to positions in favored securities, while becoming more aggressive as it
gradually reduces the number of companies represented in its portfolio.
Conversely, in rising markets, the Fund may reduce or eliminate fully valued
positions, while becoming more conservative as it gradually increases the number
of companies in its portfolio.
Although the Fund will not invest 25% or more of its total assets in any one
industry, it may, from time to time, invest 25% or more of its total assets in
one or more market sectors, such as the technology sector. If the Fund
concentrates its investments in a market sector, financial, economic, business
and other developments affecting issuers in that sector may have a greater
effect on the Fund than if it had not concentrated its assets in that sector.
15
<PAGE> 25
Under normal conditions, the Fund will invest at least 65%, and may invest up to
100%, of its total assets in equity securities. Equity securities include common
stocks, preferred stocks, securities convertible into or exchangeable for common
or preferred stocks, equity investments in partnerships, joint ventures and
other forms of non-corporate investment and warrants and rights exercisable for
equity securities.
The Fund may also purchase and write options, engage in financial futures
transactions, purchase foreign securities and engage in related foreign currency
transactions and lend its portfolio securities. See "Special Risk
Factors--Foreign Securities" and "Additional Investment Information" below. The
Fund may engage in short sales against-the-box, although it is the Fund's
current intention that no more than 5% of its net assets will be at risk. When a
defensive position is deemed advisable, all or a significant portion of the
Fund's assets may be held temporarily in cash or defensive type securities, such
as high-grade debt securities, securities of the U.S. Government or its agencies
and high quality money market instruments, including repurchase agreements.
BLUE CHIP FUND. The Blue Chip Fund seeks growth of capital and of income. In
seeking to achieve its objective, the Fund will invest primarily in common
stocks of well capitalized, established companies that the Fund's investment
manager believes to have the potential for growth of capital, earnings and
dividends. Under normal market conditions, the Fund will, as a fundamental
policy, invest at least 65%, and may invest up to 100%, of its total assets in
the common stocks of companies with a market capitalization of at least $1
billion at the time of investment.
In pursuing its objective, the Fund will emphasize investments in common stocks
of large, well known, high quality companies. Companies of this general type are
often referred to as "Blue Chip" companies. "Blue Chip" companies are generally
identified by their substantial capitalization, established history of earnings
and dividends, easy access to credit, good industry position and superior
management structure. "Blue Chip" companies are believed to generally exhibit
less investment risk and less price volatility than companies lacking these high
quality characteristics, such as smaller, less seasoned companies. In addition,
the large market of publicly held shares for such companies and the generally
high trading volume in those shares results in a relatively high degree of
liquidity for such investments. The characteristics of high quality and high
liquidity of "Blue Chip" investments should make the market for such stocks
attractive to investors both within and outside the United States. The Fund will
generally attempt to avoid speculative securities or those with significant
speculative characteristics.
Examples of "Blue Chip" companies currently eligible for investment by the Fund
include, but are not limited to, companies such as Pfizer Inc., Merck & Co.,
Inc., Hewlett-Packard Company, AT&T Company, General Reinsurance, J.P. Morgan &
Co., Union Pacific Corporation and PepsiCo. Inc. While the Fund's portfolio will
not be limited to the examples noted and need not contain any specific security,
companies of this general quality comprise a relatively small, select group. In
general, the Fund will seek to invest in those established, high quality
companies whose industries are experiencing favorable secular or cyclical
change. Thus, the Fund in seeking its objective will endeavor to select its
investments from among high quality companies operating in the more attractive
industries.
As indicated above, the Fund's investment portfolio will normally consist
primarily of common stocks. The Fund may invest to a more limited extent in
preferred stocks, debt securities and securities convertible into or
exchangeable for common stocks, including warrants and rights, when they are
believed to offer opportunities for growth of capital and of income. The Fund
may also purchase options, engage in financial futures transactions, purchase
foreign securities, engage in related foreign currency transactions and lend its
portfolio securities. See "Special Risk Factors--Foreign Securities" and
"Additional Investment Information" below. The Fund may engage in short sales
against-the-box, although it is the Fund's current intention that no more than
5% of its net assets will be at risk. When, as a result of market conditions
affecting "Blue Chip" companies, a defensive position is deemed advisable to
help preserve capital, the Fund may temporarily invest without limit in
high-grade debt securities, securities of the U.S. Government and its agencies,
and high quality money market instruments, including repurchase agreements, or
retain cash.
16
<PAGE> 26
The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
There are risks inherent in the investment in any security, including shares of
the Fund. The investment manager attempts to reduce risk through diversification
of the Fund's portfolio and fundamental research; however, there is no guarantee
that such efforts will be successful. The investment manager believes that there
are opportunities for growth of capital and growth of dividends from investments
in "Blue Chip" companies over time. The Fund's shares are intended for long-term
investment.
GROWTH FUND. The Growth Fund seeks growth of capital through professional
management and diversification of investments in securities it believes to have
potential for capital appreciation. In seeking to obtain capital appreciation,
the Fund may trade in securities for the short-term. To this extent, the Fund
will be engaged in trading operations based on short-term market considerations
as distinct from long-term investment based upon fundamental valuation of
securities. However, the Fund will emphasize fundamental research in attempting
to identify under-valued situations that it hopes will appreciate over the
longer term. The Fund's investment policy may involve a somewhat greater risk
than is inherent in the ordinary investment security. Since any income received
from such securities will be entirely incidental, an investor should not
consider a purchase of Fund shares as equivalent to a complete investment
program.
In seeking to achieve its objective, it will be the Fund's policy to invest
primarily in securities that it believes offer the potential for increasing the
Fund's total asset value. While it is anticipated that most investments will be
in common stocks of companies with above-average growth prospects, investments
may also be made to a limited degree in other common stocks and in convertible
securities (including warrants), such as bonds and preferred stocks. The Fund
may also purchase options, engage in financial futures transactions, purchase
foreign securities, engage in related foreign currency transactions and lend its
portfolio securities. See "Special Risk Factors--Foreign Securities" and
"Additional Investment Information" below. There may also be times when a
significant portion of the Fund's assets may be held temporarily in cash or
defensive type securities, such as high-grade debt securities, securities of the
U.S. Government or its agencies and high quality money market instruments,
including repurchase agreements, depending upon the investment manager's
analysis of business and economic conditions and the outlook for security
prices.
Some of the factors the Fund's management will consider in making its
investments are patterns of increasing growth in sales and earnings, the
development of new or improved products or services, favorable outlooks for
growth in the industry, the probability of increased operating efficiencies,
emphasis on research and development, cyclical conditions, or other signs that a
company is expected to show greater than average capital appreciation and
earnings growth.
QUANTITATIVE FUND. The Quantitative Fund seeks growth of capital and reduction
of risk through professional management of a diversified portfolio of equity
securities. In seeking to achieve the Fund's objectives, the investment manager
will emphasize the use of fundamental research and advanced quantitative
technology. There is no assurance that the management strategy for the Fund will
be successful or that the Fund will achieve its objectives.
The investment manager uses a disciplined approach to stock selection and
fundamental research to help it identify quality "growth" companies, whose
stocks are selling at reasonable prices based upon their earnings potential and
whose earnings are growing faster than the market average. Those stocks that are
believed by the investment manager to have superior price appreciation potential
are considered as eligible for investment by the Fund. Thus, a list of eligible
investments is developed by the investment manager through a regimented review
process that applies the results of research generated by the investment
manager's analytical staff to well defined quantitative factors (e.g., return on
equity, earnings per share growth) and qualitative factors (e.g., industry
growth, market share). As described below, the Fund's portfolio is structured by
the investment manager from eligible investments by using advanced quantitative
technology with a view to reducing the
17
<PAGE> 27
degree by which the volatility of the portfolio differs from the volatility of
the market for growth stocks generally.
The investment manager believes that there are identifiable macro-economic
factors that are major contributors to the volatility of the stock market.
Examples of these factors include: economic growth, the direction of long-term
interest rates and the credit spread, which is the spread between Treasury and
corporate fixed income securities. In selecting among the growth stocks
identified as being eligible for inclusion in the Fund's portfolio, the
investment manager applies advanced quantitative techniques to help structure
the portfolio so that normally it is neutrally weighted to these macro-economic
factors. These techniques involve the use of computer modeling to help select a
portfolio of securities believed to be attractive while simultaneously
maintaining a neutral macroeconomic posture. Neutral weighting means that the
exposure of the Fund's portfolio to the effect of these macro-economic factors
is, in the view of the investment manager, generally the same as the exposure of
the market for growth stocks as a whole. The purpose of this process is to
reduce the degree by which the volatility of the portfolio differs from the
volatility of the market for growth stocks and to increase the importance of
fundamental research and stock selection in the management process.
Depending upon economic and market conditions, the investment manager may at
times under- or overweight the portfolio with respect to certain macro-economic
factors. In those circumstances, the return potential as well as the risk
profile of the Fund's portfolio may be increased relative to the market for
growth stocks generally. However, a primary goal of portfolio structuring for
the Fund is to reduce those risks and the investment manager would normally not
be expected to so weight the portfolio.
Under normal conditions, the Fund will invest at least 65%, and may invest up to
100%, of its total assets in equity securities. Equity securities include common
stocks, preferred stocks, securities convertible into or exchangeable for common
or preferred stocks, equity investments in partnerships, joint ventures and
other forms of non-corporate investment and warrants and rights exercisable for
equity securities. Normally, the Fund's primary investments will be common
stocks of large, well capitalized companies. The Fund currently does not intend
to invest more than 5% of its net assets in debt securities (including
convertible debt securities) during the current year (except for defensive
investments described below).
The Fund may also purchase and write options, engage in financial futures
transactions, purchase foreign securities and engage in related foreign currency
transactions and lend its portfolio securities. See "Special Risk
Factors--Foreign Securities" and "Additional Investment Information" below. When
a defensive position is deemed advisable, all or a significant portion of the
Fund's assets may be held temporarily in cash or defensive type securities, such
as high-grade debt securities, securities of the U.S. Government or its agencies
and high quality money market instruments, including repurchase agreements.
The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
SMALL CAP FUND. The Small Cap Fund seeks maximum appreciation of investors'
capital. Current income will not be a significant factor. The Fund is designed
primarily for investors with substantial resources and the investment experience
to consider their shares as a long-term investment involving financial risk
commensurate with potential substantial gains.
The Fund seeks attractive areas for investment opportunity arising from such
factors as technological advances, new marketing methods, and changes in the
economy and population. Currently, the investment manager believes that such
investment opportunities may be found among the following: (a) companies engaged
in high technology fields such as electronics, medical technology, computer
software and specialty retailing; (b) companies having a significantly improved
earnings outlook as the result of a changed economic environment, acquisitions,
mergers, new management, changed corporate strategy or product innovation; (c)
companies supplying new or rapidly growing services to consumers and businesses
in such fields as
18
<PAGE> 28
automation, data processing, communications, marketing and finance; and (d)
companies having innovative concepts or ideas.
As a non-fundamental policy, at least 65% of the Fund's total assets normally
will be invested in the equity securities of smaller companies, i.e., those
having a market capitalization of $1 billion or less at the time of investment,
many of which would be in the early stages of their life cycle. The investment
manager currently believes that investment in such companies may offer greater
opportunities for growth of capital than larger, more established companies, but
also involves certain special risks. Smaller companies often have limited
product lines, markets, or financial resources, and they may be dependent upon
one or a few key people for management. The securities of such companies
generally are subject to more abrupt or erratic market movements and may be less
liquid than securities of larger, more established companies or the market
averages in general.
The Fund's investment portfolio will normally consist primarily of common stocks
and securities convertible into or exchangeable for common stocks, including
warrants and rights. The Fund may also invest to a limited degree in preferred
stocks and debt securities when they are believed by the investment manager to
offer opportunities for capital growth. The Fund may also purchase options,
engage in financial futures transactions, purchase foreign securities, engage in
related foreign currency transactions and lend its portfolio securities. See
"Special Risk Factors--Foreign Securities" and "Additional Investment
Information" below. When a defensive position is deemed advisable, it may,
without limit, invest in high-grade senior securities and securities of the U.S.
Government and its instrumentalities or retain cash or cash equivalents,
including repurchase agreements.
In the selection of investments, long-term capital appreciation will take
precedence over short range market fluctuations. The Fund does not intend to
engage actively in trading for short-term profits, although it may occasionally
make investments for short-term capital appreciation when such action is
believed to be desirable and consistent with sound investment procedure.
Generally, the Fund will make long-term rather than short-term investments.
Nevertheless, it may dispose of such investments at any time it may be deemed
advisable because of a subsequent change in the circumstances of a particular
company or industry or in general market or economic conditions. For example, a
security initially purchased for long-term growth potential may be sold at any
time when it is determined that future growth may not be at an acceptable rate
or that there is a risk of substantial decline in market price. The rate of
portfolio turnover is not a limiting factor when changes in investments are
deemed appropriate. In addition, market conditions, cash requirements for
redemption and repurchase of Fund shares or other factors could affect the
portfolio turnover rate.
Since many of the securities in the Fund's portfolio may be considered
speculative in nature by traditional investment standards, substantially greater
than average market volatility and investment risk may be involved. There can be
no assurance that the Fund's shareholders will be protected from the risk of
loss inherent in security ownership.
TECHNOLOGY FUND. The Technology Fund seeks growth of capital. In seeking to
achieve its objective, the Fund will invest primarily in securities of companies
which the investment manager expects to benefit from technological advances and
improvements ("technology companies") with an emphasis on the securities of
companies that the investment manager believes have potential for long-term
capital growth. Receipt of income from such securities will be entirely
incidental. Technology companies include those whose processes, products or
services, in the judgment of the investment manager, are or may be expected to
be significantly benefited by scientific developments and the application of
technical advances in industry, manufacturing and commerce resulting from
improving technology in such fields as, for example, aerospace, chemistry,
electronics, genetic engineering, geology, information sciences (including
computers and computer software), metallurgy, medicine (including pharmacology,
biotechnology and biophysics) and oceanography. This investment policy permits
the investment manager to seek stocks having superior growth potential in
virtually any industry in which they may be found. The above objective and
policies may not be changed without shareholder approval.
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The investment manager currently believes that investments in smaller emerging
growth technology companies may offer greater opportunities for growth of
capital than investments in larger, more established technology companies.
However, such investments also involve certain special risks. Smaller companies
often have limited product lines, markets, or financial resources; and they may
be dependent upon one or a few persons for management. The securities of such
companies generally are subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. Thus, investment by the Fund in smaller emerging growth technology
companies may expose investors to greater than average financial and market
risk. There is no assurance that the Fund's objective will be achieved.
The Fund's investment portfolio will normally consist primarily of common stocks
and securities convertible into or exchangeable for common stocks, including
warrants and rights. The Fund may also invest to a limited degree in preferred
stocks and debt securities when they are believed to offer opportunities for
capital growth. The Fund may also purchase and write options, engage in
financial futures transactions, purchase foreign securities, engage in related
foreign currency transactions and lend its portfolio securities. See "Special
Risk Factors--Foreign Securities" and "Additional Investment Information" below.
When a defensive position is deemed advisable, the Fund may, without limit,
invest in high-grade senior securities and securities of the U.S. Government and
its instrumentalities or retain cash or cash equivalents, such as high quality
money market instruments, including repurchase agreements. The Fund's shares are
intended for long-term investment.
The Fund may invest up to 10% of its total assets in entities, such as limited
partnerships or trusts, that invest primarily in the securities of technology
companies. The investment manager believes that the flexibility to make limited
indirect investment in technology companies through entities such as limited
partnerships and trusts will provide the Fund with increased opportunities for
growth of capital. However, there is no assurance that such investments will be
profitable. Entities that invest in the securities of technology companies
normally have management fees and other costs that are in addition to those of
the Fund. Such fees and costs will reduce any returns directly attributable to
the underlying technology companies. The effect of these fees will be considered
by the investment manager in connection with any decision to invest in such
entities. Securities issued by these entities are normally privately placed,
restricted and illiquid.
The Fund purchases securities for long-term investment, but it is the investment
manager's belief that a sound investment program must be flexible in order to
meet changing conditions, and changes in holdings will be made whenever deemed
advisable.
TOTAL RETURN FUND. The Total Return Fund seeks the highest total return, a
combination of income and capital appreciation, consistent with reasonable risk.
The Fund will emphasize liberal current income in seeking its objective. The
Fund's investments will normally consist of domestic and foreign fixed income
and equity securities. Fixed income securities will include bonds and other debt
securities (such as U.S. and foreign Government securities and investment grade
and high yield corporate obligations) and preferred stocks, some of which may
have a call on common stocks through attached warrants or a conversion
privilege. The percentage of assets invested in specific categories of fixed
income and equity securities will vary from time to time depending upon the
judgment of management as to general market and economic conditions, trends in
yields and interest rates and changes in fiscal or monetary policies. The Fund
may also purchase options, engage in financial futures transactions, engage in
foreign currency transactions and lend its portfolio securities. See "Special
Risk Factors--Foreign Securities" and "Additional Investment Information" below.
As noted above, the Fund may invest in high yield fixed income securities which
are in the lower rating categories and those which are unrated. Thus, the Fund
could invest in some instruments considered by the rating services to have
predominantly speculative characteristics. Investments in lower rated or
non-rated securities, while generally providing greater income and opportunity
for gain than investments in higher rated securities, entail greater risk of
loss of income and principal. Currently, it is anticipated that the Fund would
invest less than 35% of its total assets in high yield bonds. For a discussion
of lower rated and non-rated securities and related risks, see "Special Risk
Factors--High Yield (High Risk) Bonds" below.
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The Fund does not make investments for short-term profits, but it is not
restricted in policy with regard to portfolio turnover and will make changes in
its investment portfolio from time to time as business and economic conditions
and market prices may dictate and as its investment policy may require.
VALUE+GROWTH FUND. The Value+Growth Fund seeks growth of capital through
professional management of a portfolio of growth and value stocks. These stocks
include stocks of large established companies, as well as stocks of small
companies. A secondary objective is the reduction of risk over a full market
cycle compared to a portfolio of only growth stocks or only value stocks.
Growth stocks are stocks of companies whose earnings per share are expected by
the investment manager to grow faster than the market average. Growth stocks
tend to trade at higher price to earnings (P/E) ratios than the general market,
but the investment manager believes that the potential of such stocks for above
average earnings more than justifies their price. Value stocks are considered
"bargain stocks" because they are perceived as undervalued, i.e., attractively
priced in relation to their earnings potential (low P/E ratios). Value stocks
typically have dividend yields higher than the average of the companies
represented in the Standard & Poor's 500 Stock Index.
The allocation between growth and value stocks in the Fund's portfolio will be
made by the investment manager's Quantitative Research Department with the help
of a proprietary model that evaluates macro-economic factors such as the
strength of the economy, interest rates and special factors concerning growth
and value stocks. Historically, the performance of growth and value stocks has
tended to be counter-cyclical, i.e., when one was in favor, the other was out of
favor relative to the equity market in general. Through the allocation process,
the investment manager will seek to weight the portfolio more heavily in the
type of stocks that are believed to present greater return opportunities at the
time. The neutral allocation between growth and value stocks would be 50%/50%.
Although allocations in favor of growth or value normally would not be expected
to exceed 60%, the allocation to growth or value may be up to 75% at any time.
Allocation decisions are normally based upon long-term considerations and
changes would normally be expected to be gradual. There is no assurance that the
allocation process will improve investment results.
In managing the growth portion of the portfolio, the investment manager
emphasizes stock selection and fundamental research in seeking to enhance
long-term performance potential. The investment manager considers a number of
quantitative and qualitative factors in considering whether to invest in a stock
including high return on equity and earnings growth rate, low level of debt,
strong balance sheet, good management and industry leadership. In managing the
value portion of the portfolio, the investment manager seeks stocks it believes
to be undervalued. The principal factor considered is P/E ratios. Typically
stocks of both types will have a market capitalization in excess of $1 billion.
In selecting among stocks with low P/E ratios, the investment manager considers
other factors such as financial strength, book to market value, earnings and
dividend growth rates, return on equity and earnings estimates.
Although it is anticipated that the Fund will invest primarily in common stocks
of domestic companies, the Fund may also purchase convertible securities, such
as bonds and preferred stocks (including warrants and rights). The Fund may also
purchase options, engage in financial futures transactions, purchase foreign
securities, engage in related foreign currency transactions and lend its
portfolio securities. See "Special Risk Factors--Foreign Securities" and
"Additional Investment Information" below. When a defensive position is deemed
advisable, all or a significant portion of the Fund's assets may be held
temporarily in cash or defensive type securities, such as high-grade debt
securities, securities of the U.S. Government or its agencies and high quality
money market instruments, including repurchase agreements.
The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
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SPECIAL RISK FACTORS--NON-DIVERSIFIED. The Investment Company Act of 1940 (the
"1940 Act") classifies investment companies as either "diversified" or
"non-diversified." All the Funds, except the Aggressive Growth Fund, are
diversified funds under the 1940 Act. As a non-diversified fund, the Aggressive
Growth Fund may invest a greater proportion of its assets in the obligations of
a small number of issuers, and may be subject to greater risk and substantial
losses as a result of changes in the financial condition or the market's
assessment of the issuers. While not limited by the 1940 Act as to the
proportion of its assets that it may invest in obligations of a single issuer,
the Aggressive Growth Fund will comply with the diversification requirements
imposed by the Internal Revenue Code for qualification as a regulated investment
company. Accordingly, the Aggressive Growth Fund will not, as a fundamental
policy: (i) purchase more than 10% of any class of voting securities of any
issuer; (ii) with respect to 50% of its total assets, purchase securities of any
issuer (other than U.S. Government Securities) if, as a result, more than 5% of
the total value of the Fund's assets would be invested in securities of that
issuer; and (iii) invest more than 25% of its total assets in a single issuer
(other than U.S. Government Securities). The Aggressive Growth Fund does not
currently expect that it would invest more than 10% of its total assets in a
single issuer (other than U.S. Government Securities).
SPECIAL RISK FACTORS--FOREIGN SECURITIES. The Funds invest primarily in
securities that are publicly traded in the United States; but, they have
discretion to invest a portion of their assets in foreign securities that are
traded principally in securities markets outside the United States. The Funds
currently limit investment in foreign securities not publicly traded in the
United States to 25% of their total assets. The Funds may also invest without
limit in U.S. Dollar denominated American Depository Receipts ("ADRs"), which
are bought and sold in the United States and are not subject to the preceding
limitation. In connection with their foreign securities investments, the Funds
may, to a limited extent, engage in foreign currency exchange, options and
futures transactions as a hedge and not for speculation. Additional information
concerning foreign securities and related techniques is contained under
"Additional Investment Information" below and "Investment Policies and
Techniques" in the Statement of Additional Information.
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based on the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
EMERGING MARKETS. While each Fund's investments in foreign securities will be
principally in developed countries, a Fund may make investments in developing or
"emerging" countries, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. A developing or emerging market country can be
considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most Western European countries. Currently,
investing in many emerging markets may not be desirable or
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feasible because of the lack of adequate custody arrangements for a 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, a
Fund may expand and further broaden the group of emerging markets in which it
invests. In the past, markets of developing or emerging market countries have
been more volatile than the markets of developed countries; however, such
markets often have provided higher rates of return to investors. The investment
manager believes that these characteristics 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 domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.
Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of a 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 a Fund due to subsequent declines in value of the
portfolio security or, if a 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 a 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 a Fund's portfolio securities in such
markets may not be readily available. A Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of 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.
FIXED INCOME. Since most foreign fixed income securities are not rated, a Fund
(principally the Total Return Fund) will invest in foreign fixed income
securities based on the investment manager's analysis without relying
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on published ratings. Since such investments will be based upon the investment
manager's analysis rather than upon published ratings, achievement of a Fund's
goals may depend more upon the abilities of the investment manager than would
otherwise be the case.
The value of the foreign fixed income securities held by a Fund, and thus the
net asset value of the Fund's shares, generally will fluctuate with (a) changes
in the perceived creditworthiness of the issuers of those securities, (b)
movements in interest rates, and (c) changes in the relative values of the
currencies in which a Fund's investments in fixed income securities are
denominated with respect to the U.S. Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of a Fund's investments
in foreign fixed income securities, and the extent to which a Fund hedges its
interest rate, credit and currency exchange rate risks. Many of the foreign
fixed income obligations in which a Fund will invest will have long maturities.
A longer average maturity generally is associated with a higher level of
volatility in the market value of such securities in response to changes in
market conditions.
Investments in sovereign debt, including Brady Bonds, involve special risks.
Brady Bonds are debt securities issued under a plan implemented to other debtor
nations to restructure their outstanding commercial bank indebtedness. Foreign
governmental issuers of debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or pay
interest when due. In the event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Political conditions, especially a sovereign entity's
willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and a Fund may be unable to
collect all or any part of its investment in a particular issue.
Foreign investment in certain sovereign debt is restricted or controlled to
varying degrees, including requiring governmental approval for the repatriation
of income, capital or proceed of sales by foreign investors. These restrictions
or controls may at times limit or preclude foreign investment in certain
sovereign debt or increase the costs and expenses of a Fund. A significant
portion of the sovereign debt in which a Fund may invest is issued as part of
debt restructuring and such debt is to be considered speculative. There is a
history of defaults with respect to commercial bank loans by public and private
entities issuing Brady Bonds. All or a portion of the interest payments and/or
principal repayment with respect to Brady Bonds may be uncollateralized.
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. A 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 a 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 privatization will be successful or that
governments will not re-nationalize enterprises that have been privatized.
In the case of the enterprises in which a Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization of management. Such
reorganizations are made in an attempt to better enable these
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enterprises to compete in the private sector. However, certain reorganizations
could result in a management team that does not function as well as the
enterprise's prior management and may have a negative effect on such enterprise.
In addition, the privatization of an enterprise by its government may occur over
a number of years, with the government continuing to hold a controlling position
in the enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which a Fund may invest
enjoy the protection of and receive preferential treatment from the respective
sovereigns that own or control them. After making an initial equity offering
these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
DEPOSITORY RECEIPTS. For many foreign securities, there are U.S. Dollar
denominated ADRs, which are bought and sold in the United States and are issued
by domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in the domestic bank or a correspondent bank. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers, such as changes in foreign currency exchange rates. However, by
investing in ADRs rather than directly in foreign issuers' stock, the Fund
avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs. The Funds may also
invest in European Depository Receipts ("EDRs"), which are receipts evidencing
an arrangement with a European bank similar to that for ADRs and are designed
for use in the European securities markets. EDRs are not necessarily denominated
in the currency of the underlying security.
SPECIAL RISK FACTORS--HIGH YIELD (HIGH RISK) BONDS. As stated above, the Total
Return Fund may invest a portion of its assets in fixed income securities that
are in the lower rating categories (below the fourth category) of recognized
rating agencies or are non-rated. These lower rated and non-rated fixed income
securities are considered, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation and generally will involve more credit risk than securities in
the higher rating categories. Lower rated and non-rated securities, which are
commonly referred to as "junk bonds," have widely varying characteristics and
quality. The market values of such securities tend to reflect individual
corporate developments to a greater extent than do those of higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower rated securities also are more sensitive to economic
conditions than are higher rated securities. Adverse publicity and investor
perceptions regarding lower rated bonds, whether or not based upon fundamental
analysis, may depress the prices for such securities. These and other factors
adversely affecting the market value of high yield securities will adversely
affect the Fund's net asset value. Although some risk is inherent in all
securities ownership, holders of fixed income securities have a claim on the
assets of the issuer prior to the holders of common stock. Therefore, an
investment in fixed income securities generally entails less risk than an
investment in common stock of the same issuer. The Fund may have difficulty
disposing of certain high yield securities because they may have a thin trading
market. The lack of a liquid secondary market may have an adverse effect on
market price and the Fund's ability to dispose of particular issues and may also
make it more difficult for the Fund to obtain accurate market quotations for
purposes of valuing these assets. Additional information concerning high yield
securities appears under "Investment Policies and Techniques--Other
Considerations--High Yield (High Risk) Bonds" and "Appendix--Ratings of Fixed
Income Investments" in the Statement of Additional Information.
ADDITIONAL INVESTMENT INFORMATION. The portfolio turnover rates for the Funds
are listed under "Financial Highlights." Higher portfolio turnover involves
correspondingly greater brokerage commissions or other transaction costs. Higher
portfolio turnover (100% or more) may result in the realization of greater net
short-term capital gains. See "Dividends and Taxes" in the Statement of
Additional Information.
The Aggressive Growth and Blue Chip Funds each may not borrow money except as a
temporary measure for extraordinary or emergency purposes and not for leverage
purposes, and then only in an amount up to one-third of the value of its total
assets in order to meet redemption requests without immediately selling any
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portfolio securities or other assets. (If, for any reason, the current value of
a Fund's total assets falls below an amount equal to three times the amount of
its indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary.) The Blue Chip Fund may pledge up to 15% of its total assets to
secure any such borrowings. The Growth, Quantitative, Small Cap, Technology,
Total Return and Value+Growth Funds each may not borrow money except for
temporary or emergency purposes (but not for the purchase of investments) and
then only in an amount not to exceed 5% of its net assets, and may not pledge
their assets in an amount exceeding the amount of the borrowings secured by such
pledge. The Aggressive Growth Fund may not pledge its assets except to secure
permitted borrowings.
A Fund will not purchase illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 15% of the
Fund's net assets, valued at the time of the transaction, would be invested in
such securities. If a Fund holds a material percentage of its assets in illiquid
securities, there may be a question concerning the ability of the Fund to make
payment within seven days of the date its shares are tendered for redemption.
SEC guidelines provide that the usual limit on aggregate holdings by an open-end
investment company of illiquid assets is 15% of its net assets. See "Investment
Policies and Techniques--Over-the-Counter Options" in the Statement of
Additional Information for a description of the extent to which over-the-counter
traded options are in effect considered as illiquid for purposes of the limit on
illiquid securities for the Funds. Each Fund may invest in securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933. This rule
permits otherwise restricted securities to be sold to certain institutional
buyers, such as the Funds. Such securities may be illiquid and subject to the
Fund's limitation on illiquid securities. A "Rule 144A" security may be treated
as liquid, however, if so determined pursuant to procedures adopted by the Board
of Trustees. Investing in Rule 144A securities could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become uninterested for a time in purchasing Rule 144A
securities.
Each Fund has adopted certain fundamental investment restrictions, which are
presented in the Statement of Additional Information and which, together with
the investment objective and policies of a Fund (other than policies that are
not fundamental), cannot be changed without approval by holders of a majority of
its outstanding voting shares. As defined in the 1940 Act, this means the lesser
of the vote of (a) 67% of the shares of a Fund present at a meeting where more
than 50% of the outstanding shares are present in person or by proxy; or (b)
more than 50% of the outstanding shares of a Fund. Policies of the Aggressive
Growth, Blue Chip, Quantitative and Value+Growth Funds that are neither
designated as fundamental nor incorporated into any of the fundamental
investment restrictions referred to in the first sentence of this paragraph are
not fundamental and may be changed by the Board of Trustees of the Fund without
shareholder approval.
OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. The Funds may each deal in options
on securities, securities indexes and foreign currencies, which options may be
listed for trading on a national securities exchange or traded over-the-counter.
The Aggressive Growth, Quantitative and Technology Funds may write (sell)
covered call and secured put options on up to 25% of net assets and each Fund
may purchase put and call options provided that no more than 5% of its net
assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during or at the end of the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security or
other asset at the exercise price during or at the end of the option period. The
writer of a covered call owns securities or other assets that are acceptable for
escrow and the writer of a secured put invests an amount not less than the
exercise price in eligible securities or other assets to the extent that it is
obligated as a writer. If a call written by a Fund is exercised, the Fund
foregoes any possible profit from an increase in the market price of the
underlying security or other asset over the exercise price plus the premium
received. In writing puts, there is a risk that a Fund may be required to take
delivery of the underlying security or other asset at a disadvantageous price.
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Over-the-counter traded options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer as a result of the insolvency of such dealer or otherwise, in which event
a Fund may experience material losses. However, in writing options (for the
Aggressive Growth, Quantitative and Technology Funds) the premium is paid in
advance by the dealer. OTC options are available for a greater variety of
securities or other assets, and a wider range of expiration dates and exercise
prices, than for exchange traded options.
Each Fund may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or the cash value of a securities index during a specified future
period at a specified price. A Fund will "cover" futures contracts sold by the
Fund and maintain in a segregated account certain liquid assets in connection
with futures contracts purchased by the Fund as described under "Investment
Policies and Techniques" in the Statement of Additional Information. In
connection with their foreign securities investments, the Funds may also engage
in foreign currency financial futures transactions. A Fund will not enter into
any futures contracts or options on futures contracts if the aggregate of the
contract value of the outstanding futures contracts of the Fund and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
the total assets of the Fund.
The Funds may engage in financial futures transactions and may use index options
as an attempt to hedge against market risks. For example, when the near-term
market view is bearish but the portfolio composition is judged satisfactory for
the longer term, exposure to temporary declines in the market may be reduced by
entering into futures contracts to sell securities or the cash value of a
securities index. Conversely, where the near-term view is bullish, but the Fund
is believed to be well positioned for the longer term with a high cash position,
the Fund can hedge against market increases by entering into futures contracts
to buy securities or the cash value of a securities index. In either case, the
use of futures contracts would tend to reduce portfolio turnover and facilitate
the Fund's pursuit of its investment objective.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. If participants
in the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures market could result. Price
distortions also could result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators,
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager still may not result in a successful hedging
transaction. If any of these events should occur, a Fund could lose money on the
financial futures contracts and also on the value of its portfolio assets. The
costs incurred in connection with futures transactions could reduce a Fund's
return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by a Fund
may expire worthless, in which case a Fund would lose the premium paid therefor.
A Fund may engage in futures transactions only on commodities exchanges or
boards of trade. A Fund will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities which the Fund owns or intends to purchase.
27
<PAGE> 37
FOREIGN CURRENCY TRANSACTIONS. The Funds may invest a portion of their assets in
securities denominated in foreign currencies. The Funds may engage in foreign
currency transactions in connection with their investments in foreign securities
but will not speculate in foreign currency exchange.
The value of the foreign securities investments of a Fund measured in U.S.
Dollars (including ADRs) 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. A
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers.
When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Fund is able to protect itself against a
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S. Dollar and such foreign currency.
However, this tends to limit potential gains that might result from a positive
change in such currency relationships. A Fund may also hedge its foreign
currency exchange rate risk by engaging in currency financial futures and
options transactions.
When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. The forecasting of short-term currency market movement is extremely
difficult and whether such a short-term hedging strategy will be successful is
highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for a Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
A Fund will not speculate in foreign currency exchange. A Fund will not enter
into such forward contracts or maintain a net exposure in such contracts where
the Fund would be obligated to deliver an amount of foreign currency in excess
of the value of the Fund's securities or other assets denominated in that
currency. The Funds do not intend to enter into such forward contracts if they
would have more than 15% of the value of their total assets committed to forward
contracts for the purchase of a foreign currency. A Fund segregates cash or
liquid securities to the extent required by applicable regulation in connection
with forward foreign currency exchange contracts entered into for the purchase
of a foreign currency. A Fund generally does not enter into a forward contract
with a term longer than one year.
DERIVATIVES. In addition to options, financial futures and foreign currency
transactions, consistent with its objective, each Fund may invest in a broad
array of financial instruments and securities in which the value of the
instrument or security is "derived" from the performance of an underlying asset
or a "benchmark" such as a security index, an interest rate or a currency
("derivatives"). Derivatives are most often used in an effort to manage
investment risk, to increase or decrease exposure to an asset class or benchmark
(as a hedge or to enhance return), or to create an investment position
indirectly (often because it is more efficient or less costly than direct
investment). There is no guarantee that these results can be achieved through
the use of derivatives.
28
<PAGE> 38
The types of derivatives used by each Fund and the techniques employed by the
investment manager may change over time as new derivatives and strategies are
developed or regulatory changes occur.
SPECIAL RISK FACTORS--OPTIONS, FUTURES, FOREIGN CURRENCIES AND OTHER
DERIVATIVES. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures, foreign currency and other derivative transactions. See "Investment
Policies and Techniques" in the Statement of Additional Information. The
principal risks are: (a) possible imperfect correlation between movements in the
prices of options, currencies, futures contracts or other derivatives and
movements in the prices of the securities or currencies hedged, used for cover
or that the derivative intended to replicate; (b) lack of assurance that a
liquid secondary market will exist for any particular option, futures, foreign
currency or other derivatives contract at any particular time; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; (d) losses on futures contracts resulting from market movements not
anticipated by the investment manager; and (e) the possible non-performance of
the counter-party to the derivative contract.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Funds may lend securities (principally to broker-dealers)
without limit where such loans are callable at any time and are continuously
secured by segregated collateral (cash or U.S. Government securities) equal to
no less than the market value, determined daily, of the securities loaned. The
Funds will receive amounts equal to dividends or interest on the securities
loaned. The Funds will also earn income for having made the loan. Any cash
collateral pursuant to these loans will be invested in short-term money market
instruments. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the investment manager to be of good standing, and when the investment
manager believes the potential earnings justify the attendant risk. Management
will limit such lending to not more than one-third of the value of a Fund's
total assets.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345
Park Avenue, New York, New York, is the investment manager of each Fund and
provides each Fund with continuous professional investment supervision. Scudder
Kemper is one of the largest investment managers in the country with more than
$200 billion under management and has been engaged in the management of
investment funds for more than seventy years. Zurich Insurance Company, a
leading internationally recognized provider of insurance and financial services
in property/casualty and life insurance, reinsurance and structured financial
solutions as well as asset management, owns approximately 70% of Scudder Kemper,
with the balance owned by Scudder Kemper's officers and employees.
Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by
Scudder Kemper. The investment management agreements provide that Scudder Kemper
shall act as each Fund's investment adviser, manage its investments and provide
it with various services and facilities.
Tracy McCormick Chester has been the portfolio manager of the Blue Chip Fund
since September, 1994 when she joined Scudder Kemper. She is a vice president of
the Blue Chip Fund and senior vice president of Scudder Kemper. Prior to coming
to Scudder Kemper, from August 1992 to September 1994, she was a senior vice
president and portfolio manager of an investment management company; and prior
thereto, she managed private accounts. She received a B.A. and an M.B.A. in
Finance from Michigan State University, East Lansing, Michigan.
Steven H. Reynolds has been the portfolio manager of the Kemper Growth Fund
since February 1997. He joined Scudder Kemper in September 1995 and is currently
executive vice president of Scudder Kemper. From 1991 to September 1995, he was
a senior vice president and equity portfolio manager of an unaffiliated
29
<PAGE> 39
investment advisory firm. Mr. Reynolds received a B.A. degree from Johns Hopkins
University, Baltimore, Maryland and an M.B.A. in finance from the University of
Virginia, Charlottesville, Virginia.
Kurt R. Stalzer has been the portfolio manager of Kemper Small Capitalization
Equity Fund since he joined Scudder Kemper in January 1997 and the portfolio
manager of the Kemper Aggressive Growth Fund since February 1997. He is a senior
vice president at Scudder Kemper. From 1992 to 1996, Mr. Stalzer was a senior
portfolio manager for an unaffiliated investment management company. Mr. Stalzer
received a B.B.A. in finance and accounting from the University of Michigan.
Gary A. Langbaum has been the portfolio manager of the Total Return Fund since
February, 1995. He is assisted by investment personnel who specialize in certain
areas. Mr. Langbaum joined Scudder Kemper in 1988 and is an executive vice
president of Scudder Kemper. He received a B.A. in Finance from the University
of Maryland, College Park, Maryland.
Daniel J. Bukowski has been the portfolio manager of the Quantitative Fund since
it commenced operations in February, 1996 and has been a portfolio manager or
co-manager of the Value+Growth Fund since October, 1995. Mr. Bukowski joined
Scudder Kemper in 1989 and is a senior vice president and Director of
Quantitative Research of Scudder Kemper and a vice president of the Quantitative
Fund and the Value+Growth Fund. Mr. Bukowski received a B.A. in Statistics and
an M.B.A. in Finance from the University of Chicago, Chicago, Illinois.
William M. Knapp has been a co-manager of the Value+Growth Fund since December,
1996. Mr. Knapp joined Scudder Kemper in 1992 and is a first vice president of
Scudder Kemper. Immediately prior to joining Scudder Kemper, he served as an
officer with an unaffiliated investment management firm from September, 1988.
The Technology Fund is managed by a team of investment professionals who each
play an important role in the Technology Fund's management process. The team is
comprised of the following members: Tracy McCormick Chester, Richard A. Goers,
Gary A. Langbaum and Steven H. Reynolds. Mr. Goers joined Scudder Kemper in
January, 1971 and is currently a senior technology analyst. He received a B.S.
in Industrial (Business) Administration from Iowa State University, Ames, Iowa
and an M.B.A. in Finance from Northwestern University, Chicago, Illinois. Mr.
Goers is a Chartered Financial Analyst. Information concerning the other members
of the team appears above.
The Funds (other than the Aggressive Growth Fund and the Small Cap Fund) pay
Scudder Kemper investment management fees, payable monthly, at 1/12 of the
annual rates shown below. The Aggressive Growth Fund and the Small Cap Fund each
pay a base annual management fee, payable monthly, at the annual rate of .65% of
the average daily net assets of the Fund. This base fee is subject to upward or
downward adjustment on the basis of the investment performance of the Class A
shares of the Fund compared with the performance of the Standard & Poor's 500
Stock Index as described in the Statement of Additional Information. After the
effect of
30
<PAGE> 40
the adjustment, the management fee rate for the Aggressive Growth Fund may range
between .45% and .85% and the management fee rate for the Small Cap Fund may
range between .35% and .95%.
<TABLE>
<CAPTION>
BLUE CHIP,
GROWTH,
QUANTITATIVE,
TECHNOLOGY
AND TOTAL
RETURN VALUE+
AVERAGE DAILY NET ASSETS FUNDS GROWTH FUND
- ------------------------ ------------- -----------
<S> <C> <C>
$0 - $250 million........................................... .58% .72%
$250 million - $1 billion................................... .55 .69
$1 billion - $2.5 billion................................... .53 .66
$2.5 billion - $5 billion................................... .51 .64
$5 billion - $7.5 billion................................... .48 .60
$7.5 billion - $10 billion.................................. .46 .58
$10 billion - $12.5 billion................................. .44 .56
Over $12.5 billion.......................................... .42 .54
</TABLE>
FUND ACCOUNTING AGENT. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of Scudder Kemper, is responsible for determining the daily net asset
value per share of the Funds and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services to the Funds; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with each Fund, Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606, an affiliate of
Scudder Kemper, is the principal underwriter and distributor of each Fund's
shares and acts as agent of each Fund in the sale of its shares. KDI bears all
its expenses of providing services pursuant to the distribution agreement,
including the payment of any commissions. KDI provides for the preparation of
advertising or sales literature and bears the cost of printing and mailing
prospectuses to persons other than shareholders. KDI bears the cost of
qualifying and maintaining the qualification of Fund shares for sale under the
securities laws of the various states and each Fund bears the expense of
registering its shares with the Securities and Exchange Commission. KDI may
enter into related selling group agreements with various broker-dealers,
including affiliates of KDI, that provide distribution services to investors.
KDI also may provide some of the distribution services.
Class A Shares. KDI receives no compensation from the Funds as principal
underwriter for Class A shares and pays all expenses of distribution of each
Fund's Class A shares under the distribution agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of each Fund's shares.
Class B Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of each Fund attributable to Class B shares. This fee is
accrued daily as an expense of Class B shares. KDI also receives any contingent
deferred sales charges. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Class B Shares." KDI currently compensates firms for
sales of Class B shares at a commission rate of 3.75%.
Class C Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of each Fund attributable to Class C shares. This fee is
accrued daily as an expense of Class C shares. KDI currently advances to firms
the first year distribution fee at a rate of .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
.75% of net assets
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<PAGE> 41
attributable to Class C shares maintained and serviced by the firm and the fee
continues until terminated by KDI or a Fund. KDI also receives any contingent
deferred sales charges. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charges--Class C Shares".
Rule 12b-1 Plan. Since each distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the 1940 Act, which regulates the manner in which an
investment company may, directly or indirectly, bear the expenses of
distributing its shares. The table below shows amounts paid in connection with
each Fund's Rule 12b-1 Plan during its 1997 fiscal year.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
DISTRIBUTION EXPENSES DISTRIBUTION FEES PAID SALES CHARGES PAID
INCURRED BY UNDERWRITER BY FUND TO UNDERWRITER TO UNDERWRITER
----------------------- ----------------------- --------------------
FUND CLASS B CLASS C CLASS B CLASS C CLASS B CLASS C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth*............ $ 143,000 45,000 13,000 6,000 11,000 5,000
Blue Chip..................... $2,952,000 182,000 659,000 49,000 128,000 3,000
Growth........................ $5,466,000 324,000 6,426,000 110,000 1,183,000 1,000
Quantitative.................. $ 79,000 13,000 13,000 8,000 0 0
Small Cap..................... $2,632,000 168,000 1,930,000 62,000 417,000 2,000
Technology.................... $2,259,000 179,000 698,000 51,000 179,000 3,000
Total Return.................. $5,950,000 293,000 8,705,000 109,000 1,382,000 2,000
Value+Growth.................. $1,044,000 57,000 195,000(a) 8,000(a) 28,000 1,000
</TABLE>
- ---------------
* For the period December 31, 1996 to September 30, 1997.
(a) Amounts shown are after expense waiver.
If a Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of a Fund to make payments to KDI pursuant to the Plan will cease
and the Fund will not be required to make any payments past the termination
date. Thus, there is no legal obligation for the Fund to pay any expenses
incurred by KDI in excess of its fees under a Plan, if for any reason the Plan
is terminated in accordance with its terms. Future fees under a Plan may or may
not be sufficient to reimburse KDI for its expenses incurred.
ADMINISTRATIVE SERVICES. KDI also provides information and administrative
services for shareholders of each Fund pursuant to administrative services
agreements ("administrative agreements"). KDI may enter into related
arrangements with various broker-dealer firms and other service or
administrative ("firms"), that provide services and facilities for their
customers or clients who are investors of the Funds. Such administrative
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 each Fund and its special
features, and such other administrative services as may be agreed upon from time
to time and permitted by applicable statute, rule or regulation. KDI bears all
its expenses of providing services pursuant to the administrative agreement,
including the payment of any service fees. For services under the administrative
agreements, each Fund pays KDI a fee, payable monthly, at the annual rate of up
to .25% of average daily net assets of Class A, B and C shares of such Fund. KDI
then pays each firm a service fee, normally payable quarterly, at an annual rate
of up to .25% of net assets of Class A, B and C shares maintained and serviced
by the firm. Firms to which service fees may be paid include affiliates of KDI.
CLASS A SHARES. For Class A shares, a firm becomes eligible for the service fee
based upon assets in the Fund accounts maintained and serviced by the firm
commencing in the month following the month of purchase and the fee continues
until terminated by KDI or the Fund. The fees are calculated monthly and
normally paid quarterly.
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<PAGE> 42
CLASS B AND CLASS C SHARES. KDI currently advances to firms the first-year
service fee at a rate of up to .25% of the purchase price of such shares. For
periods after the first year, KDI currently intends to pay firms a service fee
at a rate of up to .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. After the first year, a firm becomes eligible for the quarterly
service fee and the fee continues until terminated by KDI or the Fund.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreements not paid to firms to compensate
itself for administrative functions performed for each Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which a firm provides administrative services and it is intended
that KDI will pay all the administrative services fee that it receives from each
Fund to firms in the form of service fees. The effective administrative services
fee rate to be charged against all assets of each Fund while this procedure is
in effect will depend upon the proportion of Fund assets that is in accounts for
which a firm provides administrative services as well as, with respect to Class
A shares, the date when shares representing such assets were purchased. In
addition, KDI may, from time to time, from its own resources pay certain firms
additional amounts for ongoing administrative services and assistance provided
to their customers and clients who are shareholders of the Funds.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of each Fund maintained in the United States. The Chase Manhattan Bank, Chase
MetroTech Center, Brooklyn, New York 11245, as custodian, has custody of all
securities and cash of each Fund held outside the United States. IFTC also is
the Funds' transfer agent and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company ("KSvC"), an affiliate of Scudder
Kemper, serves as "Shareholder Service Agent" of the Funds and, as such,
performs all of IFTC's duties as transfer agent and dividend-paying agent. For a
description of transfer agent and shareholder service agent fees payable to IFTC
and the Shareholder Service Agent, see "Investment Manager and Underwriter" in
the Statement of Additional Information.
PORTFOLIO TRANSACTIONS. Scudder Kemper places all orders for purchases and sales
of a Fund's securities. Subject to seeking the most favorable net results, they
may consider sales of shares of a Fund and other funds managed by Scudder Kemper
or its affiliates as a factor in selecting broker-dealers. See "Portfolio
Transactions" in the Statement of Additional Information.
DIVIDENDS AND TAXES
DIVIDENDS. Each Fund normally distributes dividends of net investment income as
follows: annually for the Aggressive Growth, Growth, Quantitative, Small Cap,
Technology and Value+Growth Funds; semi-annually for the Blue Chip Fund; and
quarterly for the Total Return Fund. Each Fund distributes any net realized
short-term and long-term capital gains at least annually. The quarterly
distribution to shareholders of the Total Return Fund may include short-term
capital gains.
Dividends paid by a Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
Fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset
value; or
33
<PAGE> 43
(2) To receive income and capital gain dividends in cash.
Any dividends of a Fund that are reinvested normally will be reinvested in
shares of the same class of that same Fund. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have dividends of a Fund
invested 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 a Fund in shares of another Kemper Fund,
shareholders must maintain a minimum account value of $1,000 in the Fund
distributing the dividends. The Funds will reinvest dividend checks (and future
dividends) in shares of that same Fund and class if checks are returned as
undeliverable. Dividends and other distributions of a Fund in the aggregate
amount of $10 or less are automatically reinvested in shares of the Fund unless
the shareholder requests that such policy not be applied to the shareholder's
account.
TAXES. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be liable for federal income taxes to the extent its
earnings are distributed. Dividends derived from net investment income and net
short-term capital gains are taxable to shareholders as ordinary income and
long-term capital gain dividends are taxable to shareholders as long-term
capital gain regardless of how long the shares have been held and whether
received in cash or shares. Long-term capital gain dividends received by
individual shareholders are taxed at a maximum rate of 20% on gains realized by
a Fund from securities held more than 18 months and at a maximum rate of 28% on
gains realized by a Fund from securities held more than 12 months but not more
than 18 months. Dividends declared in October, November or December to
shareholders of record as of a date in one of those months and paid during the
following January are treated as paid on December 31 of the calendar year
declared. A portion of the dividends paid by the Funds may qualify for the
dividends received deduction available to corporate shareholders.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a
return of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing gains
realized on sales of securities, such dividends would be a return of investment
though taxable as stated above.
Each Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over". The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
(IRAs) or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends and periodic
investment and redemption programs. Information for income tax purposes,
including, when appropriate, information regarding any foreign taxes and
credits, will be provided after the end of the calendar year. Shareholders are
encouraged to retain copies of their account confirmation statements or year-end
statements for tax reporting purposes. However, those who have incomplete
records may obtain historical account transaction information at a reasonable
fee.
When more than one shareholder resides at the same address, certain reports and
communications to be delivered to such shareholders may be combined in the same
mailing package, and certain duplicate reports and communications may be
eliminated. Similarly, account statements to be sent to such shareholders may be
combined in the same mailing package or consolidated into a single statement.
However, a shareholder may request that the foregoing policies not be applied to
the shareholder's account.
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<PAGE> 44
NET ASSET VALUE
The net asset value per share of a Fund is determined separately for each class
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The per share net asset value of the
Class B and Class C shares of a Fund will generally be lower than that of the
Class A shares of the Fund because of the higher expenses borne by Class B and
Class C shares. Portfolio securities that are primarily traded on a domestic
securities exchange or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed or, if there is no recent sale price available, at the last current
bid quotation. Portfolio securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges where primarily traded. A security
that is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by the Board
of Trustees or its delegates. Securities not so traded or listed are valued at
the last current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or asked
priced is used. Exchange traded fixed income options are valued at the
settlement price established each day by the board of trade or exchange on which
they are traded. Over-the-counter traded options are valued based upon current
prices provided by market makers. Financial futures and options thereon are
valued at the settlement price established each day by the board of trade or
exchange on which they are traded. Other securities and assets are valued at
fair value as determined in good faith by the Board of Trustees. Because of the
need to obtain prices as of the close of trading on various exchanges throughout
the world, the calculation of net asset value of a Fund investing in foreign
securities does not necessarily take place contemporaneously with the
determination of the prices of a Fund's foreign securities, which may be made
prior to the determination of net asset value. For purposes of determining the
Fund's net asset value of a Fund investing in foreign securities, all assets and
liabilities initially expressed in foreign currency values will be converted
into U.S. Dollar values at the mean between the bid and offered quotations of
such currencies against U.S. Dollars as last quoted by a recognized dealer. If
an event were to occur, after the value of a security was so established but
before the net asset value per share was determined, which was likely to
materially change the net asset value, then that security would be valued using
fair value determinations by the Board of Trustees or its delegates. On each day
the New York Stock Exchange (the "Exchange") is open for trading, the net asset
value is determined as of the earlier of 3:00 p.m. Chicago time or the close of
the Exchange.
PURCHASE OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase, and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.
The primary distinctions among the classes of each 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
35
<PAGE> 45
class has distinct advantages and disadvantages for different investors, and
investors may choose the class that best suits their circumstances and
objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------ ------------------------ -----------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of None Initial sales charge waived or
5.75% of the public offering reduced for certain purchases
price
Class B Maximum contingent deferred sales 0.75% Shares convert to Class A shares
charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class C Contingent deferred sales charge 0.75% No conversion feature
of 1% of redemption proceeds for
redemptions made during first
year after purchase
</TABLE>
The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing and may not be
available for certain types of account registrations. It is recommended that
investors not request share certificates unless needed for a specific purpose.
You cannot redeem shares by telephone or wire transfer or use the telephone
exchange privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond worth 2% or more of the certificate value is normally required).
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------------------------------------
ALLOWED TO
AS A PERCENTAGE DEALERS AS A
AS A PERCENTAGE OF NET ASSET PERCENTAGE OF
AMOUNT OF PURCHASE OF OFFERING PRICE VALUE* OFFERING PRICE
------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $50,000..................................... 5.75% 6.10% 5.20%
$50,000 but less than $100,000........................ 4.50 4.71 4.00
$100,000 but less than $250,000....................... 3.50 3.63 3.00
$250,000 but less than $500,000....................... 2.60 2.67 2.25
$500,000 but less than $1 million..................... 2.00 2.04 1.75
$1 million and over................................... .00** .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.
Each Fund receives the entire net asset value of all its Class A shares sold.
KDI, the Funds' principal underwriter, retains the sales charge on sales of
Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth in the above table. Upon notice to all dealers with whom it
has sales agreements, KDI may reallow up to the full applicable sales charge, as
shown in the
36
<PAGE> 46
above table, during periods and for transactions specified in such notice and
such reallowances may be based upon attainment of minimum sales levels. During
periods when 90% or more of the sales charge is reallowed, such dealers may be
deemed to be underwriters as that term is defined in the Securities Act of 1933.
Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which Scudder Kemper or an affiliate does not serve as
investment manager ("non-Kemper Fund") provided that: (a) the investor has
previously paid either an initial sales charge in connection with the purchase
of the non-Kemper Fund shares redeemed or a contingent deferred sales charge in
connection with the redemption of the non-Kemper Fund shares, and (b) the
purchase of Fund shares is made within 90 days after the date of such
redemption. To make such a purchase at net asset value, the investor or the
investor's dealer must, at the time of purchase, submit a request that the
purchase be processed at net asset value pursuant to this privilege. KDI may in
its discretion compensate firms for sales of Class A shares under this privilege
at a commission rate of .50% of the amount of Class A shares purchased. The
redemption of the shares of the non-Kemper Fund is, for Federal income tax
purposes, a sale upon which a gain or loss may be realized.
Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such 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), 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 a Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, .50% on the next $45 million and .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 a Fund and other Kemper Mutual Funds listed under
"Special Features--Class A Shares--Combined Purchases," including purchases
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features referred to above. The privilege of purchasing Class A shares
of a Fund at net asset value under the Large Order NAV Purchase Privilege is not
available if another net asset value purchase privilege also applies.
Effective on February 1, 1996, Class A shares of a Fund or any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be purchased at net asset value in any amount by members of the plaintiff
class in the proceeding known as Howard and Audrey Tabankin, et al. v. Kemper
Short-Term Global Income Fund, et al., Case No. 93 C 5231 (N.D. IL). This
privilege is generally non-transferrable 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
37
<PAGE> 47
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 .25% of net assets attributable to such
shares maintained and serviced by the firm. A firm becomes eligible for the
concession based upon assets in accounts attributable to shares purchased under
this privilege in the month after the month of purchase and the concession
continues until terminated by KDI. The privilege of purchasing Class A shares of
a Fund at net asset value under this privilege is not available if another net
asset value purchase privilege also applies.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.
Class A shares of a Fund may be purchased at net asset value in any amount by
certain professionals who assist in the promotion of Kemper Funds pursuant to
personal services contracts with KDI, for themselves or members of their
families. KDI in its discretion may compensate financial services firms for
sales of Class A shares under this privilege at a commission rate of .50% of the
amount of Class A shares purchased.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase shares of the Fund through KDI as part of an automated billing and wage
deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.
Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
a Fund, its investment manager, its principal underwriter or certain affiliated
companies, for themselves or members of their families; (b) registered
representatives and employees of broker-dealers having selling group agreements
with KDI and officers, directors and employees of service agents of the Funds,
for themselves or their spouses or dependent children; (c) shareholders who
owned shares of Kemper Value Fund, Inc. ("KVF") on September 8, 1995, and have
continuously owned shares of KVF (or a Kemper Fund acquired by exchange of KVF
shares) since that date, for themselves or members of their families; and (d)
any trust, 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 Funds for
their clients pursuant to an agreement with KDI or one of its affiliates. Only
those employees of such banks and other firms who as part of their usual duties
provide services related to transactions in Fund shares may purchase Fund Class
A shares at net asset value hereunder. Class A shares may be sold at net asset
value in any amount to unit investment trusts sponsored by Ranson & Associates,
Inc. In addition, unitholders of unit investment trusts sponsored by Ranson &
Associates, Inc. or its predecessors may purchase a Fund's Class A shares at net
asset value through reinvestment programs described in the prospectuses of such
trusts that have such programs. Class A shares of a Fund may be sold at net
asset value through certain investment advisers registered under the Investment
Advisers Act of 1940 and other financial services firms that adhere to certain
standards established by KDI, including a requirement that such shares be sold
for the benefit of their clients participating in an investment advisory program
under which such clients pay a fee to the investment adviser or other firm for
portfolio management and other services. Such shares are sold for investment
purposes and on the condition that they will not be resold except through
redemption or repurchase by the Funds. The Funds may also issue Class A shares
at net asset value in connection with the acquisition of the assets of or merger
or consolidation with another investment company, or to shareholders in
connection with the investment or reinvestment of income and capital gain
dividends.
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
38
<PAGE> 48
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 each Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of a Fund will automatically convert to Class A shares of the
same Fund six years after issuance on the basis of the relative net asset value
per share. Class B shareholders of the Funds who originally acquired their
shares as Initial Shares of Kemper Portfolios, formerly known as Kemper
Investment Portfolios ("KIP"), hold them subject to the same conversion period
schedule as that of their KIP Portfolio. Class B shares representing Initial
Shares of a former KIP Portfolio will automatically convert to Class A shares of
the applicable Fund six years after issuance of the Initial Shares for shares
issued on or after February 1, 1991 and seven years after issuance of the
Initial Shares for shares issued before February 1, 1991. The purpose of the
conversion feature is to relieve holders of Class B shares from the distribution
services fee when they have been outstanding long enough for KDI to have been
compensated for distribution related expenses. For purposes of conversion to
Class A shares, shares purchased through the reinvestment of dividends and other
distributions paid with respect to Class B shares in a shareholder's Fund
account will be converted to Class A shares on a pro rata basis.
PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full amount
of the investor's purchase payment will be invested in Class C shares for his or
her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at a
rate of .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 .75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in a Fund or 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
39
<PAGE> 49
Intent" and "Cumulative Discount" features described under "Special Features."
For more information about the three sales arrangements, consult your financial
representative or the Shareholder Service Agent. Financial services firms may
receive different compensation depending upon which class of shares they sell.
GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Fund for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers, as
described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to a
Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of the Fund sold under the following conditions: (i) the purchased
shares are held in a Kemper IRA account, (ii) the shares are purchased as a
direct "roll over" of a distribution from a qualified retirement plan account
maintained on a participant subaccount record keeping system provided by 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 or other compensation, to firms that sell shares
of the Funds. Non cash compensation includes luxury merchandise and trips to
luxury resorts. In some instances, such discounts, commissions or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Funds, or other funds underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other
financial services firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of its business day will be
confirmed at a price based on the net asset value effective on that day ("trade
date"). The Funds reserve the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may take
significantly longer for a check drawn on a foreign bank than for a check drawn
on a domestic bank. Therefore, if an order is accompanied by a check drawn on a
foreign bank, funds must normally be collected before shares will be purchased.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Funds' shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Funds' shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Funds through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of
40
<PAGE> 50
cash dividends. Such firms, including affiliates of KDI, may receive
compensation from the Funds through the Shareholder Service Agent for these
services. This prospectus should be read in connection with such firms' material
regarding their fees and services.
The Funds reserve the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, each
Fund may temporarily suspend the offering of any class of its shares to new
investors. During the period of such suspension, persons who are already
shareholders of such class of such Fund normally are permitted to continue to
purchase additional shares of such class and to have dividends reinvested.
Shareholders should direct their inquiries to KSvC, 811 Main Street, Kansas
City, Missouri 64105-2005 or to the firm from which they received this
prospectus.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require a Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Funds' transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When a Fund is asked to redeem shares for which it may not have yet received
good payment (i.e., purchases by check, Express-Transfer or Bank Direct
Deposit), it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 10 days from receipt by a Fund of the purchase
amount. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares"), the redemption of Class B shares within six years
may be subject to a contingent deferred sales charge (see "Contingent Deferred
Sales Charge--Class B Shares" below), and the redemption of Class C shares
within the first year following purchase may be subject to a contingent deferred
sales charge (see "Contingent Deferred Sales Charge--Class C Shares" below).
Because of the high cost of maintaining small accounts, effective January 1998,
the Funds may assess a quarterly fee of $9 on an account with a balance below
$1,000 for the quarter. The fee will not apply to accounts enrolled in an
automatic investment program, Individual Retirement Accounts or employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and
41
<PAGE> 51
institutional accounts and pre-authorized telephone redemption transactions for
certain institutional accounts. Shareholders may choose these privileges on the
account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. A Fund
or its agents may be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges
unless the Fund or its agents reasonably believe, based upon reasonable
verification procedures, that the telephonic instructions are genuine. The
SHAREHOLDER WILL BEAR THE RISK OF LOSS, including loss resulting from fraudulent
or unauthorized transactions, so long as reasonable verification procedures are
followed. Verification procedures include recording instructions, requiring
certain identifying information before acting upon instructions and sending
written confirmations.
TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. The Funds reserve the right to terminate or modify
this privilege at any time.
REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which each Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the Fund next determined after receipt of a
request by KDI. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of KDI's business day will be confirmed at
the net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of the Fund
effective on that day and normally the proceeds will be sent to the designated
account the following business day. Delivery of the proceeds of a wire
redemption of $250,000 or more may be delayed by the Fund for up to seven days
if 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 Funds are not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or
42
<PAGE> 52
bank. The Funds currently do not charge the account holder for wire transfers.
The account holder is responsible for any charges imposed by the account
holder's firm or bank. There is a $1,000 wire redemption minimum (including any
contingent deferred sales charge). To change the designated account to receive
wire redemption proceeds, send a written request to the Shareholder Service
Agent with signatures guaranteed as described above or contact the firm through
which shares of 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
Funds reserve the right to terminate or modify this privilege at any time.
CONTINGENT DEFERRED SALES CHARGE--LARGE ORDER NAV PURCHASE PRIVILEGE. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and .50% if they
are redeemed during the second year after purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a), a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares whose
dealer of record at the time of the investment notifies KDI that the dealer
waives the discretionary commission applicable to such Large Order NAV Purchase.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed excluding amounts not subject to the charge.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES
YEAR OF REDEMPTION AFTER PURCHASE CHARGE
- --------------------------------- ----------
<S> <C>
First....................................................... 4%
Second...................................................... 3%
Third....................................................... 3%
Fourth...................................................... 2%
Fifth....................................................... 2%
Sixth....................................................... 1%
</TABLE>
43
<PAGE> 53
Class B shareholders who originally acquired their shares as Initial Shares of
Kemper Portfolios, formerly known as Kemper Investment Portfolios, hold them
subject to the same CDSC schedule that applied when those shares were purchased,
as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
YEAR OF -------------------------------------------------------------
REDEMPTION SHARES PURCHASED ON OR AFTER
AFTER SHARES PURCHASED ON OR AFTER FEBRUARY 1, 1991 AND BEFORE
PURCHASE MARCH 1, 1993 MARCH 1, 1993
- ---------- ----------------------------- -----------------------------
<S> <C> <C>
First...................................... 4% 3%
Second..................................... 3% 3%
Third...................................... 3% 2%
Fourth..................................... 2% 2%
Fifth...................................... 2% 1%
Sixth...................................... 1% 1%
</TABLE>
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to satisfy required minimum distributions after age 70 1/2 from an
IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent: (a) redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent deferred
sales charge and the conversion privilege), (b) redemptions in connection with
retirement distributions (limited at any one time to 10% of the total value of
plan assets invested in a Fund), (c) redemptions in connection with
distributions qualifying under the hardship provisions of the Internal Revenue
Code and (d) redemptions representing returns of excess contributions to such
plans.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (limited to 10% of the
net asset value of the account during the first year, see "Special
Features--Systematic Withdrawal Plan"), (d) for redemptions made pursuant to any
IRA systematic withdrawal based on the shareholder's life expectancy including,
but not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts), (f) for any participant-directed redemption
of shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service Agent
and (g) 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.
44
<PAGE> 54
CONTINGENT DEFERRED SALES CHARGE--GENERAL. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of a Fund's Class B shares and that 16 months
later the value of the shares has grown by $1,000 through reinvested dividends
and by an additional $1,000 of share appreciation to a total of $12,000. If the
investor were then to redeem the entire $12,000 in share value, the contingent
deferred sales charge would be payable only with respect to $10,000 because
neither the $1,000 of reinvested dividends nor the $1,000 of share appreciation
is subject to the charge. The charge would be at the rate of 3% ($300) because
it was in the second year after the purchase was made.
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
December, 1996 will be eligible for the second year's charge if redeemed on or
after December 1, 1997. In the event no specific order is requested when
redeeming shares subject to a contingent deferred sales charge, the redemption
will be made first from shares representing reinvested dividends and then from
the earliest purchase of shares. KDI receives any contingent deferred sales
charge directly.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of a Fund
or any other Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of the Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
a Fund or of the other listed Kemper Mutual Funds. A shareholder of a Fund or
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") or Class B shares or Class C shares and incurs a
contingent deferred sales charge may reinvest up to the full amount redeemed at
net asset value at the time of the reinvestment, in Class A shares, Class B
shares or Class C shares, as the case may be, of a Fund or of 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 a 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 shares of a
Fund, the reinvestment in shares of a 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.
SPECIAL FEATURES
CLASS A SHARES--COMBINED PURCHASES. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following funds: Kemper Technology Fund, Kemper Total Return Fund, Kemper Growth
Fund, Kemper Small Capitalization Equity Fund, Kemper Income and Capital
Preservation Fund, Kemper Municipal Bond Fund, Kemper Diversified Income Fund,
Kemper High Yield Series, Kemper U.S. Government Securities Fund, Kemper
International Fund, Kemper State Tax-Free Income Series, Kemper Adjustable Rate
U.S. Government Fund, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper
Target Equity Fund (series are subject to a limited offering period), Kemper
Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund, Kemper U.S.
Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper Value+Growth
Fund, Kemper
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<PAGE> 55
Value Fund, Inc., Kemper Quantitative Equity Fund, Kemper Horizon Fund, Kemper
Europe Fund, Kemper Asian Growth Fund, Kemper Aggressive Growth Fund and Kemper
Global/International Series, Inc. ("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 investment, such as
guaranteed investment contracts and employer stock, maintained on such
subaccount record keeping system.
CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper 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 are included in this privilege.
CLASS A SHARES--CUMULATIVE DISCOUNT. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the above mentioned Kemper Mutual Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already owned
by the investor.
CLASS A SHARES--AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of 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 the Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the Offering Period for such
series as described in the applicable prospectus. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Investors Municipal
Cash Fund and Investors Cash Trust are available on exchange but only through a
financial services firm having a services agreement with KDI.
46
<PAGE> 56
Class A shares of a 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 a 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 a 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 a 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, they retain the cost and purchase date of the shares that
were originally purchased and exchanged.
General. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged thereafter until
they have been owned for 15 days (the "15-Day Hold Policy"). For purposes of
determining whether the 15-Day Hold Policy applies to a particular exchange, the
value of the shares to be exchanged shall be computed by aggregating the value
of shares being exchanged for all accounts under common control, discretion or
advice, including without limitation accounts administered by a financial
services firm offering market timing, asset allocation or similar services. The
total value of shares being exchanged must at least equal the minimum investment
requirement of the Kemper Fund into which they are being exchanged. Exchanges
are made based on relative dollar values of the shares involved in the exchange.
There is no service fee for an exchange; however, dealers or other firms may
charge for their services in effecting exchange transactions. Exchanges will be
effected by redemption of shares of the fund held and purchase of shares of the
other fund. For federal income tax purposes, any such exchange constitutes a
sale upon which a gain or loss may be realized, depending upon whether the value
of the shares being exchanged is more or less than the shareholder's adjusted
cost basis of such shares. Shareholders interested in exercising the exchange
privilege may obtain prospectuses of the other funds from dealers, other firms
or KDI. Exchanges may be accomplished by a written request to 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 use the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Exchanges may only be made for
funds that are available for sale in the shareholder's state of residence.
Currently, Tax-Exempt California Money Market Fund is available for sale only in
California and 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 Kemper
Fund. Exchanges are subject to the terms and conditions described above under
"Exchange Privilege," except that the $1,000 minimum
47
<PAGE> 57
investment requirement for the Kemper Fund acquired on exchange is not
applicable. This privilege may not be used for the exchange of shares held in
certificated form.
EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in a Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from ANY PERSON to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "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
Individual Retirement Accounts ("IRAs").
BANK DIRECT DEPOSIT. A shareholder may purchase additional shares of a Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, investments are made automatically (maximum $50,000) from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account. By enrolling in Bank Direct Deposit, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
Clearing House debits against the designated account at a bank or other
financial institution. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting the Shareholder
Service Agent for appropriate forms. A shareholder may terminate his or her Plan
by sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination by a shareholder will become effective within thirty
days after the Shareholder Service Agent has received the request. A Fund may
immediately terminate a shareholder's Plan in the event that any item is unpaid
by the shareholder's financial institution. The Funds may terminate or modify
this privilege at any time.
PAYROLL DIRECT DEPOSIT AND GOVERNMENT DIRECT DEPOSIT. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) A Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. The minimum periodic
payment is $100. The maximum annual rate at which Class B shares may be redeemed
(and Class A shares purchased under the Large Order NAV Purchase Privilege and
Class C shares in their first year following the purchase) under a systematic
withdrawal plan is 10% of the net asset value of the account. Shares are
redeemed so that the payee will receive payment approximately the first of the
month. Any income and capital gain dividends will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested and fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the account.
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<PAGE> 58
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, a Fund will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.
KDI will waive the contingent deferred sales charge on redemptions of Class A
shares purchased under the Large Order NAV Purchase Privilege, Class B shares
and Class C shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or the Funds.
TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
- - Individual Retirement Accounts ("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.
- - 403(b)(7) Custodial Accounts also with IFTC as custodian. This type of plan is
available to employees of most non-profit organizations.
- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans, 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.
PERFORMANCE
The Funds may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return." Performance
information will be computed separately for Class A, Class B and Class C shares.
Each of these figures is based upon historical results and is not representative
of the future performance of any class of the Funds.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a 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 a 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.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Russell 1000(R)
Index, the Russell 1000(R) Growth Index, the Wilshire Large Company Growth
Index, the Wilshire 750 Mid Cap Company Growth Index, the Standard &
Poor's/Barra Value Index, Standard & Poor's/Barra Growth Index and the Russell
1000(R) Value Index. The performance of a Fund such as the Total Return Fund may
also be compared to the combined performance of two indexes, such as a 60%/40%
combination of the Standard & Poor's 500 Stock Index and the Lehman Brothers
Government/Corporate Bond Index or for the Value+Growth Fund to a 50%/50%
combination of the Russell 1000(R) Growth Index and the Russell 1000(R) Value
Index. The performance of a Fund may also be compared to the performance of
other
49
<PAGE> 59
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"). Lipper performance calculations are based upon
changes in net asset value with all dividends reinvested and do not include the
effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National IndexTM or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R), reporting
services on money market funds. Performance of U.S. Treasury obligations may be
based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.
A Fund may depict the historical performance of the securities in which the Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. A Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund. The relative performance of growth stocks versus
value stocks may also be discussed.
Each Fund's Class A shares are sold at net asset value plus a maximum sales
charge of 5.75% of the offering price. While the maximum sales charge is
normally reflected in the Fund's Class A performance figures, certain total
return calculations may not include such charge and those results would be
reduced if it were included. Class B shares and Class C shares are sold at net
asset value. Redemptions of Class B shares within the first six years after
purchase may be subject to a contingent deferred sales charge that ranges from
4% during the first year to 0% after six years. Redemption of Class C shares
within the first year after purchase may be subject to a 1% contingent deferred
sales charge. Average annual total return figures do, and total return figures
may, include the effect of the contingent deferred sales charge for the Class B
shares and Class C shares that may be imposed at the end of the period in
question. Performance figures for the Class B shares and Class C shares not
including the effect of the applicable contingent deferred sales charge would be
reduced if it were included.
Each Fund's returns and net asset value will fluctuate. Shares of a 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. Additional
information concerning each Fund's performance appears in the Statement of
Additional Information. Additional information about each Fund's performance
also appears in its Annual Report to Shareholders, which is available without
charge from the Fund.
CAPITAL STRUCTURE
The Funds are open-end management investment companies, organized as separate
business trusts under the laws of Massachusetts. The Aggressive Growth Fund was
organized as a business trust under the laws of Massachusetts on October 3,
1996. The Blue Chip Fund was organized as a business trust under the laws of
Massachusetts on May 28, 1987. The Growth Fund was organized as a business trust
under the laws of Massachusetts on October 24, 1985 and, effective January 31,
1986, that Fund pursuant to a reorganization succeeded to the assets and
liabilities of Kemper Growth Fund, Inc., a Maryland corporation organized in
1965. The Quantitative Fund was organized as a business trust under the laws of
Massachusetts on June 12, 1995. The Small Cap Fund was organized as a business
trust under the laws of Massachusetts on October 24, 1985 and, effective January
31, 1986, that Fund pursuant to a reorganization succeeded to the assets and
liabilities of
50
<PAGE> 60
Kemper Summit Fund, Inc., a Maryland corporation organized in 1968. Prior to
February 1, 1992, the Small Cap Fund was known as "Kemper Summit Fund." The
Technology Fund was organized as a business trust under the laws of
Massachusetts on October 24, 1985 as Technology Fund and changed its name to
Kemper Technology Fund effective February 1, 1988. Effective January 31, 1986,
Technology Fund pursuant to a reorganization succeeded to the assets and
liabilities of Technology Fund, Inc., a Maryland corporation originally
organized as a Delaware corporation in 1948. Technology Fund was known as
Television Fund, Inc. until 1950 and as Television-Electronics Fund, Inc. until
1968. The Total Return Fund was organized as a business trust under the laws of
Massachusetts on October 24, 1985 and, effective January 31, 1986, that Fund
pursuant to a reorganization succeeded to the assets and liabilities of Kemper
Total Return Fund, Inc., a Maryland corporation organized in 1963. The Total
Return Fund was known as Balanced Income Fund, Inc. until 1972 and as Supervised
Investors Income Fund, Inc. until 1977. The Value+Growth Fund was organized as a
business trust under the laws of Massachusetts on June 14, 1995 under the name
Kemper Value Plus Growth Fund and does business as Kemper Value+Growth Fund.
The Technology Fund and the Quantitative Fund each may in the future seek to
achieve its investment objective by pooling its assets with assets of other
mutual funds for investment in another investment company having the same
investment objective and substantially the same investment policies and
restrictions as such Fund. The purpose of such an arrangement is to achieve
greater operational efficiencies and to reduce costs. It is expected that any
such investment company will be managed by Scudder Kemper in substantially the
same manner as the corresponding Fund. Shareholders of a Fund will be given at
least 30 days' prior notice of any such investment, although they will not be
entitled to vote on the action. Such investment would be made only if the
Trustees determine it to be in the best interests of the respective Fund and its
shareholders.
Each Fund may issue an unlimited number of shares of beneficial interest in one
or more series or "Portfolios," all having no par value, which may be divided by
the Board of Trustees into classes of shares. Currently, each Fund offers four
classes of shares. These are Class A, Class B and Class C shares, as well as
Class I shares, which have different expenses, which may affect performance, and
that are available for purchase exclusively by the following investors: (a)
tax-exempt retirement plans of Scudder Kemper and its affiliates; and (b) the
following investment advisory clients of Scudder Kemper and its investment
advisory affiliates that invest at least $1 million in a Fund: (1) unaffiliated
benefit plans, such as qualified retirement plans (other than individual
retirement accounts and self-directed retirement plans); (2) unaffiliated banks
and insurance companies purchasing for their own accounts; and (3) endowment
funds of unaffiliated non-profit organizations. The Board of Trustees of a Fund
may authorize the issuance of additional classes and additional Portfolios if
deemed desirable, each with its own investment objectives, policies and
restrictions. Since the Funds may offer multiple Portfolios, each is known as a
"series company." Shares of a Fund have equal noncumulative voting rights except
that Class B and Class C shares have separate and exclusive voting rights with
respect to each Fund's Rule 12b-1 Plan. Shares of each class also have equal
rights with respect to dividends, assets and liquidation of such Fund subject to
any preferences (such as resulting from different Rule 12b-1 distribution fees),
rights or privileges of any classes of shares of the Fund. Shares of each Fund
are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Funds are not
required to hold annual shareholder meetings and do not intend to do so.
However, they will hold special meetings as required or deemed desirable for
such purposes as electing trustees, changing fundamental policies or approving
an investment management agreement. Subject to the Agreement and Declaration of
Trust of each Fund, shareholders may remove trustees. If shares of more than one
Portfolio for any Fund are outstanding, shareholders will vote by Portfolio and
not in the aggregate or by class except when voting in the aggregate is
required, under the 1940 Act, such as for the election of trustees or when
voting by class is appropriate.
51
<PAGE> 61
Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza Chicago, Illinois 60606-5808
www.kemper.com E-mail [email protected]
Tel (800) 621-1048
[KEMPER FUNDS LOGO]
KEF-1 (12/96) KDI 801162
FEBRUARY 1, 1998
PROSPECTUS
KEMPER EQUITY FUNDS/GROWTH STYLE
KEMPER AGGRESSIVE GROWTH FUND
KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER QUANTITATIVE EQUITY FUND
KEMPER SMALL CAPITALIZATION EQUITY FUND
KEMPER TECHNOLOGY FUND
KEMPER TOTAL RETURN FUND
KEMPER VALUE+GROWTH FUND
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
<PAGE> 62
KEMPER AGGRESSIVE GROWTH FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
LOCATION IN STATEMENT OF
ITEM NUMBER ADDITIONAL INFORMATION
OF FORM N-1A ------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies and
Techniques
14. Management of the Fund................... Investment Manager and Underwriter;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Underwriter;
Officers and Trustees
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions
18. Capital Stock and Other Securities....... Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends and Taxes
21. Underwriters............................. Investment Manager and Underwriter
22. Calculation of Performance Data.......... Performance
23. Financial Statements..................... Financial Statements
</TABLE>
<PAGE> 63
KEMPER EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1998
KEMPER AGGRESSIVE GROWTH FUND ("AGGRESSIVE GROWTH FUND")
KEMPER BLUE CHIP FUND ("BLUE CHIP FUND")
KEMPER GROWTH FUND ("GROWTH FUND")
KEMPER QUANTITATIVE EQUITY FUND ("QUANTITATIVE FUND")
KEMPER SMALL CAPITALIZATION EQUITY FUND ("SMALL CAP FUND")
KEMPER TECHNOLOGY FUND ("TECHNOLOGY FUND")
KEMPER TOTAL RETURN FUND ("TOTAL RETURN FUND")
KEMPER VALUE PLUS GROWTH FUND ("VALUE+GROWTH FUND")
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the combined
Statement of Additional Information for each of the funds (the "Funds") listed
above. It should be read in conjunction with the combined prospectus of the
Funds dated February 1, 1998. The prospectus may be obtained without charge from
the Funds.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions..................................... B-1
Investment Policies and Techniques.......................... B-8
Portfolio Transactions...................................... B-15
Investment Manager and Underwriter.......................... B-16
Purchase and Redemption of Shares........................... B-24
Dividends and Taxes......................................... B-25
Performance................................................. B-26
Officers and Trustees....................................... B-44
Shareholder Rights.......................................... B-49
Appendix -- Ratings of Fixed Income Investments............. B-50
</TABLE>
The financial statements appearing in each Fund's 1997 Annual Report to
Shareholders are incorporated herein by reference. The Annual Report for the
Fund for which this Statement of Additional Information is requested accompanies
this document.
KEF-13 2/98 (LOGO) printed on recycled paper
<PAGE> 64
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions which,
together with the investment objective and fundamental policies of such Fund,
cannot be changed without approval of a majority of its outstanding voting
shares. As defined in the Investment Company Act of 1940, this means the lesser
of the vote of (a) 67% of the shares of the Fund present at a meeting where more
than 50% of the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund.
THE AGGRESSIVE GROWTH FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) With respect to 50% of its total assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) if, as a result, more than 5% of the total value of the
Fund's assets would be invested in securities of that issuer, except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(2) Purchase more than 10% of any class of voting securities of any issuer,
except that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment objective
and substantially similar investment policies as the Fund.
(3) Invest more than 25% of its total assets in a single issuer (other than
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities), except that all or substantially all of the assets of the
Fund may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
(4) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objectives and policies.
(5) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.
(6) Pledge, hypothecate, mortgage or otherwise encumber its assets except to
secure borrowings permitted by restriction number 5 above. (The collateral
arrangements with respect to options, financial futures, foreign currency
transactions and delayed delivery transactions and any margin payments in
connection therewith are not deemed to be pledges or other encumbrances.)
(7) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions.
(8) Make short sales of securities or maintain a short position for the account
of the Fund unless at all times when a short position is open it owns an equal
amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 10% of the Fund's total assets is held as collateral for such
sales at any one time.
(9) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
the Fund's total assets would be invested in any one industry, except
B-1
<PAGE> 65
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(10) Invest in commodities or commodity futures contracts, although it may buy
or sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities that are secured by real estate and securities of issuers that invest
or deal in real estate.
(11) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(12) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond that specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund has
adopted the following non-fundamental restrictions, which may be changed by the
Board of Trustees without shareholder approval. The Aggressive Growth Fund may
not:
(i) Invest for the purpose of exercising control or management of another
issuer.
(ii) Purchase more than 3% of the stock of another investment company or
purchase stock of other investment companies equal to more than 5% of the Fund's
total assets (valued at time of purchase) in the case of any one other
investment company and 10% of such assets (valued at time of purchase) in the
case of all other investment companies in the aggregate. Any such purchases are
to be made in the open market where no profit to a sponsor or dealer results
from the purchase, other than the customary broker's commission, except for
securities acquired as part of a merger, consolidation or acquisition of assets.
(iii) Invest more than 15% of its net assets in illiquid securities.
(iv) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may it purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts.
THE BLUE CHIP FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result,
more than 5% of the total value of the Fund's assets would be invested in
securities of that issuer, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
(2) Purchase more than 10% of any class of voting securities of any issuer,
except that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment objective
and substantially similar investment policies as the Fund.
(3) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objective and policies.
(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The
B-2
<PAGE> 66
Fund will not borrow for leverage purposes and will not purchase securities or
make investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction number
(4) above. (The collateral arrangements with respect to options, financial
futures and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions.
(7) Make short sales of securities or maintain a short position for the account
of the Fund unless at all times when a short position is open it owns an equal
amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 10% of the Fund's total assets is held as collateral for such
sales at any one time.
(8) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(9) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
the Fund's total assets would be invested in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(10) Invest in commodities or commodity futures contracts, although it may buy
or sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate (including real estate limited
partnership interests), although it may invest in securities which are secured
by real estate and securities of issuers which invest or deal in real estate.
(11) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(12) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Blue Chip
Fund may not:
(i) Invest for the purpose of exercising control or management of another
issuer.
(ii) Purchase securities of other open-end investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
(iii) Invest more than 15% of its net assets in illiquid securities.
B-3
<PAGE> 67
THE GROWTH FUND AND THE VALUE+GROWTH FUND, EACH MAY NOT, AS A FUNDAMENTAL
POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer, except that all or substantially all of the assets of the Fund
may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
(2) Purchase more than 10% of any class of securities of any issuer, except that
all or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. All debt securities and
all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
(6) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(7) Invest 25% or more of its total assets in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Growth
Fund did not borrow money as permitted by investment restriction number 4 in the
latest fiscal year and neither Fund has a present intention of borrowing during
the current year. The Fund has adopted the
B-4
<PAGE> 68
following non-fundamental restrictions, which may be changed by the Board of
Trustees without shareholder approval. The Growth Fund and the Value+Growth
Fund, each may not:
(i) Invest for the purpose of exercising control or management of another
issuer.
(ii) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(iii) Invest more than 15% of its net assets in illiquid securities.
THE SMALL CAP FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer, except that all or substantially all of the assets of the Fund
may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
(2) Purchase more than 10% of any class of securities of any issuer, except that
all or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. All debt securities and
all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
(6) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(7) Invest 25% or more of its total assets in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, and except that all or
B-5
<PAGE> 69
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Small Cap
Fund may not:
(i) Invest for the purpose of exercising control or management of another
issuer.
(ii) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(iii) Invest more than 15% of its net assets in illiquid securities.
THE QUANTITATIVE FUND AND THE TECHNOLOGY FUND, EACH MAY NOT, AS A FUNDAMENTAL
POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer, except that all or substantially all of the assets of the Fund
may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
(2) Purchase more than 10% of any class of securities of any issuer, except that
all or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. All debt securities and
all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
(6) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may it purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts.
(7) Invest 25% or more of its total assets in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
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(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Technology Fund did not borrow money as permitted by investment restriction
number 4 in the latest fiscal year and neither Fund has a present intention of
borrowing during the current year. The Quantitative Fund and the Technology Fund
adopted the following non-fundamental restrictions, which may be changed by the
Board of Trustees without shareholder approval. These Funds may not:
(i) Invest for the purpose of exercising control or management of another
issuer.
(ii) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase in
the open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than (i) 3%
of the total outstanding voting stock of such company is owned by it, (ii) 5% of
its total assets would be invested in any one such company, and (iii) 10% of
total assets would be invested in such securities.
(iii) Invest more than 15% of its net assets in illiquid securities.
THE TOTAL RETURN FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer, except that all or substantially all of the assets of the Fund
may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
(2) Purchase more than 10% of any class of securities of any issuer, except that
all or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. All debt securities and
all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowings secured thereby.
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(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
(6) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(7) Invest 25% or more of its total assets in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Total
Return Fund may not:
(i) Invest for the purpose of exercising control or management of another
issuer.
(ii) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(iii) Invest more than 15% of its net assets in illiquid securities.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. Each Fund may engage in options transactions and may engage in
financial futures transactions in accordance with its respective investment
objectives and policies. The Blue Chip, Growth, Small Cap, Total Return and
Value+Growth Funds each may invest in put and call options but may not write
(sell) options. The Aggressive Growth, Quantitative and Technology Funds may
write (sell) covered call options and secured put options and may purchase put
and call options. Each such Fund intends to engage in such transactions if it
appears to the investment manager to be advantageous for the Fund to do so in
order to pursue its investment objective and also to hedge against the effects
of market risks but not for speculative purposes. The use of futures and
options, and possible benefits and attendant risks, are discussed below along
with information concerning other investment policies and techniques.
OPTIONS ON SECURITIES. The Aggressive Growth, Quantitative and Technology Funds
may write (sell) "covered" call options on securities as long as the Fund owns
the underlying securities subject to the option or an option to purchase the
same underlying securities, having an exercise price equal to or less than the
exercise
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price of the "covered" option, or will establish and maintain for the term of
the option a segregated account consisting of cash or other liquid securities
("eligible securities") to the extent required by applicable regulation in
connection with the optioned securities. The Aggressive Growth, Quantitative and
Technology Funds may write "covered" put options provided that, as long as the
Fund is obligated as a writer of a put option, the Fund will own an option to
sell the underlying securities subject to the option, having an exercise price
equal to or greater than the exercise price of the "covered" option, or it will
deposit and maintain in a segregated account eligible securities having a value
equal to or greater than the exercise price of the option. A call option gives
the purchaser the right to buy, and the writer the obligation to sell, the
underlying security at the exercise price during or at the end of the option
period. A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying security at the exercise price during or at
the end of the option period. The premium received for writing an option will
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to such market price, the price
volatility of the underlying security, the option period, supply and demand and
interest rates. The Funds may write (for the Quantitative and Technology Funds)
or purchase spread options, which are options for which the exercise price may
be a fixed dollar spread or yield spread between the security underlying the
option and another security that is used as a bench mark. The exercise price of
an option may be below, equal to or above the current market value of the
underlying security at the time the option is written. The buyer of a put who
also owns the related security is protected by ownership of a put option against
any decline in that security's price below the exercise price less the amount
paid for the option. The ability to purchase put options allows a Fund to
protect capital gains in an appreciated security it owns, without being required
to actually sell that security. At times a Fund would like to establish a
position in a security upon which call options are available. By purchasing a
call option, a Fund is able to fix the cost of acquiring the security, this
being the cost of the call plus the exercise price of the option. This procedure
also provides some protection from an unexpected downturn in the market, because
a Fund is only at risk for the amount of the premium paid for the call option
which it can, if it chooses, permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium, plus the interest income on the eligible securities that
have been segregated. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However,
this would be offset in whole or in part by gain from the premium received and
any interest income earned on the eligible securities that have been segregated.
OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objectives, Policies and Risk Factors"), the Funds may deal in over-the-counter
traded options ("OTC options"). OTC options differ from exchange traded options
in several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event a Fund may
experience material losses. However, in writing options the premium is paid in
advance by the dealer. OTC options are available for a greater variety of
securities, and a wider range of expiration dates and exercise prices, than are
exchange traded options. Since there is no
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exchange, pricing is normally done by reference to information from market
makers, which information is carefully monitored by the investment manager and
verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Fund writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Funds understand the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Funds have adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Funds' portfolios. A brief description of
such procedures is set forth below.
A Fund will only engage in OTC options transactions with dealers that have been
specifically approved by the investment manager pursuant to procedures adopted
by the Fund's Board of Trustees. The investment manager believes that the
approved dealers should be able to enter into closing transactions if necessary
and, therefore, present minimal credit risks to a Fund. The investment manager
will monitor the credit-worthiness of the approved dealers on an ongoing basis.
A Fund currently will not engage in OTC options transactions if the amount
invested by the Fund in OTC options, plus (for the Aggressive Growth,
Quantitative and Technology Funds) a "liquidity charge" related to OTC options
written by the Fund, plus the amount invested by the Fund in illiquid
securities, would exceed 15% of the Fund's net assets. The "liquidity charge"
referred to above is computed as described below.
The Aggressive Growth, Quantitative and Technology Funds anticipate entering
into agreements with dealers to which the Fund sells OTC options. Under these
agreements either Fund would have the absolute right to repurchase the OTC
options from the dealer at any time at a price no greater than a price
established under the agreements (the "Repurchase Price"). The "liquidity
charge" referred to above for a specific OTC option transaction will be the
Repurchase Price related to the OTC option less the intrinsic value of the OTC
option. The intrinsic value of an OTC call option for such purposes will be the
amount by which the current market value of the underlying security exceeds the
exercise price. In the case of an OTC put option, intrinsic value will be the
amount by which the exercise price exceeds the current market value of the
underlying security. If there is no such agreement requiring a dealer to allow
either Fund to repurchase a specific OTC option written by the Fund, the
"liquidity charge" will be the current market value of the assets serving as
"cover" for such OTC option.
OPTIONS ON SECURITIES INDICES. The Blue Chip, Growth, Small Cap, Total Return
and Value+Growth Funds may purchase, and the Aggressive Growth, Quantitative and
Technology Funds may purchase and write, call and put options on securities
indices in an attempt to hedge against market conditions affecting the value of
securities that the Fund owns or intends to purchase, and not for speculation.
Through the writing or purchase of index options, a Fund can achieve many of the
same objectives as through the use of options on individual
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securities. Options on securities indices are similar to options on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Unlike security options, all settlements are in cash and gain or loss depends
upon price movements in the market generally (or in a particular industry or
segment of the market), rather than upon price movements in individual
securities. Price movements in securities that the Fund owns or intends to
purchase will probably not correlate perfectly with movements in the level of an
index since the prices of such securities may be affected by somewhat different
factors and, therefore, the Fund bears the risk that a loss on an index option
would not be completely offset by movements in the price of such securities.
When the Aggressive Growth, Quantitative or Technology Fund writes an option on
a securities index, it will segregate, and mark-to-market, eligible securities
to the extent required by applicable regulations. In addition, where a Fund
writes a call option on a securities index at a time when the contract value
exceeds the exercise price, the Fund will segregate and mark-to-market, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess.
A Fund may also purchase and sell options on other appropriate indices, as
available, such as foreign currency indices. Options on futures contracts and
index options involve risks similar to those risks relating to transactions in
financial futures contracts described below. Also, an option purchased by a Fund
may expire worthless, in which case the Fund would lose the premium paid
therefor.
FINANCIAL FUTURES CONTRACTS. The Funds may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or an amount of foreign currency or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might affect adversely the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.
Although some futures contracts by their terms call for the actual delivery or
acquisition of securities or other assets, in most cases a party will close out
the contractual commitment before delivery without having to make or take
delivery of the underlying assets by purchasing (or selling, as the case may be)
on a commodities exchange an identical futures contract calling for delivery in
the same month. Such a transaction, if effected through a member of an exchange,
cancels the obligation to make or take delivery of the underlying securities or
other assets. All transactions in the futures market are made, offset or
fulfilled through a clearing house associated with the exchange on which the
contracts are traded. A Fund will incur brokerage fees when it purchases or
sells contracts, and will be required to maintain margin deposits. At the time a
Fund enters into a futures contract, it is required to deposit with its
custodian, on behalf of the broker, a specified amount of cash or eligible
securities, called "initial margin." The initial margin required for a futures
contract is set by the exchange on which the contract is traded. Subsequent
payments, called "variation margin," to and from the broker are made on a daily
basis as the market price of the futures contract fluctuates. The costs incurred
in connection with futures transactions could reduce a Fund's return. Futures
contracts entail risks. If the investment manager's judgment about the general
direction of markets or exchange rates is wrong, the overall performance may be
poorer than if no such contracts had been entered into.
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There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures markets are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager may still not result in a successful hedging
transaction. If any of these events should occur, the Fund could lose money on
the financial futures contracts and also on the value of its portfolio assets.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. A Fund may purchase and write call and
put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. A Fund would be required
to deposit with its custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by it. A Fund will
establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities." Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above. Also, an option purchased by a Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.
REGULATORY RESTRICTIONS. To the extent required to comply with applicable
regulation, when purchasing a futures contract, writing a put option or entering
into a forward currency exchange purchase, a Fund will maintain eligible
securities in a segregated account. A Fund will use cover in connection with
selling a futures contract.
A Fund will not engage in transactions in financial futures contracts or options
thereon for speculation, but only in an attempt to hedge against changes in
interest rates or market conditions affecting the value of securities that the
Fund holds or intends to purchase.
FOREIGN CURRENCY OPTIONS. The Funds may engage in foreign currency options
transactions. A foreign currency option provides the option buyer with the right
to buy or sell a stated amount of foreign currency at the exercise price at a
specified date or during the option period. A call option gives its owner the
right, but not the obligation, to buy the currency, while a put option gives its
owner the right, but not the obligation, to sell the currency. The option seller
(writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Fund against an adverse movement in the
value of a foreign currency, it does not limit the gain which might result from
a favorable movement in the value of such currency. For example, if a Fund were
holding securities denominated in an appreciating foreign currency and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, it would not have to exercise its put. Similarly, if the Fund had
entered into a contract to purchase a security denominated in a foreign currency
and had purchased a foreign currency call to hedge against a rise in value of
the currency but instead the currency had depreciated in value between the date
of
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purchase and the settlement date, the Fund would not have to exercise its call
but could acquire in the spot market the amount of foreign currency needed for
settlement.
FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of their financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), the Funds may use foreign currency futures contracts
and options on such futures contracts. Through the purchase or sale of such
contracts, a Fund may be able to achieve many of the same objectives as through
forward foreign currency exchange contracts more effectively and possibly at a
lower cost.
Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days ("term") from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. The investment manager believes that it
is important to have the flexibility to enter into such forward contracts when
it determines that to do so is in the best interests of a Fund. A Fund will not
speculate in foreign currency exchange.
If a Fund retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Fund will incur a gain or a
loss (as described below) to the extent that there has been movement in forward
contract prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between a Fund's entering into a
forward contract for the sale of foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain that might result should the value of such currency increase. A
Fund may have to convert its holdings of foreign currencies into U.S. Dollars
from time to time in order to meet such needs as Fund expenses and redemption
requests. 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.
A Fund will not enter into forward contracts or maintain a net exposure in such
contracts when the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets
denominated in that currency. A Fund segregates eligible securities to the
extent required by applicable regulation in connection with forward foreign
currency exchange contracts entered into for the purchase of a foreign currency.
A Fund generally does not enter into a forward contract with a term longer than
one year.
REPURCHASE AGREEMENTS. A Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. No Fund currently intends to invest more than 5% of
its net assets in repurchase agreements during the current year.
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SHORT SALES AGAINST-THE-BOX. The Aggressive Growth and Blue Chip Funds 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 a 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 sold short. A
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. Each Fund does not currently 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.
OTHER CONSIDERATIONS--HIGH YIELD (HIGH RISK) BONDS. As reflected in the
prospectus, the Total Return Fund may invest a portion of its assets in fixed
income securities that are in the lower rating categories of recognized rating
agencies or are non-rated. These lower rated or non-rated fixed income
securities are considered, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation and generally will involve more credit risk than securities in
the higher rating categories.
The market values of such securities tend to reflect individual corporate
developments to a greater extent than do those of higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower rated securities also tend to be more sensitive to economic conditions
than are higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, regarding lower rated bonds may
depress the prices for such securities. These and other factors adversely
affecting the market value of high yield securities will adversely affect the
Fund's net asset value. Although some risk is inherent in all securities
ownership, holders of fixed income securities have a claim on the assets of the
issuer prior to the holders of common stock. Therefore, an investment in fixed
income securities generally entails less risk than an investment in common stock
of the same issuer.
High yield securities frequently are issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such high yielding
securities often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the securities of such issuers generally is greater than is the case with higher
rated securities. For example, during an economic downturn or recession, highly
leveraged issuers of high yield securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss from default by the
issuer is significantly greater for the holders of high yielding securities
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer.
Zero coupon securities and pay-in-kind bonds involve additional special
considerations. Zero coupon securities are debt obligations that do not entitle
the holder to any periodic payments of interest prior to maturity or a specified
cash payment date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from their face
amount or par value. The market prices of zero coupon securities are generally
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a greater
degree than do securities paying interest currently with similar maturities and
credit quality. Zero coupon, pay-in-kind or deferred interest bonds carry
additional risk in that unlike bonds that pay interest throughout the period to
maturity, the Fund will realize no cash until the cash payment date unless a
portion of such securities is sold and, if the issuer defaults, the Fund may
obtain no return at all on its investment.
Additional information concerning high yield securities appears under
"Appendix--Ratings of Fixed Income Investments."
B-14
<PAGE> 78
PORTFOLIO TRANSACTIONS
BROKERAGE
Allocation of brokerage is supervised by Scudder Kemper.
The primary objective of Scudder Kemper in placing orders for the purchase and
sale of securities for a Fund's portfolio is to obtain the most favorable net
results taking into account such factors as price, commission (negotiable in the
case of U.S. national securities exchange transactions) where applicable, size
of order, difficulty of execution and skill required of the executing
broker/dealer. Scudder Kemper seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. Scudder
Kemper reviews on a routine basis commission rates, execution and settlement
services performed, making internal and external comparisons.
Each Fund's purchases and sales of fixed-income securities are generally placed
by Scudder Kemper with primary market makers for these securities on a net
basis, without any brokerage commission being paid by a 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 Scudder Kemper's practice to place such orders with
broker/dealers who supply market quotations to Scudder Fund Accounting
Corporation ("SFAC") for appraisal purposes or who supply research, market and
statistical information to a Fund. The term "research, market and statistical
information" 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. Scudder Kemper is authorized when placing
portfolio transactions for a Fund to pay a brokerage commission in excess of
that which another broker might charge for executing the same transaction solely
on account of the receipt of research, market or statistical information. 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.
In selecting among firms believed to meet the criteria for handling a particular
transaction, Scudder Kemper may give consideration to those firms that have sold
or are selling shares of a Fund managed by Scudder Kemper.
To the maximum extent feasible, it is expected that Scudder Kemper will place
orders for portfolio transactions through Scudder Investor Services, Inc., Two
International Place, Boston, Massachusetts 02110 ("SIS"), a corporation
registered as a broker-dealer and a subsidiary of Scudder Kemper; SIS will place
orders on behalf of the Funds with issuers, underwriters or other brokers and
dealers. SIS will not receive any commission, fee or other remuneration from the
Funds for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to Scudder Kemper, it is the opinion
of Scudder Kemper that such information only supplements its own research effort
since the information must still be analyzed, weighed and reviewed by Scudder
Kemper's staff. Such information may be useful to Scudder Kemper in providing
services to clients other than the Funds and not all such information is used by
Scudder Kemper in connection with the Funds. Conversely, such information
provided to Scudder Kemper by broker/dealers through whom other clients of
Scudder Kemper effect securities transactions may be useful to Scudder Kemper in
providing services to a Fund.
B-15
<PAGE> 79
The Trustees for the Funds review from time to time whether the recapture for
the benefit of a Fund of some portion of the brokerage commissions or similar
fees paid by a Fund on portfolio transactions is legally permissible and
advisable.
Each 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 a 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 a Fund's portfolio whenever necessary, in
management's opinion, to meet a Fund's objective.
The table below shows total brokerage commissions paid by each Fund for the last
three fiscal years 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
FUND FISCAL 1997 1997 FISCAL 1996 FISCAL 1995
---- ----------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Aggressive*.............................. $ 27,000 100% $ N.A. $ N.A.
Blue Chip................................ $ 2,664,000 94% $1,661,000 $ 506,000
Growth................................... $11,676,000 83% $9,535,000 $6,470,000
Quantitative............................. $ 21,000 92% $ 9,000 N.A.
Small Cap................................ $ 6,618,000 97% $6,362,000 $5,975,000
Technology............................... $ 3,329,000 92% $4,438,000 $3,504,000
Total Return............................. $ 7,170,000 76% $6,335,000 $8,309,000
Value+Growth............................. $ 142,000 85% $ 66,000 $ 6,000
</TABLE>
- ---------------
* For the period December 31, 1996 to September 30, 1997.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345
Park Avenue, New York, New York, is each Fund's investment manager. Scudder
Kemper is approximately 70% owned by Zurich Insurance Company, a leading
internationally recognized provider of insurance and financial services in
property/casualty and life insurance, reinsurance and structured financial
solutions as well as asset management. The balance of Scudder Kemper is owned by
Scudder Kemper's officers and employees. Pursuant to investment management
agreements, Scudder Kemper acts as each 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 trustees or officers of a
Fund if elected to such positions. Each investment management agreement provides
that each Fund pays the charges and expenses of its operations, including the
fees and expenses of the trustees (except those who are affiliated with officers
or employees of Scudder Kemper), 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. Each Fund bears the expenses of registration of its shares
with the Securities and Exchange Commission, while Kemper Distributors, Inc.
("KDI"), as principal underwriter, pays the cost of qualifying and maintaining
the qualification of each Fund's shares for sale under the securities laws of
the various states.
The investment management agreements provide that Scudder Kemper shall not be
liable for any error of judgment or of law, or for any loss suffered by a Fund
in connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Scudder Kemper in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under each agreement.
B-16
<PAGE> 80
Each Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually (a) by a majority
of the trustees who are not parties to such agreement or interested persons of
any such party except in their capacity as trustees of the Fund and (b) by the
shareholders or the Board of Trustees of the Fund. Each 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, and will
terminate automatically upon assignment. If additional Fund's become subject to
an investment management agreement, the provisions concerning continuation,
amendment and termination shall be on a Fund by Fund basis. Additional Funds may
be subject to a different agreement.
Pursuant to the terms of an agreement, Scudder, Stevens & Clark, Inc.
("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new global
investment organization by combining Scudder with Zurich Kemper Investments,
Inc. ("ZKI"), a former subsidiary of Zurich and the former investment manager to
the Funds and Scudder changed its name to Scudder Kemper Investments, Inc. As a
result of the transaction, Zurich owns approximately 70% of Scudder Kemper, with
the balance owned by Scudder Kemper's officers and employees.
Because the transaction between Scudder and Zurich resulted in the assignment of
the Funds' investment management agreements with ZKI, the agreements were deemed
to be automatically terminated upon consummation of the transaction. In
anticipation of the transaction, however, new investment management agreements
between the Funds and Scudder Kemper were approved by the Funds' Board of
Trustees and shareholders. The new investment management agreements were
effective as of December 31, 1997 and will be in effect for an initial term
ending on the same date as would the previous investment management agreement
with ZKI.
The Funds' investment management agreements are on substantially similar terms
as the investment management agreements terminated by the transaction, except
that Scudder Kemper is the new investment adviser to the Funds.
The current investment management fee rates paid by the Funds are in the
prospectus, see "Investment Manager and Underwriter." The investment management
fees paid by each Fund for its last three fiscal years are shown in the table
below.
<TABLE>
<CAPTION>
FUND FISCAL 1997 FISCAL 1996 FISCAL 1995
---- ----------- ----------- -----------
<S> <C> <C> <C>
Aggressive+........................................ $ 37,000(1) -- --
Blue Chip.......................................... $ 2,018,000 1,198,000 903,000
Growth............................................. $14,576,000 13,994,000 12,349,000
Quantitative....................................... $ 46,000 11,000(2) N.A.
Small Cap.......................................... $ 3,193,000(3) 4,418,000(4) 3,273,000(5)
Technology......................................... $ 6,532,000 5,582,000 4,542,000
Total Return....................................... $17,084,000 15,825,000 15,147,000
Value+Growth....................................... $ 474,000 131,000* 1,000(6)*
</TABLE>
- ---------------
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* Amounts shown are after expense waiver.
(1) Fee was increased $1,000 from $36,000 base fee.
(2) For the period February 15, 1996 to November 30, 1996.
(3) Fee was decreased $2,617,000 from $5,810,000 base fee.
(4) Fee was decreased $670,000 from $5,088,000 base fee.
(5) Fee was decreased $766,000 from $4,039,000 base fee.
(6) For the period October 16, 1995 to November 30, 1995.
The Small Cap Fund pays a base annual investment management fee, payable
monthly, at the rate of .65 of 1% of the average daily net assets of the Fund.
This base fee is subject to upward or downward adjustment on the basis of the
investment performance of the Class A shares of the Fund as compared with the
performance of the
B-17
<PAGE> 81
Standard & Poor's 500 Stock Index (the "Index"). The Small Cap Fund will pay an
additional monthly fee at an annual rate of .05% of such average daily net
assets for each percentage point (fractions to be prorated) by which the
performance of the Class A shares of the Fund exceeds that of the Index for the
immediately preceding twelve months; provided that such additional monthly fee
shall not exceed 1/12 of .30% of the average daily net assets. Conversely, the
compensation payable by the Small Cap Fund will be reduced by an annual rate of
.05% of such average daily net assets for each percentage point (fractions to be
prorated) by which the performance of the Class A shares of the Fund falls below
that of the Index, provided that such reduction in the monthly fee shall not
exceed 1/12 of .30% of the average net assets. The total fee on an annual basis
can range from .35% to .95% of average daily net assets. The Small Cap Fund's
investment performance during any twelve month period is measured by the
percentage difference between (a) the opening net asset value of one Class A
share of the Fund and (b) the sum of the closing net asset value of one Class A
share of the Fund plus the value of any income and capital gain dividends on
such share during the period treated as if reinvested in Class A shares of the
Fund at the time of distribution. The performance of the Index is measured by
the percentage change in the Index between the beginning and the end of the
twelve month period with cash distributions on the securities which comprise the
Index being treated as reinvested in the Index at the end of each month
following the payment of the dividend. Each monthly calculation of the incentive
portion of the fee may be illustrated as follows: if over the preceding twelve
month period the Small Cap Fund's adjusted net asset value applicable to one
Class A share went from $10.00 to $11.00 (10% appreciation), and the Index,
after adjustment, went from 100 to 104 (or only 4%), the entire incentive
compensation would have been earned by Scudder Kemper. On the other hand, if the
Index rose from 100 to 110 (10%), no incentive fee would have been payable. A
rise in the Index from 100 to 116 (16%) would have resulted in the minimum
monthly fee of 1/12 of .35%. Since the computation is not cumulative from year
to year, an additional management fee may be payable with respect to a
particular year, although the Small Cap Fund's performance over some longer
period of time may be less favorable than that of the Index. Conversely, a lower
management fee may be payable in a year in which the performance of the Fund's
Class A shares' is less favorable than that of the Index, although the
performance of the Fund's Class A shares over a longer period of time might be
better than that of the Index.
The Aggressive Growth Fund pays a base annual investment management fee, payable
monthly, at the rate of .65 of 1% of the average daily net assets of the Fund.
This base fee is subject to upward or downward adjustment on the basis of the
investment performance of the Class A shares of the Fund as compared with the
performance of the Standard & Poor's 500 Stock Index (the "Index"). The
Aggressive Growth Fund will pay an additional monthly fee at an annual rate of
.02% of such average daily net assets for each percentage point (fractions to be
prorated) by which the performance of the Class A shares of the Fund exceeds
that of the Index for the immediately preceding twelve months; provided that
such additional monthly fee shall not exceed 1/12 of .20% of the average daily
net assets. Conversely, the compensation payable by the Aggressive Growth Fund
will be reduced by an annual rate of .02% of such average daily net assets for
each percentage point (fractions to be prorated) by which the performance of the
Class A shares of the Fund falls below that of the Index, provided that such
reduction in the monthly fee shall not exceed 1/12 of .20% of the average net
assets. The total fee on an annual basis can range from .45% to .85% of average
daily net assets. The Aggressive Growth Fund's investment performance during any
twelve month period is measured by the percentage difference between (a) the
opening net asset value of one Class A share of the Fund and (b) the sum of the
closing net asset value of one Class A share of the Fund plus the value of any
income and capital gain dividends on such share during the period treated as if
reinvested in Class A shares of the Fund at the time of distribution. The
performance of the Index is measured by the percentage change in the Index
between the beginning and the end of the twelve month period with cash
distributions on the securities which comprise the Index being treated as
reinvested in the Index at the end of each month following the payment of the
dividend. Each monthly calculation of the incentive portion of the fee may be
illustrated as follows: if over the preceding twelve month period the Aggressive
Growth Fund's adjusted net asset value applicable to one Class A share went from
$10.00 to $11.50 (15% appreciation), and the Index, after adjustment, went from
100 to 104 (or only 4%), the entire
B-18
<PAGE> 82
incentive compensation would have been earned by Scudder Kemper. On the other
hand, if the Index rose from 100 to 115 (15%), no incentive fee would have been
payable. A rise in the Index from 100 to 125 (25%) would have resulted in the
minimum monthly fee of 1/12 of .45%. Since the computation is not cumulative
from year to year, an additional management fee may be payable with respect to a
particular year, although the Aggressive Growth Fund's performance over some
longer period of time may be less favorable than that of the Index. Conversely,
a lower management fee may be payable in a year in which the performance of the
Fund's Class A shares is less favorable than that of the Index, although the
performance of the Fund's Class A shares over a longer period of time might be
better than that of the Index.
FUND ACCOUNTING AGENT. SFAC, a subsidiary of Scudder Kemper, is responsible for
determining the daily net asset value per share of the Funds and maintaining all
accounting records related thereto. Currently, SFAC receives no fee for its
services to the Funds; however, subject to Board approval, some time in the
future, SFAC may seek payment for its services under this agreement.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), a wholly owned subsidiary of Scudder Kemper, is the principal
underwriter and distributor for the shares of each Fund and acts as agent of
each Fund in the continuous offering of its shares. KDI bears all its expenses
of providing services pursuant to the distribution agreements, including the
payment of any commissions. Each Fund pays the cost for the prospectus and
shareholder reports to be set in type and printed for existing shareholders, and
KDI, as principal underwriter, pays for the printing and distribution of copies
thereof used in connection with the offering of shares to prospective investors.
KDI also pays for supplementary sales literature and advertising costs.
Each distribution agreement continues in effect from year to year so long as
such continuance is approved for each class at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to a
class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
Investment Company Act of 1940. The agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.
B-19
<PAGE> 83
CLASS A SHARES. The following information concerns the underwriting commissions
paid in connection with the distribution of each Fund's Class A shares for the
fiscal years noted.
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
COMMISSIONS RETAINED UNDERWRITER PAID TO KEMPER
FUND FISCAL YEAR BY UNDERWRITER PAID TO ALL FIRMS AFFILIATED FIRMS
---- ----------- -------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Aggressive................... 1997+ $ 7,000 111,000 5,000
1996 N.A. N.A. N.A.
1995 N.A. N.A. N.A.
Blue Chip.................... 1997 $124,000 1,101,000 7,000
1996 $ 72,000 424,000 11,000
1995 $ 33,000 225,000 29,000
Growth....................... 1997 $296,000 1,523,000 9,000
1996 $327,000 2,075,000 57,000
1995 $266,000 2,130,000 326,000
Quantitative................. 1997 $ 2,000 18,000 0
1996* $ 1,000 5,000 0
1995 N.A. N.A. N.A.
Small Cap.................... 1997 $104,000 705,000 0
1996 $130,000 849,000 16,000
1995 $105,000 798,000 133,000
Technology................... 1997 $181,000 853,000 7,000
1996 $198,000 869,000 37,000
1995 $116,000 840,000 218,000
Total Return................. 1997 $191,000 1,591,000 0
1996 $225,000 1,697,000 79,000
1995 $206,000 1,642,000 218,000
Value+Growth................. 1997 $ 40,000 538,000 0
1996 $ 33,000 238,000 15,000
1995** $ 0 48,000 3,000
</TABLE>
- ---------------
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* For the period February 15, 1996 to November 30, 1996.
** For the period October 16, 1995 to November 30, 1995.
CLASS B SHARES AND CLASS C SHARES. Since the distribution agreement provides for
fees charged to Class B and Class C shares that are used by KDI to pay for
distribution services (see the prospectus under "Investment Manager and
Underwriter"), the agreement (the "Plan") is approved and renewed separately for
the Class B and Class C shares in accordance with Rule 12b-1 under the
Investment Company Act of 1940, which regulates the manner in which an
investment company may, directly or indirectly, bear expenses of distributing
its shares. Expenses of the Funds and of KDI in connection with the Rule 12b-1
Plans for the Class B and Class C Shares
B-20
<PAGE> 84
are set forth below. A portion of the marketing, sales and operating expenses
shown below could be considered overhead expense.
<TABLE>
<CAPTION>
DISTRIBUTION CONTINGENT TOTAL
FEES PAID DEFERRED COMMISSIONS COMMISSIONS
FUND CLASS B FISCAL BY FUND TO SALES CHARGES PAID BY UNDERWRITER PAID BY UNDERWRITER
SHARES YEAR UNDERWRITER TO UNDERWRITER TO FIRMS TO AFFILIATED FIRMS
------------ ------ ------------ -------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Aggressive........... 1997+ $ 13,000 11,000 122,000 0
1996 N.A. N.A. N.A. N.A.
1995 N.A. N.A. N.A. N.A.
Blue Chip............ 1997 $ 659,000 128,000 1,885,000 0
1996 $ 233,000 41,000 521,000 3,000
1995 $ 59,000 29,000 183,000 25,000
Growth............... 1997 $6,426,000 1,183,000 3,193,000 0
1996 $6,149,000 1,494,000 3,522,000 53,000
1995 $5,249,000 2,368,000 3,296,000 335,000
Quantitative......... 1997 $ 13,000 0 40,000 0
1996* $ 3,000 0 4,000 0
1995 N.A. N.A. N.A. N.A.
Small Cap............ 1997 $1,930,000 417,000 1,308,000 0
1996 $1,743,000 389,000 1,370,000 18,000
1995 $1,341,000 518,000 1,188,000 142,000
Technology........... 1997 $ 698,000 179,000 1,272,000 0
1996 $ 413,000 102,000 974,000 28,000
1995 $ 168,000 56,000 654,000 151,000
Total Return......... 1997 $8,705,000 1,382,000 3,769,000 0
1996 $8,464,000 2,089,000 3,572,000 64,000
1995 $8,303,000 3,318,000 3,751,000 371,000
Value+............... 1997 $ 195,000(a) 28,000 656,000 0
Growth 1996 $ 65,000 4,000 320,000 15,000
1995** $ 1,000 0 75,000 2,000
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY UNDERWRITER
-----------------------------------------------------------
ADVERTISING MARKETING MISC.
FUND CLASS B AND PROSPECTUS AND SALES OPERATING INTEREST
SHARES LITERATURE PRINTING EXPENSES EXPENSES EXPENSES
------------ ----------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Aggressive........... 12,000 1,000 3,000 1,000 4,000
Blue Chip............ 189,000 13,000 530,000 97,000 238,000
117,000 10,000 232,000 76,000 85,000
18,000 6,000 77,000 26,000 22,000
Growth............... 563,000 39,000 1,424,000 199,000 48,000
1,020,000 88,000 2,049,000 284,000 188,000
322,000 59,000 1,872,000 239,000 277,000
Quantitative......... 3,000 0 9,000 22,000 5,000
7,000 1,000 17,000 4,000 1,000
N.A. N.A. N.A. N.A. N.A.
Small Cap............ 222,000 15,000 564,000 97,000 426,000
384,000 34,000 781,000 125,000 380,000
117,000 22,000 666,000 98,000 317,000
Technology........... 162,000 11,000 442,000 77,000 295,000
309,000 28,000 572,000 121,000 191,000
53,000 14,000 239,000 55,000 54,000
Total Return......... 517,000 36,000 1,391,000 193,000 44,000
1,100,000 100,000 2,139,000 344,000 438,000
416,000 62,000 2,277,000 277,000 809,000
Value+............... 65,000 5,000 184,000 30,000 104,000
Growth 88,000 7,000 160,000 41,000 40,000
2,000 0 9,000 3,000 1,000
</TABLE>
- ---------------
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* For the period February 15, 1996 to November 30, 1996.
** For the period October 16, 1995 to November 30, 1995.
(a) Amounts shown after expense waiver.
B-21
<PAGE> 85
<TABLE>
<CAPTION>
TOTAL DISTRIBUTION
DISTRIBUTION CONTINGENT DISTRIBUTION FEES PAID
FEES PAID DEFERRED FEES PAID BY UNDERWRITER
BY FUND SALES CHARGES BY UNDERWRITER TO AFFILIATED
FUND CLASS C SHARES FISCAL YEAR TO UNDERWRITER TO UNDERWRITER TO FIRMS FIRMS
- ------------------- ----------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Aggressive.......... 1997+ $ 6,000 5,000 16,000 0
1996 N.A. N.A. N.A. N.A.
1995 N.A. N.A. N.A. N.A.
Blue Chip........... 1997 $ 49,000 3,000 72,000 0
1996 $ 12,000 0 18,000 0
1995 $ 5,000 N.A. 5,000 0
Growth.............. 1997 $110,000 1,000 123,000 0
1996 $ 57,000 0 73,000 0
1995 $ 23,000 N.A. 22,000 6,000
Quantitative........ 1997 $ 8,000 0 2,000 0
1996* $ 3,000 0 0 0
1995 N.A. N.A. N.A. N.A.
Small Cap........... 1997 $ 62,000 2,000 63,000 0
1996 $ 35,000 0 42,000 0
1995 $ 13,000 N.A. 13,000 4,000
Technology.......... 1997 $ 51,000 3,000 66,000 0
1996 $ 21,000 1,000 32,000 0
1995 $ 5,000 N.A. 4,000 1,000
Total Return........ 1997 $109,000 2,000 123,000 0
1996 $ 60,000 0 69,000 0
1995 $ 26,000 N.A. 25,000 5,000
Value+Growth........ 1997 $ 8,000(a) 1,000 20,000 0
1996 $ 2,000 0 7,000 0
1995** $ 0 N.A. 0 0
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY UNDERWRITER
-----------------------------------------------------------
ADVERTISING MARKETING MISC.
AND PROSPECTUS AND SALES OPERATING INTEREST
FUND CLASS C SHARES LITERATURE PRINTING EXPENSES EXPENSES EXPENSES
- ------------------- ----------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Aggressive.......... 7,000 1,000 20,000 0 1,000
N.A. N.A. N.A. N.A. N.A.
N.A. N.A. N.A. N.A. N.A.
Blue Chip........... 26,000 2,000 52,000 18,000 12,000
14,000 1,000 28,000 1,000 5,000
3,000 1,000 13,000 8,000 2,000
Growth.............. 44,000 3,000 110,000 8,000 36,000
48,000 4,000 89,000 8,000 18,000
12,000 2,000 70,000 15,000 7,000
Quantitative........ 0 0 0 9,000 2,000
7,000 0 15,000 6,000 1,000
N.A. N.A. N.A. N.A. N.A.
Small Cap........... 21,000 1,000 53,000 9,000 21,000
30,000 3,000 60,000 3,000 11,000
6,000 1,000 36,000 14,000 4,000
Technology.......... 24,000 2,000 66,000 2,000 19,000
34,000 3,000 67,000 2,000 8,000
4,000 1,000 19,000 10,000 2,000
Total Return........ 35,000 2,000 94,000 2,000 36,000
49,000 4,000 97,000 5,000 20,000
13,000 2,000 72,000 15,000 9,000
Value+Growth........ 7,000 1,000 20,000 2,000 7,000
13,000 1,000 23,000 8,000 3,000
1,000 0 1,000 1,000 0
</TABLE>
- ---------------
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* For the period February 15, 1996 to November 30, 1996.
** For the period October 16, 1995 to November 30, 1995.
(a) Amount shown after expense waiver.
ADMINISTRATIVE SERVICES. Administrative services are provided to each 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 each Fund, including the payment of service fees. Each
Fund pays KDI an administrative services fee, payable monthly, at an annual rate
of up to .25% of average daily net assets of Class A, B and C shares of each
Fund.
KDI has entered into related arrangements with various broker-dealer firms and
other service or administrative firms ("firms"), that provide services and
facilities for their customers or clients who are shareholders of a 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. For Class
A shares, KDI pays each firm a service fee, normally payable quarterly, at an
annual rate of up to .25% of the net assets in Fund accounts that it maintains
and services attributable to Class A shares commencing with the month after
investment. With respect to Class B and Class C shares, KDI currently advances
to firms the first-year service fee at a rate of up to .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 .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
B-22
<PAGE> 86
terminated by KDI or the Fund. Firms to which service fees may be paid include
broker-dealers affiliated with KDI.
The following information concerns the administrative services fee paid by each
Fund.
<TABLE>
<CAPTION>
ADMINISTRATIVE SERVICE FEES
PAID BY FUND SERVICE FEES SERVICE FEES
-------------------------------- PAID BY ADMINISTRATOR PAID BY ADMINISTRATOR
FUND FISCAL YEAR CLASS A CLASS B CLASS C TO FIRMS TO AFFILIATED FIRMS
---- ----------- ------- ------- ------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive........... 1997+ $ 7,000 4,000 2,000 24,000 0
1996 N.A. N.A. N.A. N.A. N.A.
1995 N.A. N.A. N.A. N.A. N.A.
Blue Chip............ 1997 $ 598,000 220,000 16,000 886,000 0
1996 $ 415,000 78,000 4,000 512,000 15,000
1995 $ 361,000 19,000 2,000 386,000 69,000
Growth............... 1997 $4,000,000 2,093,000 36,000 6,149,000 41,000
1996 $3,929,000 2,016,000 19,000 5,983,000 138,000
1995 $3,633,000 1,721,000 8,000 5,301,000 693,000
Quantitative......... 1997 $ 3,000 0 1,000 7,000 0
1996** $ 1,000 1,000 1,000 1,000 0
1995 N.A. N.A. N.A. N.A. N.A.
Small Cap............ 1997 $1,376,000 632,000 21,000 2,027,000 7,000
1996 $1,315,000 580,000 12,000 1,918,000 34,000
1995 $1,141,000 442,000 4,000 1,579,000 334,000
Technology........... 1997 $1,682,000 228,000 17,000 1,955,000 0
1996 $1,460,000 138,000 7,000 1,607,000 15,000
1995 $1,187,000 56,000 2,000 1,269,000 116,000
Total Return......... 1997 $4,683,000 2,813,000 36,000 7,603,000 22,000
1996 $4,252,000 2,772,000 20,000 7,049,000 194,000
1995 $4,047,000 2,710,000 9,000 6,685,000 1,010,000
Value+Growth......... 1997* $ 71,000 73,000 4,000 169,000 0
1996 $ 22,000 25,000 2,000 57,000 2,000
1995*** $ 0 0 0 5,000 0
</TABLE>
- ---------------
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* Amounts shown after expense waiver.
** For the period February 15, 1996 to November 30, 1996.
*** For the period October 16, 1995 to November 30, 1995.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a 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 fee that it receives
from a Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of a 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 Trustees of a Fund,
in its discretion, may approve basing the fee to KDI on all Fund assets in the
future.
Certain trustees or officers of a Fund are also directors or officers of Scudder
Kemper or KDI as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of each Fund maintained in the United States. The Chase Manhattan Bank, Chase
MetroTech Center, Brooklyn, New York 11245, as custodian, has custody of all
securities and cash of each Fund held outside of the United States. They attend
to the collection of principal and income, and payment for and collection of
B-23
<PAGE> 87
proceeds of securities bought and sold by each Fund. IFTC is also each Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of Scudder Kemper, serves as
"Shareholder Service Agent" of each 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 $6 per account plus account set
up, transaction and maintenance charges, annual fees associated with the
contingent deferred sales charge (Class B only) and out-of-pocket expense
reimbursement. IFTC's fee is reduced by certain earnings credits in favor of the
Fund. The following shows for each Fund's 1997 fiscal year the shareholder
service fees IFTC remitted to KSvC.
<TABLE>
<CAPTION>
FEES IFTC
PAID TO KSVC
FUND ------------
<S> <C>
Aggressive*................................................. $ 13,000
Blue Chip................................................... $ 959,000
Growth...................................................... $7,398,000
Quantitative................................................ $ 10,000
Small Cap................................................... $2,814,000
Technology.................................................. $1,091,000
Total Return................................................ $7,212,000
Value+Growth................................................ $ 236,000
</TABLE>
- ---------------
* For the period December 31, 1996 (commencement of operations) to September 30,
1997.
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 Funds' annual financial statements, review certain
regulatory reports and the Funds' federal income tax returns, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Funds.
PURCHASE AND REDEMPTION OF SHARES
As described in the Funds' prospectus, shares of a Fund are sold at their public
offering price, which is the net asset value per share of the Fund next
determined after an order is received in proper form plus, with respect to Class
A shares, an initial sales charge. The minimum initial investment is $1,000 and
the minimum subsequent investment is $100 but such minimum amounts may be
changed at any time. See the prospectus for certain exceptions to these
minimums. An order for the purchase of shares that is accompanied by a check
drawn on a foreign bank (other than a check drawn on a Canadian bank in U.S.
Dollars) will not be considered in proper form and will not be processed unless
and until the Fund determines that it has received payment of the proceeds of
the check. The time required for such a determination will vary and cannot be
determined in advance.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by the Fund at the applicable net asset value
per share of such Fund as described in the Funds' 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 in the prospectus, are
provided because of anticipated economies in sales and sales related efforts.
B-24
<PAGE> 88
A Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
a Fund's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. Each Fund normally distributes dividends of net investment income as
follows: annually for the Aggressive Growth, Quantitative, Small Cap, Technology
and Value+Growth Funds; semi-annually for the Blue Chip Fund; and quarterly for
the Total Return Fund. Each Fund distributes any net realized short-term and
long-term capital gains at least annually. The quarterly distribution to
shareholders of the Total Return Fund may include short-term capital gains.
A Fund may at any time vary its foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and long-
term capital gains as the Board of Trustees of the Fund determines appropriate
under the then current circumstances. In particular, and without limiting the
foregoing, a Fund may make additional distributions of net investment income or
capital gain net income in order to satisfy the minimum distribution
requirements contained in the Internal Revenue Code (the "Code"). Dividends will
be reinvested in shares of the Fund paying such dividends unless shareholders
indicate in writing that they wish to receive them in cash or in shares of other
Kemper Funds as described in the prospectus.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
TAXES. Each 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.
A Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Fund's securities.
The mark-to-market rules of the Code may require a Fund to recognize unrealized
gains and losses on certain options and futures held by the Fund at the end of
the fiscal year. Under these provisions, 60% of any capital gain net income or
loss recognized will generally be treated as long-term and 40% as short-term.
However, although certain forward contracts on foreign currency are
marked-to-market, the gain or loss is generally ordinary under Section 988 of
the Code. In addition, the straddle rules of the Code would require deferral of
certain losses realized on positions of a straddle to the extent that the Fund
had unrealized gains in offsetting positions at year end.
Gains and losses attributable to fluctuations in the value of foreign currencies
will be characterized generally as ordinary gain or loss under Section 988 of
the Code. For example, if a Fund sold a foreign bond and part of the
B-25
<PAGE> 89
gain or loss on the sale was attributable to an increase or decrease in the
value of a foreign currency, then the currency gain or loss may be treated as
ordinary income or loss. If such transactions result in greater net ordinary
income, the dividends paid by the Fund will be increased; if the result of such
transactions is lower net ordinary income, a portion of dividends paid could be
classified as a return of capital.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of a 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 of 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. Each Fund intends to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax.
A shareholder who redeems shares of a 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 a Fund or other Kemper Mutual Fund listed in the
prospectus 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 any Fund or in shares of a Kemper Mutual
Fund within six months of the redemption as described in the prospectus under
"Redemption or Repurchase of Shares--Reinvestment Privilege." If redeemed shares
were purchased after October 3, 1989 and 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 realized a loss on the redemption or exchange of a Fund's shares and
reinvests in shares of the same Fund 30 days before or after the redemption or
exchange, the transactions may be subject to the wash sale rules resulting in a
postponement of the recognition of such loss for federal income tax purposes. An
exchange of a Fund's shares for shares of another fund is treated as a
redemption and reinvestment for federal income tax purposes upon which gain or
loss may be recognized.
A Fund's investment income derived from foreign securities may be subject to
foreign income taxes withheld at the source. Because the amount of a 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.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, each Fund's historical performance or return for
a class of shares may be shown in the form of "average annual total return" and
"total return" figures. These various measures of performance are described
below. Performance information will be computed separately for each class.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
B-26
<PAGE> 90
value in the case of Class B or Class C shares includes the effect of the
applicable contingent deferred sales charge that may be imposed at the end of
the period. The redeemable value is then divided by the initial investment, and
this quotient is taken to the Nth root (N representing the number of years in
the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Average annual total return may also be calculated
without deducting the maximum sales charge.
Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for purposes of 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 an investment (assumed below to
be $10,000) ("initial investment") in a 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 and Class C shares may or may not
include the effect of the applicable contingent deferred sales charge that may
be imposed at the end of the period. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Total return may also be shown as
the increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B and Class C shares
would be reduced if such charge were included. Total return figures for Class A
shares for various periods are set forth in the tables below.
A Fund's performance figures are based upon historical results and are not
representative of future performance. Each 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
shares and Class C shares are sold at net asset value. Redemptions of Class B
shares may be subject to a contingent deferred sales charge that is 4% in the
first year following the purchase, declines by a specified percentage 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.
Returns and net asset value will fluctuate. Factors affecting each Fund's
performance include general market conditions, operating expenses and investment
management. Any additional fees charged by a dealer or other financial services
firm would reduce the returns described in this section. Shares of each Fund are
redeemable at the then current net asset value, which may be more or less than
original cost.
The figures below show performance information for various periods. Comparative
information for certain indices is also included. Please note the differences
and similarities between the investments which a Fund may purchase and the
investments measured by the applicable indices. The net asset values and returns
of each class of shares of the Funds will also fluctuate. No adjustment has been
made for taxes payable on dividends. The periods indicated were ones of
fluctuating securities prices and interest rates.
B-27
<PAGE> 91
AGGRESSIVE GROWTH FUND -- SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1) (1)
------ ---------- ------------ ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 12,500 0 0 12,500 25.0 13,263 32.6
CLASS B SHARES
Life of Fund(+) 13,179 0 0 12,779 27.8 13,179 31.8
CLASS C SHARES
Life of Fund(+) 13,189 0 0 13,089 30.9 13,189 31.9
<CAPTION>
Dow Russell U.S.
TOTAL Jones Standard Consumer 3000(R) Lipper Treasury
RETURN Industrial & Poor's Price Growth Growth Bill
TABLE Average(3) 500(4) Index(5) Index(13) Fund(9) Index(8)
------ ---------- -------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 24.9 29.6 1.6 28.8 27.2 2.6
CLASS B SHARES
Life of Fund(+) 24.9 29.6 1.6 28.8 27.2 2.6
CLASS C SHARES
Life of Fund(+) 24.9 29.6 1.6 28.8 27.2 2.6
</TABLE>
<TABLE>
<CAPTION>
Russell U.S.
AVERAGE ANNUAL Fund Fund Fund Dow Jones Standard Consumer 3000(R) Lipper Treasury
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Growth Bill
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(13) Fund(9) Index(8)
-------------- ------- ------- ------- ---------- -------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 34.7 38.7 43.2 34.6 41.3 2.2 40.1 37.9 3.4
</TABLE>
- ---------------
(+) Since December 31, 1996 for Class A, B and C shares.
B-28
<PAGE> 92
BLUE CHIP FUND -- OCTOBER 31, 1997
<TABLE>
<CAPTION>
Initial Income Ending Percentage
TOTAL $10,000 Capital Gain Dividends Ending Percentage Value Increase
RETURN Investment Dividends Reinvested Value Increase (unadjusted) (unadjusted)
TABLE (1) Reinvested (2) (adjusted)(1) (adjusted)(1) (1) (1)
------ ---------- ------------ ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 18,513 4,905 9,387 32,805 228.1 34,810 248.1
Five Years 13,096 2,336 4,287 19,719 97.2 20,928 109.3
One Year 9,719 881 1,346 11,946 19.5 12,678 26.8
Year to Date 11,247 0 52 11,299 13.0 11,985 19.9
CLASS B SHARES
Life of Fund(++) 14,317 2,000 3,008 19,125 91.3 19,325 93.3
One Year 10,304 934 1,324 12,262 22.6 12,562 25.6
Year to Date 11,898 0 7 11,505 15.1 11,905 19.1
CLASS C SHARES
Life of Fund(++) 14,382 2,002 3,036 * * 19,420 94.2
One Year 10,315 931 1,325 * * 12,571 25.7
Year to Date 11,897 0 10 11,807 18.1 11,907 19.1
<CAPTION>
Dow Russell Lipper U.S.
TOTAL Jones Standard Consumer 1000(R) Growth Treasury
RETURN Industrial & Poor's Price Growth and Income Bill
TABLE Average(3) 500(4) Index(5) Index(6) Fund(7) Index(8)
------ ---------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 451.5 432.4 40.0 439.0 351.1 72.6
Five Years 161.4 147.1 14.0 132.8 130.4 25.8
One Year 25.8 32.1 2.1 30.5 28.0 5.2
Year to Date 17.2 25.4 1.9 23.8 21.5 2.6
CLASS B SHARES
Life of Fund(++) 114.6 116.9 9.6 120.2 92.9 19.9
One Year 25.8 32.1 2.1 30.5 28.0 5.2
Year to Date 17.2 25.4 1.9 23.8 21.5 2.6
CLASS C SHARES
Life of Fund(++) 114.6 116.9 9.6 120.2 92.9 19.9
One Year 25.8 32.1 2.1 30.5 28.0 5.2
Year to Date 17.2 25.4 1.9 23.8 21.5 2.6
</TABLE>
<TABLE>
<CAPTION>
Lipper
Russell Growth U.S.
AVERAGE ANNUAL Fund Fund Fund Dow Jones Standard Consumer 1000(R) and Treasury
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Income Bill
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(7) Index(8)
-------------- ------- ------- ------- ---------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 12.7 * * 18.7 18.3 3.5 18.5 16.4 5.7
Life of Fund(++) * 20.9 21.4 25.0 25.4 2.7 26.0 21.2 5.4
Five Years 14.5 * * 21.2 19.8 2.7 18.4 18.2 4.7
One Year 19.5 22.6 25.7 25.8 32.1 2.1 30.5 28.0 5.2
</TABLE>
- ---------------
(+) Since November 23, 1987 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
B-29
<PAGE> 93
GROWTH FUND -- SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
INITIAL CAPITAL INCOME ENDING PERCENTAGE ENDING PERCENTAGE
TOTAL $10,000 GAIN DIVIDENDS VALUE INCREASE VALUE INCREASE DOW JONES
RETURN INVESTMENT DIVIDENDS REINVESTED (ADJUSTED) (ADJUSTED) (UNADJUSTED) (UNADJUSTED) INDUSTRIAL
TABLE (1) REINVESTED (2) (1) (1) (1) (1) AVERAGE(3)
------ ---------- ---------- ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 28,916 291,840 134,747 455,503 4,455.0 483,520 4,735.2 3,030.1
Ten Years 10,618 13,544 6,975 31,137 211.4 33,042 230.4 316.4
Five Years 11,138 5,109 1,921 18,168 81.7 19,278 92.8 175.5
One Year 8,472 1,936 899 11,307 13.1 11,997 20.0 37.7
Year to Date 11,170 0 0 11,170 11.7 11,854 18.5 24.9
CLASS B SHARES
Life of Fund(++) 11,321 4,195 1,742 17,058 70.6 17,258 72.6 128.7
One Year 8,817 2,083 968 11,604 16.0 11,868 18.7 37.7
Year to Date 11,761 0 0 11,361 13.6 11,761 17.6 24.9
CLASS C SHARES
Life of Fund(++) 11,390 4,209 1,747 * * 17,346 73.5 128.7
One Year 8,838 2,082 967 * * 11,887 18.9 37.7
Year to Date 11,787 0 0 11,687 16.9 11,787 17.9 24.9
<CAPTION>
RUSSELL U.S.
TOTAL STANDARD CONSUMER 1000(R) LIPPER TREASURY
RETURN & POOR'S PRICE GROWTH GROWTH BILL
TABLE 500(4) INDEX(5) INDEX(6) FUND(9) INDEX(8)
------ -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
L CLASS A SHARES
ife of Fund(+) 3,351.3 402.2 NA 2,788.9 705.0
Ten Years 295.2 40.2 292.6 250.6 72.6
Five Years 156.8 14.1 145.3 137.7 25.8
One Year 40.4 2.2 36.3 34.6 5.2
Year to Date 29.6 1.6 28.5 25.6 2.6
CLASS B SHARES
Life of Fund(++) 124.3 9.3 128.6 98.6 19.9
One Year 40.4 2.2 36.3 34.6 5.2
Year to Date 29.6 1.6 28.5 25.6 2.6
CLASS C SHARES
Life of Fund(++) 124.3 9.3 128.6 98.6 19.9
One Year 40.4 2.2 36.3 34.6 5.2
Year to Date 29.6 1.6 28.5 25.6 2.6
</TABLE>
<TABLE>
<CAPTION>
Dow Russell U.S.
AVERAGE ANNUAL Fund Fund Fund Jones Standard Consumer 1000(R) Lipper Treasury
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Growth Bill
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(9) Index(8)
-------------- ------- ------- ------- ---------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 12.9 * * 11.6 11.9 5.3 NA 11.3 6.9
Life of
Fund(++) * 17.3 17.9 28.1 27.4 2.7 28.2 22.8 5.6
Ten Years 12.0 * * 15.3 14.7 3.4 14.7 13.4 5.6
Five Years 12.7 * * 22.5 20.8 2.7 19.7 18.9 4.7
One Year 13.1 16.0 18.9 37.7 40.4 2.2 36.3 34.6 5.2
</TABLE>
- ---------------
(+) Since April 4, 1966 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
B-30
<PAGE> 94
QUANTITATIVE EQUITY FUND -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
INITIAL CAPITAL INCOME ENDING PERCENTAGE ENDING PERCENTAGE
TOTAL $10,000 GAIN DIVIDENDS VALUE INCREASE VALUE INCREASE DOW JONES
RETURN INVESTMENT DIVIDENDS REINVESTED (ADJUSTED) (ADJUSTED) (UNADJUSTED) (UNADJUSTED) INDUSTRIAL
TABLE (1) REINVESTED (2) (1) (1) (1) (1) AVERAGE(3)
------ ---------- ---------- ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 12,927 0 228 13,155 31.6 13,958 39.6 50.6
One Year 11,042 0 195 11,237 12.4 11,925 19.3 22.2
Year to Date 11,390 0 0 11,390 13.9 12,087 20.9 23.4
CLASS B SHARES
Life of Fund(+) 13,516 0 240 13,456 34.6 13,756 37.6 50.6
One Year 11,630 0 207 11,537 15.4 11,837 18.4 22.2
Year to Date 12,011 0 0 11,611 16.1 12,011 20.1 23.4
CLASS C SHARES
Life of Fund(+) 13,536 0 241 * * 13,777 37.8 50.6
One Year 11,638 0 207 * * 11,845 18.5 22.2
Year to Date 12,019 0 0 11,919 19.2 12,019 20.2 23.4
<CAPTION>
RUSSELL U.S.
TOTAL STANDARD CONSUMER 1000(R) LIPPER TREASURY
RETURN & POOR'S PRICE GROWTH GROWTH BILL
TABLE 500(4) INDEX(5) INDEX(6) FUND(9) INDEX(8)
------ -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 55.8 4.7 51.0 44.5 7.9
One Year 28.5 1.9 26.5 23.6 5.2
Year to Date 31.1 1.9 29.0 26.0 2.6
CLASS B SHARES
Life of Fund(+) 55.8 4.7 51.0 44.5 7.9
One Year 28.5 1.9 26.5 23.6 5.2
Year to Date 31.1 1.9 29.0 26.0 2.6
CLASS C SHARES
Life of Fund(+) 55.8 4.7 51.0 44.5 7.9
One Year 28.5 1.9 26.5 23.6 5.2
Year to Date 31.1 1.9 29.0 26.0 2.6
</TABLE>
<TABLE>
<CAPTION>
Dow Russell U.S.
AVERAGE ANNUAL Fund Fund Fund Jones Standard Consumer 1000(R) Lipper Treasury
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Growth Bill
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(9) Index(8)
-------------- ------- ------- ------- ---------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 16.6 18.0 19.6 25.7 28.1 2.6 26.5 22.8 4.4
</TABLE>
- ---------------
(+) Since February 15, 1996 for Class A, B and C shares.
B-31
<PAGE> 95
SMALL CAP FUND -- SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase Dow Jones
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (1) (1) (1) (1) Average(3)
------ ---------- ------------ ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 37,607 229,569 70,009 337,185 3,271.9 357,753 3,477.5 2,788.1
Ten Years 11,240 18,189 4,396 33,825 238.3 35,898 259.0 316.4
Five Years 14,327 7,554 1,007 22,888 128.9 24,283 142.8 175.5
One Year 10,725 864 121 11,710 17.1 12,429 24.3 37.7
Year to Date 12,000 0 0 12,000 20.0 12,727 27.3 24.9
CLASS B SHARES
Life of Fund(++) 13,522 4,432 794 18,548 85.5 18,748 87.5 128.7
One Year 11,219 933 131 11,983 19.8 12,283 22.8 37.7
Year to Date 12,607 0 0 12,207 22.1 12,607 26.1 24.9
CLASS C SHARES
Life of Fund(++) 13,505 4,434 795 * * 18,734 87.3 128.7
One Year 11,221 935 131 * * 12,287 22.9 37.7
Year to Date 12,612 0 0 12,512 25.1 12,612 26.1 24.9
<CAPTION>
Russell
TOTAL Standard Consumer 1000(R)
RETURN & Poor's Price Wilshire Growth
TABLE 500(4) Index(5) 4500 Index(6)
------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 2,763.2 350.3 NA NA
Ten Years 295.2 40.2 251.3 292.6
Five Years 156.8 14.1 148.8 145.3
One Year 40.4 2.2 32.1 36.3
Year to Date 29.6 1.6 27.5 28.5
CLASS B SHARES
Life of Fund(++) 124.3 9.3 101.5 128.6
One Year 40.4 2.2 32.1 36.3
Year to Date 29.6 1.6 27.5 28.5
CLASS C SHARES
Life of Fund(++) 124.3 9.3 101.5 128.6
One Year 40.4 2.2 32.1 36.3
Year to Date 29.6 1.6 27.5 28.5
</TABLE>
<TABLE>
<CAPTION>
Dow
AVERAGE ANNUAL Fund Fund Fund Jones Standard Consumer
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Wilshire
TABLE Shares Shares Shares Average(3) 500(4) Index(5) 4500
-------------- ------- ------- ------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 13.1 * * 12.5 12.4 5.4 NA
Life of Fund(++) * 20.3 20.7 28.1 27.4 2.7 23.4
Ten Years 13.0 * * 15.3 14.7 3.4 13.4
Five Years 18.0 * * 22.5 20.8 2.7 20.0
One Year 17.1 19.8 22.9 37.7 40.4 2.2 32.1
<CAPTION>
AVERAGE ANNUAL Russell
TOTAL RETURN 1000(R) Growth
TABLE Index(6)
-------------- --------------
<S> <C>
Life of Fund(+) NA
Life of Fund(++) 28.2
Ten Years 14.7
Five Years 19.7
One Year 36.3
</TABLE>
- ---------------
(+) Since February 20, 1969 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
B-32
<PAGE> 96
TECHNOLOGY FUND -- OCTOBER 31, 1997
<TABLE>
<CAPTION>
INITIAL INCOME ENDING PERCENTAGE ENDING PERCENTAGE DOW
TOTAL $10,000 CAPITAL GAIN DIVIDENDS VALUE INCREASE VALUE INCREASE JONES
RETURN INVESTMENT DIVIDENDS REINVESTED (ADJUSTED) (ADJUSTED) (UNADJUSTED) (UNADJUSTED) INDUSTRIAL
TABLE (1) REINVESTED (2) (1) (1) (1) (1) AVERAGE(3)
------ ---------- ------------ ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 55,343 3,623,143 665,479 4,343,965 43,339.7 4,611,214 46,012.1 34,104.0
Ten Years 10,521 26,801 3,488 40,810 308.1 43,309 333.1 407.2
Five Years 12,434 10,959 1,138 24,531 145.3 26,035 160.4 161.4
One Year 9,405 1,635 0 11,040 10.4 11,711 17.1 25.8
Year to Date 10,330 0 0 10,330 3.3 10,960 9.6 17.2
CLASS B SHARES
Life of Fund(++) 12,552 7,134 971 20,457 104.6 20,657 106.6 114.6
One Year 9,820 1,771 0 11,296 13.0 11,591 15.9 25.8
Year to Date 10,876 0 0 10,476 4.8 10,876 8.8 17.2
CLASS C SHARES
Life of Fund(++) 12,652 7,152 973 * * 20,777 107.8 114.6
One Year 9,836 1,762 0 * * 11,598 16.0 25.8
Year to Date 10,878 0 0 10,778 7.8 10,878 8.8 17.2
<CAPTION>
RUSSELL
TOTAL STANDARD CONSUMER 1000(R)
RETURN & POOR'S PRICE GROWTH
TABLE 500(4) INDEX(5) INDEX(6)
------ -------- -------- --------
<S> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 41,183.2 559.6 NA
Ten Years 387.0 40.2 392.5
Five Years 147.1 14.0 132.8
One Year 32.1 2.1 30.5
Year to Date 25.4 1.9 23.8
CLASS B SHARES
Life of Fund(++) 116.9 9.6 120.2
One Year 32.1 2.1 30.5
Year to Date 25.4 1.9 23.8
CLASS C SHARES
Life of Fund(++) 116.9 9.6 120.2
One Year 32.1 2.1 30.5
Year to Date 25.4 1.9 23.8
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL Fund Fund Fund Dow Jones Standard Consumer Russell
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price 1000(R) Growth
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6)
-------------- ------- ------- ------- ---------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 13.2 * * 12.6 13.0 3.9 NA
Life of Fund(++) * 23.3 23.8 25.0 25.4 2.7 26.0
Ten Years 15.1 * * 17.6 17.2 3.4 17.3
Five Years 19.7 * * 21.2 19.8 2.7 18.4
One Year 10.4 13.0 16.0 25.8 32.1 2.1 30.5
</TABLE>
- ---------------
(+) Since September 7, 1948 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
B-33
<PAGE> 97
TOTAL RETURN FUND -- OCTOBER 31, 1997
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending Percentage Dow
TOTAL $10,000 Gain Dividends Value Increase Value Increase Jones
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (1) (1) (1) (1) Average(3)
------ ---------- ---------- ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 26,872 169,595 234,049 430,516 4,205.2 457,048 4,470.5 3,538.3
Ten Years 14,765 7,446 9,220 31,431 214.3 33,342 233.4 407.2
Five Years 10,618 3,511 2,815 16,944 69.4 17,970 79.7 161.4
One Year 9,474 1,007 728 11,209 12.1 11,895 19.0 25.8
Year to Date 10,608 0 221 10,829 8.3 11,485 14.9 17.2
CLASS B SHARES
Life of Fund(++) 12,262 1,918 1,601 15,581 55.8 15,781 57.8 114.6
One Year 10,053 1,069 664 11,486 14.9 11,786 17.9 25.8
Year to Date 11,240 0 157 10,997 10.0 11,397 14.0 17.2
CLASS C SHARES
Life of Fund(++) 12,272 1,922 1,645 * * 15,839 58.4 114.6
One Year 10,053 1,068 671 * * 11,792 17.9 25.8
Year to Date 11,239 0 161 11,300 13.0 11,400 14.0 17.2
<CAPTION>
Russell
TOTAL Standard Consumer 1000(R) Lipper Lehman Bros.
RETURN & Poor's Price Growth Balanced Gov't/Corp.
TABLE 500(4) Index(5) Index(6) Fund(11) Index(12)
------ -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 3,978.3 423.0 NA 2,455.0 *
Ten Years 387.0 40.2 392.5 231.5 140.9
Five Years 147.1 14.0 132.8 86.5 44.4
One Year 32.1 2.1 30.5 20.1 8.8
Year to Date 25.4 1.9 23.8 16.2 8.1
Life of Fund(++) 116.9 9.6 120.2 64.0 33.4
One Year 32.1 2.1 30.5 20.1 8.8
Year to Date 25.4 1.9 23.8 16.2 8.1
Life of Fund(++) 116.9 9.6 120.2 64.0 33.4
One Year 32.1 2.1 30.5 20.1 8.8
Year to Date 25.4 1.9 23.8 16.2 8.1
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
ANNUAL Fund Fund Fund Dow Jones Standard Consumer Russell Lipper Lehman Bros.
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price 1000(R) Growth Balanced Gov't/Corp.
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(11) Index(12)
------------ ------- ------- ------- ---------- -------- -------- -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 11.8 * * 11.3 11.6 5.0 NA 10.1 *
Life of Fund(++) * 13.9 14.4 25.0 25.4 2.7 26.0 15.6 8.8
Ten Years 12.1 * * 17.6 17.2 3.4 17.3 12.7 9.2
Five Years 11.1 * * 21.2 19.8 2.7 18.4 13.3 7.6
One Year 12.1 14.9 17.9 25.8 32.1 2.1 30.5 20.1 8.8
</TABLE>
- ---------------
(+) Since March 2, 1964 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
B-34
<PAGE> 98
VALUE+GROWTH FUND -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
INITIAL CAPITAL INCOME ENDING PERCENTAGE ENDING PERCENTAGE
TOTAL $10,000 GAIN DIVIDENDS VALUE INCREASE VALUE INCREASE DOW JONES
RETURN INVESTMENT DIVIDENDS REINVESTED (ADJUSTED) (ADJUSTED) (UNADJUSTED) (UNADJUSTED) INDUSTRIAL
TABLE (1) REINVESTED (2) (1) (1) (1) (1) AVERAGE(3)
------ ---------- ---------- ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 14,503 123 897 15,523 55.2 16,471 64.7 71.0
One Year 10,640 90 658 11,388 13.9 12,083 20.8 22.2
Year to Date 11,622 0 0 11,622 16.2 12,327 23.3 23.4
CLASS B SHARES
Life of Fund(+) 15,126 129 945 15,900 59.0 16,200 62.0 71.0
One Year 11,201 96 699 11,696 17.0 11,996 20.0 22.2
Year to Date 12,240 0 0 11,840 18.4 12,240 22.4 23.4
CLASS C SHARES
Life of Fund(+) 15,126 129 945 * * 16,200 62.0 71.0
One Year 11,191 96 699 * * 11,986 19.9 22.2
Year to Date 12,230 0 0 12,130 21.3 12,230 22.3 23.4
<CAPTION>
RUSSELL U.S.
TOTAL STANDARD CONSUMER 1000(R) LIPPER TREASURY
RETURN & POOR'S PRICE GROWTH GROWTH BILL
TABLE 500(4) INDEX(5) INDEX(6) FUND(9) INDEX(8)
------ -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 70.9 5.5 66.0 51.6 10.7
One Year 28.5 1.9 26.5 23.6 5.2
Year to Date 31.1 1.9 29.0 26.0 2.6
CLASS B SHARES
Life of Fund(+) 70.9 5.5 66.0 51.6 10.7
One Year 28.5 1.9 26.5 23.6 5.2
Year to Date 31.1 1.9 29.0 26.0 2.6
CLASS C SHARES
Life of Fund(+) 70.9 5.5 66.0 51.6 10.7
One Year 28.5 1.9 26.5 23.6 5.2
Year to Date 31.1 1.9 29.0 26.0 2.6
</TABLE>
<TABLE>
<CAPTION>
Dow Russell U.S.
AVERAGE ANNUAL Fund Fund Fund Jones Standard Consumer 1000(R) Lipper Treasury
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Growth Bill
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(9) Index(8)
-------------- ------- ------- ------- ---------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 22.9 24.3 25.4 28.6 28.6 2.5 27.5 21.6 4.9
</TABLE>
- ---------------
(+) Since October 16, 1995 for Class A, B and C shares.
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were adjusted
for the maximum initial sales charge at the beginning of the period, which is
5.75%. The Initial Investment for Class B and Class C shares was not adjusted.
Amounts were adjusted for Class B shares for the contingent deferred sales
charge that may be imposed at the end of the period based upon the schedule for
shares sold currently, see "Redemption or Repurchase of Shares" in the
prospectus. No adjustments were made to Class C shares. Amounts were adjusted
for Class C shares for the contingent deferred sales charge that may be imposed
for periods less than one year.
(2) Includes short-term capital gain dividends, if any.
(3) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange. Assumes
reinvestment of dividends. Source is Towers Data Systems.
(4) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange. Assumes
reinvestment of dividends. Source is Towers Data Systems.
(5) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(6) The Russell 1000(R) Growth Index is an unmanaged index comprised of common
stocks of larger U.S. companies with greater than average growth orientation and
represents the universe of stocks from which "earnings/growth" money managers
typically select. Assumes reinvestment of dividends. Source is Lipper Analytical
Services, Inc.
(7) The Lipper Growth and Income Fund Index is a net asset value weighted index
of the performance of certain mutual funds tracked by Lipper Analytical
Services, Inc. The largest mutual funds within the Lipper "growth and income
investment" objective category are included in the index. Performance is based
on changes in net asset value with all dividends reinvested and with no
adjustment for sales charges. Source is Towers Data Systems.
(8) The U.S. Treasury Bill Index is an unmanaged index based on the average
monthly yield of Treasury Bills maturing in 6 months. Source is Towers Data
Systems.
(9) The Lipper Growth Fund Index is a net asset value weighted index of the
performance of certain mutual funds tracked by Lipper Analytical Services, Inc.
The largest mutual funds within the Lipper "growth investment" objective
category are included in the index. Performance is based on changes in net asset
value with all dividends reinvested and with no adjustment for sales changes.
Source is Towers Data Systems.
(10) The Wilshire 4500 Index Trust is a capitalization-weighted index, including
all of the securities in the Wilshire 5000 Index with the exception of the S&P
500 securities.
(11) The Lipper Balanced Fund Index is a net asset value weighted index of the
performance of certain mutual funds tracked by Lipper Analytical Services, Inc.,
New York, New York. The largest mutual funds within the Lipper "balanced
investment" objective category are included in the index. Performance is based
on changes in net asset value with all dividends reinvested and with no
adjustment for sales charges. Source is Towers Data Systems.
(12) The Lehman Brothers Government/Corporate Bond Index is on a total return
basis and is comprised of all publicly issued, non-convertible, domestic debt of
the U.S. Government or any agency thereof, quasi-federal corporation, or
corporate debt guaranteed by the U.S. Government and all publicly issued,
fixed-rate, non-convertible, domestic debt of the three major corporate
classifications: industrial, utility, and financial. Only notes and bonds with a
minimum outstanding principal amount of $1,000,000 and a minimum of one year to
maturity are included. Bonds included must have a rating of at least Baa by
Moody's Investors Service, Inc., BBB by Standard & Poor's Corporation or in the
case of bank bonds not rated by either Moody's or S&P, BBB by Fitch Investors
Service. This index is unmanaged. Source is Towers Data Systems.
(13) The Russell 3000(R) Index is an unmanaged index comprised of 3000 of the
largest capitalized U.S. domiciled companies whose common stocks trade in the
U.S. This portfolio of securities represents approximately 98 percent of the
investable U.S. equity market.
B-35
<PAGE> 99
Investors may want to compare the performance of a Fund to certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of deposits prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution.
Information regarding bank products may be based upon, among other things, the
BANK RATE MONITOR National IndexTM for certificates of deposit, which is an
unmanaged index and is based on stated rates and the annual effective yields of
certificates of deposit in the ten largest banking markets in the United States,
or the CDA Investment Technologies, Inc. Certificate of Deposit Index, which is
an unmanaged index based on the average monthly yields of certificates of
deposit.
Investors also may want to compare the performance of a Fund to that of U.S.
Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on the average monthly yield of
treasury bills maturing in six months. Due to their short maturities, Treasury
bills generally experience very low market value volatility.
Investors may want to compare the performance of a Fund, such as the Total
Return Fund, to the performance of a hypothetical portfolio weighted 60% in the
Standard & Poor's 500 Stock Index (an unmanaged index generally representative
of the U.S. stock market) and 40% in the Lehman Brothers Government/Corporate
Bond Index (an unmanaged index generally representative of intermediate and
long-term government and investment grade corporate debt securities). See the
footnotes above for a more complete description of these indexes. The Total
Return Fund may invest in both equity and fixed income securities. The
percentage of assets invested in each type of security will vary from time to
time in the discretion of the Fund's investment manager and will not necessarily
approximate the 60%/40% weighting of this hypothetical index.
Investors may want to compare the performance of a 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.
B-36
<PAGE> 100
The following tables illustrate an assumed $10,000 investment in Class A shares
of each Fund, which includes the current maximum sales charge of 5.75%, with
income and capital gain dividends reinvested in additional shares. Each table
covers the period from commencement of operations of the Fund to December 31,
1997.
AGGRESSIVE GROWTH FUND (12/31/96)
<TABLE>
<CAPTION>
------- DIVIDENDS -------- ----- CUMULATIVE VALUE OF SHARES ACQUIRED -----
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 $ 0 $ 0 $ 9,425 $ 0 $ 0 $ 9,425
1997 546 0 11,994 577 0 12,571
- ----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
BLUE CHIP FUND (11/23/87)
<TABLE>
<CAPTION>
------- DIVIDENDS -------- ----- CUMULATIVE VALUE OF SHARES ACQUIRED -----
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1987 $ 0 $ 0 $ 9,519 $ 0 $ 0 $ 9,519
1988 339 0 8,545 342 0 8,887
1989 220 0 10,650 659 0 11,309
1990 134 0 10,776 806 0 11,582
1991 531 712 14,284 1,657 786 16,727
1992 185 0 13,949 1,810 768 16,527
1993 897 374 13,392 2,647 1,118 17,157
1994 269 27 12,472 2,733 1,068 16,273
1995 1,201 714 14,932 4,497 2,006 21,435
1996 3,027 1,993 15,517 7,743 4,112 27,372
1997 3,455 928 17,057 12,023 5,466 34,546
- ----------------------------------------------------------------------------------------------------
</TABLE>
B-37
<PAGE> 101
- --------------------------------------------------------------------------------
GROWTH FUND (4/4/66)
<TABLE>
<CAPTION>
------ DIVIDENDS ------- ----- CUMULATIVE VALUE OF SHARES ACQUIRED -----
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1966 $ 0 $ 0 $ 8,920 $ 0 $ 0 $ 8,916
1967 75 954 13,165 77 984 14,220
1968 121 1,278 15,103 211 2,371 17,684
1969 242 836 12,897 410 2,862 16,168
1970 306 0 12,137 726 2,692 15,548
1971 313 652 13,794 1,143 3,757 18,692
1972 280 765 13,907 1,419 4,544 19,876
1973 322 0 11,089 1,471 3,622 16,174
1974 384 0 7,779 1,383 2,541 11,698
1975 368 0 10,809 2,295 3,530 16,626
1976 376 0 13,689 3,303 4,471 21,452
1977 383 0 13,757 3,715 4,495 21,963
1978 661 572 15,439 4,827 5,613 25,879
1979 852 3,998 18,775 6,772 10,900 36,439
1980 1,097 5,842 23,439 9,656 19,407 52,502
1981 1,053 2,201 19,253 8,955 18,257 46,465
1982 1,364 1,691 23,346 12,515 24,081 59,942
1983 4,257 5,471 25,476 17,849 31,659 74,984
1984 1,772 6,113 20,973 16,409 32,242 69,624
1985 2,313 8,923 22,822 20,376 45,166 88,364
1986 3,785 22,963 18,803 20,481 60,930 100,214
1987 12,643 22,692 13,065 26,916 65,975 105,956
1988 3,977 0 13,963 32,949 70,505 117,417
1989 2,844 0 17,907 45,201 90,420 153,528
1990 2,898 6,132 17,495 47,095 94,866 159,456
1991 7,496 5,963 27,552 82,490 156,017 266,059
1992 542 542 27,009 81,412 153,492 261,913
1993 1,631 16,494 25,552 78,674 161,958 266,184
1994 0 3,505 23,701 72,977 153,770 250,448
1995 8,987 24,887 27,981 95,333 206,954 330,268
1996 30,446 65,524 24,393 113,668 246,187 384,248
1997 37,100 24,439 24,467 152,226 272,111 448,804
</TABLE>
- --------------------------------------------------------------------------------
QUANTITATIVE EQUITY (2/15/96)
<TABLE>
<CAPTION>
----- DIVIDENDS ----- --- CUMULATIVE VALUE OF SHARES ACQUIRED ---
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 $ 188 $ 0 $10,694 $ 189 $ 0 $ 10,883
1997 333 202 12,411 556 204 13,171
- ------------------------------------------------------------------------------------------
</TABLE>
B-38
<PAGE> 102
- --------------------------------------------------------------------------------
SMALL CAP FUND (2/20/69)
<TABLE>
<CAPTION>
---- DIVIDENDS ---- ---- CUMULATIVE VALUE OF SHARES ACQUIRED ----
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1969 $ 94 $ 0 $ 9,179 $ 95 $ 0 $ 9,274
1970 172 0 8,924 275 0 9,199
1971 117 243 10,868 463 267 11,598
1972 121 634 10,925 583 890 12,398
1973 193 0 7,745 615 631 8,991
1974 197 0 4,953 585 403 5,941
1975 192 0 7,585 1,096 618 9,299
1976 162 0 9,915 1,605 808 12,328
1977 223 0 10,981 2,007 895 13,883
1978 358 1,527 11,548 2,469 2,471 16,488
1979 1,455 1,845 14,009 4,521 4,932 23,462
1980 1,770 1,232 18,670 7,745 7,771 34,186
1981 829 1,607 16,916 7,931 8,811 33,658
1982 657 1,201 20,472 10,389 12,108 42,969
1983 1,386 3,307 23,170 13,087 16,875 53,132
1984 1,082 0 20,934 12,916 15,247 49,097
1985 1,217 1,482 25,386 17,035 20,161 62,582
1986 581 11,279 24,104 16,782 30,928 71,814
1987 5,059 17,848 15,990 16,510 39,485 71,985
1988 1,062 0 16,982 18,656 41,931 77,569
1989 2,370 0 20,896 25,344 51,599 97,839
1990 1,325 6,405 18,019 23,288 51,425 92,732
1991 4,370 7,283 27,925 40,971 87,829 156,725
1992 0 12,972 25,613 37,580 93,726 156,919
1993 578 9,825 28,161 41,914 113,195 183,270
1994 0 10,437 25,566 38,053 113,583 177,202
1995 7,520 26,809 28,303 50,068 154,057 232,428
1996 2,709 19,351 29,548 55,007 180,376 264,931
1997 845 33,380 31,574 59,670 227,911 319,155
</TABLE>
- --------------------------------------------------------------------------------
B-39
<PAGE> 103
- --------------------------------------------------------------------------------
TECHNOLOGY FUND (9/7/48)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1948 $ 0 $ 0 $10,127 $ 0 $ 0 $ 10,127
1949 305 112 10,907 354 125 11,386
1950 618 510 12,490 1,046 659 14,195
1951 722 569 13,608 1,870 1,312 16,790
1952 700 303 15,158 2,854 1,779 19,791
1953 812 595 14,325 3,494 2,292 20,111
1954 962 1,308 22,406 6,656 5,050 34,112
1955 1,129 1,681 24,367 8,426 7,310 40,103
1956 1,286 1,973 24,873 9,890 9,466 44,229
1957 1,362 2,109 20,485 9,344 9,912 39,741
1958 1,356 1,883 29,557 15,178 16,404 61,139
1959 1,430 2,771 34,283 19,144 22,002 75,429
1960 1,591 3,018 32,615 19,858 24,191 76,664
1961 1,498 3,620 37,426 24,332 31,506 93,264
1962 1,482 2,766 29,367 20,530 27,753 77,650
1963 1,686 3,388 32,152 24,207 33,809 90,168
1964 2,026 3,949 34,220 27,804 39,936 101,960
1965 2,279 5,209 41,983 36,626 54,459 133,068
1966 2,421 7,556 36,878 34,531 56,060 127,469
1967 2,347 16,506 43,123 42,726 83,106 168,955
1968 2,661 29,453 38,354 40,541 104,411 183,306
1969 4,067 15,134 30,970 36,388 98,699 166,057
1970 4,576 2,306 29,156 39,278 95,450 163,884
1971 4,307 7,228 31,519 46,839 111,044 189,402
1972 3,573 9,256 32,320 51,550 123,411 207,281
1973 4,092 0 26,202 45,665 100,050 171,917
1974 5,036 0 19,704 38,853 75,239 133,796
1975 5,503 0 26,160 57,435 99,889 183,484
1976 5,671 0 31,983 76,277 122,122 230,382
1977 6,134 3,081 30,127 78,198 118,387 226,712
1978 8,346 6,127 34,852 99,253 143,347 277,452
1979 8,825 14,677 42,911 132,292 192,861 368,064
1980 11,331 22,789 59,831 198,060 293,649 551,540
1981 12,949 29,973 46,878 166,926 259,055 472,859
1982 15,945 18,664 53,122 207,300 312,576 572,998
1983 22,078 88,219 53,165 228,712 402,902 684,779
1984 18,122 67,505 44,050 206,394 401,017 651,461
1985 11,304 43,186 51,561 253,748 516,719 822,028
1986 11,483 185,857 46,920 240,583 653,079 940,582
1987 28,099 200,645 38,481 222,331 744,271 1,005,083
1988 25,656 56,631 36,414 236,256 763,523 1,036,193
1989 35,011 36,281 42,828 314,484 935,927 1,293,237
1990 25,588 29,491 41,138 327,604 930,196 1,298,939
1991 18,709 328,427 47,131 395,051 1,432,891 1,875,073
1992 0 216,548 41,055 344,122 1,467,648 1,852,825
1993 0 127,584 42,953 360,038 1,666,453 2,069,449
1994 0 304,928 41,308 346,245 1,916,846 2,304,399
1995 164,768 336,598 49,199 591,597 2,649,098 3,289,894
1996 0 594,714 50,496 607,192 3,305,808 3,963,496
1997 29,776 678,228 44,805 569,410 3,631,208 4,245,423
</TABLE>
- --------------------------------------------------------------------------------
B-40
<PAGE> 104
- --------------------------------------------------------------------------------
TOTAL RETURN FUND (3/2/64)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1964 $ 286 $ 36 $ 9,775 $ 280 $ 35 $ 10,090
1965 485 75 10,249 788 113 11,150
1966 498 133 9,337 1,195 238 10,770
1967 528 533 10,367 1,854 821 13,042
1968 576 934 11,552 2,685 1,869 16,106
1969 705 186 9,608 2,880 1,734 14,222
1970 787 91 9,977 3,851 1,899 15,727
1971 798 308 10,806 4,991 2,382 18,179
1972 913 475 11,102 6,040 2,937 20,079
1973 1,095 0 9,502 6,202 2,514 18,218
1974 1,164 0 7,370 5,841 1,950 15,161
1975 1,251 0 9,324 8,721 2,467 20,512
1976 1,412 0 11,920 12,712 3,153 27,785
1977 1,580 689 11,517 13,873 3,777 29,167
1978 1,997 2,026 11,173 15,386 5,733 32,292
1979 2,493 3,239 12,547 19,958 9,982 42,487
1980 3,872 2,955 15,545 29,058 15,524 60,127
1981 2,893 2,272 14,278 29,458 16,532 60,268
1982 4,254 2,803 15,771 37,194 21,076 74,041
1983 8,825 3,719 16,256 47,149 25,542 88,947
1984 4,093 1,005 15,142 48,081 24,798 87,961
1985 5,472 2,977 17,891 62,603 32,510 113,004
1986 6,471 12,816 18,069 69,383 45,459 132,911
1987 5,213 3,478 16,564 67,975 45,219 129,758
1988 7,763 0 16,991 77,756 46,384 141,131
1989 7,619 0 19,432 96,645 53,047 169,124
1990 10,289 0 19,029 105,091 51,947 176,067
1991 8,001 6,055 24,999 146,974 74,795 246,768
1992 6,616 9,754 23,957 147,512 81,449 252,918
1993 10,120 22,863 23,578 155,228 103,420 282,226
1994 6,437 0 20,901 143,755 91,675 256,331
1995 12,811 11,545 24,265 179,922 118,210 322,467
1996 23,184 34,012 23,886 200,221 150,791 374,858
1997 31,868 39,103 23,934 232,013 190,663 446,610
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE+GROWTH FUND (10/16/95)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 0 $ 0 $10,030 $ 0 $ 0 $10,030
1996 724 99 11,766 727 100 12,593
1997 372 159 14,146 1,252 282 15,680
</TABLE>
- --------------------------------------------------------------------------------
* Includes short-term capital gain dividends.
B-41
<PAGE> 105
The following tables compare the performance of the Class A shares of the Funds
over various periods with that of other mutual funds within the categories
described below according to data reported by Lipper Analytical Services, Inc.
("Lipper"), New York, New York, which is a mutual fund reporting service. Lipper
performance figures are based on changes in net asset value, with all income and
capital gain dividends reinvested. Such calculations do not include the effect
of any sales charges. Future performance cannot be guaranteed. Lipper publishes
performance analyses on a regular basis. Each category includes funds with a
variety of objectives, policies and market and credit risks that should be
considered in reviewing these rankings.
AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Capital Appreciation
Funds
----------------------
<S> <C>
One Year (Period ended 12/31/97)............................ 24 of 231
</TABLE>
The Lipper Capital Appreciation Fund category includes funds which aim to
maximize capital appreciation.
BLUE CHIP FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Growth & Income
Funds
----------------------
<S> <C>
Ten Year (Period ended 12/31/97)............................ 117 of 136
Five Year (Period ended 12/31/97)........................... 186 of 240
One Year (Period ended 12/31/97)............................ 361 of 611
</TABLE>
The Lipper Growth & Income Funds category includes funds which combine a growth
of earnings orientation and an income requirement for level and/or rising
dividends.
GROWTH FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Growth Funds
----------------------
<S> <C>
Ten Years (Period ended 12/31/97)........................... 115 of 181
Five Years (Period ended 12/31/97).......................... 293 of 311
One Year (Period ended 12/31/97)............................ 709 of 820
</TABLE>
The Lipper Growth Funds category includes funds which normally invest in
companies whose long-term earnings are expected to grow significantly faster
than the earnings of the stocks represented in the major unmanaged stock
indices.
QUANTITATIVE FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Growth Funds
----------------------
<S> <C>
One Year (Period ended 12/31/97)............................ 602 of 820
</TABLE>
The Lipper Growth Funds category includes funds which normally invest in
companies whose long-term earnings are expected to grow significantly faster
than the earnings of the stocks represented in the major unmanaged stock
indices.
B-42
<PAGE> 106
SMALL CAP FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Small Cap Company
Growth Funds
----------------------
<S> <C>
Ten Years (Period ended 12/31/97)........................... 35 of 56
Five Years (Period ended 12/31/97).......................... 85 of 138
One Year (Period ended 12/31/97)............................ 251 of 466
</TABLE>
The Lipper Small Company Growth Fund category includes funds which by prospectus
or portfolio practice limit their investments to companies on the basis of the
size of the company.
TECHNOLOGY FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Science &
Technology Funds
----------------------
<S> <C>
Ten Years (Period ended 12/31/97)........................... 11 of 12
Five Years (Period ended 12/31/97).......................... 10 of 15
One Year (Period ended 12/31/97)............................ 31 of 57
</TABLE>
The Lipper Science & Technology Funds category includes funds which invest 65%
of their equity portfolio in science and technology stocks.
TOTAL RETURN FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Balanced Funds
----------------------
<S> <C>
Ten Years (Period ended 12/31/97)........................... 21 of 48
Five Years (Period ended 12/31/97).......................... 78 of 109
One Year (Period ended 12/31/97)............................ 173 of 350
</TABLE>
The Lipper Balanced Fund category includes funds whose primary objectives are to
conserve principal by maintaining at all times a balanced portfolio of both
stock and bonds. Typically, the stock/bond ratio ranges around 60% to 40%.
VALUE + GROWTH FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
----------------------
Growth & Income
----------------------
<S> <C>
One Year (Period ended 12/31/97)............................ 449 of 611
</TABLE>
The Lipper Growth & Income Fund category includes funds which combine a growth
of earnings orientation and an income requirement for level and/or rising
dividends.
B-43
<PAGE> 107
OFFICERS AND TRUSTEES
The officers and trustees of the Funds, their birthdates, their principal
occupations and their affiliations, if any, with Scudder Kemper, the investment
manager, and KDI, the principal underwriter, are listed below. All persons named
as trustees also serve in similar capacities for other funds advised by Scudder
Kemper.
ALL FUNDS:
DAVID W. BELIN (6/20/28), Trustee, 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); prior thereto,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director; Bethlehem Steel Corp.
DANIEL PIERCE (3/18/34), Trustee*, 345 Park Avenue, New York, New York; Chairman
of the Board and Managing Director, Scudder Kemper; Director, Fiduciary Trust
Company and Fiduciary Company Incorporated.
WILLIAM P. SOMMERS (7/22/33), Trustee, 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); formerly, Executive Vice President, Iameter (medical
information and educational service provider), prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) (retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
EDMOND D. VILLANI (3/4/47), Trustee*, 345 Park Avenue, New York, New York;
President, Chief Executive Officer and Managing Director, Scudder Kemper.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
JERALD K. HARTMAN (3/1/33), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Scudder Kemper.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
STEVEN H. REYNOLDS (9/11/43), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Executive Vice President and Chief Investment
Officer -- Equities, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
B-44
<PAGE> 108
\PHILIP J. COLLORA (11/15/45), Vice President, Treasurer and Secretary*, 222
South Riverside Plaza, Chicago, Illinois; Attorney, Senior Vice President and
Assistant Secretary, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Scudder Kemper; Vice President, KDI.
AGGRESSIVE GROWTH FUND & SMALL CAP FUND:
KURT R. STALZER (5/1/58), Vice President*, 222 South Riverside Plaza, Chicago,
Illinois; Senior Vice President, Scudder Kemper; formerly, senior portfolio
manager with an unaffiliated investment management firm.
BLUE CHIP FUND:
TRACY McCORMICK CHESTER (9/27/54), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President, Scudder Kemper; formerly, Portfolio
Manager for Fiduciary Management; prior thereto, independent consultant managing
private accounts.
QUANTITATIVE FUND & VALUE+GROWTH FUND:
DANIEL J. BUKOWSKI (5/6/63), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President and Director of Quantitative Research,
Scudder Kemper.
TOTAL RETURN FUND:
GARY A. LANGBAUM (12/16/48), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Executive Vice President, Scudder Kemper.
* Interested persons of the Fund as defined in the Investment Company Act of
1940.
B-45
<PAGE> 109
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during
each Fund's 1997 fiscal year except that the information in the last column is
for calendar year 1997.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM FUND
-----------------------------------------------------------------------------------
BLUE SMALL TOTAL VALUE+
NAME OF TRUSTEE AGGRESSIVE(A) CHIP GROWTH QUANTITATIVE CAP TECH RETURN GROWTH
--------------- ------------- ---- ------ ------------ ----- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Belin*..................... $ 0 $3,400 $9,400 $800 $6,500 $7,400 $10,100 $1,500
Lewis A. Burnham.................... $ 0 $2,300 $5,200 $500 $3,800 $4,000 $ 5,600 $1,000
Donald L. Dunaway*.................. $ 0 $3,700 $9,300 $900 $6,400 $7,000 $ 9,800 $1,700
Robert B. Hoffman................... $ 0 $2,300 $5,200 $500 $3,800 $4,000 $ 5,600 $1,000
Donald R. Jones..................... $ 0 $2,400 $5,600 $500 $4,000 $4,100 $ 5,800 $1,000
Shirley D. Peterson................. $ 0 $2,200 $5,300 $500 $3,700 $3,900 $ 5,400 $1,000
William P. Sommers.................. $ 0 $2,200 $5,100 $500 $3,600 $3,800 $ 5,300 $1,000
<CAPTION>
TOTAL COMPENSATION
FROM FUND AND
KEMPER FUND
COMPLEX
NAME OF TRUSTEE PAID TO TRUSTEES**
--------------- ------------------
<S> <C>
David W. Belin*..................... $168,100
Lewis A. Burnham.................... $117,800
Donald L. Dunaway*.................. $162,700
Robert B. Hoffman................... $109,400
Donald R. Jones..................... $114,200
Shirley D. Peterson................. $114,000
William P. Sommers.................. $109,400
</TABLE>
- ---------------
(a) No compensation for services as fee schedule not established. It is
anticipated that a fee schedule will be established in the future.
* Includes deferred fees and interest thereon pursuant to deferred compensation
agreements with Kemper funds. Deferred amounts accrue interest monthly at a
rate equal to the yield of Zurich Money Funds -- Zurich Money Market Fund.
Total deferred amounts and interest accrued through each Fund's fiscal year
are $0, $15,600, $65,900, $800, $42,600, $57,700, $77,500 and $1,500 for Mr.
Belin and $0, $14,600, $44,400, $900, $26,700, $34,900, $50,200 and $1,700
for Mr. Dunaway for the Aggressive, Blue Chip, Growth, Quantitative, Small
Cap, Technology, Total Return and Value+Growth Funds, respectively.
** Includes compensation for service on the boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as a trustee of 26 Kemper
funds with 46 fund portfolios.
As of January 7, 1998, except for Steven H. Reynolds, who beneficially owned
2.01 percent of the Aggressive Growth Fund, and William M. Knapp, who
beneficially owned 1.31 percent of the Quantitative Fund, the officers and
trustees of the Funds, as a group, owned less than 1% of the then outstanding
shares of each Fund and no person owned of record 5% or more of the outstanding
shares of any class of any Fund, except the persons indicated in the chart
below.
<TABLE>
<CAPTION>
NAME AND ADDRESS % OWNED FUND CLASS
---------------- ------- ---- -----
<C> <S> <C> <C> <C>
** Scudder Kemper Investments, Inc. ........................ 23.86 Quantitative A
Accounting Department
222 S. Riverside Plaza
Chicago, IL 60606
* NFSC..................................................... 6.32 Aggressive A
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
** Scudder Kemper Investments, Inc. ........................ 32.62 Quantitative B
Accounting Department
222 S. Riverside Plaza
Chicago, IL 60606
* BHC Securities, Inc. .................................... 5.31 Quantitative B
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
</TABLE>
B-46
<PAGE> 110
<TABLE>
<CAPTION>
NAME AND ADDRESS % OWNED FUND CLASS
---------------- ------- ---- -----
<S> <C> <C> <C> <C>
* NFSC..................................................... 6.25 Aggressive B
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
* PaineWebber.............................................. 9.45 Aggressive B
Mutual Fund Department
1000 Harbor Blvd.
8th Floor
Weehawken, NJ 07087-6727
* BHC Securities, Inc. .................................... 5.50 Aggressive B
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
* Edward D. Jones & Co. ................................... 6.58 Technology C
201 Progress Parkway
Maryland Hts, MO 63043-3009
* MLPFSS................................................... 5.11 Small Cap C
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
** Scudder Kemper Investments, Inc. ........................ 72.01 Quantitative C
Accounting Department
222 S. Riverside Plaza
Chicago, IL 60606
** John E. Susong........................................... 8.10 Quantitative C
7181 Chagrin Rd.
Chagrin Falls, OH 44023
* NFSC..................................................... 9.53 Aggressive C
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
* PaineWebber.............................................. 5.46 Aggressive C
Mutual Fund Department
1000 Harbor Blvd.
8th Floor
Weehawken, NJ 07087-6727
* PaineWebber FBO.......................................... 8.79 Aggressive C
Michael Sequall
13835 North 107th Street
Longmont, CO 80501
** Wolf C. Neumann, M.D. ................................... 5.18 Aggressive C
3400 Goltingen
Karl - Grueneklee - STR 4C
Germany
</TABLE>
B-47
<PAGE> 111
<TABLE>
<CAPTION>
NAME AND ADDRESS % OWNED FUND CLASS
---------------- ------- ---- -----
<S> <C> <C> <C> <C>
* NFSC..................................................... 5.21 Value+Growth C
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
BT Alex Brown Incorporated............................... 9.89 Value+Growth C
P.O. Box 1346
Baltimore, MD 21203
Scudder Kemper Retirement Plans.......................... 100 Technology I
222 S. Riverside Plaza 100 Total Return I
Chicago, IL 60606 100 Growth I
100 Small Cap I
100 Quantitative I
100 Blue Chip I
</TABLE>
- ---------------
* Record and beneficial owner.
** Record owner only.
B-48
<PAGE> 112
SHAREHOLDER RIGHTS
The Funds generally are not required to hold meetings of their shareholders.
Under the Agreement and Declaration of Trust of each Fund ("Declaration of
Trust"), however, shareholder meetings will be held in connection with the
following matters: (a) the election or removal of trustees if a meeting is
called for such purpose; (b) the adoption of any contract for which shareholder
approval is required by the Investment Company Act of 1940 ("1940 Act"); (c) any
termination of the Fund or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund, supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision thereof); and (e) such additional matters as may be required by law,
the Declaration of Trust, the By-laws of the Fund, or any registration of the
Fund with the Securities and Exchange Commission or any state, or as the
trustees may consider necessary or desirable. The shareholders also would vote
upon changes in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) each Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of a Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, each
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
Each Fund's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of a 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 trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of a Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
Each Fund's Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Fund or any Portfolio or class by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of each Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of a Fund and each Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.
B-49
<PAGE> 113
APPENDIX--RATINGS OF FIXED INCOME INVESTMENTS
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-50
<PAGE> 114
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
B-51
<PAGE> 115
PORTFOLIO OF INVESTMENTS
KEMPER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL GOODS--12.7% (a)Advanced Lighting Technologies 6,700 $ 181,000
(a)American Disposal Services 4,000 125,000
Applied Power, Inc. 2,700 170,000
BMC Industries 7,600 242,000
(a)Caribiner International, Inc. 6,000 244,000
(a)Culligan Water Technologies 2,000 92,000
Pittway Corp. 2,500 162,000
Precision Castparts Corp. 1,200 78,000
(a)Unifab International, Inc. 400 13,000
Watsco, Inc. 5,500 172,000
-------------------------------------------------------------------------
1,479,000
- ------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--21.5% (a)AccuStaff 5,500 173,000
(a)Boron, Lepore & Associates 1,400 32,000
(a)CapStar Hotels Co. 4,100 138,000
(a)EduTrek International, Inc. 400 11,000
Four Seasons Hotels, Ltd. 5,300 217,000
(a)MSC Industrial Direct 3,000 138,000
(a)Men's Wearhouse 6,000 223,000
(a)Outdoor Systems, Inc. 3,800 100,000
(a)Pacific Sunwear of California 4,400 180,000
Pier 1 Imports 10,500 188,000
Royal Caribbean Cruises, Ltd. 5,100 223,000
(a)Schlotzsky's, Inc. 17,000 322,000
(a)Star Buffet, Inc. 1,900 30,000
Stewart Enterprises, Inc. 3,800 166,000
(a)Travis Boats & Motors, Inc. 10,000 204,000
U.S. Rentals 5,600 147,000
-------------------------------------------------------------------------
2,492,000
- ------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.3% (a)Emmis Broadcasting Corp. 3,000 143,000
(a)JLK Direct Distribution, Inc. 5,600 168,000
(a)Jacor Communications 2,500 110,000
(a)Tefron, Ltd. 1,800 36,000
Westinghouse Electric Corp. 6,000 162,000
-------------------------------------------------------------------------
619,000
- ------------------------------------------------------------------------------------------------------------------
ENERGY--1.9% (a)Global Industries, Ltd. 3,000 120,000
(a)Precision Drilling Corp. 1,500 96,000
-------------------------------------------------------------------------
216,000
</TABLE>
10
<PAGE> 116
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE--6.8% (a)ABR Information Services 4,200 $ 116,000
First Union Real Estate Investments 8,000 110,000
Frontier Insurance Group 5,000 190,000
(a)Healthcare Financial Partners 3,500 108,000
(a)LaSalle Partners 2,100 73,000
Sirrom Capital Corp. 3,600 187,000
---------------------------------------------------------------------------
784,000
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE--13.2% (a)Coast Dental Services, Inc. 3,400 101,000
(a)Dura Pharmaceuticals 4,200 183,000
McKesson Corp. 2,000 204,000
(a)National Surgery Centers 6,000 131,000
(a)Ocular Sciences, Inc. 7,900 183,000
(a)Pediatrix Medical Group 2,800 124,000
(a)Safeskin Corp. 4,000 177,000
(a)Serologicals Corp. 7,500 171,000
(a)Sofamor-Danek Group 4,500 257,000
---------------------------------------------------------------------------
1,531,000
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--22.7% (a)Advantage Learning Systems, Inc. 2,200 56,000
(a)Analog Devices 5,500 184,000
(a)Atmel Corp. 4,900 179,000
(a)Bell Canada International, Inc. 1,800 34,000
(a)Best Software, Inc. 700 10,000
(a)CFM Technologies, Inc. 5,100 200,000
(a)Cisco Systems 1,500 110,000
(a)Computer Products, Inc. 9,800 292,000
HBO & Co. 5,300 200,000
(a)J.D. Edwards & Co. 500 17,000
(a)MRV Communications 5,000 182,000
Natural MicroSystems Corp. 1,700 65,000
(a)Network Appliance, Inc. 2,600 141,000
(a)Network Solutions, Inc. 400 9,000
(a)Nextlink Communications 200 5,000
(a)Pervasive Software, Inc. 14,300 164,000
(a)Tecnomatix Technologies 6,000 229,000
(a)Tellabs, Inc. 3,200 165,000
(a)Visio Corp. 4,900 205,000
(a)World Access, Inc. 5,700 185,000
---------------------------------------------------------------------------
2,632,000
</TABLE>
11
<PAGE> 117
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--4.2% Expeditors International of Washington 4,300 $ 180,000
Heartland Express 4,100 113,000
(a)Knight Transportation 7,000 196,000
---------------------------------------------------------------------------
489,000
- --------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--2.7% OM Group 4,500 180,000
(a)Tower Automotive, Inc. 3,200 144,000
---------------------------------------------------------------------------
324,000
---------------------------------------------------------------------------
TOTAL COMMON STOCKS--91.0%
(Cost: $9,016,000) 10,566,000
---------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.41% to 5.92%
INSTRUMENTS--5.2%
Due--October 1997
Federal Home Loan Bank $400,000 400,000
Federal National Mortgage Association 200,000 200,000
---------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--5.2%
(Cost: $600,000) 600,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS--96.2%
(Cost: $9,616,000) 11,166,000
---------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--3.8% 443,000
---------------------------------------------------------------------------
NET ASSETS--100% $11,609,000
---------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security
Based on the cost of investments of $9,616,000 for federal income tax purposes
at September 30, 1997, the gross unrealized appreciation was $1,605,000, the
gross unrealized depreciation was $55,000 and the net unrealized appreciation on
investments was $1,550,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 118
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER AGGRESSIVE GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Aggressive Growth Fund as of
September 30, 1997, and the related statements of operations and changes in net
assets and the financial highlights for the period from December 31, 1996
(commencement of operations) to September 30, 1997. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Aggressive Growth Fund at September 30, 1997, the results of its operations, the
changes in its net assets and the financial highlights for the period from
December 31, 1996 to September 30, 1997, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1997
13
<PAGE> 119
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------
Investments, at value
(Cost: $9,616,000) $11,166,000
- ---------------------------------------------------------------------------
Cash 14,000
- ---------------------------------------------------------------------------
Receivable for:
Investments sold 414,000
- ---------------------------------------------------------------------------
Fund shares sold 255,000
- ---------------------------------------------------------------------------
Dividends 2,000
- ---------------------------------------------------------------------------
TOTAL ASSETS 11,851,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ---------------------------------------------------------------------------
Payable for:
Investments purchased 215,000
- ---------------------------------------------------------------------------
Management fee 16,000
- ---------------------------------------------------------------------------
Distribution services fee 3,000
- ---------------------------------------------------------------------------
Administrative services fee 2,000
- ---------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 5,000
- ---------------------------------------------------------------------------
Other 1,000
- ---------------------------------------------------------------------------
Total liabilities 242,000
- ---------------------------------------------------------------------------
NET ASSETS $11,609,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ---------------------------------------------------------------------------
Paid-in capital $ 9,330,000
- ---------------------------------------------------------------------------
Undistributed net realized gain on investments 729,000
- ---------------------------------------------------------------------------
Net unrealized appreciation on investments 1,550,000
- ---------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $11,609,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
THE PRICING OF SHARES
- ---------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($6,289,000 / 499,000 shares outstanding) $12.60
- ---------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $13.37
- ---------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($4,132,000 / 330,000 shares outstanding) $12.52
- ---------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,188,000 / 95,000 shares outstanding) $12.53
- ---------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 120
FINANCIAL STATEMENTS
For the period from December 31, 1996 (commencement of operations) to
September 30, 1997
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------
Interest $ 48,000
- ---------------------------------------------------------------------------
Dividends 14,000
- ---------------------------------------------------------------------------
Total investment income 62,000
- ---------------------------------------------------------------------------
Expenses:
Management fee 37,000
- ---------------------------------------------------------------------------
Distribution services fee 19,000
- ---------------------------------------------------------------------------
Administrative services fee 13,000
- ---------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 23,000
- ---------------------------------------------------------------------------
Professional fees 10,000
- ---------------------------------------------------------------------------
Other 1,000
- ---------------------------------------------------------------------------
Total expenses 103,000
- ---------------------------------------------------------------------------
NET INVESTMENT LOSS (41,000)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ---------------------------------------------------------------------------
Net realized gain on sales of investments 729,000
- ---------------------------------------------------------------------------
Change in net unrealized appreciation on investments 1,550,000
- ---------------------------------------------------------------------------
Net gain on investments 2,279,000
- ---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,238,000
- ---------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
- ---------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------
<S> <C>
Net investment loss $ (41,000)
- ---------------------------------------------------------------------------
Net realized gain 729,000
- ---------------------------------------------------------------------------
Change in net unrealized appreciation 1,550,000
- ---------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,238,000
- ---------------------------------------------------------------------------
Net increase from capital share transactions 9,271,000
- ---------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 11,509,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------
Beginning of period 100,000
- ---------------------------------------------------------------------------
END OF PERIOD $11,609,000
- ---------------------------------------------------------------------------
</TABLE>
15
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Aggressive Growth Fund is an open-end
management investment company organized as a
business trust under the laws of Massachusetts. The
Fund currently offers four classes of shares. Class
A shares 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 and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares (none sold
through September 30, 1997) are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
Differences in class expenses will result in the
payment of different per share income dividends by
class. All shares of the Fund have equal rights
with respect to voting, dividends and assets,
subject to class specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. Fixed income securities
are valued by using market quotations, or
independent pricing services that use prices
provided by market makers or estimates of market
values obtained from yield data relating to
instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on money market instruments. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class
16
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS
by dividing the Fund's net assets attributable to
that class by the number of shares of the class
outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) and pays a management fee at a base annual
rate of .65% of average daily net assets which is
then adjusted upward or downward by a maximum of
.20% based upon the Fund's performance as compared
to the performance of the Standard & Poor's 500
Stock Index (thus the fee on an annual basis can
range from .45% to .85% of average daily net
assets).
During the period ended September 30, 1997, the
Fund incurred management fees as follows:
<TABLE>
<S> <C>
Base fee $36,000
Performance adjustment 1,000
-------
Total fees $37,000
=======
</TABLE>
Zurich Investment Management Limited, an affiliate
of ZKI, serves as sub-adviser with respect to
foreign securities investments in the Fund and is
paid by ZKI for its services.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Zurich Kemper Distributors,
Inc. (ZKDI). Underwriting commissions paid in
connection with the distribution of Class A shares
are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY ZKDI
RETAINED BY ----------------------------
ZKDI TO ALL FIRMS TO AFFILIATES
----------- ------------ -------------
<S> <C> <C> <C>
Period ended September 30, 1997 $7,000 111,000 5,000
</TABLE>
For services under the distribution services
agreement, the Fund pays ZKDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, ZKDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, ZKDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions
17
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS
paid in connection with the sale of Class B and
Class C shares and the CDSC received in connection
with the redemption of such shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES
AND CDSC COMMISSIONS AND
RECEIVED BY DISTRIBUTION FEES PAID
ZKDI BY ZKDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Period ended September 30, 1997 $35,000 138,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays ZKDI a fee at an annual rate of up to
.25% of average daily net assets of each class.
ZKDI in turn has various agreements with financial
services firms that provide these services and pays
these firms based on assets of Fund accounts the
firms service. Administrative services fees (ASF)
paid are as follows:
<TABLE>
<CAPTION>
ASF PAID BY
THE FUND TO ASF PAID BY
ZKDI ZKDI TO FIRMS
---------------- --------------
<S> <C> <C>
Period ended September 30, 1997 $13,000 24,000
</TABLE>
SHAREHOLDER SERVICES AGENT AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) is the
shareholder service agent of the Fund. Under the
agreement, ZKSvC received shareholder services fees
of $13,000 for the period ended September 30, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the period ended September 30, 1997, the
Fund made no payments to its officers or trustees.
- --------------------------------------------------------------------------------
4 TRANSACTIONS
INVESTMENT For the period ended September 30, 1997, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $25,305,000
Proceeds from sales 17,018,000
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
SEPTEMBER 30, 1997
------------------------------
SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C>
SHARES SOLD
Class A 766,000 $ 7,757,000
----------------------------------------------------------------------------
Class B 379,000 3,908,000
----------------------------------------------------------------------------
Class C 144,000 1,404,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES REDEEMED
Class A (276,000) (2,723,000)
----------------------------------------------------------------------------
Class B (47,000) (508,000)
----------------------------------------------------------------------------
Class C (53,000) (567,000)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 5 60
----------------------------------------------------------------------------
Class B (5) (60)
----------------------------------------------------------------------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS $ 9,271,000
----------------------------------------------------------------------------
</TABLE>
18
<PAGE> 124
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM DECEMBER 31, 1996 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1997
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------- ------------------- -------------------
PER SHARE OPERATING PERFORMANCE CLASS A CLASS B CLASS C
- -------------------------------------------------------------------- ------------------- -------------------
Net asset value, beginning of period $ 9.50 9.50 9.50
- -------------------------------------------------------------------- ------------------- -------------------
Income from investment operations:
Net investment loss (.02) (.08) (.07)
- -------------------------------------------------------------------- ------------------- -------------------
Net realized and unrealized gain 3.12 3.10 3.10
- -------------------------------------------------------------------- ------------------- -------------------
Total from investment operations 3.10 3.02 3.03
- -------------------------------------------------------------------- ------------------- -------------------
Net asset value, end of period $12.60 12.52 12.53
- -------------------------------------------------------------------- ------------------ ------------------
TOTAL RETURN (NOT ANNUALIZED) 32.63% 31.79 31.89
- -------------------------------------------------------------------- ------------------- -------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------- ------------------- -------------------
Expenses 1.49% 2.41 2.19
- -------------------------------------------------------------------- ------------------- -------------------
Net investment loss (.35)% (1.27) (1.05)
- -------------------------------------------------------------------- ------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $11,609,000
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 364%
- ------------------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on
stock transactions $.0588
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
19
<PAGE> 125
KEMPER AGGRESSIVE GROWTH FUND
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(i) Financial statements included in Part A of the Registration
Statement: None.
(ii) Financial statements included in Part B of the Registration
Statement:
Statements of Assets and Liabilities (September 30, 1997).
Statement of Operations for the period from December 31, 1996
(commencement of operations) to September 30, 1997.
Statement of Changes in Net Assets for the period from December 31,
1996 (commencement of operations) to September 30, 1997.
Notes to Financial Statements
Schedule I has been omitted as the required information is
presented in the Portfolio of Investments at September 30, 1997.
Schedules II, III, IV and V are omitted as the required information is
not present.
(b) Exhibits
<TABLE>
<S> <C>
99.B.1(a) Agreement and Declaration of Trust.*
99.B.1(b) Written Instrument Amending the Agreement and Declaration of
Trust.*
99.B.2. By-Laws.**
99.B.3. Inapplicable.
99.B.4.(a) Text of Share Certificate.**
99.B.4.(b) Written Instrument Establishing and Designating Separate
Classes of Shares.**
99.B.5. Investment Management Agreement.
99.B.6.(a) Underwriting and Distribution Services Agreement.
99.B.6.(b) Form of Selling Group Agreement.
99.B.7. Inapplicable.
99.B.8.(a) Custody Agreement.**
99.B.8.(b) Foreign Custody Agreement.**
99.B.9.(a) Agency Agreement.**
99.B.9.(b) Administrative Services Agreement.
99.B.9.(c) Supplement to Agency Agreement.
99.B.9.(d) Fund Accounting Agreement.
99.B.10. Inapplicable.
99.B.11. Report and Consent of Independent Auditors.
99.B.12. Inapplicable.
99.B.13. Inapplicable.
99.B.14.(a) Kemper Retirement Plan Prototype.**
99.B.14.(b) Model Individual Retirement Account.**
99.B.15. See 6(a) above (Class B and Class C shares).**
99.B.16. Inapplicable.
99.B.18. Multi-Distribution System Plan.**
99.B.24. Powers of Attorney.
</TABLE>
C-1
<PAGE> 126
<TABLE>
<S> <C>
27. Financial Data Schedule.
99.485(b) Representation of Counsel (Rule 485(b)).
</TABLE>
* Incorporated by reference to Registrant's Registration Statement on Form N-1A
which was filed on October 8, 1996.
** Incorporated by reference to Registrant's Registration Statement on Form N-1A
which was filed on December 4, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 7, 1998, there were 1,192 Class A, 1,103 Class B, 176 Class C
and 0 Class I shareholders of record.
ITEM 27. INDEMNIFICATION
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions 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 each
Fund 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.
C-2
<PAGE> 127
Item 28 Business or Other Connections of Investment Adviser
Scudder Kemper Investments, Inc. has stockholders and employees who are
denominated officers but do not as such have corporation-wide responsibilities.
Such persons are not considered officers for the purpose of this Item 28.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ---------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.
Director and President, Scudder Capital Asset Corporation
Director and President, Scudder Capital Stock Corporation
Director and President, Scudder Capital Planning Corporation
Director and President, SS&C Investment Corporation
Director and President, SIS Investment Corporation
Director and President, SRV Investment Corporation
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investment, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zunica Insurance Company of Switzerland
Director, ZKI Holding Corporation
Steven Gluckstern Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zurich Insurance Company of Switzerland
Director, Zurich Holding Company of America
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
Director, ZKI Holding Corporation
Kathryn L. Quirk Director, 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
</TABLE>
<PAGE> 128
<TABLE>
<S> <C>
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.
Markus Rohrbasser Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zurich Insurance Company of Switzerland
President, Director, Chairman of the Board, ZKI Holding Corporation
Cornelia M. Small Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President, Chief Executive Officer, Scudder Kemper Investments,
Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President & Director, Scudder, Stevens & Clark Overseas Corporationo oo
President & 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
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Socjete 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
</TABLE>
<PAGE> 129
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Funds,
Investors Fund Series and Kemper International Bond Fund.
(b) Information on the officers and directors of Kemper
Distributors, Inc., principal underwriter for the Registrant is set forth
below. The principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- ---------------- ----------
<S> <C> <C>
James L. Greenawalt Director, President None
Patrick H. Dudasik Financial Principal, Treasurer
and Chief Financial Officer None
Michael E. Harrington Executive Vice President None
Philip D. Hausken Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Marc L. Hecht Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
</TABLE>
(c) Not applicable.
<PAGE> 130
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, the offices of Registrant's investment adviser, Scudder
Kemper Investments, Inc. and Kemper Distributors, Inc., the Registrant's
principal underwriter, 222 South Riverside Plaza, Chicago, Illinois 60606 or at
the offices of the custodian and transfer agent, Investors Fiduciary Trust
Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105 or at the offices
of the shareholder service agent, Kemper Service Company, 811 Main Street,
Kansas City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-6
<PAGE> 131
S I G N A T U R E S
-------------------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Chicago and State of Illinois, on the 26th day of January,
1998.
KEMPER AGGRESSIVE GROWTH FUND
By /s/ Mark S. Casady
---------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below on January 26,
1998 on behalf of the following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Mark S. Casady President
-------------------------------------
Mark S. Casady
/s/ Daniel Pierce* Chairman and
------------------------------------- Trustee
/s/ David W. Belin* Trustee
-------------------------------------
/s/ Lewis A. Burnham* Trustee
-------------------------------------
/s/ Donald L. Dunaway* Trustee
-------------------------------------
/s/ Robert B. Hoffman* Trustee
-------------------------------------
/s/ Donald R. Jones* Trustee
-------------------------------------
/s/ Shirley D. Peterson* Trustee
-------------------------------------
/s/ William P. Sommers* Trustee
-------------------------------------
/s/ Edmond D. Villani* Trustee
-------------------------------------
/s/ Philip J. Collora Treasurer
-------------------------------------
*Philip J. Collora signs this document pursuant to powers of
attorney filed herewith.
/s/ Philip J. Collora
---------------------------
Philip J. Collora
<PAGE> 132
KEMPER AGGRESSIVE GROWTH FUND
INDEX TO EXHIBITS
(b) Exhibits
<TABLE>
<S> <C>
99.B.1(a) Agreement and Declaration of Trust.*
99.B.1(b) Written Instrument Amending the Agreement and Declaration of
Trust.*
99.B.2. By-Laws.**
99.B.3. Inapplicable.
99.B.4.(a) Text of Share Certificate.**
99.B.4.(b) Written Instrument Establishing and Designating Separate
Classes of Shares.**
99.B.5. Investment Management Agreement.
99.B.6.(a) Underwriting and Distribution Services Agreement.
99.B.6.(b) Form of Selling Group Agreement.
99.B.7. Inapplicable.
99.B.8.(a) Custody Agreement.**
99.B.8.(b) Foreign Custody Agreement.**
99.B.9.(a) Agency Agreement.**
99.B.9.(b) Administrative Services Agreement.
99.B.9.(c) Supplement to Agency Agreement.
99.B.9.(d) Fund Accounting Agreement.
99.B.10. Inapplicable.
99.B.11. Report and Consent of Independent Auditors.
99.B.12. Inapplicable.
99.B.13. Inapplicable.
99.B.14.(a) Kemper Retirement Plan Prototype.**
99.B.14.(b) Model Individual Retirement Account.**
99.B.15. See 6(a) above (Class B and Class C shares).
99.B.16. Inapplicable.
99.B.18. Multi-Distribution System Plan.**
99.B.24. Powers of Attorney.
27. Financial Data Schedule.
99.485(b) Representation of Counsel (Rule 485(b)).
</TABLE>
- ---------------
* Incorporated by reference to Registrant's Registration Statement on Form N-1A
which was filed on October 8, 1996.
** Incorporated by reference to Registrant's Registration Statement on Form N-1A
which was filed on December 4, 1996.
<PAGE> 1
EXHIBIT-99.B5
INVESTMENT MANAGEMENT AGREEMENT
Kemper Aggressive Growth Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Aggressive Growth Fund
Ladies and Gentlemen:
KEMPER AGGRESSIVE GROWTH FUND (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment
company. Pursuant to the Trust's Declaration of Trust, as amended from
time-to-time (the "Declaration"), the Board of Trustees is authorized to issue
the Trust's shares of beneficial interest (the "Shares"), in separate series,
or funds. The Board of Trustees has authorized Kemper Aggressive Growth Fund
(the "Fund"). Series may be abolished and dissolved, and additional series
established, from time to time by action of the Trustees.
The Trust, on behalf of 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 Trust on behalf of the Fund agrees
with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund 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") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement")
filed by the Trust 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 Trust.
The Trust has also furnished you with copies properly certified or
authenticated of each of the following additional documents related to the
Trust and the Fund:
<PAGE> 2
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof
(the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the
shareholders of the Fund selecting you as investment manager and approving the
form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust 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, 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 Trust's Board of
Trustees. 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 Trust. You
shall also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust 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 Trust 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,
2
<PAGE> 3
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 Trust's Board of Trustees 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 Trust's officers or Board of Trustees 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 Trust administrative services on behalf
of the Fund 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 Trust's Board of
Trustees 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
3
<PAGE> 4
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
Trust as it may reasonably request in the conduct of the Fund's business,
subject to the direction and control of the Trust's Board of Trustees. 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
Trustees, officers and executive employees of the Trust (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 Trust, 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 Trustees 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 Trust; 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
Trust 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
4
<PAGE> 5
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 Trust business) of
Trustees, officers and employees of the Trust 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 Trustees and officers
of the Trust; 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 Trust on behalf of 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
Trust on behalf of the Fund shall pay you in United States Dollars a base
annual investment management fee, payable monthly, at the rate of .65 of 1% of
the average daily net assets of the Fund. This base fee is subject to upward
or downward adjustment on the basis of the investment performance of the Class
A shares of the Fund as compared with the performance of the Standard & Poor's
500 Stock Index (the "Index"). The Trust will pay an additional monthly fee at
an annual rate of .02% of such average daily net assets for each percentage
point (fractions to be prorated) by which the performance of the Class A shares
of the Fund exceeds that of the Index for the immediately preceding twelve
months; provided that such additional monthly fee shall not exceed 1/12 of .20%
of the average daily net assets. Conversely, the compensation payable by
5
<PAGE> 6
the Trust will be reduced by an annual rate of .02% of such average daily net
assets for each percentage point (fractions to be prorated) by which the
performance of the Class A shares of the Fund falls below that of the Index,
provided that such reduction in the monthly fee shall not exceed 1/12 of .20%
of the average net assets. The total fee on an annual basis can range from .45%
to .85% of average daily net assets. The Trust's investment performance during
any twelve month period is measured by the percentage difference between (a)
the opening net asset value of one Class A share of the Fund and (b) the sum of
the closing net asset value of one Class A share of the Fund plus the value of
any income and capital gain dividends on such share during the period treated
as if reinvested in Class A shares of the Fund at the time of distribution.
The performance of the Index is measured by the percentage change in the Index
between the beginning and the end of the twelve month period with cash
distributions on the securities which comprise the Index being treated as
reinvested in the Index at the end of each month following the payment of the
dividend. Each monthly calculation of the incentive portion of the fee may be
illustrated as follows: if over the preceding twelve month period the Trust's
adjusted net asset value applicable to one Class A share went from $10.00 to
$11.50 (15% appreciation), and the Index, after adjustment, went from 100 to
104 (or only 4%), the entire incentive compensation would have been earned by
you. On the other hand, if the Index rose from 100 to 115 (15%), no incentive
fee would have been payable. A rise in the Index from 100 to 125 (25%) would
have resulted in the minimum monthly fee of 1/12 of .45%. Since the computation
is not cumulative from year to year, an additional management fee may be
payable with respect to a particular year, although the Trust's performance
over some longer period of time may be less favorable than that of the Index.
Conversely, a lower management fee may be payable in a year in which the
performance of the Fund's Class A shares is less favorable than that of the
Index, although the performance of the Fund's Class A shares over a longer
period of time might be better than that of the Index. These management fees
will be reduced by any compensation waived by you from time to time (as more
fully described below).
For the first year after commencement of operations, the Trust will pay to you
an annual management fee computed by applying the annual base fee described
above to the average daily net assets of the Fund for the year subject to
upward or downward adjustment (at the annual rate described above) on the basis
of the investment performance of the Fund's Class A Shares in relation to the
investment record of the Index for such year. During the first such year, the
Fund will pay you on a monthly basis 1/12 of the minimum annual fee that would
be payable with any balance due for such year to be payable at the end of such
year.
6
<PAGE> 7
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 Declaration 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 Trust. 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
7
<PAGE> 8
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 Trust 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, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Trust, 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 March 1, 1998, 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 Trustees 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 Trustees of the Trust, 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 Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. 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 Trustees 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
8
<PAGE> 9
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Aggressive
Growth Fund" refers to the Trustees under the Declaration collectively as
Trustees and not as individuals or personally, and that no shareholder of the
Fund, or Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of the Fund to any extent
whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of the Fund pursuant to this Agreement shall be limited in all
cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.
11. 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
Commonwealth of Massachusetts, 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 Trust on behalf of the Fund.
9
<PAGE> 10
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 Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER AGGRESSIVE GROWTH FUND,
on behalf of Kemper Aggressive
Growth Fund
By: Jack E. Neal
------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: Lynn S. Birdsong
------------------------------
Vice President
10
<PAGE> 1
EXHIBIT 99.B6(a)
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 20th day of January, 1998, between KEMPER AGGRESSIVE GROWTH
FUND, a Massachusetts business trust (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 the 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.
<PAGE> 2
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 Agreement and
Declaration of Trust of the Fund.
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 the 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, and 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 Section 8 hereof.
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.
- 2 -
<PAGE> 3
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.
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 trustee or officer of the Fund or to any
officer or director 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 Agreement and
- 3 -
<PAGE> 4
Declaration of Trust of the Fund (and of any fundamental policies adopted by
the Fund pursuant to the Investment Company Act of 1940, 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. 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 of 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. For the services and facilities described herein in connection with Class
B shares and Class C shares of each series of the Fund, the Fund will pay to
KDI at the end of each calendar month a distribution services fee computed at
the annual rate of .75% of average daily net assets attributable to the Class B
shares and Class C shares of each such series. 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 the month and year, respectively. The foregoing fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by KDI under Section 2 hereof.
- 4 -
<PAGE> 5
The net asset value 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 any class of any series 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 previous day on which such calculation was made. The
distribution services fee for any class of a series of the Fund shall be based
upon average daily net assets of the series attributable to the class and such
fee shall be charged only to such class.
9. KDI shall prepare reports for the Board of Trustees of the Fund on a
quarterly basis in connection with the Fund's distribution plan for Class B
shares and Class C shares showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board of Trustees.
10. To the extent applicable, this Agreement constitutes the plan for the
Class B shares and Class C shares of each series of the Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940; and this Agreement and plan
shall be approved and renewed in accordance with Rule 12b-1 for such Class B
shares and Class C shares separately.
This Agreement shall become effective on the date hereof and shall continue
until March 1, 1998; 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 of 1940.
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 of Trustees, (ii) a majority of the
trustees who are not interested persons of the Fund and who have no direct or
indirect financial interest in this Agreement or in any agreement related to
this Agreement, or (iii) a majority of the outstanding voting securities of the
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.
This Agreement may not be amended to increase the amount to be paid to KDI by
the Fund for services hereunder with respect to a class of any series of the
Fund 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 a vote of the Board of Trustees of the Fund including the trustees
who are not interested persons of the Fund and who have no direct
- 5 -
<PAGE> 6
or indirect financial interest in this Agreement or in any agreement related to
this Agreement, cast in person at a meeting called for such purpose.
The terms "assignment", "interested" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the Investment Company
Act of 1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of KDI to receive
payments on any unpaid balance of the compensation described in Section 8
earned prior to such termination.
11. 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.
12. 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.
13. 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.
14. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust, and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund hereunder
are not binding upon any of the Trustees, officers or shareholders of the Fund
individually but are binding upon only the assets and property of the Fund.
With respect to any claim by KDI for recovery of any liability of the Fund
arising hereunder allocated to a particular series or class, whether in
accordance with the express terms hereof or otherwise, KDI shall have recourse
solely against the assets of that series or class to satisfy such claim and
shall have no recourse against the assets of any other series or class for such
purpose.
15. This Agreement shall be construed in accordance with applicable federal
law and the laws of the Commonwealth of Massachusetts.
- 6 -
<PAGE> 7
16. 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 AGGRESSIVE GROWTH FUND
By: /s/ John E. Neal
-------------------------
Title: Vice President
----------------------
ATTEST:
/s/ Philip J. Collora
- ---------------------
Title: Secretary
---------------
KEMPER DISTRIBUTORS, INC.
By: /s/ James L. Greenawalt
-------------------------
Title: President
----------------------
ATTEST:
/s/ Charles R. Manzoni
- ----------------------
Title: Secretary
----------------
- 7 -
<PAGE> 1
EXHIBIT 99.B6(b)
SELLING GROUP AGREEMENT KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza, Chicago, Illinois 60606
Dear Financial Services Firm:
As principal underwriter and distributor, we invite you to join a Selling
Group for the distribution of shares of the Kemper Funds (herein called
"Funds"), but only in those states in which the shares of the respective Funds
may legally be offered for sale. As exclusive agent of each of the Funds, we
offer to sell to you shares of the Funds on the following terms:
1. In all sales of these shares to the public you shall act as dealer for
your own account, and in no transaction shall you have any authority to act as
agent for the issuer, for us, or for any other member of the Selling Group.
2. Orders received from you will be accepted by us only at the public
offering price applicable to each order, as established by the Prospectus of
each Fund, subject to the discount, commission or other concession, if any, as
provided in such Prospectus. Upon receipt from you of any order to purchase
shares of a Fund, we shall confirm to you in writing or by wire to be followed
by a confirmation in writing. Additional instructions may be forwarded to you
from time to time. All orders are subject to acceptance or rejection by us in
our sole discretion.
3. You may offer and sell shares to your customers only at the public
offering price determined in the manner described in the applicable Prospectus.
The public offering price is the net asset value per share as provided in the
applicable Prospectus plus, with respect to certain Funds, a sales charge from
which you shall receive a discount equal to a percentage of the applicable
offering price as provided in the applicable Prospectus. You shall receive a
sales commission, with respect to certain Funds, equal to a percentage of the
amount invested as provided in the applicable Prospectus. You shall receive a
distribution service fee, for certain Funds for which such fees are available,
as provided in the applicable Prospectus which fee shall be payable with
respect to such assets, for such periods and at such intervals as are from time
to time specified by us. The discounts or other concessions to which you may be
entitled in connection with sales to your customers pursuant to any special
features of a Fund (such as cumulative discounts, letters of intent, etc., the
terms of which shall be as described in the applicable Prospectus and related
forms) shall be in accordance with the terms of such features. You may receive
an administrative service fee, with respect to certain Funds for which such
fees are available, as provided in the applicable Prospectus, which fee shall
be payable with respect to such assets, for such periods and at such intervals
as are from time
<PAGE> 2
to time specified by us. Our liability to you with respect to the payment of
any service fee is limited to the proceeds received by us from the Funds for
your services, and you waive any right you may have to payment of any service
fee until we are in receipt of the proceeds from the Funds that are
attributable to your services.
4. By accepting this agreement, you agree:
(a) To purchase shares only from us or from your customers.
(b) That you will purchase shares from us only to cover purchase
orders already received from your customers, or for your own bona fide
investments.
(c) That you will not purchase shares from your customers at a price
lower than the bid price then quoted by or for the Fund involved. You may,
however, sell shares for the account of your customer to the Fund, or to us as
agent for the Fund, at the bid price currently quoted by or for the Fund and
charge your customer a fair commission for handling the transaction.
(d) That you will not withhold placing with us orders received from
your customers so as to profit yourself as a result of such withholding.
5. We will not accept from you any conditional orders for shares.
6. If any shares confirmed to you under the terms of this agreement are
repurchased by the issuing Fund or by us as agent for the Fund, or are tendered
for repurchase, within seven business days after the date of our confirmation
of the original purchase order, you shall forthwith refund to us the full
discount, commission, finder's fee or other concession, if any, allowed or paid
to you on such shares.
7. Payment for shares ordered from us shall be in New York clearing house
funds and must be received by the appropriate Fund's shareholder service agent
within seven days after our acceptance of your order (or such shorter time
period as may be required by applicable regulations). If such payment is not
received, we reserve the right, without notice, forthwith to cancel the sale
or, at our option, to sell the shares ordered back to the Fund, in which case
we may hold you responsible for any loss, including loss of profit suffered by
us as a result of your failure to make such payment.
8. Shares sold to you hereunder shall be available in negotiable form for
delivery at the appropriate Fund's shareholder services agent, against payment,
unless other instructions have been given.
9. All sales will be made subject to our receipt of shares from the Fund.
We reserve the right, in our discretion, without notice, to suspend sales or
withdraw the offering of shares entirely. We reserve the right to modify,
cancel or change the terms of this agreement, upon 15 days prior written notice
to you. Also, the sales charges, discounts, commissions or other concessions,
service fees of any kind provided for hereunder are subject to change at any
time by the Funds and us.
<PAGE> 3
10. All communications to us should be sent to the address in the heading
above. Any notice to you shall be duly given if mailed or telegraphed to you
at the address specified by you below.
11. This agreement shall be construed in accordance with the laws of
Illinois. This agreement is subject to the Prospectuses of the Funds from time
to time in effect, and, in the event of a conflict, the terms of the
Prospectuses shall control. References herein to the "Prospectus" of a Fund
shall mean the prospectus and statement of additional information of such Fund
as from time to time in effect. Any changes, modifications or additions
reflected in any such Prospectus shall be effective on the date of such
Prospectus (or supplement thereto) unless specified otherwise.
12. This agreement is subject to the Additional Stipulations and
Conditions on the reverse side hereof, all of which are a part of this
agreement.
Kemper Distributors, Inc.
By
----------------------------
Authorized Signature
Title
-------------------------
We have read the foregoing agreement and accept and agree to the terms and
conditions thereof.
Firm
-------------------------
Witness
------------------------ By
-------------------------
Authorized Representative
Dated Title
------------------------- -------------------------
<PAGE> 4
ADDITIONAL STIPULATIONS AND CONDITIONS
13. No person is authorized to make any representations concerning shares
of any Fund except those contained in the Prospectus of such Fund and in
printed information subsequently issued by the Fund or by us as information
supplemental to such Prospectus. If you wish to use your own advertising with
respect to a Fund, all such advertising must be approved by us or by the Fund
prior to use. You shall be responsible for any required filing of such
advertising.
14. Your acceptance of this agreement constitutes a representation (i)
that you are a registered security dealer and a member in good standing of the
National Association of Securities Dealers, Inc. and that you agree to comply
with all state and federal laws, rules and regulations applicable to
transactions hereunder and to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., or (ii) if you are offering and
selling shares of the Funds only in jurisdictions outside of the several
states, territories and possessions of the United States and are not otherwise
required to be a member of the National Association of Securities Dealers,
Inc., that you nevertheless agree to conduct your business in accordance with
the spirit of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and to observe the laws and regulations of the
applicable jurisdiction. You likewise agree that you will not offer to sell
shares of any Fund in any state or other jurisdiction in which they may not
lawfully be offered for sale.
15. You shall make available an investment management account for your
customers through the Funds and shall provide such office space and equipment,
telephone facilities, personnel and literature distribution as is necessary or
appropriate for providing information and services to your customer. Such
services and assistance may include, but not be limited to, establishment and
maintenance of shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds, and
such other services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule, or regulation. You agree to release,
indemnify and hold harmless the Funds, us and our respective representatives
and agents from any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you, your officers,
employees or agents regarding the purchase, redemption or transfer of
registration of shares of the Funds for accounts of you, your customers and
other shareholders or from any unauthorized or improper use of any on-line
computer facilities. You shall prepare such periodic reports for us as shall
reasonably be requested by us. You shall immediately inform the Funds or us of
all written complaints received by you from Fund shareholders relating to the
maintenance of their accounts and shall promptly answer all such complaints and
other similar correspondence. You shall provide the Funds and us on a timely
<PAGE> 5
basis with such information as may be required to complete various regulatory
forms.
16. As a result of the necessity to compute the amount of any contingent
deferred sales charge due with respect to the redemption of shares, you may not
hold shares of a Fund imposing such a charge in an account registered in your
name or in the name of your nominee for the benefit of certain of your
customers except with our prior written consent. Except as otherwise permitted
by us, shares of such a Fund owned by a shareholder must be in a separate
identifiable account for such shareholder.
17. Shares of certain Funds have been divided into separate classes:
Class A Shares, Class B Shares and Class C Shares. Class A Shares are offered
at net asset value plus an initial sales charge. Class B Shares are offered at
net asset value without an initial sales charge but are subject to a contingent
deferred sales charge and a Rule 12b-1 fee and have a conversion feature.
Class C Shares are offered at net asset value without an initial sales charge
but are subject to a contingent deferred sales charge and a Rule 12b-1 fee, and
have no conversion feature. Please see the appropriate Prospectuses for a more
complete description of the distinctions between the classes of shares.
It is important to investors not only to choose Funds appropriate for their
investment objectives, but also to choose the appropriate distribution
arrangement, based on the amount invested and the expected duration of the
investment. To assist investors in these decisions, we have instituted the
following policies with respect to orders for shares of the Funds. The
following policies and procedures with respect to sales of classes of shares of
the Funds apply to each broker/dealer that distributes shares of the Funds.
1. All purchase orders for $500,000 or more (not including street name or
omnibus accounts) should be for Class A Shares.
2. Any purchase order of less than $500,000 may be for either Class A,
Class B or Class C Shares in light of the relevant facts and circumstances,
including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold the shares;
and
c. any other relevant circumstances such as the availability of
purchases under a Letter of Intent, Combined Purchases or Cumulative Discount
Privilege.
There are instances when one pricing structure may be more appropriate than
another. For example, investors who would qualify for a reduced sales charge
on Class A Shares may determine that payment of a reduced front-end sales
charge is preferable to payment of an ongoing Rule 12b-1 fee. On the other
hand, investors whose orders would not qualify for such a discount and who plan
to hold their investment for more than six years may wish to defer the sales
charge and would consider Class B Shares. Investors who prefer not to pay an
initial sales charge and who plan to redeem their shares within six years might
consider Class C Shares.
<PAGE> 6
Appropriate supervisory personnel within your organization must ensure
that all employees receiving investor inquiries about the purchase of shares of
the Funds advise the investor of the available pricing structures offered by
the Funds and the impact of choosing one method over another, including
breakpoints and the availability of Letters of Intent, Combined Purchases and
Cumulative Discounts. In some instances it may be appropriate for a
supervisory person to discuss a purchase with the investor.
18. This agreement shall be in substitution of any prior selling group
agreement between you and us regarding these shares. This agreement shall not
be applicable to the provision of services for Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Tax-Exempt New York Money Market Fund, Investors
Cash Trust and similar wholesale money market funds. The payment of related
distribution and services fees, shall be subject to separate services
agreements.
<PAGE> 1
EXHIBIT 99.B9(b)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this 1st day of April, 1997, by and between KEMPER AGGRESSIVE
GROWTH FUND, a Massachusetts business trust (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
<PAGE> 2
up to 0.25 of 1% of the average daily net assets of the Fund (except assets
attributable to Class I Shares). The current 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.
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. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee
2
<PAGE> 3
liability contained therein. This Agreement has been executed by and on behalf
of the Fund by its representatives as such representatives and not
individually, and the obligations of the Fund hereunder are not binding upon
any of the trustees, officers or shareholders of the Fund individually but are
binding upon only the assets and property of the Fund.
8. This Agreement shall be construed in accordance with applicable federal
law and (except as to Section 7 hereof which shall be construed in accordance
with the laws of The Commonwealth of Massachusetts) the laws of the State of
Illinois.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
KEMPER AGGRESSIVE GROWTH FUND KEMPER DISTRIBUTORS, INC.
By: /s/ John E. Neal By: /s/ James L. Greenawalt
---------------------------- ---------------------------
Title: Vice President Title: President
------------------------- ------------------------
3
<PAGE> 4
APPENDIX I
KEMPER AGGRESSIVE GROWTH FUND
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.
Dated: April 1, 1997
KEMPER AGGRESSIVE GROWTH FUND KEMPER DISTRIBUTORS, INC.
By: /s/ John E. Neal By: /s/ James L. Greenawalt
--------------------------- --------------------------
Title: Vice President Title: President
------------------------ -----------------------
<PAGE> 1
EXHIBIT 99.B9(c)
SUPPLEMENT TO AGENCY AGREEMENT
Supplement to Agency Agreement ("Supplement") made as of June 1, 1997 and
between the registered investment company executing this document (the "Fund")
and Investors Fiduciary Trust Company ("Agent").
WHEREAS, the Fund and Agent are parties to an Agency Agreement ("Agency
Agreement"), as supplemented from time to time;
WHEREAS, Section 5.A. of the Agency Agreement provides that the fees
payable by the Fund to Agent thereunder shall be as set forth in a separate
schedule to be agreed to by the Fund and Agent; and
WHEREAS, the parties desire to reflect in this Supplement the revised fee
schedule for the Agency Agreement as in effect as of the date hereof;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein provided, the parties agree as follows:
1. The revised fee schedule for services provided by Agent to the Fund
under the Agency Agreement as in effect as of the date hereof is set forth in
Exhibit A attached hereto.
2. This Supplement shall become a part of the Agency Agreement and
subject to its terms and shall supersede all previous fee schedules under such
agreement as of the date hereof.
IN WITNESS WHEREOF, the Fund and Agent have duly executed this
Supplement as of the day and year first set forth above.
KEMPER AGGRESSIVE GROWTH FUND
By: /s/ Philip J. Collora
----------------------------------
Title: Vice President
-------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Stephen R. Hilliard
----------------------------------
Title: EVP/CFO
-------------------------------
<PAGE> 2
EXHIBIT A
FEE SCHEDULE (MULTIPLE CLASSES OF SHARES)
TRANSFER AGENCY FUNCTION FEE PAYABLE BY FUND
CLASS A, C AND I CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Annual open shareholder
account fee (per year per
account).
a. Non-daily dividend series. $6.00 $6.00
b. Daily dividend series. $8.00 $8.00
2. Annual closed shareholder account
fee (per year per account). $6.00 $6.00
3. Contingent deferred sales charge Not
account fee (per year per open Applicable $2.25
account).
4. Establishment of new shareholder
account (per new account). $4.00 $4.00
5. Payment of dividend (per dividend
per account). $ .40 $ .40
6. Automated transaction (per
transaction).** $ .50 $ .50
7. Non-monetary transactions fee (per
year per open account). $2.00 $2.00
8. All other shareholder inquiry,
correspondence and research
transactions (per transaction). $1.25 $1.25
</TABLE>
The out-of-pocket expenses of IFTC will be reimbursed by Fund in accordance
with the provisions of Section 5 of the Agency Agreement. All fees will be
subject to offset by earnings allowances under the Custody Agreement between
Fund and IFTC. The attached Transfer Agency Fee Schedule Supplement is a part
of this Exhibit A.
- -----------------
* The new shareholder account fee is not applicable to Class A
Share accounts established in connection with a conversion
from Class B Shares.
** Automated transaction includes, without limitation, money
market series purchases and redemptions, ACH purchases,
systematic exchanges and conversions from Class B Shares to
Class A Shares.
<PAGE> 1
EXHIBIT 99.B9(d)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between
Kemper Aggressive Growth Fund (the "Fund"), on behalf of the
Initial Portfolio (hereinafter called the "Portfolio"), a
registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza,
Chicago, Illinois 60606 and Scudder Fund Accounting
Corporation, with its principal place of business in Boston,
Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio 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 Portfolio
as provided in the prospectus of the Portfolio 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
Portfolio, 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.
<PAGE> 2
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 Portfolio'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.
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 Trustees 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
Trustees 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 Portfolio'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 Portfolio'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 Portfolio;
2
<PAGE> 3
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 portfolio 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 Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon
advice of Counsel for the Fund at the reasonable expense of
the Portfolio 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 Trustees. The Fund, on behalf of
the Portfolio, 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, on behalf of the Portfolio, 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
Portfolio or the Fund in acting in reliance thereon.
3
<PAGE> 4
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, the Portfolio 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 on behalf of the Portfolio, 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.
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
4
<PAGE> 5
others. In acting under this Agreement, FUND ACCOUNTING
shall be an independent contractor and not an agent of the
Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as
amended to date (the "Declaration"), a copy of which,
together with all amendments thereto, is on file in the
Office of the Secretary of State of the Commonwealth of
Massachusetts, provides that the name "Kemper Aggressive
Growth Fund" refers to the Trustees under the Declaration
collectively as trustees and not as individuals or
personally, and that no shareholder of the Fund or the
Portfolio, or Trustee, officer, employee or agent of the
Fund shall be subject to claims against or obligations of
the Trust or of the Portfolio to any extent whatsoever, but
that the Trust estate only shall be liable.
FUND ACCOUNTING is expressly put on notice of the limitation
of liability as set forth in the Declaration and FUND
ACCOUNTING agrees that the obligations assumed by the Fund
and/or the Portfolio under this Agreement shall be limited
in all cases to the Portfolio and its assets, and FUND
ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the
Fund or the Portfolio or any other series of the Fund, or
from any Trustee, officer, employee or agent of the Fund.
FUND ACCOUNTING understands that the rights and obligations
of the Portfolio under the Declaration are separate and
distinct from those of any and all other series of the Fund.
Section 11. 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 - Portfolio: Kemper Aggressive Growth Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
5
<PAGE> 6
Section 12. 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 Trustees.
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 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.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized and its seal to be hereunder affixed as of the date
first written above.
[SEAL] KEMPER AGGRESSIVE GROWTH FUND
on behalf of the Initial Portfolio
By:
------------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:
------------------------------
Vice President
7
<PAGE> 1
EXHIBIT 99.B11
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Kemper Aggressive Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Aggressive Growth Fund as of September
30, 1997, and the related statements of operations and changes in net assets
and the financial highlights for the period from December 31, 1996
(commencement of operations) to September 30, 1997. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of September 30, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper Aggressive Growth Fund at September 30, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period from December 31, 1996 to September 30, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1997
<PAGE> 2
EXHIBIT 99.B11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated November 18, 1997 in the Registration Statement (Form
N-1A) of Kemper Aggressive Growth Fund and its incorporation by reference in
the related Prospectus of Kemper Equity Funds, filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 2 to the Registration
Statement under the Securities Act of 1933 (File No. 333-13681) and in this
Amendment No. 3 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-07855).
ERNST & YOUNG LLP
Chicago, Illinois
January 22, 1998
<PAGE> 1
EXHIBIT 99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ David W. Belin Trustee January 20, 1998
- ----------------------
<PAGE> 2
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ Lewis A. Burnham Trustee January 20, 1998
- ----------------------
<PAGE> 3
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ Donald L. Dunaway Trustee January 20, 1998
- ----------------------
<PAGE> 4
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ Robert B. Hoffman Trustee January 20, 1998
- ----------------------
<PAGE> 5
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ Donald R. Jones Trustee January 20, 1998
- ----------------------
<PAGE> 6
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ Shirley D. Peterson Trustee January 20, 1998
- -----------------------
<PAGE> 7
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ Daniel Pierce Trustee January 20, 1998
- ----------------------
<PAGE> 8
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ William P. Sommers Trustee January 20, 1998
- --------------------------
<PAGE> 9
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission
or any other regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Aggressive Growth Fund.
Signature Title Date
/s/ Edmond D. Villani Trustee January 20, 1998
- ----------------------
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL AND IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001024112
<NAME> KEMPER AGGRESSIVE GROWTH FUND
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 9,616
<INVESTMENTS-AT-VALUE> 11,166
<RECEIVABLES> 671
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,851
<PAYABLE-FOR-SECURITIES> 215
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27
<TOTAL-LIABILITIES> 242
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,330
<SHARES-COMMON-STOCK> 499
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 729
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,550
<NET-ASSETS> 11,609
<DIVIDEND-INCOME> 14
<INTEREST-INCOME> 48
<OTHER-INCOME> 0
<EXPENSES-NET> (103)
<NET-INVESTMENT-INCOME> (41)
<REALIZED-GAINS-CURRENT> 729
<APPREC-INCREASE-CURRENT> 1,550
<NET-CHANGE-FROM-OPS> 2,238
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 771
<NUMBER-OF-SHARES-REDEEMED> (276)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,509
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 103
<AVERAGE-NET-ASSETS> 7,140
<PER-SHARE-NAV-BEGIN> 9.50
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 3.12
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.60
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL AND IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001024112
<NAME> KEMPER AGGRESSIVE GROWTH FUND
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 9,616
<INVESTMENTS-AT-VALUE> 11,166
<RECEIVABLES> 671
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,851
<PAYABLE-FOR-SECURITIES> 215
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27
<TOTAL-LIABILITIES> 242
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,330
<SHARES-COMMON-STOCK> 330
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 729
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,550
<NET-ASSETS> 11,609
<DIVIDEND-INCOME> 14
<INTEREST-INCOME> 48
<OTHER-INCOME> 0
<EXPENSES-NET> (103)
<NET-INVESTMENT-INCOME> (41)
<REALIZED-GAINS-CURRENT> 729
<APPREC-INCREASE-CURRENT> 1,550
<NET-CHANGE-FROM-OPS> 2,238
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 379
<NUMBER-OF-SHARES-REDEEMED> (52)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,509
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 103
<AVERAGE-NET-ASSETS> 7,140
<PER-SHARE-NAV-BEGIN> 9.50
<PER-SHARE-NII> (.00)
<PER-SHARE-GAIN-APPREC> 3.10
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.52
<EXPENSE-RATIO> 2.41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001024112
<NAME> KEMPER AGGRESSIVE GROWTH FUND
<SERIES>
<NUMBER> 003
<NAME> CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 9,616
<INVESTMENTS-AT-VALUE> 11,166
<RECEIVABLES> 671
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,851
<PAYABLE-FOR-SECURITIES> 215
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27
<TOTAL-LIABILITIES> 242
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,330
<SHARES-COMMON-STOCK> 95
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 729
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,550
<NET-ASSETS> 11,609
<DIVIDEND-INCOME> 14
<INTEREST-INCOME> 48
<OTHER-INCOME> 0
<EXPENSES-NET> (103)
<NET-INVESTMENT-INCOME> (41)
<REALIZED-GAINS-CURRENT> 729
<APPREC-INCREASE-CURRENT> 1,550
<NET-CHANGE-FROM-OPS> 2,238
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 144
<NUMBER-OF-SHARES-REDEEMED> (53)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,509
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 103
<AVERAGE-NET-ASSETS> 7,140
<PER-SHARE-NAV-BEGIN> 9.50
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 3.10
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.53
<EXPENSE-RATIO> 2.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.485(b)
[VEDDER PRICE LETTERHEAD]
January 23, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Kemper Aggressive Growth Fund
To The Commission:
We are counsel to the above-referenced investment company (the "Fund")
and as such have participated in the preparation and review of Post-Effective
Amendment No. 2 to the Fund's registration statement being filed pursuant to
Rule 485(b) under the Securities Act of 1933. In accordance with paragraph
(b)(4) of Rule 485 and in reliance upon the oral approval of the staff of the
Commission, acting on behalf of the Commission, under Rule 485(b)(l)(ix) for
certain of the disclosures to be contained in the amendment, we hereby
represent that such amendment does not contain disclosures that would render it
ineligible to become effective pursuant to paragraph (b) thereof.
Very truly yours,
/s/ Vedder, Price, Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
DAS/COK/dme
