KEMPER VALUE PLUS GROWTH FUND, N-1A EL, 1995-07-31

KEMPER VALUE PLUS GROWTH FUND
N-1A EL, 1995-07-31

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1995.

1933 ACT REGISTRATION NO.
1940 ACT REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/

Pre-Effective Amendment No. / /

Post-Effective Amendment No. / /

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/

Amendment No. / /

(Check appropriate box or boxes)
------------------

KEMPER VALUE PLUS GROWTH FUND
(Exact name of Registrant as Specified in Charter)

120 South LaSalle Street, Chicago, Illinois 60603
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code: (312) 781-1121

Philip J. Collora, Vice President and Secretary With a copy to:
Kemper Value Plus Growth Fund Charles F. Custer
120 South LaSalle Street Vedder, Price, Kaufman & Kammholz
Chicago, Illinois 60603 222 North LaSalle Street
(Name and Address of Agent for Service) Chicago, Illinois 60601

Approximate Date of Proposed Offering: As soon as practicable after the
effective date of this Registration Statement.

Pursuant to Reg. sec. 270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933. A registration filing fee of
$500 is being paid with this filing.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

KEMPER VALUE PLUS 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......... Performance

4. General Description of Registrant....... Summary; Investment Objectives and Policies;
Capital Structure

5. Management of the Fund.................. Summary; Investment Manager and
Underwriter

5A. Management's Discussion of Fund
Performance............................. Inapplicable

6. Capital Stock and Other Securities...... Summary; 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

9. Pending Legal Proceedings............... Inapplicable
</TABLE>
<PAGE> 3

KEMPER EQUITY FUNDS
SUPPLEMENT TO PROSPECTUS
DATED __________, 1995

CLASS I SHARES

Kemper Blue Chip Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Technology Fund
Kemper Total Return Fund
Kemper Value+Growth Fund

Kemper Blue Chip Fund (the "Blue Chip Fund"), Kemper Growth Fund (the "Growth
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 Kemper Financial Services, Inc.
("KFS") and its affiliates; and (b) the following investment advisory clients
of KFS and its investment advisory affiliates (including Kemper Asset
Management Company ("KAMCO")) 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 or Kemper Clearing Corp., an
affiliate of KFS and KAMCO. 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>
ANNUAL FUND BLUE SMALL TOTAL VALUE+
OPERATING EXPENSES CHIP GROWTH CAP TECHNOLOGY RETURN GROWTH
(as a percentage of average net assets) FUND FUND FUND FUND FUND FUND
---- ------ ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (restated) . . . . .58% .54% .54% .56% .54% .72%
12b-1 Fees . . . . . . . . . . . . None None None None None None
Other Expenses (estimated) . . . . .07% .06% .04% .05% .05% .50%
---- ---- ---- ---- ----- -----
Total Operating Expenses . . . . . .65% .60% .58% .61% .61% 1.22%
==== ==== ==== ==== ===== =====
</TABLE>

<TABLE>
<CAPTION>
Example Fund 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following Blue Chip $7 $21 $36 $81
expenses on a $1,000 investment, Growth $6 $19 $33 $75
assuming (1) 5% annual return and (2) Small Cap $6 $19 $32 $73
redemption at the end of each time Technology $6 $20 $34 $76
period: Total Return $6 $19 $33 $75
Value+Growth $ $ -- --
</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.

As discussed in the prospectus under "Investment Manager and Underwriter,"
effective May 31, 1994, the investment management fee for the Blue Chip, Growth
Technology and Total Return Funds changed. "Management Fees" have been
restated based upon the new management fee. The base management fee for the
Small Cap Fund is .65% and is subject to a maximum upward or downward
performance adjustment of .30 of 1%. The table reflects the management fee for
the prior fiscal year after such adjustment. The Value+Growth Fund commenced
the public offering of its shares on __________, 1995, thus expenses are shown
for only the one and three year periods. See "Investment Manager and
Underwriter" in the prospectus.

"Other Expenses" for Class I shares, which were not available for purchase
prior to May 31, 1994, have been estimated for the current fiscal year.

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.

FINANCIAL HIGHLIGHTS

No financial information is presented for Class I shares since no Class I
shares of any Fund had been issued as of the end of a Fund's fiscal year.

SPECIAL FEATURES

Shareholders of a Fund's Class I shares may exchange their shares for (i)
shares of Kemper Money Market Fund - Money Market Portfolio if the shareholders
of Class I shares have purchased shares because they are participants in
tax-exempt retirement plans of KFS 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
Kemper Money Market

2
<PAGE> 5

Fund - Money Market Portfolio who have purchased shares because they are
participants in tax-exempt retirement plans of KFS 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
shares relative net asset values. Exchanges are subject to the limitations set
forth in the prospectus under "Special Features - Exchange Privilege -
General."

_______, 1995
KEF-1I (_/95)

3
<PAGE> 6

<TABLE>
<S> <C>
TABLE OF CONTENTS
- -----------------------------------------------
Summary 1
- -----------------------------------------------
Summary of Expenses 2
- -----------------------------------------------
Financial Highlights 5
- -----------------------------------------------
Investment Objectives and Policies 10
- -----------------------------------------------
Investment Manager and Underwriter 21
- -----------------------------------------------
Dividends and Taxes 25
- -----------------------------------------------
Net Asset Value 26
- -----------------------------------------------
Purchase of Shares 27
- -----------------------------------------------
Redemption or Repurchase of Shares 32
- -----------------------------------------------
Special Features 35
- -----------------------------------------------
Performance 39
- -----------------------------------------------
Capital Structure 40
- -----------------------------------------------
Account Application
- -----------------------------------------------
</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

, 1995, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. It is available upon request without charge
from the 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 LOGO)

KEMPER
EQUITY
FUNDS

PROSPECTUS , 1995

KEMPER EQUITY FUNDS
120 South LaSalle Street, Chicago, Illinois 60603
1-800-621-1048

This prospectus describes a choice of six equity and balanced mutual funds
managed by Kemper Financial Services, Inc.

KEMPER BLUE CHIP FUND
KEMPER GROWTH 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> 7

KEMPER EQUITY FUNDS
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048

SUMMARY

INVESTMENT OBJECTIVES. The six open-end, diversified management investment
companies (the "Funds") covered in this combined prospectus are as follows:

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 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.

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 Technology Fund may also write
(sell) put and call options. The Funds may invest up to 25% of total assets in
foreign securities. See "Investment Objectives and Policies."

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 emphasis of the Technology Fund on
smaller emerging growth technology companies involve greater risk than
investment in larger, more established companies. 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 there is no assurance that use of those investment techniques
will be successful. See "Investment Objectives and Policies."

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. The
redemption within one year of 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.

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

1
<PAGE> 8

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 or
contingent deferred sales charge, but subject to a
Rule 12b-1 distribution fee. 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, in the case of Class A shares
purchased under the Large Order NAV Purchase Privilege and for Class B shares,
to any applicable contingent deferred sales charge. See "Purchase of Shares" and
"Redemption or Repurchase of Shares."

INVESTMENT MANAGER AND UNDERWRITER. Kemper Financial Services, Inc. ("KFS")
serves as investment manager for each Fund. KFS is paid an investment management
fee by each Fund based upon average daily net assets of that Fund at an
effective annual rate that differs for each Fund. Dreman Value Advisors, Inc.
("DVA"), a wholly owned subsidiary of KFS, is the sub-advisor for the
Value+Growth Fund and is paid a fee of .25% of average daily net assets of that
Fund by KFS. Kemper Distributors, Inc. ("KDI"), a wholly owned subsidiary of
KFS, 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
1% of average daily net assets of each class of the Fund, which KDI pays to
financial services firms. See "Investment Manager and Underwriter."

DIVIDENDS. Each Fund normally distributes dividends of net investment income as
follows: annually for the Growth, 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.

SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL
FUNDS)(1) CLASS A CLASS B CLASS C
------- ------------------------ -------
<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 None
year, 3% during the
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.
(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 within one year of shares purchased at net asset value under
the Large Order NAV Purchase Privilege may be subject to a 1% contingent
deferred sales charge. See "Purchase of Shares -- Initial Sales Charge
Alternative -- Class A Shares."

2
<PAGE> 9

ANNUAL FUND OPERATING EXPENSES

(as a percentage of average net assets and, for Value+Growth Fund, after fee
waiver/expense reimbursement)

<TABLE>
<CAPTION>
TOTAL VALUE+
BLUE CHIP GROWTH SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND
--------- ------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Management Fees........................... .58% .54% .65% .56% .54% .60%
12b-1 Fees................................ None None None None None None
Other Expenses............................ .71% .63% .64% .31% .58% .90%
--------- ------ --------- ---------- ------- -------
Total Operating Expenses.................. 1.29% 1.17% 1.29% .87% 1.12% 1.50%
======= ====== ======= ======== ====== ======
</TABLE>

<TABLE>
<CAPTION>
TOTAL VALUE+
BLUE CHIP GROWTH SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND
--------- ------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Management Fees........................... .58% .54% .65% .56% .54% .60%
12b-1 Fees(4)............................. .75% .75% .75% .75% .75% .75%
Other Expenses (estimated)................ .65% .92% .96% .50% .72% .93%
--------- ------ --------- ---------- ------- -------
Total Operating Expenses.................. 1.98% 2.21% 2.36% 1.81% 2.01% 2.28%
======= ====== ======= ======== ====== ======
</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 it is unlikely because of the
automatic conversion feature described under "Purchase of Shares -- Deferred
Sales Charge Alternative -- Class B Shares."

<TABLE>
<CAPTION>
TOTAL VALUE+
BLUE CHIP GROWTH SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND
--------- ------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Management Fees........................... .58% .54% .65% .56% .54% .60%
12b-1 Fees(5)............................. .75% .75% .75% .75% .75% .75%
Other Expenses (estimated)................ .72% .69% .88% .45% .54% .90%
--------- ------ --------- ---------- ------- -------
Total Operating Expenses.................. 2.05% 1.98% 2.28% 1.76% 1.83% 2.25%
======= ====== ======= ======== ====== ======
</TABLE>

- -------------------------
(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 Blue Chip $ 70 $ 96 $ 124 $204
$1,000 investment, assuming (1) 5% annual Growth $ 69 $ 93 $ 118 $191
return and (2) redemption at the end of Small Cap $ 70 $ 96 $ 124 $204
each time period: Technology $ 66 $ 84 $ 103 $159
Total Return $ 68 $ 91 $ 116 $186
Value+Growth $ 72 $ 102 -- --
</TABLE>

3
<PAGE> 10

EXAMPLE

<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
------------- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
CLASS B SHARES(6)
You would pay the following expenses on a Blue Chip $50 $82 $117 $231
$1,000 investment, assuming (1) 5% annual Growth $52 $89 $128 $254
return and (2) redemption at the end of Small Cap $54 $94 $136 $270
each time period: Technology $48 $77 $108 $213
Total Return $50 $83 $118 $234
Value+Growth $53 $91 -- --

You would pay the following expenses on Blue Chip $20 $62 $107 $231
the same investment, assuming no Growth $22 $69 $118 $254
redemption: Small Cap $24 $74 $126 $270
Technology $18 $57 $ 98 $213
Total Return $20 $63 $108 $234
Value+Growth $23 $71 -- --
CLASS C SHARES
You would pay the following expenses on a Blue Chip $21 $64 $110 $238
$1,000 investment, assuming (1) 5% annual Growth $20 $62 $107 $231
return and (2) redemption at the end of Small Cap $23 $71 $122 $262
each time period: Technology $18 $55 $ 95 $207
Total Return $19 $58 $ 99 $215
Value+Growth $23 $70 -- --
</TABLE>

- -------------------------
(6) Assumes conversion to Class A shares six years after purchase and was
calculated based upon the assumption that the shareholder was an owner of
the shares on the first day of the first year and the contingent deferred
sales charge was applied as follows: 1 year (3%), 3 years (2%), 5 years (1%)
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.

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 Small Cap Fund is .65% and is subject to a
maximum upward or downward performance adjustment of .30 of 1%. The table
reflects the base management fee without any performance adjustment. The actual
management fees paid by Class A, Class B and Class C shares during the last
fiscal year were .74%, .47% and .47%, respectively. Differences in the
management fee among the classes were due to differences in time periods during
which shares were available for purchase and stock market activity. Class B and
Class C shares were not offered until May 31, 1994.

The Value+Growth Fund commenced the public offering of its shares on ,
1995, thus estimated expenses are shown for only the one and three year periods.
KFS has agreed to temporarily waive a portion of its management fee and
reimburse or pay operating expenses to the extent necessary to limit the Fund's
"Total Operating Expenses" to the levels indicated in the tables above. Without
such waiver and reimbursement, "Management Fees" would be .72% and estimated
"Total Operating Expenses" for Class A, B and C shares would be 1.62%, 2.40% and
2.37%, respectively.

4
<PAGE> 11

FINANCIAL HIGHLIGHTS

The tables below show financial information for each Fund except the
Value+Growth Fund expressed in terms of one share outstanding throughout the
period. The information in the table for each Fund, except for the recent six
months information for the Funds which is unaudited, 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 1994 Annual Report to Shareholders and 1995 Semiannual
Report to Shareholders are incorporated herein by reference and may be obtained
by writing or calling that Fund.

BLUE CHIP FUND

<TABLE>
<CAPTION>
SIX MONTHS
ENDED NOV. 23, 1987
APRIL 30, YEAR ENDED OCTOBER 31, TO OCT. 31,
1995 1994 1993 1992 1991 1990 1989 1988
---------- -------------------------------------------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES

PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.33 13.88 12.72 13.24 9.65 10.07 8.41 9.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .10 .19 .18 .18 .11 .13 .18 .35
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments .86 (.71) 1.13 .41 3.63 (.45) 1.78 (.80)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .96 (.52) 1.31 .59 3.74 (.32) 1.96 (.45)
- -----------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .13 .19 .15 .14 .15 .10 .30 .14
- -----------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments -- .84 -- .97 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends .13 1.03 .15 1.11 .15 .10 .30 .14
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.16 12.33 13.88 12.72 13.24 9.65 10.07 8.41
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 8.08 (3.82) 10.35 4.76 39.19 (3.23) 24.08 (4.99)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.29 1.48 1.25 1.46 1.66 1.91 2.08 1.83
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.69 1.50 1.28 1.63 .88 1.28 1.99 4.47
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------- --------------------------
SIX MONTHS MAY 31, SIX MONTHS MAY 31,
ENDED 1994 TO ENDED 1994 TO
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995 1994 1995 1994
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CLASS B AND C SHARES

PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.29 12.30 12.32 12.30
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .06 .07 .09
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .86 (.01) .87 (.01)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .91 .05 .94 .08
- ----------------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .07 .06 .08 .06
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.13 12.29 13.18 12.32
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 7.68 .42 7.87 .67
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.98 2.43 2.05 2.33
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.00 .33 .93 .43
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
ENDED NOV. 23, 1987
APRIL 30, YEAR ENDED OCTOBER 31, TO OCT. 31,
1995 1994 1993 1992 1991 1990 1989 1988
---------- ----------------------------------------------------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES

SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands) $152,182 153,172 196,327 182,553 61,146 32,172 26,164 20,421
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 92 131 222 178 162 93 89 326
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

5
<PAGE> 12

GROWTH FUND

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
SIX MONTHS 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
ENDED MARCH
31, 1995
----------- ---------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.93 15.33 13.09 13.14 9.00 9.79 7.61 13.73 13.07 12.29 12.74
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .01 .01 .03 .06 .18 .17 .23 .20 .24 .33
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .91 (1.41) 2.29 .71 4.57 (.79) 2.24 (2.83) 4.13 2.28 .67
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .95 (1.40) 2.30 .74 4.63 (.61) 2.41 (2.60) 4.33 2.52 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .03 .05 .11 .18 .23 .21 .10 .30 .35
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments .18 1.00 .03 .74 .38 -- -- 3.31 3.57 1.44 1.10
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .18 1.00 .06 .79 .49 .18 .23 3.52 3.67 1.74 1.45
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.70 12.93 15.33 13.09 13.14 9.00 9.79 7.61 13.73 13.07 12.29
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 7.47 (9.39) 17.60 5.55 54.13 (6.37) 32.60 (15.15) 44.69 23.37 9.14
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.17 1.09 1.00 1.03 1.04 .89 .83 .82 .80 .78 .79
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .45 .24 .06 .32 .59 1.84 2.11 3.38 1.67 1.96 2.73
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------- ----------------------------
MAY 31, MAY 31,
SIX MONTHS 1994 TO SIX MONTHS 1994 TO
ENDED MARCH SEPTEMBER 30, ENDED MARCH SEPTEMBER 30,
31, 1995 1994 31, 1995 1994
----------- ------------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.88 13.10 12.88 13.09
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.03) (.03) (.02) (.02)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency transactions .91 (.19) .91 (.19)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .88 (.22) .89 (.21)
- --------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain on investments .18 -- .18 --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.58 12.88 13.59 12.88
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 6.96 (1.68) 7.03 (1.60)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 2.21 2.11 1.98 2.09
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.59) (.76) (.32) (.67)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

6
<PAGE> 13

SMALL CAP FUND

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992(A) 1991 1990 1989 1988 1987 1986 1985
----------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period $5.81 6.45 5.25 5.35 3.79 4.71 3.66 6.69 5.80 4.93 4.59
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) .01 (.01) (.02) (.02) .02 .05 .10 .05 .09 .10 .11
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .27 (.27) 1.71 .40 1.89 (.86) 1.00 (1.45) 1.82 1.01 .33
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations .28 (.28) 1.69 .38 1.91 (.81) 1.10 (1.40) 1.91 1.11 .44
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income -- -- -- .01 .06 .11 .05 .13 -- .11 .10
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net
realized gain on
investments .34 .36 .49 .47 .29 -- -- 1.50 1.02 .13 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .34 .36 .49 .48 .35 .11 .05 1.63 1.02 .24 .10
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $5.75 5.81 6.45 5.25 5.35 3.79 4.71 3.66 6.69 5.80 4.93
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 5.40 (4.31) 34.11 7.02 55.16 (17.52) 30.58 (17.34) 39.40 23.71 9.85
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(%):
Expenses 1.02 1.34 1.03 1.28 1.25 .86 .64 .72 .53 .48 .46
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .13 (.76) (.43) (.43) .27 1.22 2.55 1.42 1.62 1.83 2.29
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------- ----------------------------
SIX MONTHS MAY 31, SIX MONTHS MAY 31,
ENDED 1994 TO ENDED 1994 TO
MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
1995 1994 1995 1994
----------- ------------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $5.78 5.65 5.77 5.65
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.02) (.02) (.02) (.03)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .27 .15 .27 .15
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .25 .13 .25 .12
- --------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain on investments .34 -- .34 --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.69 5.78 5.68 5.77
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 4.89 2.30 4.90 2.12
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 2.09 2.29 2.00 2.10
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.94) (1.38) (.82) (1.21)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-----------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands) $ 665,417 631,607 510,060 329,116 289,345 179,092 286,411 284,426 353,111 273,736 190,896
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 104 58 82 73 126 107 100 90 115 113 60
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

7
<PAGE> 14

TECHNOLOGY FUND

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1995 1994 1993(A) 1992 1991 1990 1989 1988 1987 1986 1985
----------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.50 10.68 9.95 12.42 9.37 10.19 9.39 11.76 13.82 11.45 11.77
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) -- -- (.01) .01 .13 .22 .26 .18 .19 .20 .20
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 1.24 1.49 2.03 .04 3.35 (.45) 1.28 .07 .56 3.03 1.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.24 1.49 2.02 .05 3.48 (.23) 1.54 .25 .75 3.23 1.23
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- -- .03 .20 .29 .23 .12 .13 .21 .26
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments 1.50 .67 1.29 2.49 .23 .30 .51 2.50 2.68 .65 1.29
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends 1.50 .67 1.29 2.52 .43 .59 .74 2.62 2.81 .86 1.55
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.24 11.50 10.68 9.95 12.42 9.37 10.19 9.39 11.76 13.82 11.45
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 13.17 14.95 21.76 .32 38.58 (2.51) 18.19 3.84 6.32 29.79 11.73
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .87 .89 .81 .82 .81 .71 .69 .69 .63 .60 .60
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.02) .05 (.06) .07 1.24 2.23 2.92 2.26 1.17 1.58 2.10
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.45 9.99 11.45 9.99
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.05) (.05) (.05) (.05)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.21 1.51 1.24 1.51
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.16 1.46 1.19 1.46
- ----------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain on investments 1.50 -- 1.50 --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.11 11.45 11.14 11.45
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 12.45 14.61 12.74 14.61
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.81 1.99 1.76 1.83
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.96) (1.08) (.91) (.92)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-----------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands) $761,609 713,654 612,604 559,279 606,295 472,992 532,760 513,800 566,241 598,722 624,108
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 81 95 95 81 25 39 11 41 37 48
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

8
<PAGE> 15

TOTAL RETURN FUND

PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period $9.10 11.23 10.07 10.07 7.78 8.34 7.34 7.24 8.78 7.28 6.52
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .14 .19 .30 .22 .36 .46 .37 .36 .27 .33 .28
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .40 (1.01) 1.54 .37 2.42 (.64) 1.04 .23 (.55) 1.77 .87
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations .54 (.82) 1.84 .59 2.78 (.18) 1.41 .59 (.28) 2.10 1.15
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .11 .23 .24 .29 .49 .38 .41 .29 .28 .21 .31
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net
realized gain on
investments -- 1.04 .44 .30 -- -- -- .20 .98 .39 .08
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution in excess of
net realized gain on
investments -- .04 -- -- -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .11 1.31 .68 .59 .49 .38 .41 .49 1.26 .60 .39
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $9.53 9.10 11.23 10.07 10.07 7.78 8.34 7.34 7.24 8.78 7.28
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 5.95 (7.92) 19.08 6.09 37.20 (2.31) 20.00 8.75 (4.18) 30.57 18.24
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(%):
Expenses 1.12 1.13 1.02 1.06 1.03 .87 .79 .78 .72 .72 .76
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 3.11 2.34 2.94 2.23 3.96 5.87 4.76 5.10 3.05 4.02 4.02
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------- ----------------------------
SIX MONTHS MAY 31, SIX MONTHS MAY 31,
ENDED 1994 TO ENDED 1994 TO
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995 1994 1995 1994
--------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.09 9.24 9.09 9.24
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .09 .06 .12 .06
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .40 (.16) .40 (.16)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .49 (.10) .52 (.10)
- ----------------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .06 .05 .07 .05
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.52 9.09 9.54 9.09
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 5.47 (1.06) 5.73 (1.05)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 2.01 2.03 1.83 2.00
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 2.22 1.57 2.40 1.60
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end
of period (in
thousands) $2,767,315 2,864,322 1,509,687 1,212,896 998,465 781,417 937,804 976,972 1,077,369 677,618 350,616
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate (%) 163 121 180 150 157 157 130 187 171 172 176
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

9
<PAGE> 16

Notes:
(a) Per share data were determined based on average shares outstanding.

Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of any sales charges. The Funds are
organized as separate Massachusetts business trusts. As discussed under
"Investment Manager and Underwriter," effective May 31, 1994, the investment
management fee for some Funds changed, resulting in a higher fee for the Growth
Fund, the Technology Fund and the Total Return Fund and a lower fee for the Blue
Chip Fund. The fee schedule for the Small Cap Fund is unchanged, except that the
performance adjustment is based upon the performance of the Fund's Class A
shares.

INVESTMENT OBJECTIVES AND POLICIES

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.

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. 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.

10
<PAGE> 17

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 to some degree in securities for the short-term. To this
extent, the Fund will be engaged in trading operations based on short-term
market considerations as distinct from long-term investment based upon
fundamental valuation of securities. However, the Fund will emphasize
fundamental research in attempting to identify under-valued situations which it
is hoped 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 which 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.

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 automation, data processing, communications, marketing and
finance; and (d) companies having innovative concepts or ideas.

11
<PAGE> 18

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.

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

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<PAGE> 19

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.

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.

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<PAGE> 20

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. 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.

KFS manages the growth portion of the Fund. In managing the growth portion of
the portfolio, KFS emphasizes stock selection and fundamental research in
seeking to enhance long-term performance potential. KFS 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 debt, strong
balance sheet, good management, industry leadership. DVA manages the value
portion of the Fund. DVA 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, DVA 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. From time to time, 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.

SPECIAL RISK FACTORS--FOREIGN SECURITIES. Although the Funds invest primarily in
securities that are publicly traded in the United States, the Funds have the
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

14
<PAGE> 21

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
principally be 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 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

15
<PAGE> 22

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 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

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<PAGE> 23

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 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

17
<PAGE> 24

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
(other than the Value+Growth Fund) are listed under "Financial Highlights." It
is anticipated that, under normal circumstances, the portfolio turnover rate for
the Value+Growth Fund will not exceed 100%. Certain Funds may experience high
turnover rates (over 100%). Higher portfolio turnover involves correspondingly
greater brokerage commissions or other transaction costs. Higher portfolio
turnover may result in the realization of greater net short-term capital gains.
In order to continue to qualify as a regulated investment company for federal
income tax purposes, less than 30% of the annual gross income of a Fund must be
derived from the sale or other disposition of securities and certain other
investments held by a Fund for less than three months. See "Dividends and Taxes"
in the Statement of Additional Information.

The Blue Chip Fund 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 portfolio securities or
other assets. If, for any reason, the current value of the Fund's total assets
falls below an amount equal to three times the amount of its indebtedness from
money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes. The Fund may pledge up to 15% of its total assets
to secure any such borrowings. The Growth, 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. These Funds may not pledge their
assets in an amount exceeding the amount of the borrowings secured by such
pledge.

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. 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 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 Investment Company Act of 1940,
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 Blue Chip and Value+Growth Funds that are neither designated as fundamental
nor incorporated into any of the fundamental investment restrictions referred to
above are not fundamental and may be changed by the Board of Trustees of the
Fund without shareholder approval.

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<PAGE> 25

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 Technology Fund may write (sell) covered call and secured put options on up
to 25% of net assets and may purchase put and call options provided that no more
than 5% of its net assets may be invested in premiums on such options. The Blue
Chip, Growth, Small Cap, Total Return and Value+Growth Funds may each invest up
to 5% of net assets in put and call options on securities, securities indices
and foreign currencies. 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.

A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during the option period. A put option gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying security or other asset at
the exercise price during the option period. The writer of a covered call owns
securities or other assets that are acceptable for escrow and the writer of a
secured put invests an amount not less than the exercise price in eligible
securities or other assets to the extent that it is obligated as a writer. If a
call written by 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.

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
Technology Fund) 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.

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

19
<PAGE> 26

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.

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.

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<PAGE> 27

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 high-grade securities in an amount not less than the value of the Fund's
total assets committed to forward foreign currency exchange contracts entered
into for the purchase of a foreign currency. If the value of the securities
segregated declines, additional cash or securities are added so that the
segregated amount is not less than the amount of the Fund's commitments with
respect to such contracts. A Fund generally does not enter into a forward
contract with a term longer than one year.

RISK CONSIDERATIONS. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures and foreign currency 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 or futures contracts and movements in the prices of the securities or
currencies hedged or used for cover; (b) lack of assurance that a liquid
secondary market will exist for any particular option, futures or foreign
currency 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 need to defer closing out certain
options or futures contracts in order to continue to qualify for beneficial tax
treatment afforded "regulated investment companies" under the Internal Revenue
Code.

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. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of each Fund and
provides each Fund with continuous professional investment supervision. Dreman
Value Advisors, Inc. ("DVA") is the sub-advisor for the Value+Growth Fund. See
"Value+Growth Fund" below for information about DVA. KFS is one of the largest
investment managers in the country and has been engaged in the management of
investment funds for more than forty-five years. KFS and its affiliates provide
investment advice and manage investment portfolios for the Kemper Funds, the
Kemper insurance companies, Kemper Corporation and other corporate, pension,
profit-sharing and individual accounts representing approximately $60 billion
under management. KFS acts as investment manager for 26 open-end and seven
closed-end investment companies, with 64 separate investment portfolios,
representing more than 3 million shareholder accounts. KFS is a wholly-owned
subsidiary of Kemper Financial Companies, Inc., which is a financial services
holding company that is more than 99% owned by Kemper Corporation, a diversified
insurance and financial services holding company.

Kemper Corporation, has entered into a definitive agreement with an investor
group led by Zurich Insurance Company ("Zurich") pursuant to which Kemper
Corporation would be acquired by the investor group in a merger transaction. As
part of the transaction, Zurich or an affiliate would purchase KFS. The Kemper
Corporation and Zurich boards have approved the transaction.

21
<PAGE> 28

Consummation of the transaction is subject to a number of contingencies,
including approval by the stockholders of Kemper Corporation and regulatory
approvals. Because the transaction would constitute an assignment of the Funds'
investment management agreements with KFS and, where applicable, Rule 12b-1
agreements under the Investment Company Act of 1940, and therefore a termination
of such agreements, KFS has received approval of new agreements from the Funds'
boards and is seeking approval from the Funds' shareholders prior to
consummation of the transaction. The transaction is expected to close in the
fourth quarter of 1995 or early 1996.

Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreements provide that KFS shall act as each Fund's
investment adviser, manage its investments and provide it with various services
and facilities. KFS will from time to time use the services of Kemper Investment
Management Company Limited, 1 Fleet Place, London EC4M 7RQ, a wholly-owned
subsidiary of KFS, with respect to foreign securities investments of the Funds
including analysis, research, execution and trading services.

Tracy McCormick Chester has been the portfolio manager of the Blue Chip Fund
since September, 1994 when she joined KFS. She is a vice president of the Blue
Chip Fund and senior vice president of KFS. Prior to coming to KFS, she was a
senior vice president and portfolio manager of an investment management company;
and prior thereto, she managed private accounts. She received a B.A. and an
M.B.A. in Finance from Michigan State University, East Lansing, Michigan.

C. Beth Cotner has been the portfolio manager of the Growth Fund since 1994.
Mrs. Cotner joined KFS in January 1985 and is currently an executive vice
president and the Director of Equity Mutual Fund Portfolio Management of KFS and
a Vice President of the Blue Chip, Growth, Small Cap, Technology and Total
Return Funds. She received a B.A. from Ohio State University, Columbus, Ohio and
an M.B.A. from George Washington University, Washington, D.C.

Karen A. Hussey has been the portfolio manager of the Small Cap Fund since
September, 1994 when she joined KFS. She is a vice president of the Small Cap
Fund and senior vice president of KFS. Prior to joining KFS, she was a portfolio
manager for a national bank. She received a B.S. from Southwest Missouri State,
Springfield, Missouri and did graduate work towards an M.B.A. at St. Louis
University. Ms. Hussey is a Chartered Financial Analyst.

Frank D. Korth and Richard A. Goers are the co-portfolio managers of the
Technology Fund. Mr. Korth has served as co-portfolio manager since January
1994. Mr. Korth joined KFS in March 1990 and is currently a senior vice
president of KFS and a vice president of the Fund. Prior to coming to KFS, Mr.
Korth was president and portfolio manager of a mutual fund investing primarily
in equity securities. He received a B.A. in Math from Mankato State University,
Mankato, Minnesota and an M.B.A. in Finance from Bernard Baruch College, New
York, New York. Mr. Korth is a Chartered Financial Analyst. Mr. Goers has served
as a portfolio manager since 1991. Mr. Goers joined KFS in January 1971 and is
currently a senior vice president of KFS and a vice president of the Fund. Mr.
Goers 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.

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 KFS in 1988 and is currently an executive vice
president of KFS. He received a B.A. in Finance from the University of Maryland,
College Park, Maryland.

Daniel J. Bukowski has been a portfolio co-manager of the Value+Growth Fund
since it commenced operations in 1995. Mr. Bukowski joined KFS in 1989 and is a
senior vice president and Director of Quantitative Research of KFS and a vice
president of 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. See
"Value+Growth Fund" below for more information on management of that Fund.

KFS has an Equity Investment Committee that determines overall investment
strategy for equity portfolios managed by KFS. The Equity Investment Committee
is currently comprised of the following members: Daniel J. Bukowski, Tracy
McCormick Chester, C. Beth Cotner, James H. Coxon, Richard A. Goers, Karen A.
Hussey, Frank D. Korth,

22
<PAGE> 29

Gary A. Langbaum, Maura J. Murrihy, James R. Neel and Thomas M. Regner. The
portfolio managers work together as a team with the Equity Investment Committee
and various equity analysts and equity traders to manage each Fund's
investments. Equity analysts--through research, analysis and evaluation--work to
develop investment ideas appropriate for the Fund. These ideas are studied and
debated by the Equity Investment Committee and, if approved, are added to a list
of eligible investments. The portfolio managers use the list of eligible
investments to help them structure the Fund's portfolio in a manner consistent
with the Fund's objective. The KFS International Equity Investments area,
directed by Dennis H. Ferro, and the KFS International Fixed Income Investments
area, directed by Gordon K. Johns, provide research and analysis regarding
foreign investments to the portfolio managers. After investment decisions are
made, equity traders execute the portfolio manager's instructions through
various broker-dealer firms.

The Funds (other than the Small Cap Fund) pay KFS investment management fees,
payable monthly, at the annual rates shown below. Before May 31, 1994, each Fund
(other than the Small Cap Fund and Value+Growth Fund) paid KFS an investment
management fee under different schedules that are described in the Statement of
Additional Information. The Small Cap Fund pays a base annual 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 between .35 and
.95 of 1% 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.

<TABLE>
<CAPTION>
BLUE CHIP,
GROWTH,
TECHNOLOGY
AND TOTAL VALUE+
AVERAGE DAILY NET ASSETS RETURN 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>

VALUE+GROWTH FUND. As mentioned above, DVA is the sub-advisor for the
Value+Growth Fund. Under the terms of the Sub-Advisory Agreement, DVA will
manage the value portion of the Fund and will provide such other investment
advice, research and assistance as KFS may, from time to time, reasonably
request. DVA currently serves as investment manager for Kemper-Dreman Fund, Inc.
and institutional accounts. DVA is a wholly-owned subsidiary of KFS and is
located at 10 Exchange Place, Suite 2050, Jersey City, New Jersey 07302. KFS
pays DVA for its services a sub-advisory fee, payable monthly at the annual rate
of .25% of average daily net assets of the Fund. The investment manager has
agreed to temporarily waive a portion of its investment management fee and
reimburse or pay operating expenses to the extent necessary to limit the Fund's
operating expenses to the levels described under "Summary of Expenses." For this
purpose operating expenses do not include taxes, interest, extraordinary
expenses, brokerage commissions or transaction costs. KFS can terminate this fee
waiver/expense reimbursement at any time upon notice to the Fund. David N.
Dreman has been a portfolio co-manager of the Fund and primarily responsible for
management of the value portion of the Value+Growth Fund since its inception in
1995. Mr. Dreman is the Chairman of DVA and has been an investment advisor and
security analyst for more than 20 years. Mr. Dreman received a Bachelor of
Finance in Commerce from the University of Manitoba, Winnipeg, Manitoba, Canada.

PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with each Fund, Kemper Distributors, Inc.
("KDI"), an affiliate of KFS, is the principal underwriter and

23
<PAGE> 30

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. Before February 1, 1995,
KFS was the principal underwriter and distributor.

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 1% 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 1% 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 pays firms for
sales of Class C shares a distribution fee, payable quarterly, at an annual rate
of .75 of 1% of net assets attributable to Class C shares maintained and
serviced by the firm. A firm becomes eligible for the distribution fee based
upon assets in accounts in the month of purchase and the fee continues until
terminated by KDI or a Fund.

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 Investment Company Act of 1940, 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 1994 fiscal year (except
the Value+Growth Fund which commenced operations , 1995).

<TABLE>
<CAPTION>
DISTRIBUTION FEES
DISTRIBUTION EXPENSES PAID CONTINGENT DEFERRED
INCURRED BY BY FUND TO SALES CHARGES PAID
UNDERWRITER UNDERWRITER TO UNDERWRITER
--------------------- -------------------- -------------------
FUND CLASS B CLASS C CLASS B CLASS C CLASS B
- ----------------------------------------- ---------- ------- --------- ------- -------------------
<S> <C> <C> <C> <C> <C>
Blue Chip................................ $ 50,000 5,000 4,000 -- 2,000
Growth................................... $2,222,000 23,000 1,794,000 2,000 534,000
Small Cap................................ $ 904,000 18,000 390,000 1,000 104,000
Technology............................... $ 47,000 3,000 4,000 -- --
Total Return............................. $4,622,000 48,000 3,909,000 3,000 1,158,000
</TABLE>

If a Rule 12b-1 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 (or KFS as predecessor to 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

24
<PAGE> 31

arrangements with various financial services firms, such as broker-dealer firms
or banks ("firms"), that provide services and facilities for their customers or
clients who are shareholders of the Funds. Such administrative services and
assistance may include, but are not limited to, establishing and maintaining
shareholder accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding each Fund and its special
features, and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. KDI bears all its expenses
of providing services pursuant to the administrative agreement, including the
payment of any service fees. For services under the administrative agreements,
each Fund pays KDI a fee, payable monthly, at the annual rate of up to .25 of 1%
of average daily net assets of each class of such Fund. KDI then pays each firm
a service fee at an annual rate of up to .25 of 1% of net assets of each class
of those accounts that it maintains and services for each Fund. Firms to which
service fees may be paid include broker-dealers affiliated with KDI. A firm
becomes eligible for the service fee based on assets in the accounts in the
month following the month of purchase (in the month of purchase for Class C
Shares) and the fee continues until terminated by KDI or a Fund. The fees are
calculated monthly and paid quarterly. KDI may advance to financial services
firms the first year service fee related to Class B shares sold by such firms at
a rate of up to .25 of 1% of the purchase price of such shares. As compensation
therefor, KDI may retain the administrative services fee paid by a Fund with
respect to such shares for the first year after purchase. Financial services
firms will become eligible for future service fees with respect to such shares
commencing in the thirteenth month following the month of purchase.

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 there is a firm listed on a Fund's records 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 there is a firm of record.

CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian, and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of each Fund
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of 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, an affiliate of KFS, 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 custodian,
transfer agent and shareholder service agent fees, see "Investment Manager and
Underwriter" in the Statement of Additional Information.

PORTFOLIO TRANSACTIONS. KFS places all orders for purchases and sales of a
Fund's securities (except that DVA places all orders for the value portion of
the Value+Growth Fund). Subject to seeking best execution of orders, KFS or DVA
may consider sales of shares of a Fund and other funds managed by KFS and DVA 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 Growth, 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

25
<PAGE> 32

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

(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 and a minimum account value of $1,000 in the Kemper
Fund in which dividends are reinvested. The Funds will reinvest dividend checks
(and future dividends) in shares of that same Fund and class if checks are
returned as undeliverable.

TAXES. Each Fund intends to continue to qualify (or for the Value+Growth Fund,
intends 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 28%. Dividends declared in October, November or December to shareholders of
record as of a date in one of those months and paid during the following January
are treated as paid on December 31 of the calendar year declared. 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, periodic
investment and redemption programs and reinvestment programs for unit investment
trusts underwritten by an affiliate of KFS. Information for income tax purposes,
including 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.

26
<PAGE> 33

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 last sale
price unless there is no sale price, in which event current prices provided by
market makers are used. Over-the-counter traded options are valued based upon
current prices provided by market makers. Financial futures and options thereon
are valued at the settlement price established each day by the board of trade or
exchange on which they are traded. Other securities and assets are valued at
fair value as determined in good faith by the Board of Trustees. Because of the
need to obtain prices as of the close of trading on various exchanges throughout
the world, the calculation of net asset value 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 considerations by the Board of Trustees or its delegates. On each day
the New York Stock Exchange (the "Exchange") is open for trading, the net asset
value is determined as of the earlier of 3:00 p.m. Chicago time or the close of
the Exchange.

PURCHASE OF SHARES

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 or a contingent deferred sales charge
but are subject to higher ongoing expenses than Class A shares 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

27
<PAGE> 34

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 price reduced for certain purchases
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 None 0.75% No conversion feature
</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. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).

INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.

<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------
ALLOWED
TO
DEALERS
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF NET OF
OFFERING ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE* 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 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.

28
<PAGE> 35

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 KFS or DVA 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. 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) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 provided
in either case that such plan has not less than 200 eligible employees (the
"Large Order NAV Purchase Privilege"). Redemption within one year 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 to
employer sponsored employee benefit plans using the subaccount recordkeeping
system made available through KFS at net asset value in accordance with the
Large Order NAV Purchase Privilege up to the following amounts: 1.00% of the net
asset value of shares sold on amounts up to $5 million in any calendar year,
.50% on the next $5 million and .25% on amounts over $10 million in such
calendar year. KDI may in its discretion compensate investment dealers or other
financial services firms in connection with the sale of Class A shares of each
Fund to other purchasers at net asset value in accordance with the Large Order
NAV Purchase Privilege up to the following amounts: 1.00% of the net asset value
of shares sold on amounts up to $3 million, .50% on the next $2 million and .25%
on amounts over $5 million. For purposes of determining the appropriate
commission percentage to be applied to a particular sale under the foregoing
schedules, 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 is also applicable.

Class A shares may be sold to 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, or to any trust, pension,
profit-sharing or other benefit plan for only such persons at net asset value
and in any amount. Class A shares may be sold at net asset value in any amount
to 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, or
to any trust or pension, profit-sharing or other benefit plan for only such
persons. Class A shares may be sold at net asset value in any amount to selected
employees (including their spouses and dependent children) of banks and other
financial services firms that provide administrative services related to order
placement and payment to facilitate transactions in shares of the 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 and in any amount to persons who were shareholders (for themselves or
members of their immediate families, or for any trust, pension, profit-sharing
or other benefit plan for such persons) as of August 25, 1995 of Kemper-Dreman
Fund, Inc. and who maintain continuous ownership in a Kemper Mutual Fund. Class
A shares may be sold

29
<PAGE> 36

at net asset value in any amount to unit investment trusts underwritten by an
affiliate of KFS. In addition, unitholders of unit investment trusts
underwritten by an affiliate of KFS may purchase a Fund's Class A shares at net
asset value through reinvestment programs described in the prospectuses of such
trusts which 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 a "wrap account" or similar
program under which such clients pay a fee to the investment adviser or other
firm. Such shares are sold for investment purposes and on the condition that
they will not be resold except through redemption or repurchase by the 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 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 Growth Fund, Small Cap Fund and Total
Return Fund who acquired their shares as a result of the acquisition by those
Funds of the assets of the Growth Portfolio, Small Capitalization Equity
Portfolio and Total Return Portfolio, respectively, 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 or contingent deferred
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. KDI pays firms for sales of Class C
shares a distribution fee, payable quarterly, at an annual rate of .75 of 1% of
net assets attributable to Class C shares maintained and serviced by the firm.
KDI is compensated by each

30
<PAGE> 37

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 KFS 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 Intent" and "Cumulative
Discount" features described under "Special Features." For more information
about the three sales arrangements, consult your financial representative or the
Funds' 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.

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. 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

31
<PAGE> 38

only from their firm. Certain of these firms may receive compensation from the
Funds through the Shareholder Service Agent for recordkeeping and other expenses
relating to these nominee accounts. In addition, certain privileges with respect
to the purchase and redemption of shares or the reinvestment of dividends may
not be available through such firms. Some firms may participate in a program
allowing them access to their clients' accounts for servicing including, without
limitation, transfers of registration and dividend payee changes; and may
perform functions such as generation of confirmation statements and disbursement
of cash dividends. Such firms, including affiliates of KDI, may receive
compensation from the Funds through the Shareholder Service Agent for these
services. This 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 Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.

REDEMPTION OR REPURCHASE OF SHARES

GENERAL. Any shareholder may require 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, it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 15 days from receipt by a Fund of the purchase
amount. The redemption within one year of 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 (see "Purchase of Shares") and the redemption
of Class B shares may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge--Class B Shares" below).

Because of the high cost of maintaining small accounts, the Funds reserve the
right to redeem an account (and, in the case of Class B shares, impose any
applicable contingent deferred sales charge) that falls below the minimum
investment level, currently $1,000, as a result of redemptions. Currently,
Individual Retirement Accounts and employee benefit plan accounts are not
subject to this procedure. A shareholder will be notified in writing and will be
allowed 60 days to make additional purchases to bring the account value up to
the minimum investment level

32
<PAGE> 39

before a Fund redeems the shareholder's account. The investment required to
reach that level may be made at net asset value (without any initial sales
charge in the case of Class A shares).

Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. Neither a Fund nor its agents will be
liable for any loss, expense or cost arising out of any telephone request
pursuant to these privileges, including any fraudulent or unauthorized request,
and THE SHAREHOLDER WILL BEAR THE RISK OF LOSS, so long as the Fund or its agent
reasonably believes, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The verification procedures include
recording instructions, requiring certain identifying information before acting
upon instructions and sending written confirmations.

TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge in the case of Class B
shares) 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 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 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 15 days. This privilege of redeeming shares by
telephone request or by written request without a signature guarantee may not be
used to redeem shares held in certificated form and may not be used if the
shareholder's account has had an address change within 30 days of the redemption
request. During periods when it is difficult to contact the Shareholder Service
Agent by telephone, it may be difficult to use the telephone redemption
privilege, although investors can still redeem by mail. The 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 KFS deems it appropriate under then current market conditions. Once
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048 or in writing, subject to

33
<PAGE> 40

the limitations on liability described under "General" above. The Funds are not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Funds currently do not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum (including any contingent deferred sales charge). To change
the designated account to receive wire redemption proceeds, send a written
request to the Shareholder Service Agent with signatures guaranteed as described
above or contact the firm through which shares of 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
15 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
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 of 1% may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege if they
are redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived in the event of: (a)
redemptions by a participant-directed qualified retirement plan described in
Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457; (b) redemptions by employer
sponsored employee benefit plans using the subaccount record keeping system made
available through KFS; (c) redemption of shares of a shareholder (including a
registered joint owner) who has died; (d) redemption of shares of a shareholder
(including a registered joint owner) who after purchase of the shares being
redeemed becomes totally disabled (as evidenced by a determination by the
federal Social Security Administration); and (e) redemptions under a Fund's
Systematic Withdrawal Plan at a maximum of 10% per year of the net asset value
of the account.

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>

34
<PAGE> 41

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 SHARES PURCHASED BEFORE
PURCHASE MARCH 1, 1993 MARCH 1, 1993 FEBRUARY 1, 1991
------------------------ ----------------------------- ----------------------------- ------------------------
<S> <C> <C> <C>
First................... 4% 3% 5%
Second.................. 3% 3% 4%
Third................... 3% 2% 3%
Fourth.................. 2% 2% 2%
Fifth................... 2% 1% 2%
Sixth................... 1% 1% 1%
</TABLE>

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 in
appreciation to a total of $12,000. If the investor were then to redeem the
entire $12,000 in share value, the contingent deferred sales charge would be
payable only with respect to $10,000 because neither the $1,000 of reinvested
dividends nor the $1,000 of share appreciation is subject to the charge. The
charge would be at the rate of 3% ($300) because it was in the second year after
the purchase was made.

The rate of the contingent deferred sales charge under the schedule above is
determined by the length of the period of ownership. Investments are tracked on
a monthly basis. The period of ownership for this purpose begins the first day
of the month in which the order for the investment is received. For example, an
investment made in June, 1994 will be eligible for the 3% charge if redeemed on
or after June 1, 1995. In the event no specific order is requested, the
redemption will be made first from Class B shares representing reinvested
dividends and then from the earliest purchase of Class B shares. KDI receives
any contingent deferred sales charge directly.

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 KFS: (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.

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" 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") or Class B shares and incurs a
contingent

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<PAGE> 42

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 or Class B 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 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 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 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 Fund, Kemper U.S.
Government Securities Fund, Kemper International Fund, Kemper State Tax-Free
Income Series, Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip
Fund, Kemper Global Income Fund, Kemper Target Equity Fund (series are subject
to a limited offering period), Kemper Intermediate Municipal Bond Fund, Kemper
Cash Reserves Fund (available only upon exchange or conversion from Class A
shares of another Kemper Mutual Fund), Kemper U.S. Mortgage Fund, Kemper
Short-Intermediate Government Fund, Kemper Value+Growth Fund and Kemper-Dreman
Fund, Inc. ("Kemper Mutual Funds"). Except as noted below, there is no combined
purchase credit for direct purchases of shares of Kemper Money Market Fund, Cash
Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust,
Tax-Exempt New York Money Market Fund or Investors Cash Trust ("Money Market
Funds"), which are not considered "Kemper Mutual Funds" for purposes hereof. For
purposes of the Combined Purchases feature described above as well as for the
Letter of Intent and Cumulative Discount features described below, employer
sponsored employee benefit plans using the subaccount record keeping system made
available through KFS 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 KFS 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"

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<PAGE> 43

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 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, Tax-Exempt New York Money
Market Fund and Investors Cash Trust are available on exchange but only through
a financial services firm having a services agreement with KDI. Exchanges may
only be made for funds that are available for sale in the shareholder's state of
residence. Currently, Tax-Exempt California Money Market Fund is available for
sale only in California and Tax-Exempt New York Money Market Fund is available
for sale only in New York, Connecticut, New Jersey and Pennsylvania.

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 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.

General. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be exchanged until they have been owned for at least 15 days. In
addition, shares of a Kemper Mutual Fund (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 total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, dealers or other
firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders

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<PAGE> 44

interested in exercising the exchange privilege may obtain prospectuses of the
other funds from dealers, other firms or KDI. Exchanges may be accomplished by a
written request to Kemper Mutual Funds, Attention: Exchange Department, P.O. Box
419557, Kansas City, Missouri 64141-6557, or by telephone if the shareholder has
given authorization. Once the authorization is on file, the Shareholder Service
Agent will honor requests by telephone at 1-800-621-1048, subject to the
limitations on liability under "Redemption or Repurchase of Shares--General."
Any share certificates must be deposited prior to any exchange of such shares.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the telephone exchange privilege. The
exchange privilege is not a right and may be suspended, terminated or modified
at any time. Except as otherwise permitted by applicable regulations, 60 days'
prior written notice of any termination or material change will be provided.

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," including the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange. 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 $2,500) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in a Fund. Shareholders can also redeem shares (minimum $500 and maximum $2,500)
from their Fund account and transfer the proceeds to their bank, savings and
loan, or credit union checking account. By enrolling in EXPRESS-Transfer, the
shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to transfer the specified amounts between the
shareholder's Fund account and the predesignated bank, savings and loan or
credit union account, subject to the limitations on liability under "Redemption
or Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a
shareholder can initiate a transaction by calling Kemper Shareholder Services
toll free at 1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m.
Chicago time. Shareholders may terminate this privilege by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").

BANK DIRECT DEPOSIT. A shareholder may purchase additional shares of a Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, monthly investments are made automatically 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 Kemper
Service Company, P.O. Box 419415, Kansas City, Missouri 64141-6415. Termination
by a shareholder will become effective within thirty days after the Shareholder
Service Agent has received the request. A Fund may immediately terminate a
shareholder's Plan in the event that any item is unpaid by the shareholder's
financial institution. The 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.

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<PAGE> 45

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
under a systematic withdrawal plan is 10% of the net asset value of the account.
Shares are redeemed so that the payee will receive payment approximately the
first of the month. Any income and capital gain dividends will be automatically
reinvested at net asset value. A sufficient number of full and fractional shares
will be redeemed to make the designated payment. Depending upon the size of the
payments requested and fluctuations in the net asset value of the shares
redeemed, redemptions for the purpose of making such payments may reduce or even
exhaust the account.

The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, 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 B
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. KFS provides retirement plan services and
documents and KDI can establish investor accounts in any of the following types
of retirement plans:

- - Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.

- - 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.

- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.

Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from KDI upon request. The brochures for plans trusteed by
IFTC describe the current fees payable to IFTC for its services as trustee.
Investors should consult with their own tax advisers before establishing a
retirement plan.

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 necessarily
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.

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<PAGE> 46

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)
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 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.

A Fund may quote information from publications such as Morningstar, Inc., The
Wall Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago
Tribune, USA Today, Institutional Investor and Registered Representative. Also,
investors may want to compare the historical returns of various investments,
performance indexes of those investments or economic indicators, including but
not limited to stocks, bonds, certificates of deposit, money market funds and
U.S. Treasury obligations. Bank product performance may be based upon, among
other things, the BANK RATE MONITOR National 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.

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. 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 that may be imposed at the end of
the period in question. Performance figures for the Class B 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 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 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 Small Cap Fund
was organized as a

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<PAGE> 47

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 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 12, 1995
under the name Kemper Value Plus Growth Fund and does business as Kemper
Value+Growth Fund. The investment manager invested the "seed money" as the sole
shareholder of the Value+Growth Fund before the public offering of its shares
and therefore as of the date of this prospectus controls the Value+Growth Fund.

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 are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of KFS and its affiliates; and (b)
the following investment advisory clients of KFS and its investment advisory
affiliates that invest at least $1 million in a Fund: (1) unaffiliated benefit
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 Investment Company Act of
1940, such as for the election of trustees or when voting by class is
appropriate.

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<PAGE> 48

INSTITUTIONAL ACCOUNT APPLICATION GUIDE

KEMPER EQUITY FUNDS
INSTRUCTIONS
Please make sure you are using the correct application. Use the Institutional
Account Application for Corporate, Trust or other Fiduciary accounts. Use the
Individual Account Application for Individual, Joint Owners and Transfer to
Minor accounts.

THIS APPLICATION CANNOT BE USED TO ESTABLISH A RETIREMENT ACCOUNT WITH INVESTORS
FIDUCIARY TRUST COMPANY AS TRUSTEE. This application also cannot be used for any
modification of an existing account. To obtain an application for Retirement
Accounts, or forms to modify your account, call 1-800-621-1048.

- - Please print information exactly as you wish it to appear on the account.

- - Please check the box that is applicable to the type of account you are
opening.

- - PLEASE BE SURE TO COMPLETE BOTH SECTIONS I AND II.

- - PLEASE BE SURE TO SIGN THIS APPLICATION.

- - Signature(s) of authorized person(s) are required.

READ THIS IMPORTANT INFORMATION
FUND FEATURES

Exchanges. If you elect this option:
- You are authorizing exchanges between Kemper Mutual Funds by ANY
PERSON by telephone.
- Shares held in certificated form may not be exchanged until they
have been received by the Fund's Shareholder Service Agent and
deposited to the account.
- If exchanging to a new account, the minimum requirement is $1,000.
- Subsequent exchanges may be made for $100 or more.

Systematic Exchanges. If you elect this option:
- You are authorizing monthly exchanges from your Fund account to
another Fund account with the same registration.
- Shares may not be held in certificated form.
- The minimum initial account balance for Fund shares being exchanged
is $1,000.
- The minimum monthly exchange is $100 per Fund exchanged into.

Wire Redemptions. If you elect this option:
- You are authorizing the Fund or its agents to honor telephone or
other instructions from ANY PERSON for the redemption of Fund
shares. Proceeds will be wire transferred to the bank account
referenced on the application.
- Shares held in certificated form may not be redeemed under this
privilege.
- The amount redeemed must be at least $1,000.

Telephone Redemptions. If you elect this option:
- You are authorizing the Fund or its agents to honor telephone or
other instructions from ANY PERSON for the redemption of Fund
shares. Redemptions may not exceed $50,000 and proceeds are to be
payable to the shareholder of record and mailed to the address of
record.
- Shares held in certificated form may not be redeemed under this
privilege.

CERTIFICATION

The account holders certify that they have the power and authority to establish
this account and select the privileges requested. Account holders can request
the following telephone privileges on this application: expedited wire transfer
redemptions, telephone exchange transactions and pre-authorized telephone
redemption transactions. Please note that the telephone exchange privilege is
automatic unless the account holder refuses it. Neither a Fund nor its agents
will be liable for any loss, expense or cost arising out of any telephone
request pursuant to these privileges, including any fraudulent or unauthorized
request, and THE ACCOUNT HOLDER WILL BEAR THE RISK OF LOSS, so long as the Fund
or its agent reasonably believes, based upon reasonable verification procedures,
that the telephonic instructions are genuine. The verification procedures
include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations. The account holders
certify that the current prospectus for the Fund (including any Kemper Fund
selected under the Systematic Exchange Privilege) has been received and read and
that the authorizations hereon shall continue until the Fund receives written
notice of a modification signed by all appropriate parties or a termination
signed by any party. This account is subject to the terms of the Fund's
prospectus, as amended from time to time, and the terms herein set forth, and is
subject to acceptance by the Fund and to the laws of Illinois. All terms shall
be binding upon the heirs, representatives, successors and assigns of the
account holders.

All persons signing as representatives warrant as individuals that each person
signing is an authorized representative of the account holder, that the account
and privileges selected have been duly authorized, that all signatures hereon
are genuine and that the persons indicated hereon are authorized to sign.

The account holders authorize the Fund to provide the trustees or custodian of
their tax-deferred retirement plan any information necessary to administer such
a plan.

QUESTIONS

Shareholders may call 1-800-621-1048 to speak with a Kemper Shareholder Services
Representative.

Financial Representatives may call 1-800-621-5027 to speak with a Kemper Sales
Support Representative.
<PAGE> 49

INSTITUTIONAL ACCOUNT APPLICATION--SECTION I OF II

KEMPER EQUITY FUNDS (KEMPER LOGO)

MAIL TO: KEMPER MUTUAL FUNDS, ATTENTION: NEW APPLICATIONS, P.O. BOX 419356,
KANSAS CITY, MO 64141-6356

<TABLE>
<S><C>
- --------------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION.

NAME OF TRUSTEE(S)/AUTHORIZED SIGNER(S)

FIRST NAME _____________________________ M.I. _________ LAST NAME ___________________________________________
FIRST NAME _____________________________ M.I. _________ LAST NAME ___________________________________________
NAME OF _______________________________________________________________________________________________________________________
ORGANIZATION __________________________________________________________________________________________________________________
- --------------------------------------------------------------------------------------------------------------------------------
2. IS THIS A RETIREMENT PLAN*? / / Yes / / No. If Yes, designate type below. If No, complete Item 3.

/ / Self Directed IRA / / Defined Benefit
/ / Profit Sharing Plan / / Target Benefit
/ / Money Purchase Pension Plan / / 401(k) Salary Deferral
/ / Other

* If each participant is to have a separate account for the contributions, call
1-800-621-1048 for special forms. Any series of Kemper State Tax-Free Income
Series or Kemper National Tax-Free Income Series is not appropriate for
certain qualified plans.
- --------------------------------------------------------------------------------------------------------------------------------
3. TYPE OF ORGANIZATION (COMPLETE IF ANSWER TO ITEM 2 ABOVE WAS NO).

/ / Corporation / / Sole Proprietorship / / Other __________________________
/ / Partnership / / Trust __________________________
Trust Date (required)
- --------------------------------------------------------------------------------------------------------------------------------
4. MAILING ADDRESS.

Street Address _______________________________________________________________________________________________
City _______________________________________________________ State _____________ Zip _________________________
Tax ID No. _________________________________________________

- --------------------------------------------------------------------------------------------------------------------------------
5. AMOUNT INVESTED AND FUND/CLASS SELECTION. Please Do Not Write In This Space
Make checks payable to Kemper Mutual Funds.

The minimum initial investment is $1,000 per Fund.*

FUND AMOUNT CLASS
Kemper Blue Chip Fund $ _______________________ _____
Kemper Growth Fund $ _______________________ _____
Kemper Small Capitalization Equity Fund $ _______________________ _____
Kemper Technology Fund $ _______________________ _____
Kemper Total Return Fund $ _______________________ _____
Kemper Value+Growth Fund $ _______________________ _____
Total Amount Invested $ _______________________ _____

*See Letter of Intent Conditions if Item 7 is selected.
- --------------------------------------------------------------------------------------------------------------------------------
6. RIGHTS OF ACCUMULATION--CLASS A.
Cum. Discount Number (if known). We own shares in other Kemper Mutual Funds which may entitle this
purchase to a reduced sales charge as described in the Fund prospectus.

Existing Fund Name(s) Account Number(s)
____________________________________________________________ ______________________________________________________________
____________________________________________________________ ______________________________________________________________

- -------------------------------------------------------------------------------------------------------------------------------
7. LETTER OF INTENT--CLASS A (OPTIONAL). We agree to the Letter of Intent Conditions on the reverse side of this application.
We intend to invest, within a 24-month period beginning on the date hereof (initial purchase date) in shares of the Fund
purchased hereunder and one or more of the other funds listed in Item 6 above (the "Funds"), an aggregate amount which, together
with the value of shares of any of the Funds then owned by us, will equal or exceed the amount indicated below:

/ / $50,000 / / $100,000 / / $250,000 / / $500,000 / / $1,000,000
- -------------------------------------------------------------------------------------------------------------------------------
8. YOUR BROKER/DEALER. Representative's Phone Number _____________________
Dealer Number _______________________ Branch Number ______________________ Representative's Number ___________________________
Firm Name _________________________________________________________________ Representative's Last Name ________________________
Branch Address ________________________________________________________________________________________________________________
</TABLE>

<PAGE> 50

TEAR OUT COMPLETED APPLICATION

<TABLE>
<S><C>
INSTITUTIONAL ACCOUNT APPLICATION--SECTION II OF II
- ------------------------------------------------------------------------------------------------------------------------------------
9. DIVIDENDS.

Choose how you wish to receive dividends. IF NO BOXES ARE CHECKED, OPTION A WILL BE ASSIGNED.
A. / / All income and capital gains dividends REINVESTED in the account.
B. / / All income and short-term capital gains dividends IN CASH and long-term capital gains REINVESTED in the account.
(COMPLETE CASH DIVIDENDS SECTION BELOW.)
C. / / All income and capital gains dividends paid IN CASH. (COMPLETE CASH DIVIDENDS SECTION BELOW.)
D. / / All dividends REINVESTED in another Kemper Fund account: (See prospectus regarding limitations on this privilege.)

Fund Name _____________________________________________________________________ Account Number _________________________________

PLEASE SEND CASH DIVIDENDS TO (if no special payee, cash dividends will be sent to the account registration address):
/ / Account registration address. / / Special Payee as follows:

Name of Payee ________________________________________________________________ Account No. (if applicable)_________________________
Street Address ____________________________________________________________________________________________________________________
City _______________________________________________________________________________ State __________ Zip _________________________
- ------------------------------------------------------------------------------------------------------------------------------------
10. EXCHANGES.
I authorize exchanges between Kemper Mutual Funds upon instruction from ANY PERSON by telephone. / / Yes / / No
IF NEITHER BOX IS CHECKED, THE TELEPHONE EXCHANGE PRIVILEGE WILL BE PROVIDED.
- ------------------------------------------------------------------------------------------------------------------------------------
11. SYSTEMATIC EXCHANGE PRIVILEGE (OPTIONAL). PLEASE CROSS OUT THIS SECTION IF THIS PRIVILEGE IS NOT WANTED.

I authorize the monthly exchange of shares FROM my account established by this Application as follows. The account registration
on the account being exchanged INTO is/will be identical to that listed in Item 1 of this Application.
Fund (to exchange INTO):______________________________________________________ Account No. (if existing) __________________________

Choose one of the following options. Monthly exchange amount must be at least $100.
/ / Exchange shares at net asset value in the amount of $ _________.
/ / Exchange _________ % annual rate of the net asset value of my account.
/ / Exchange sufficient amounts to exchange my entire account within (choose one): / / __ years or / / __ months.

The Fund or its agents are authorized to honor telephone or other instructions from ANY PERSON for the redemption of Fund shares.
Proceeds are to be wire transferred to the bank account referenced below. ($1,000 minimum per redemption.)
Name of Depositor ________________________________________________________________________________________________________________
(as shown on bank records)
Name of Bank _____________________________________________________________________Bank Account No. _______________________________
(a savings and loan or credit union may not be able to receive wire redemptions)
Address of Bank __________________________________________________________________________________________________________________
City ______________________________________________________________________ State ____________ Zip _______________________________
- ------------------------------------------------------------------------------------------------------------------------------------
13. TELEPHONE REDEMPTIONS (OPTIONAL). / / Yes / / No PLEASE CROSS OUT THIS SECTION IF THIS PRIVILEGE IS NOT WANTED.

The Fund or its agents are authorized to honor telephone or other instructions from ANY PERSON for the redemption of Fund shares.
The amount of the redemption shall not exceed $50,000 and the proceeds are to be payable to the shareholder of record and mailed
to the address of record.
- ------------------------------------------------------------------------------------------------------------------------------------
14. CERTIFICATION AND SIGNATURE (SUBJECT TO CERTIFICATION SHOWN ON APPLICATION GUIDE).

Under penalties of perjury, the account owner hereby certifies (1) that the Tax I.D. Number above is correct and (2) that the
account owner is not subject to backup withholding because (a) the account owner has not been notified of being subject to
backup withholding as a result of a failure to report all interest or dividends, or (b) the I.R.S. has provided notification that
the account owner is no longer subject to backup withholding. (Cross out (2) if it is not correct.)

X _________________________________________________________ X__________________________________________________________
Authorized Signature Title Authorized Signature Title

_____________________ ________________________________ X _________________________________________________________
Date Daytime Phone # Authorized Signature Title

SIGNATURE GUARANTEE: REQUIRED ONLY IF ITEM 12 (WIRE REDEMPTIONS) OR ITEM 13 (TELEPHONE REDEMPTIONS) IS SELECTED. A signature
guarantee must be supplied by a commercial bank, trust company, savings and loan association, federal savings bank, member of
a national securities exchange or other eligible financial institution.

AFFIX SIGNATURE GUARANTEE STAMP

_____________________________________________________________ ____________________________________________________________
Signature Guaranteed by Authorized Signature

</TABLE>

<PAGE> 51

LETTER OF INTENT ("LOI") CONDITIONS -- CLASS A
(APPLICABLE IF ITEM 7 LETTER OF INTENT SELECTED)

The first investment hereunder must equal or exceed $1,000 or 5% of the
indicated amount, whichever is greater. The value of shares owned by us on the
initial purchase date is determined by the maximum offering price on that date.

Each investment will be made at the public offering price applicable to a single
transaction of the dollar amount indicated on the application, as described in
the applicable Fund Prospectus in effect at the time of such investment. We
understand that the levels at which reduced sales charges are available may vary
for different Funds. We agree that the sales charge schedules for the Funds are
subject to change.

We are making no commitment to purchase shares, but if our investments within 24
months from the initial purchase date do not aggregate the sum specified, we
will pay the increased amount of sales charge as prescribed below. In
determining the total amount of purchases, any shares purchased under this LOI
and then sold within the 24-month period will be deducted from our total
purchases. Exchanges between Funds will not be deducted.

Five percent (5%) of the dollar amount specified in this LOI will be held in
escrow by Kemper Distributors, Inc. (the principal underwriter) in the form of
shares of one or more of the Funds being purchased (computed to the nearest full
share at public offering price) registered in our name. All income and capital
gain dividends on the escrowed shares will be reinvested in additional shares or
paid in cash per our dividend instructions. If the shares held in escrow in
connection with this LOI are to be exchanged in accordance with the Exchange
Privilege described in the applicable Fund Prospectus, the smallest number of
full shares of the Kemper Mutual Fund to be issued on the exchange having the
same aggregate net asset value as the shares being exchanged shall be
substituted in the escrow account. If we complete the investment specified
within the 24 month period, the escrowed shares will be released.

If our total investments pursuant to this Letter are less than the amount
specified, we will remit to the principal underwriter the difference in the
sales charge actually paid and the sales charge which we would have paid if our
total investments hereunder had been made at a single time. If we do not pay
such difference in sales charge within 7 business days after written request by
the principal underwriter or our dealer, we irrevocably constitute and appoint
the principal underwriter Kemper Distributors, Inc., our attorney, with full
power of substitution, to surrender for redemption the necessary number of the
escrowed shares to realize such difference without further notice or demand. If
shares of more than one Fund are held in escrow, shares of only one Fund, or
more than one Fund, as determined in the sole discretion of the principal
underwriter may be redeemed for this purpose. In the event of a deficiency after
such surrender, we shall remain liable for such deficiency.

We agree that we or our dealer will refer to this LOI in placing any future
order for us for shares of the Fund(s) hereunder. If additional Funds are to be
added to the LOI, we or our dealer will notify the Shareholder Service Agent for
the Kemper Mutual Funds of that fact.

All purchases under this LOI must be by the same purchaser as described in the
applicable Fund Prospectus.

We agree that this LOI is subject to the terms of the applicable Fund Prospectus
that is currently in effect from time to time and that neither Kemper
Distributors, Inc. nor any Fund has any obligation to sell shares of any Fund
hereunder.
<PAGE> 52

INDIVIDUAL ACCOUNT APPLICATION GUIDE

KEMPER EQUITY FUNDS
INSTRUCTIONS
Please make sure you are using the correct application. Use the Individual
Account Application for Individual, Joint Owners and Transfer to Minor accounts.
Use the Institutional Account Application for Corporate, Trust or other
Fiduciary accounts. This application cannot be used for any modification of an
existing account. This application also cannot be used to establish an
Individual Retirement Account (IRA) with Investors Fiduciary Trust Company as
trustee. To obtain an IRA application, or forms to modify your account, call
1-800-621-1048.

- - Please print information exactly as you wish it to appear on the account.

- - Please check the box that is applicable to the type of account you are
opening.

- - Please insure that the social security number for a joint account is for the
FIRST named registrant and for a transfer to minor account is for the MINOR.

- - PLEASE BE SURE TO COMPLETE BOTH SECTIONS I AND II.

- - PLEASE BE SURE TO SIGN THIS APPLICATION. If the account is registered in the
name of:
- an individual, the individual must sign.
- joint owners, all must sign.
- a custodian for a minor, the custodian must sign.

READ THIS IMPORTANT INFORMATION
FUND FEATURES

Systematic Exchanges. If you elect this option:
- You are authorizing monthly exchanges from your Fund account to
another Kemper Fund account with the same registration.
- Shares may not be held in certificated form.
- The minimum initial account balance for Fund shares being exchanged
is $1,000.
- The minimum monthly exchange is $100 per Kemper Fund exchanged into.

Systematic Withdrawal Plans. If you elect this option:
- Shares may not be held in certificated form.
- The Plan may not be selected in conjunction with a Letter of Intent.
- Your account value must be at least $5,000.
- All dividends will be reinvested.

CERTIFICATION
The account holders certify that they have the power and authority to establish
this account and select the privileges requested. Account holders can request
the following telephone privileges on this application: expedited wire transfer
redemption and telephone exchange transactions. Please note that the telephone
exchange privilege is automatic unless the account holder refuses it. Neither a
Fund nor its agents will be liable for any loss, expense or cost arising out of
any telephone request pursuant to these privileges, including any fraudulent or
unauthorized request, and THE ACCOUNT HOLDER WILL BEAR THE RISK OF LOSS, so long
as the Fund or its agent reasonably believes, based upon reasonable verification
procedures, that the telephonic instructions are genuine. The verification
procedures include recording instructions, requiring certain identifying
information before acting upon instructions, and sending written confirmations.
The account holders certify that the current prospectus for the Fund (including
any Kemper Fund selected under the Systematic Exchange Privilege) has been
received and read and that the authorizations hereon shall continue until the
Fund receives written notice of a modification signed by all appropriate parties
or a termination signed by any party. This account is subject to the terms of
the Fund's prospectus, as amended from time to time, and the terms herein set
forth, and is subject to acceptance by the Fund and to the laws of Illinois. All
terms shall be binding upon the heirs, representatives and assigns of the
account holders.

QUESTIONS
Shareholders may call 1-800-621-1048 to speak with a Kemper Shareholder Services
Representative.

Financial Representatives may call 1-800-621-5027 to speak with a Kemper Sales
Support Representative.
<PAGE> 53

INDIVIDUAL ACCOUNT APPLICATION--SECTION I OF II

KEMPER EQUITY FUNDS (KEMPER LOGO)

MAIL TO: KEMPER MUTUAL FUNDS, ATTENTION: NEW APPLICATIONS, P.O. BOX 419356,
KANSAS CITY, MO 64141-6356

<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION.

/ / INDIVIDUAL FIRST NAME ____________________________ M.I. ________ LAST NAME __________________________________
OR
/ / JOINT TENANT* FIRST NAME ____________________________ M.I. ________ LAST NAME __________________________________
FIRST NAME ____________________________ M.I. ________ LAST NAME __________________________________
*Joint accounts will be registered as joint tenants with rights of survivorship unless otherwise indicated.
- ------------------------------------------------------------------------------------------------------------------------
/ / GIFT TO A MINOR Custodian's Name ___________________________________ Minor's Name _________________________________
(only one permitted) (only one permitted)
- ------------------------------------------------------------------------------------------------------------------------
2. YOUR MAILING ADDRESS.

Street Address _____________________________________________________________ Apt. # ____________________________________
City _____________________________________________________ State ___________ Zip _______________________________________
I am a citizen of / / U.S. / / Other (Please specify) ____________________ Social Security No. _______________________
(for first registrant or minor)
- ------------------------------------------------------------------------------------------------------------------------
3. AMOUNT INVESTED AND FUND/CLASS SELECTION. Please Do Not Write In This Space
Make checks payable to Kemper Mutual Funds.
The minimum initial investment is $1,000 per Fund
($50 if Item 12 selected).*

FUND AMOUNT CLASS
Kemper Blue Chip Fund $ _________________ _____
Kemper Growth Fund $ _________________ _____
Kemper Small Capitalization Equity Fund $ _________________ _____
Kemper Technology Fund $ _________________ _____
Kemper Total Return Fund $ _________________ _____
Kemper Value+Growth Fund $ _________________ _____
_________________________________________________
Total Amount Invested $ _________________ _____

*See Letter of Intent Conditions if Item 6 is selected.
- ------------------------------------------------------------------------------------------------------------------------
4. DIVIDENDS.
Choose how you wish to receive dividends. IF NO BOXES ARE CHECKED, OPTION A WILL BE ASSIGNED.

A. / / All income and capital gains dividends REINVESTED in my account.
B. / / All income and short-term capital gains dividends IN CASH and long-term capital gains REINVESTED in my account.
(COMPLETE CASH DIVIDENDS SECTION BELOW.)
C. / / All income and capital gains dividends paid to me IN CASH. (COMPLETE CASH DIVIDENDS SECTION BELOW.)
D. / / All dividends REINVESTED in another Kemper Fund account: (See prospectus regarding limitations on this privilege.)

Fund Name ____________________________________________ Account Number _________________________________________________

PLEASE SEND CASH DIVIDENDS TO (if no special payee, cash dividends will be sent
to the account registration address):
/ / Account registration address. / / Special Payee as follows:

Name of Payee _______________________________________________ Account No. (if applicable) _____________________________
Street Address _________________________________________________________________________________________________________
City ________________________________________________________ State _________________ Zip ____________________________

- ------------------------------------------------------------------------------------------------------------------------
5. RIGHTS OF ACCUMULATION--CLASS A.
Cum. Discount Number _______________________________ (if known). I own shares in other Kemper Mutual Funds which may
entitle this purchase to a reduced sales charge as described in the Fund prospectus.
Existing Fund Name(s) Account Number(s)
_________________________________________________________ ___________________________________________________________
_________________________________________________________ ___________________________________________________________

- ------------------------------------------------------------------------------------------------------------------------
6. LETTER OF INTENT--CLASS A (OPTIONAL). I agree to the Letter of Intent Conditions on the reverse side of this
application.
I intend to invest, within a 24-month period beginning on the date hereof
(initial purchase date) in shares of the Fund purchased hereunder and one or
more of the other funds listed in Item 5 above (the "Funds"), an aggregate
amount which, together with the value of shares of any of the Funds then owned
by me, will equal or exceed the amount indicated below:

/ /$50,000 / /$100,000 / /$250,000 / /$500,000 / /$1,000,000
- ------------------------------------------------------------------------------------------------------------------------
7. YOUR BROKER/DEALER. Representative's Phone Number _____________________
Dealer Number_________________________ Branch Number ______________ Representative's Number ___________________________
Firm Name _________________________________________________________ Representative's Last Name ________________________
Branch Address _________________________________________________________________________________________________________
</TABLE>

<PAGE> 54

TEAR OUT COMPLETED APPLICATION
PLEASE ATTACH VOIDED CHECK HERE

<TABLE>
<S><C>
INDIVIDUAL ACCOUNT APPLICATION--SECTION II OF II
- -----------------------------------------------------------------------------------------------------------------------------------
8. EXCHANGES.
I authorize exchanges between Kemper Funds upon instruction from ANY PERSON by telephone. / / Yes / / No
IF NEITHER BOX IS CHECKED, THE TELEPHONE EXCHANGE PRIVILEGE WILL BE PROVIDED.
- -----------------------------------------------------------------------------------------------------------------------------------
9. SYSTEMATIC EXCHANGE PRIVILEGE (OPTIONAL). PLEASE CROSS OUT THIS SECTION IF THIS PRIVILEGE IS NOT WANTED.
I authorize the monthly exchange of shares from my Fund account established by this Application as follows. The account
registration on the account being exchanged INTO is/will be identical to that listed in Item 1 of this application.

Kemper Fund (to exchange from): ______________________________________________

Kemper Fund (to exchange to): ________________________________________________ Account No. (if existing): _________________________

Choose one of the following options. Monthly exchange amount must be at least $100.
/ / Exchange Fund shares at net asset value in the amount of $ ____________________.
/ / Exchange ___ % annual rate of the net asset value of my account.
/ / Exchange sufficient amounts to exchange my entire account within / /________ years or / /_______ months.

If you want to establish the Systematic Exchange Privilege with options other than those listed above, call the Shareholder
Service Agent at 1-800-621-1048.
- -----------------------------------------------------------------------------------------------------------------------------------
10. SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL). PLEASE CROSS OUT THIS SECTION IF THIS PRIVILEGE IS NOT WANTED.
Please establish a Systematic Withdrawal Plan to begin: _______________ (Month, Year) for my account(s) established by this
Application. The payment ($100 minimum) may be either a specified dollar amount or an annualized percentage (10% maximum for
Class B shares) of the net asset value of the account as determined by a monthly valuation.

Withdrawal Amount or
Fund Annualized Percentage Payment Frequency
-----------------------------------------------------------
___________________ ______________________ / / Monthly / / Quarterly / / Semi-Annually / / Annually
___________________ ______________________ / / Monthly / / Quarterly / / Semi-Annually / / Annually
___________________ ______________________ / / Monthly / / Quarterly / / Semi-Annually / / Annually

Fund Send Check to
------------------------------------
___________________ / / Acc't registration / / Special
___________________ / / Acc't registration / / Special
___________________ / / Acc't registration / / Special

Please send the Systematic Withdrawal Plan check to (check above; IF NO SPECIAL PAYEE, PAYMENT WILL BE SENT TO ACCOUNT
REGISTRATION ADDRESS).

Special Payee Address:
Name _______________________________________________________ Account No. (if applicable) ________________________________________
Address ___________________________________________________________________________________________________________________________
City _______________________________________________________ State ___________ Zip ______________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
11. WIRE REDEMPTIONS (OPTIONAL). PLEASE CROSS OUT THIS SECTION IF THIS PRIVILEGE IS NOT WANTED.
I authorize the Fund or its agents to honor telephone or other instructions from ANY PERSON for the redemption of Fund shares.
Proceeds are to be wire transferred to the bank account referenced below. ($1,000 minimum per redemption.)

Name of Depositor __________________________________________
(as shown on bank records)
Name of Bank _______________________________________________ Bank Account No. ____________________________________________________
(a savings and loan or credit union may not be able to receive wire redemptions)
Address of Bank ___________________________________________________________________________________________________________________
City _______________________________________________________ State ________________ Zip _________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
12. AUTOMATIC INVESTING (OPTIONAL). PLEASE CROSS OUT THIS SECTION IF THIS PRIVILEGE IS NOT WANTED.
A. BANK DIRECT DEPOSIT I authorize the Fund's Agent to draw checks or initiate Automated Clearing House ("ACH") debits against the
bank account described on the attached voided check beginning on the __________ day of each month or the next business day for my
account(s) established by this Application. WRITE "VOID" ACROSS THE FACE OF A CHECK FOR THE BANK ACCOUNT YOU WISH TO USE, THEN
ATTACH THE CHECK TO THIS FORM. A $50 minimum applies.

If you do not have check writing privileges and therefore,
cannot attach a voided check, please complete the following
FUND AMOUNT information:
_____________________________ ________________ ----------------------------------------------------------------
_____________________________ ________________ Name of bank Branch
_____________________________ ________________ (if applicable)
_____________________________ ________________ ----------------------------------------------------------------
Address
----------------------------------------------------------------
City State Zip Code
----------------------------------------------------------------
Bank Account Number
----------------------------------------------------------------

B. DIRECT DEPOSIT OF PAYROLL/GOVERNMENT CHECK For information on direct deposit of payroll or government checks please call
the Shareholder Service Agent at 1-800-621-1048.
- -----------------------------------------------------------------------------------------------------------------------------------
13. CERTIFICATION AND SIGNATURE (SUBJECT TO CERTIFICATION SHOWN ON APPLICATION GUIDE).

Under penalties of perjury, the undersigned hereby certify (1) that the Social Security Number above is correct and (2) that the
account owner is not subject to backup withholding because (a) the account owner has not been notified of being subject to backup
withholding as a result of a failure to report all interest or dividends, or (b) the I.R.S. has provided notification that the
account owner is no longer subject to backup withholding. (Cross out (2) if it is not correct.)

X ____________________________________________________________ X _________________________________________________________________
Signature Co-Owner (if applicable)
_____________________________ _______________________________ X _________________________________________________________________
Date Daytime Phone # Co-Owner (if applicable)
</TABLE>

<PAGE> 55

LETTER OF INTENT ("LOI") CONDITIONS -- CLASS A
(APPLICABLE IF ITEM 6 LETTER OF INTENT SELECTED)

The first investment hereunder must equal or exceed $1,000 or 5% of the
indicated amount, whichever is greater. The value of shares owned by me on the
initial purchase date is determined by the maximum offering price on that date.

Each investment will be made at the public offering price applicable to a single
transaction of the dollar amount indicated on the application, as described in
the applicable Fund Prospectus in effect at the time of such investment. I
understand that the levels at which reduced sales charges are available may vary
for different Funds. I agree that the sales charge schedules for the Funds are
subject to change.

I am making no commitment to purchase shares, but if my investments within 24
months from the initial purchase date do not aggregate the sum specified, I will
pay the increased amount of sales charge as prescribed below. In determining the
total amount of purchases, any shares purchased under this LOI and then sold
within the 24-month period will be deducted from my total purchases. Exchanges
between Funds will not be deducted.

Five percent (5%) of the dollar amount specified in this LOI will be held in
escrow by Kemper Distributors, Inc. (the principal underwriter) in the form of
shares of one or more of the Funds being purchased (computed to the nearest full
share at public offering price) registered in my name. All income and capital
gain dividends on the escrowed shares will be reinvested in additional shares or
paid in cash per my dividend instructions. If the shares held in escrow in
connection with this LOI are to be exchanged in accordance with the Exchange
Privilege described in the applicable Fund Prospectus, the smallest number of
full shares of the Kemper Mutual Fund to be issued on the exchange having the
same aggregate net asset value as the shares being exchanged shall be
substituted in the escrow account. If I complete the investment specified within
the 24 month period, the escrowed shares will be released.

If my total investments pursuant to this Letter are less than the amount
specified, I will remit to the principal underwriter the difference in the sales
charge actually paid and the sales charge which I would have paid if my total
investments hereunder had been made at a single time. If I do not pay such
difference in sales charge within 7 business days after written request by the
principal underwriter or my dealer, I irrevocably constitute and appoint the
principal underwriter Kemper Distributors, Inc., my attorney, with full power of
substitution, to surrender for redemption the necessary number of the escrowed
shares to realize such difference without further notice or demand. If shares of
more than one Fund are held in escrow, shares of only one Fund, or more than one
Fund, as determined in the sole discretion of the principal underwriter may be
redeemed for this purpose. In the event of a deficiency after such surrender, I
shall remain liable for such deficiency.

I agree that I or my dealer will refer to this LOI in placing any future order
for me for shares of the Fund(s) hereunder. If additional Funds are to be added
to the LOI, I or my dealer will notify the Shareholder Service Agent for the
Kemper Mutual Funds of that fact.

All purchases under this LOI must be by the same purchaser as described in the
applicable Fund Prospectus.

I agree that this LOI is subject to the terms of the applicable Fund Prospectus
that is currently in effect from time to time and that neither Kemper
Distributors, Inc. nor any Fund has any obligation to sell shares of any Fund
hereunder.
<PAGE> 56

KEMPER

KEMPER
EQUITY
FUNDS

PROSPECTUS
AND APPLICATION

, 1995

KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER SMALL CAPITALIZATION
EQUITY FUND
KEMPER TECHNOLOGY FUND
KEMPER TOTAL RETURN FUND

KEMPER VALUE+GROWTH FUND

(KEMPER LOGO)
INVESTMENT MANAGER
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
1-800-621-1048

(KEMPER LOGO)

KEF-1A /95 (RECYCLE LOGO)printed on recycled paper

<PAGE> 57

KEMPER VALUE PLUS GROWTH FUND

CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
------------ ---------------------------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page

11. Table of Contents........................ Table of Contents

12. General Information and History.......... Inapplicable

13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies
and Techniques

14. Management of the Fund................... Investment Manager and Underwriter;
Officers and Trustees

15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees

16. Investment Advisory and Other Services... Investment Manager and Underwriter;
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..................... Value+Growth Fund--Report of Independent
Auditors; Value+Growth Fund--Statement of Net
Assets
</TABLE>
<PAGE> 58

KEMPER EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION

, 1995

KEMPER BLUE CHIP FUND ("BLUE CHIP FUND")
KEMPER GROWTH FUND ("GROWTH 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")

120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
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 , 1995. The prospectus may be obtained without charge
from the Funds.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
Investment Restrictions................................................. B-1
Investment Policies and Techniques...................................... B-8
Portfolio Transactions.................................................. B-14
Investment Manager and Underwriter...................................... B-15
Purchase and Redemption of Shares....................................... B-21
Dividends and Taxes..................................................... B-22
Performance............................................................. B-23
Officers and Trustees................................................... B-36
Shareholder Rights...................................................... B-38
Value+Growth Fund--Report of Independent Auditors ( , 1995)..... B-40
Value+Growth Fund--Statement of Net Assets ( , 1995)............ B-41
Appendix -- Ratings of Fixed Income Investments......................... B-42
</TABLE>

The financial statements appearing in each Fund's 1994 Annual Report to
Shareholders and 1995 Semiannual report to shareholders (unaudited), except for
the Value+Growth Fund, are incorporated herein by reference. With respect to the
unaudited financial statements contained in the Semiannual Reports, all
adjustments necessary for a fair statement of the results of operations for the
period covered by the report are included. All such adjustments are of a normal
recurring nature. The financial statements for the Fund for which this Statement
of Additional Information is requested accompanies this document.

KEF-13 /95 [RECYCLE LOGO] printed on recycled paper

<PAGE> 59

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 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.

(2) Purchase more than 10% of any class of voting securities of any issuer.

(3) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment 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 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
(5) 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.

(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.

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<PAGE> 60

(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) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.

(ii) Invest for the purpose of exercising control or management of another
issuer.

(iii) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers which
invest in or sponsor such programs.

(iv) Purchase securities of other open-end investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.

(v) Invest more than 5% of the Fund's total assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) which with their predecessors have a record of less than
three years continuous operation and equity securities of issuers which are not
readily marketable.

(vi) Invest more than 15% of its net assets in illiquid securities.

(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchange. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

(viii) Invest in oil, gas, and other mineral leases.

(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies which invest in real estate).

(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities will not exceed 15% of total
assets.

(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.

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.

(2) Purchase more than 10% of any class of securities of any issuer. 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.

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<PAGE> 61

(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) Concentrate more than 25% of the value of its assets in any one industry.
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.

(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.

(i) Invest more than 5% of the Fund's total assets in securities of issuers
which with their predecessors have a record of less than three years continuous
operation and equity securities of issuers which are not readily marketable.

(ii) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.

(iii) Invest for the purpose of exercising control or management of another
issuer.

(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.

(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets.

(vi) Invest more than 15% of its net assets in illiquid securities.

(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

(viii) Invest in oil, gas, and other mineral leases.

B-3
<PAGE> 62

(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable securities in real estate investment trusts and
readily marketable securities of companies which invest in real estate).

(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.

THE SMALL CAP FUND MAY NOT, AS A FUNDAMENTAL POLICY:

(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.

(7) Concentrate more than 25% of the value of its assets in any one industry.
Water, communications, electric and gas utilities shall each be considered a
separate industry.

(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.

B-4
<PAGE> 63

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:

(ii) Purchase or retain the securities of any issuer if any of the officers or
trustees of the Fund or its investment adviser owns beneficially more than 1/2
of 1% of the securities of such issuer and together own more than 5% of the
securities of such issuer.

(iii) Invest for the purpose of exercising control or management of another
issuer.

(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.

(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets.

(vi) Invest more than 15% of its net assets in illiquid securities.

(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

(viii) Invest in oil, gas, and other mineral leases.

(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.

THE TECHNOLOGY FUND MAY NOT, AS A FUNDAMENTAL POLICY:

(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.

B-5
<PAGE> 64

(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) Concentrate more than 25% of the value of its assets in any one industry.
Water, communications, electric and gas utilities shall each be considered a
separate industry.

(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.

(iii) Invest for the purpose of exercising control or management of another
issuer.

(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.

(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets unless
immediately thereafter not more than (i) 3% of the total outstanding voting
stock of such company would be owned by the Fund, (ii) 5% of the Fund's total
assets would be invested in any one such company, and (iii) 10% of the Fund's
total assets would be invested in such securities.

(vi) Invest more than 15% of its net assets in illiquid securities.

(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

(viii) Invest in oil, gas, and other mineral leases.

B-6
<PAGE> 65

(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.

THE TOTAL RETURN FUND MAY NOT, AS A FUNDAMENTAL POLICY:

(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.

(7) Concentrate more than 25% of the value of its assets in any one industry.
Water, communications, electric and gas utilities shall each be considered a
separate industry.

(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.

(i) Invest more than 5% of the Fund's total assets in securities of issuers
which with their predecessors have a record of less than three years continuous
operation and in equity securities which are not readily marketable.

B-7
<PAGE> 66

(iii) Invest for the purpose of exercising control or management of another
issuer.

(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.

(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets.

(vi) Invest more than 15% of its net assets in illiquid securities.

(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

(viii) Invest in oil, gas, and other mineral leases.

(xi) Invest more than 10% of its total assets in securities of real estate
investment funds.

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 Technology Fund 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 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 Technology Fund may write (sell) "covered" call
options on securities as long as it owns the underlying securities subject to
the option or an option to purchase the same underlying securities, having an
exercise price equal to or less than the exercise price of the "covered" option,
or will establish and maintain for the term of the option a segregated account
consisting of cash, U.S. Government securities or other liquid high-grade debt
obligations ("eligible securities") having a value at least equal to the
fluctuating market value of the optioned securities. The Technology Fund may
write "covered" put options provided that, as long as the Fund is obligated as a
writer of a put option, the Fund will own an option to sell the underlying
securities subject to the option, having an exercise price equal to or greater
than the exercise price of the "covered" option, or it will deposit and maintain
in a segregated account eligible securities having a value equal to or greater
than the exercise price of the option. A call option gives the purchaser the
right to buy, and the writer the obligation to sell, the underlying security at
the exercise price during the option period. A put option gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying security
at the exercise price during the option period. The premium received for writing
an option will reflect, among other things, the current market price of the
underlying

B-8
<PAGE> 67

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 Technology Fund) 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 money market investment.
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
money market investment.

OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objectives and Policies"), 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 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.

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<PAGE> 68

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 Technology Fund) 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 Technology Fund anticipates entering into agreements with dealers to which
the Fund sells OTC options. Under these agreements the Fund would have the
absolute right to repurchase the OTC options from the dealer at any time at a
price no greater than a price established under the agreements (the "Repurchase
Price"). The "liquidity charge" referred to above for a specific OTC option
transaction will be the Repurchase Price related to the OTC option less the
intrinsic value of the OTC option. The intrinsic value of an OTC call option for
such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put
option, intrinsic value will be the amount by which the exercise price exceeds
the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow the Fund to repurchase a specific OTC
option written by the Fund, the "liquidity charge" will be the current market
value of the assets serving as "cover" for such OTC option.

OPTIONS ON SECURITIES INDICES. The Blue Chip, Growth, Small Cap, Total Return
and Value+Growth Funds may purchase, and the Technology Fund 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 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 Technology Fund writes an option on a securities index, it will
segregate, and mark-to-market, eligible securities equal in value to 100% of the
exercise price in the case of a put, or the contract value in the case of a
call. In addition, where the 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

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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 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.

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

B-11
<PAGE> 70

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 SEC Release No.
IC-10666, when purchasing a futures contract, writing a put option or entering
into a forward currency exchange purchase, a Fund will maintain in a segregated
account cash, U.S. Government securities or liquid high-grade debt obligations
equal to the value of such contracts. 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 which 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 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

B-12
<PAGE> 71

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 cash or liquid high-grade
securities in an amount not less than the value of the Fund's total assets
committed to forward foreign currency exchange contracts entered into for the
purchase of a foreign currency. If the value of the securities segregated
declines, additional cash or securities is added so that the segregated amount
is not less than the amount of the Fund's commitments with respect to such
contracts. 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.

SHORT SALES AGAINST-THE-BOX. The Blue Chip Fund may make short sales
against-the-box for the purpose of deferring realization of gain or loss for
federal income tax purposes. A short sale "against-the-box" is a short sale in
which the Fund owns at least an equal amount of the securities 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. The Fund may engage in such short sales only to the
extent that not more than 10% of the Fund's total assets (determined at the time
of the short sale) is held as collateral for such sales. The Fund 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.

B-13
<PAGE> 72

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."

PORTFOLIO TRANSACTIONS

KFS is the investment manager for the Kemper Funds and KFS and its affiliates
also furnish investment management services to other clients including Kemper
Corporation and the Kemper insurance companies. KFS is the sole shareholder of
Kemper Asset Management Company and Kemper Investment Management Company
Limited. These three entities share some common research and trading facilities.
DVA is the investment manager for Kemper-Dreman Fund, Inc. and the sub-advisor
for the Value+Growth Fund. At times investment decisions may be made to purchase
or sell the same investment securities for a Fund and for one or more of the
other clients managed by KFS or DVA. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated as to amount and price in a manner considered
equitable to each.

National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options a Fund
will be able to write on a particular security.

The above mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or futures contracts available to a Fund. On the
other hand, the ability of a Fund to participate in volume transactions may
produce better executions for a Fund in some cases. The Board of Trustees of
each Fund believes that the benefits of KFS's and DVA's organization outweigh
any limitations that may arise from simultaneous transactions or position
limitations.

KFS and DVA, in effecting purchases and sales of portfolio securities for the
account of a Fund, will implement each Fund's policy of seeking best execution
of orders, which includes best net prices, except to the extent that KFS and DVA
may be permitted to pay higher brokerage commissions for research services as
described below. Consistent

B-14
<PAGE> 73

with this policy, orders for portfolio transactions are placed with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services, which include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to a Fund and KFS or DVA. Any research benefits derived are
available for all clients, including clients of affiliated companies. Since it
is only supplementary to KFS's and DVA's own research efforts and must be
analyzed and reviewed by KFS' and DVA's staff, the receipt of research
information is not expected to materially reduce expenses. In selecting among
firms believed to meet the criteria for handling a particular transaction, KFS
and DVA may give consideration to those firms that have sold or are selling
shares of the Funds and of other funds managed by KFS and DVA, as well as to
those firms that provide market, statistical and other research information to a
Fund and KFS and DVA, although neither KFS nor DVA is not authorized to pay
higher commissions or, in the case of principal trades, higher prices to firms
that provide such services, except as provided below.

KFS and DVA may in certain instances be permitted to pay higher brokerage
commissions (not including principal trades) solely for receipt of market,
statistical and other research services. Subject to Section 28(e) of the
Securities Exchange Act of 1934 and procedures that may be adopted by the Board
of Trustees of each Fund, a Fund could pay a firm that provides research
services to KFS or DVA commissions for effecting a securities transaction for
the Fund in excess of the amount other firms would have charged for the
transaction if KFS or DVA determines in good faith that the greater commission
is reasonable in relation to the value of the research services provided by the
executing firm viewed in terms either of a particular transaction or KFS's or
DVA's overall responsibilities to the Fund or other clients. Not all of such
research services may be useful or of value in advising a particular Fund.
Research benefits will be available for all clients of KFS and its subsidiaries.
The investment management fee paid by a Fund to KFS is not reduced because KFS
or DVA receives these research services.

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 or sales of
Kemper Fund shares (except for the Value+Growth Fund, which commenced operations
on , 1995).

<TABLE>
<CAPTION>
ALLOCATED TO FIRMS
BASED ON
RESEARCH/SALES OF
KEMPER FUND SHARES
FUND FISCAL 1994 IN FISCAL 1994 FISCAL 1993 FISCAL 1992
- ------------------------------------------- ----------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Blue Chip.................................. $ 565,000 98% $ 1,128,000 $ 592,000
Growth..................................... $ 7,110,000 98% $ 8,100,000 $ 4,224,000
Small Cap.................................. $ 2,782,000 86% $ 2,740,000 $ 1,855,000
Technology................................. $ 1,644,000 85% $ 3,279,000 $ 2,814,000
Total Return............................... $ 7,705,000 81% $ 6,884,000 $ 4,236,000
</TABLE>

INVESTMENT MANAGER AND UNDERWRITER

INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is each Fund's investment manager. Pursuant to
investment management agreements, KFS acts as each Fund's investment adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical, bookkeeping and administrative
services, and permits any of its officers or employees to serve without
compensation as trustees or officers of 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 officers or employees of KFS), independent auditors,
counsel, custodian and transfer agent and the cost of share certificates,
reports and notices to shareholders, brokerage commissions or transaction costs,
costs of calculating net asset value, taxes and membership dues. Each Fund bears
the expenses of registration of its shares with the Securities and Exchange
Commission, while Kemper Distributors,

B-15
<PAGE> 74

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. KFS has agreed to reimburse each Fund to
the extent required by applicable state expense limitations should all operating
expenses of each Fund, including the investment management fees of KFS but
excluding taxes, interest, distribution fees, extraordinary expenses, brokerage
commissions or transaction costs and any other properly excludable expenses,
exceed the applicable state expense limitations. The Funds believe that the most
restrictive state expense limitation currently in effect would require that such
operating expenses not exceed 2.5% of the first $30 million of average daily net
assets, 2% of the next $70 million and 1.5% of average daily net assets over
$100 million. Under such state expense limitation, custodian costs attributable
to foreign securities that are in excess of similar domestic custodian costs are
excluded from operating expenses.

The investment management agreements provide that KFS 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
KFS in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under each agreement.

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. The agreement for the
Value+Growth Fund has an initial term ending March 1, 1997. 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.

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 (except for the Value+Growth Fund, which commenced operations on
, 1995).

<TABLE>
<CAPTION>
FUND FISCAL 1994 FISCAL 1993 FISCAL 1992
- ----------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Blue Chip.................................................. $ 1,072,000 1,298,000 763,000
Growth..................................................... $ 9,634,000 8,320,000 5,661,000
Small Cap.................................................. $ 3,746,000+ 2,290,000++ 2,447,000
Technology................................................. $ 3,296,000 3,074,000 3,015,000
Total Return............................................... $10,997,000 6,837,000 5,763,000
</TABLE>

- ---------------
+ Fee was increased $499,000 from $3,247,000 base fee.

++ Fee was decreased from $2,392,000 base fee.

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 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

B-16
<PAGE> 75

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
KFS. 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.

Prior to May 31, 1994, the Blue Chip Fund paid KFS an investment management fee,
payable monthly, at the annual rate of .65 of 1% of average daily net assets of
the Fund. Prior to May 31, 1994, the Growth Fund and the Total Return Fund each
paid KFS an investment management fee, payable monthly, at the annual rate of
.65 of 1% of the first $200 million of average daily net assets, .55 of 1% of
the next $300 million of average daily net assets and .45 of 1% of average daily
net assets over $500 million. Prior to May 31, 1994, the Technology Fund paid
KFS an investment management fee, payable monthly, at the annual rate of .60 of
1% of the first $200 million of average daily net assets, .50 of 1% of the next
$300 million of average daily net assets and .40 of 1% of average daily net
assets over $500 million.

VALUE+GROWTH FUND SUB-ADVISOR. Dreman Value Advisors, Inc. ("DVA"), 10 Exchange
Place, Jersey City, New Jersey 07302, is the sub-advisor for the value portion
of the Value+Growth Fund. DVA is a wholly owned subsidiary of KFS. DVA will act
as sub-advisor pursuant to the terms of a Sub-Advisory Agreement between it and
KFS.

Under the terms of the Sub-Advisory Agreement, DVA will manage the value portion
of the Value+Growth Fund's portfolio and will provide such investment advice,
research and assistance as KFS may, from time to time, reasonably request. DVA
may, under the terms of the Sub-Advisory Agreement, render similar services to
others including other investment companies. For its services, DVA will receive
from KFS a monthly fee at the annual rate of .25% of the Fund's average daily
net assets. DVA permits any of its officers or employees to serve without
compensation as trustees or officers of the Value+Growth Fund if elected to such
positions.

The Sub-Advisory Agreement provides that DVA will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
DVA in the performance of its duties or from reckless disregard by DVA of its
obligations and duties under the Sub-Advisory Agreement.

The Sub-Advisory Agreement has an initial term ending March 1, 1997 and
continues by its terms from year to year if such continuance is specifically
approved at least annually (a) by a majority of the trustees who are not parties
to such agreement or interested persons of any such party except in their
capacity as trustees of the Fund, and (b) by the shareholders or the Board of
Trustees of the Fund. The Sub-Advisory Agreement may be terminated at any time
upon 60 days' notice by either party or by majority vote of the outstanding
shares of the Fund, and will terminate automatically upon assignment.

PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), a wholly owned subsidiary of KFS, is the principal

B-17
<PAGE> 76

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. Before
February 1, 1995, KFS was the principal underwriter and distributor.

Each distribution agreement continues in effect from year to year so long as
such continuance is approved for each class at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to a
class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
Investment Company Act of 1940. The agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.

CLASS A SHARES. 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 (except for the Value+Growth Fund, which commenced operations
on , 1995).

<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS PAID TO KEMPER
COMMISSIONS RETAINED UNDERWRITER AFFILIATED
FUND FISCAL YEAR BY UNDERWRITER PAID TO ALL FIRMS FIRMS
- ------------------------------ ----------- -------------------- ----------------- --------------
<S> <C> <C> <C> <C>
Blue Chip..................... 1994 $ 64,000 398,000 68,000
1993 $ 130,000 1,022,000 214,000
1992 $ 239,000 5,827,000 1,563,000
Growth........................ 1994 $ 489,000 3,861,000 591,000
1993 $1,404,000 12,057,000 1,622,000
1992 $3,126,000 34,418,000 6,739,000
Small Cap..................... 1994 $ 182,000 1,264,000 243,000
1993 $ 224,000 4,669,000 1,148,000
1992 $ 278,000 1,779,000 402,000
Technology.................... 1994 $ 43,000 218,000 38,000
1993 $ 65,000 250,000 37,000
1992 $ 86,000 257,000 51,000
Total Return.................. 1994 $ 523,000 4,036,000 693,000
1993 $ 620,000 5,144,000 746,000
1992 $ 811,000 9,003,000 1,972,000
</TABLE>

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 KFS, the underwriter until February 1,
1995, in connection with the Rule 12b-1 Plans for the Class B

B-18
<PAGE> 77

and Class C Shares are set forth below (except for the Value+Growth Fund, which
commenced operations on , 1995). A portion of the marketing, sales
and operating expenses shown below could be considered overhead expense.

<TABLE>
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID
BY UNDERWRITER
DISTRIBUTION CONTINGENT TOTAL ----------------------------------
FEES PAID DEFERRED COMMISSIONS COMMISSIONS ADVERTISING MARKETING
FUND CLASS B FISCAL BY FUND TO SALES CHARGES PAID BY UNDERWRITER PAID BY UNDERWRITER AND PROSPECTUS AND SALES
SHARES YEAR* UNDERWRITER TO UNDERWRITER TO FIRMS TO AFFILIATED FIRMS LITERATURE PRINTING EXPENSES
- ---------------- ------ ----------- -------------- ------------------- ------------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Blue Chip....... 1994 $ 4,000 2,000 27,000 9,000 4,000 1,000 12,000
Growth.......... 1994 $1,794,000 534,000 1,282,000 122,000 106,000 28,000 662,000
Small Cap....... 1994 $ 390,000 104,000 487,000 61,000 43,000 11,000 251,000
Technology...... 1994 $ 4,000 -- 29,000 11,000 3,000 -- 8,000
Total Return.... 1994 $3,909,000 1,158,000 2,376,000 329,000 220,000 73,000 1,401,000

<CAPTION>
OTHER DISTRIBUTION
EXPENSES PAID
BY UNDERWRITER
--------------------
MISC.
FUND CLASS B OPERATING INTEREST
SHARES EXPENSES EXPENSES
- ---------------- --------- --------
<S> <C> <C>
Blue Chip....... 5,000 1,000
Growth.......... 80,000 95,000
Small Cap....... 31,000 75,000
Technology...... 4,000 1,000
Total Return.... 179,000 378,000
</TABLE>

- ---------------
* Class B shares were first offered on May 31, 1994.
<TABLE>
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY
TOTAL DISTRIBUTION UNDERWRITER
DISTRIBUTION DISTRIBUTION FEES PAID --------------------------------------
FEES PAID FEES PAID BY UNDERWRITER ADVERTISING MARKETING
FUND CLASS C FISCAL BY FUND BY UNDERWRITER TO AFFILIATED AND PROSPECTUS AND SALES
SHARES YEAR** TO UNDERWRITER TO FIRMS FIRMS LITERATURE PRINTING EXPENSES
- ------------------ ----------- -------------- -------------- -------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Blue Chip......... 1994 $ -- -- -- 1,000 -- 2,000
Growth............ 1994 $2,000 2,000 1,000 3,000 1,000 16,000
Small Cap......... 1994 $1,000 1,000 -- 2,000 1,000 12,000
Technology........ 1994 $ -- -- -- -- -- 1,000
Total Return...... 1994 $3,000 3,000 1,000 5,000 2,000 32,000

<CAPTION>
OTHER DISTRIBUTION
EXPENSES PAID BY
UNDERWRITER
---------------------
MISC.
FUND CLASS C OPERATING INTEREST
SHARES EXPENSES EXPENSES
- ------------------ --------- --------
<S> <C> <C>
Blue Chip......... 2,000 --
Growth............ 2,000 --
Small Cap......... 2,000 --
Technology........ 1,000 --
Total Return...... 5,000 1,000
</TABLE>

- ---------------
** Class C shares were first offered on May 31, 1994.

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 1% of average daily net assets of each class of each Fund.
Before February 1, 1995, KFS was the administrator.

KDI has entered into related arrangements with various financial services firms,
such as broker-dealers or banks ("firms"), that provide services and facilities
for their customers or clients who are shareholders of 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 shareholder 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. KDI pays
each firm a service fee, payable quarterly, at an annual rate of up to .25 of 1%
of the net assets in Fund accounts that it maintains and services attributable
to Class A, Class B and Class C shares, respectively, in each case commencing
with the month after investment (month of investment for Class C shares);
provided, however, KDI may advance the first year service fee as described in
the prospectus under "Investment Manager and Underwriter." Firms to which
service fees may be paid include broker-dealers affiliated with KDI.

B-19
<PAGE> 78

The following information concerns the administrative services fee paid by each
Fund (except for the Value+Growth Fund, which commenced operations on
, 1995).

<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>
Blue Chip........... 1994* $ 407,000 2,000 -- 413,000 92,000
1993 $ 476,000 * * 476,000 129,000
1992 $ 262,000 * * 262,000 74,000
Growth.............. 1994* $3,628,000 553,000 1,000 4,347,000 618,000
1993 $3,740,000 * * 3,740,000 627,000
1992 $2,264,000 * * 2,264,000 434,000
Small Cap........... 1994* $1,066,000 124,000 -- 1,212,000 321,000
1993 $ 935,000 * * 935,000 292,000
1992 $ 705,000 * * 705,000 250,000
Technology.......... 1994* $ 873,000 1,000 -- 885,000 83,000
1993 $ 820,000 * * 820,000 81,000
1992 $ 766,000 * * 766,000 67,000
Total Return........ 1994* $3,635,000 1,212,000 1,000 5,063,000 959,000
1993 $3,159,000 * * 3,159,000 869,000
1992 $2,603,000 * * 2,603,000 773,000
</TABLE>

- ---------------
* Class B and Class C shares were first offered on May 31, 1994.

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 KFS or
KDI as indicated under "Officers and Trustees."

CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of each Fund
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of each Fund held outside of the United States. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by 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 KFS, serves as "Shareholder
Service Agent." IFTC receives an annual fee as custodian for each Fund, payable
monthly, at a rate of $.10 per $1,000 of average monthly net assets of each Fund
plus certain transaction charges and out-of-pocket expense reimbursement. 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 1994 fiscal
year, the custodian and transfer agent fees paid to IFTC

B-20
<PAGE> 79

(excluding related expenses) and the shareholder service fees IFTC remitted to
KSvC. Prior to February 1, 1995, IFTC was 50% owned by KFS. As noted previously,
the Value+Growth Fund commenced operations on , 1995.

<TABLE>
<CAPTION>
FEES PAID BY FEES IFTC
FUND FUND TO IFTC PAID TO KSVC
------------ ------------
<S> <C> <C>
Blue Chip............................................................... $ 632,000 625,000
Growth.................................................................. $ 5,388,000 5,284,000
Small Cap............................................................... $ 1,595,000 1,561,000
Technology.............................................................. $ 643,000 613,000
Total Return............................................................ $ 5,775,000 5,646,000
</TABLE>

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.

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. The redemption
within one year of Class A shares purchased at net asset value under the Large
Order NAV Purchase Privilege described in the prospectus may be subject to a 1%
contingent deferred sales charge (see "Purchase of Shares" in the prospectus).
Redemption of Class B shares may be subject to a contingent deferred sales
charge. When a Fund is asked to redeem shares for which it may not yet have
received good payment, it may delay the mailing of a redemption check until it
has determined that collected funds have been received for the purchase of such
shares, which will be up to 15 days.

Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B shares by certain classes of persons or through certain
types of transactions as described in the prospectus is provided because of
anticipated economies in sales and sales related efforts.

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

B-21
<PAGE> 80

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 Growth, 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 (or for the Value+Growth Fund,
intends to qualify) as a regulated investment company under Subchapter M of the
Code and, if so qualified, will not be liable for federal income taxes to the
extent its earnings are distributed. One of the Subchapter M requirements to be
satisfied is that less than 30% of a Fund's gross income during its fiscal year
must be derived from gains (not reduced by losses) from the sale or other
disposition of securities and certain other investments held for less than three
months. A Fund may be limited in its options, futures and foreign currency
transactions in order to prevent recognition of such gains.

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 and futures 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 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.

B-22
<PAGE> 81

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" 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 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
value in the case of Class B 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 figures for Class A shares
for various periods are set forth in the tables below.

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. 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

B-23
<PAGE> 82

case of Class A shares), and computing the "ending value" of that investment at
the end of the period. The total return percentage is then determined by
subtracting the initial investment from the ending value and dividing the
remainder by the initial investment and expressing the result as a percentage.
The ending value in the case of Class B shares may or may not include the effect
of the applicable contingent deferred sales charge that may be imposed at the
end of the period. The calculation assumes that all income and capital gains
dividends paid by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B shares 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
necessarily 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 each year thereafter and becomes zero after six years.
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 Dow Jones Industrial Average
and the Standard & Poor's 500 Stock Index are unmanaged indices of common stocks
which are considered to be generally representative of the U.S. stock market.
The Russell 1000(R) Growth Index is an unmanaged index generally representative
of the market for small domestic stocks. The market prices and yields of the
stocks in these indexes will fluctuate. The Consumer Price Index is generally
considered to be a measure of inflation. The Lipper Growth and Income Fund Index
and the Lipper Balanced Fund Index are weighted performance averages of other
mutual funds with growth of capital and income objectives. The Lipper Growth
Fund Index is a weighted performance average of other mutual funds with growth
of capital objectives. The Wilshire Mid Cap Growth Index is an unmanaged index
generally representative of the market for mid-capitalization domestic stocks.
The Lehman Brothers Government/Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment grade
corporate debt securities during various market conditions. The U.S. Treasury
Bill Index represents the performance of U.S. Treasury bills during various
market conditions. 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. As indicated previously, the Value+Growth Fund commenced
operations on , 1995.

B-24
<PAGE> 83

BLUE CHIP FUND -- OCTOBER 31, 1994
<TABLE>
<CAPTION>
Initial Income
TOTAL $10,000 Capital Gain Dividends Ending Percentage
RETURN Investment Dividends Reinvested Value Increase
TABLE (1) Reinvested (2) (adjusted)(1) (adjusted)(1)
- ----------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 12,911 $ 1,078 $ 2,648 $ 16,637 66.4%
Five Years 11,545 915 1,661 14,121 41.2
One Year 8,371 200 492 9,063 (9.4)
Year to Date 9,086 0 53 9,139 (8.6)

CLASS B SHARES
Life of Fund(++) $ 9,992 $ 0 $ 50 $ 9,642 (3.6)%

CLASS C SHARES
Life of Fund(++) $ 10,016 $ 0 $ 51 -- --

<CAPTION>
Ending Percentage
TOTAL Value Increase Dow Jones Standard Consumer
RETURN (unadjusted) (unadjusted) Industrial & Poor's Price
TABLE (1) (1) Average(3) 500(4) Index(5)
- ----------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 17,654 76.5% 169.6% 156.0% 29.6%
Five Years 14,976 49.8 73.2 62.0 19.0
One Year 9,618 (3.8) 9.2 3.9 2.6
Year to Date 9,697 (3.0) 6.5 3.6 2.5
CLASS B SHARES
Life of Fund(++) $ 10,042 0.4% 5.2% 4.6% 1.4%
CLASS C SHARES
Life of Fund(++) $ 10,067 0.7% 5.2% 4.6% 1.4%

<CAPTION>
Russell Lipper U.S.
TOTAL 1000(R) Growth Treasury
RETURN Growth and Income Bill
TABLE Index(6) Fund(7) Index(8)
- ----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 161.9% 144.3% 47.3%
Five Years 65.9 61.1 27.7
One Year 5.4 3.1 3.9
Year to Date 4.3 2.4 2.3
CLASS B SHARES
Life of Fund(++) 7.0% 3.2% 2.3%
CLASS C SHARES
Life of Fund(++) 7.0% 3.2% 2.3%
</TABLE>

<TABLE>
<CAPTION>
Lipper
Fund Fund Fund Dow Standard Russell Growth U.S.
AVERAGE ANNUAL Class Class Class Jones & Consumer 1000(R) and Treasury
TOTAL RETURN A B 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(+) 7.6% -- -- 15.4% 14.6% 3.8% 14.9% 13.8% 5.7%
Life of Fund(++) -- (8.4)% 1.6% 13.0 11.4 3.3 17.6 7.9 5.6
Five Years 7.2 -- -- 11.6 10.1 3.6 10.7 10.0 5.0
One Year (9.4) -- -- 9.2 3.9 2.6 5.4 3.1 3.9
</TABLE>

- ---------------

(+) Since November 23, 1987 for Class A shares.

(++) Since May 31, 1994 for Class B and Class C shares.

B-25
<PAGE> 84

GROWTH FUND -- SEPTEMBER 30, 1994
<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(+) $ 24,169 $ 153,191 $ 74,415 $ 251,775 2,417.8% $267,260 2,572.6% 1,312.3%
Fifteen Years 10,967 38,696 17,805 67,468 574.7 71,597 616.0 730.7
Ten Years 9,563 16,401 7,564 33,528 235.3 35,581 255.8 355.7
Five Years 12,445 1,892 958 15,295 53.0 16,232 62.3 67.4
One Year 7,948 537 53 8,538 (14.6) 9,061 (9.4) 11.1
Year to Date 8,917 0 0 8,917 (10.8) 9,459 (5.4) 4.5

CLASS B SHARES
Life of Fund(++) $ 9,832 $ 0 $ 0 $ 9,439 (5.6)% $ 9,832 (1.7)% 3.2%

CLASS C SHARES
Life of Fund(++) $ 9,840 $ 0 $ 0 -- -- $ 9,840 (1.6)% 3.2%

<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(+) 1,474.6 % 365.4% * 965.0% 587.1%
Fifteen Years 664.4 100.3 577.7% 563.0 205.0
Ten Years 289.9 42.3 282.9 261.2 79.7
Five Years 54.7 19.5 59.2 55.4 27.7
One Year 3.7 3.0 5.8 1.3 3.9
Year to Date 1.3 2.5 1.9 (0.7) 2.3

CLASS B SHARES
Life of Fund(++) 2.3 % 1.3% 4.5% 1.3% 2.3%

CLASS C SHARES
Life of Fund(++) 2.3 % 1.3% 4.5% 1.3% 2.3%
</TABLE>

<TABLE>
<CAPTION>
Fund Fund Fund Dow Standard Russell U.S.
AVERAGE ANNUAL Class Class Class Jones & Consumer 1000(R) Lipper Treasury
TOTAL RETURN A B 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(+) 12.0% -- -- 9.7% 10.2% 5.5% * 8.7% 7.0%
Life of Fund(++) -- (15.9)% (4.7)% 10.0 7.1 3.9 14.2% 4.0 7.0
Fifteen Years 13.6 -- -- 15.2 14.5 4.7 13.6 13.4 7.7
Ten Years 12.9 -- -- 16.4 14.6 3.6 14.4 13.7 6.0
Five Years 8.9 -- -- 10.9 9.1 3.6 9.7 9.2 5.0
One Year (14.6) -- -- 11.1 3.7 3.0 5.8 1.3 3.9
</TABLE>

- ---------------

* Data not available.

(+) Since April 4, 1966 for Class A shares.

(++) Since May 31, 1994 for Class B and Class C shares.

B-26
<PAGE> 85

SMALL CAP FUND -- SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Initial Income Ending Percentage
TOTAL $10,000 Capital Gain Dividends Value Increase
RETURN Investment Dividends Reinvested (adjusted) (adjusted)
TABLE (1) Reinvested (2) (1) (1)
- ----------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 27,406 $ 110,161 $ 40,791 $ 178,358 1,683.6%
Fifteen Years 16,841 44,885 15,032 76,758 667.6
Ten Years 11,930 17,123 4,805 33,858 238.6
Five Years 11,620 3,944 991 16,555 65.6
One Year 8,494 500 29 9,023 (9.8)
Year to Date 9,179 0 0 9,179 (8.2)

CLASS B SHARES
Life of Fund(++) $ 10,230 $ 0 $ 0 $ 9,830 (1.7)%

CLASS C SHARES
Life of Fund(++) $ 10,212 $ 0 $ 0 -- --

Life of Fund(+) $ 189,059 1,790.6% 1,198.6% 1,202.5% 317.3%
Fifteen Years 81,841 718.4 730.7 664.4 100.3
Ten Years 35,939 259.4 355.7 289.9 42.3
Five Years 17,575 75.8 67.4 54.7 19.5
One Year 9,569 (4.3) 11.1 3.7 3.0
Year to Date 9,732 (2.7) 4.5 1.3 2.5

CLASS B SHARES
Life of Fund(++) $ 10,230 2.3% 3.2% 2.3% 1.3%

CLASS C SHARES
Life of Fund(++) $ 10,212 2.1% 3.2% 2.3% 1.3%

<CAPTION>
Russell
TOTAL Wilshire 1000(R)
RETURN Mid Cap Growth
TABLE Growth(10) Index(6)
- ----------------- ---------------- ----------------
<S> <C> <C>
CLASS A SHARES
Life of Fund(+) * *
Fifteen Years 677.3% 577.7%
Ten Years 251.6 282.9
Five Years 71.5 59.2
One Year 5.9 5.8
Year to Date 1.4 1.9

CLASS B SHARES
Life of Fund(++) 4.8% 4.5%

CLASS C SHARES
Life of Fund(++) 4.8% 4.5%
</TABLE>

<TABLE>
<CAPTION>
Fund Fund Fund Dow Standard Wilshire Russell
AVERAGE ANNUAL Class Class Class Jones & Consumer Mid 1000(R)
TOTAL RETURN A B C Industrial Poor's Price Cap Growth
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Growth(10) Index(6)
- ---------------- ---- ---- --- ---- ---- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 11.9% -- -- 10.5% 10.6% 5.7% -- *
Life of Fund(++) -- (5.0)% 6.4% 10.0 7.1 3.9 4.8% 14.2%
Fifteen Years 14.6 -- -- 15.2 14.5 4.7 14.7 13.6
Ten Years 13.0 -- -- 16.4 14.6 3.6 13.4 14.4
Five Years 10.6 -- -- 10.9 9.1 3.6 11.4 9.7
One Year (9.8) -- -- 11.1 3.7 3.0 5.9 5.8
</TABLE>

- ---------------

* Data not available.
(+) Since February 20, 1969 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.

B-27
<PAGE> 86

TECHNOLOGY FUND -- OCTOBER 31, 1994
<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(+) $ 48,524 $ 1,882,535 $ 406,722 $2,337,781 23,277.8% $ 2,478,988 24,689.9%
Twenty-five Years 12,722 94,680 19,047 126,449 1,164.5 134,167 1,241.7
Fifteen Years 11,297 48,434 7,549 67,280 572.8 71,419 614.2
Ten Years 9,207 21,919 2,701 33,827 238.3 35,896 259.0
Five Years 10,638 6,617 627 17,882 78.8 18,970 89.7
One Year 10,150 686 0 10,836 8.4 11,495 15.0
Year to Date 10,648 0 0 10,648 6.5 11,297 13.0

CLASS B SHARES
Life of Fund(++) $ 11,461 $ 0 $ 0 $ 11,061 10.6% $ 11,461 14.6%

CLASS C SHARES
Life of Fund(++) $ 11,461 $ 0 $ 0 -- -- $ 11,461 14.6%

<CAPTION>
Russell
TOTAL Dow Jones Standard Consumer 1000(R)
RETURN Industrial & Poor's Price Growth
TABLE Average(3) 500(4) Index(5) Index(6)
- ----------------- ---------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 16,509.9% 19,634.1% 510.2% *
Twenty-five Years 1,265.3 1,215.7 300.8 *
Fifteen Years 806.8 735.1 98.8 637.8%
Ten Years 362.0 297.1 42.0 289.2
Five Years 73.2 62.0 19.0 65.9
One Year 9.2 3.9 2.6 5.4
Year to Date 6.5 3.6 2.5 4.3
CLASS B SHARES
Life of Fund(++) 5.2% 4.6% 1.4% 7.0%
CLASS C SHARES
Life of Fund(++) 5.2% 4.6% 1.4% 7.0%
</TABLE>

<TABLE>
<CAPTION>
Russell
AVERAGE ANNUAL Fund Fund Fund Dow Jones Standard Consumer 1000(R)
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6)
- ----------------- ------- ------- ------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 12.6% -- -- 11.7% 12.1% 4.0% *
Life of Fund(++) -- 27.4% 38.7% 13.0 11.4 3.3 17.6%
Twenty-five Years 10.7 -- -- 11.0 10.9 5.7 *
Fifteen Years 13.6 -- -- 15.8 15.2 4.7 14.3
Ten Years 13.0 -- -- 16.5 14.8 3.6 14.6
Five Years 12.3 -- -- 11.6 10.1 3.6 10.7
One Year 8.4 -- -- 9.2 3.9 2.6 5.4
</TABLE>

- ---------------

* Data not available.

(+) Since September 7, 1948 for Class A shares.

(++) Since May 31, 1994 for Class B and Class C shares.

B-28
<PAGE> 87

TOTAL RETURN FUND -- OCTOBER 31, 1994
<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(+) $ 21,564 $ 94,585 $ 146,524 $ 262,673 2,526.7% $ 278,863 2,688.6% 1,677.4%
Twenty-five Years 19,655 58,024 89,631 167,310 1,573.1 177,468 1,674.7 1,265.3
Fifteen Years 15,826 20,403 27,937 64,166 541.7 68,073 580.7 806.8
Ten Years 13,169 6,557 8,646 28,372 183.7 30,092 200.9 362.0
Five Years 10,282 1,998 2,411 14,691 46.9 15,589 55.9 73.2
One Year 7,634 703 338 8,675 (13.3) 9,208 (7.9) 9.2
Year to Date 8,618 0 152 8,770 (12.3) 9,307 (6.9) 6.5

CLASS B SHARES
Life of Fund(++) $ 9,838 $ 0 $ 56 $ 9,501 (5.0)% $ 9,894 (1.1)% 5.2%

CLASS C SHARES
Life of Fund(++) $ 9,838 $ 0 $ 57 -- -- $ 9,895 (1.1)% 5.2%

<CAPTION>
Standard Russell
TOTAL & 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(+) 1,859.5% 383.8% * * *
Twenty-five Years 1,215.7 300.8 * * *
Fifteen Years 735.1 98.8 637.8% 486.6% 372.3%
Ten Years 297.1 42.0 289.2 207.1 162.4
Five Years 62.0 19.0 65.9 53.4 45.8
One Year 3.9 2.6 5.4 (0.6) (4.6)
Year to Date 3.6 2.5 4.3 (0.7) (4.0)

CLASS B SHARES
Life of Fund(++) 4.6% 1.4% 7.0% 1.4% 0.2%

CLASS C SHARES
Life of Fund(++) 4.6% 1.4% 7.0% 1.4% 0.2%
</TABLE>

<TABLE>
<CAPTION>
AVERAGE
ANNUAL Fund Fund Fund Dow Jones
TOTAL RETURN Class A Class B Class C Industrial
TABLE Shares Shares Shares Average(3)
- ------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Life of Fund(+) 11.3% -- -- 9.8%
Life of Fund(++) -- (11.6)% (2.5)% 13.0
Twenty-five Years 11.9 -- -- 11.0
Fifteen Years 13.2 -- -- 15.8
Ten Years 11.0 -- -- 16.5
Five Years 8.0 -- -- 11.6
One Year (13.3) -- -- 9.2

<CAPTION>
AVERAGE
ANNUAL Standard Consumer Russell Lipper Lehman Bros.
TOTAL RETURN & Poor's Price 1000(R) 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(+) 10.2% 5.3% * * *
Life of Fund(++) 11.4 3.3 17.6% 3.4% 0.4%
Twenty-five Years 10.9 5.7 * * *
Fifteen Years 15.2 4.7 14.3 12.5 10.9
Ten Years 14.8 3.6 14.6 11.9 10.1
Five Years 10.1 3.6 10.7 8.9 7.8
One Year 3.9 2.6 5.4 (0.6) (4.6)
</TABLE>

- ---------------
* Data not available.
(+) Since March 2, 1964 for Class A shares.
(++) Since May 31, 1994 for Class B and Class 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 since they do not have an
initial or contingent deferred sales charge.

(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 and Lipper Analytical
Services, Inc.
(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 and Lipper Analytical
Services, Inc.
(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.
(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.
(10) The Wilshire Mid Cap Growth Index is a market capitalization-weighted index
including domestic equity securities chosen from the Wilshire Mid-Cap 750 which
exhibit growth characteristics. Assumes reinvestment of dividends. Source is
Wilshire Associates Incorporated.
(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.

B-29
<PAGE> 88

(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 CDA Investment Technologies, Inc.,
Silver Spring, Maryland.

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-30
<PAGE> 89

The following tables illustrate an assumed $10,000 investment in Class A shares
of each Fund (except the Value+Growth 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, 1994.

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
-----------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

GROWTH FUND (4/4/66)
<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>
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
--------------------------------------------------------------------------------------
</TABLE>

B-31
<PAGE> 90

- --------------------------------------------------------------------------------

SMALL CAP FUND (2/20/69)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED

B-32
<PAGE> 91

- --------------------------------------------------------------------------------

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
---------------------------------------------------------------------------------------------
<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
--------------------------------------------------------------------------------------------
</TABLE>

B-33
<PAGE> 92

- --------------------------------------------------------------------------------
TOTAL RETURN FUND (3/2/64)
<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>
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
</TABLE>

- --------------------------------------------------------------------------------

* Includes short-term capital gain dividends.

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.

BLUE CHIP FUND

<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance
Analysis
------------------
Growth & Income
Funds
------------------
<S> <C>
Five Year (Period ended 12/31/94)............................................. 120 of 182
One Year (Period ended 12/31/94).............................................. 310 of 347
</TABLE>

B-34
<PAGE> 93

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>
Fifteen Years (Period ended 12/31/94)......................................... 39 of 96
Ten Years (Period ended 12/31/94)............................................. 43 of 132
Five Years (Period ended 12/31/94)............................................ 51 of 226
One Year (Period ended 12/31/94).............................................. 389 of 481
</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.

SMALL CAP FUND

<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance
Analysis
------------------
Small Cap Company
Growth Funds
------------------
<S> <C>
Fifteen Years (Period ended 12/31/94)......................................... 3 of 9
Ten Years (Period ended 12/31/94)............................................. 9 of 18
Five Years (Period ended 12/31/94)............................................ 12 of 34
One Year (Period ended 12/31/94).............................................. 44 of 75
</TABLE>

The Lipper Mid Cap 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>
Fifteen Years (Period ended 12/31/94)......................................... 2 of 4
Ten Years (Period ended 12/31/94)............................................. 6 of 10
Five Years (Period ended 12/31/94)............................................ 9 of 15
One Year (Period ended 12/31/94).............................................. 12 of 26
</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>
Fifteen Years (Period ended 12/31/94)......................................... 13 of 24
Ten Years (Period ended 12/31/94)............................................. 14 of 25
Five Years (Period ended 12/31/94)............................................ 12 of 57
One Year (Period ended 12/31/94).............................................. 149 of 152
</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%.

B-35
<PAGE> 94

OFFICERS AND TRUSTEES

The officers and trustees of the Funds, their principal occupations and their
affiliations, if any, with KFS, the investment manager and KDI, the principal
underwriter, are as follows (The number following each person's title is the
number of investment companies managed by KFS and its affiliates for which he or
she holds similar positions):

ALL FUNDS:

DAVID W. BELIN, Trustee (22), 2000 Financial Center, 7th and Walnut, Des Moines,
Iowa; Member, Belin Harris Lamson McCormick, P.C. (attorneys).

LEWIS A. BURNHAM, Trustee (22), 16410 Avila Boulevard, Tampa, Florida; Director,
Management Consulting Services, McNulty & Company; formerly, Executive Vice
President, Anchor Glass Container Corporation.

DONALD L. DUNAWAY, Trustee (22), One Park Place, Milwaukee, Wisconsin; Retired;
formerly, Executive Vice President, A. O. Smith Corporation (diversified
manufacturer).

ROBERT B. HOFFMAN, Trustee (22), 800 North Lindbergh Boulevard, St. Louis,
Missouri; Senior Vice President and Chief Financial Officer, Monsanto Company
(chemical products); prior thereto, Vice President, FMC Corporation
(manufacturer of machinery and chemicals); prior thereto, Director, Executive
Vice President and Chief Financial Officer, Staley Continental, Inc. (food
products).

DONALD R. JONES, Trustee (22), 1303 East Algonquin Road, Schaumburg, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.

DAVID B. MATHIS, Trustee* (29), Kemper Center, Long Grove, Illinois; Chairman,
Chief Executive Officer and Director, Kemper Corporation; Director, KFS, Kemper
Financial Companies, Inc., and IMC Global Inc.; Chairman of the Board,
Lumbermens Mutual Casualty Company.

SHIRLEY D. PETERSON, Trustee (18), 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; prior thereto, partner, Steptoe & Johnson (attorneys);
prior thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice.

WILLIAM P. SOMMERS, Trustee (22), 333 Ravenswood Avenue, Menlo Park, California;
President and Chief Executive Officer, SRI International (research and
development); prior thereto, Executive Vice President, Iameter (medical
information and educational service provider), prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) (retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.

STEPHEN B. TIMBERS, President and Trustee* (32), 120 South LaSalle Street,
Chicago, Illinois; President, Chief Operating Officer and Director, Kemper
Corporation; Chairman, Chief Executive Officer, Chief Investment Officer and
Director, KFS; Director, KDI, Kemper Financial Companies, Inc., Gillett Holdings
Inc. and LTV Corporation.

JOHN E. PETERS, Vice President* (32), 120 South LaSalle Street, Chicago,
Illinois; Senior Executive Vice President, Kemper Financial Services, Inc.;
President and Director, KDI.

CHARLES F. CUSTER, Vice President and Assistant Secretary* (32), 222 North
LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman & Kammholz
(attorneys), Legal Counsel to the Fund.

JEROME L. DUFFY, Treasurer* (32), 120 South LaSalle Street, Chicago, Illinois;
Senior Vice President, KFS.

PHILIP J. COLLORA, Vice President and Secretary* (32), 120 South LaSalle Street,
Chicago, Illinois; Attorney, Senior Vice President and Assistant Secretary, KFS.

B-36
<PAGE> 95

ELIZABETH C. WERTH, Assistant Secretary* (24), 120 South LaSalle Street,
Chicago, Illinois; Vice President, KFS; Vice President and Director of State
Registrations, KDI.

BLUE CHIP FUND:

C. BETH COTNER, Vice President* (6), 120 South LaSalle Street, Chicago,
Illinois; Executive Vice President and Director of Equity Mutual Fund Portfolio
Management, KFS.

TRACY McCORMICK CHESTER, Vice President* (2), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS; formerly, Portfolio Manager for Fiduciary
Management; prior thereto, independent consultant managing private accounts.

GROWTH FUND:

C. BETH COTNER, Vice President* (6), 120 South LaSalle Street, Chicago,
Illinois; Executive Vice President and Director of Equity Mutual Fund Portfolio
Management, KFS.

SMALL CAP FUND:

C. BETH COTNER, Vice President* (6), 120 South LaSalle Street, Chicago,
Illinois; Executive Vice President and Director of Equity Mutual Fund Portfolio
Management, KFS.

KAREN A. HUSSEY, Vice President* (2), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS; formerly, Portfolio Manager, The Northern
Trust Company.

TECHNOLOGY FUND:

C. BETH COTNER, Vice President* (6), 120 South LaSalle Street, Chicago,
Illinois; Executive Vice President and Director of Equity Mutual Fund Portfolio
Management, KFS.

RICHARD A. GOERS, Vice President*, 120 South LaSalle Street, Chicago, Illinois;
Senior Vice President, KFS.

FRANK D. KORTH, Vice President* (2), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS.; formerly, President, Value Line Fund.

TOTAL RETURN FUND:

C. BETH COTNER, Vice President* (6), 120 South LaSalle Street, Chicago,
Illinois; Executive Vice President and Director of Equity Mutual Fund Portfolio
Management, KFS.

VALUE+GROWTH FUND:

DANIEL J. BUKOWSKI, Vice President, 120 South LaSalle Street, Chicago, Illinois,
Senior Vice President and Director of Quantitative Research, KFS.

* Interested persons of the Fund as defined in the Investment Company Act of
1940.

The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds, except that Mr. Custer's law firm
receives fees from the Funds as counsel to the Funds. The table below

B-37
<PAGE> 96

shows amounts paid or accrued to those trustees who are not designated
"interested persons" during each Fund's 1994 fiscal year except that the
information in the last column is for calendar year 1994.

<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM FUND RETIREMENT BENEFITS FROM FUND AND
------------------------------------------------------ VALUE+ ACCRUED AS PART OF KEMPER FUND COMPLEX
NAME OF TRUSTEE BLUE CHIP GROWTH SMALL CAP TECH TOTAL RETURN GROWTH FUND EXPENSES PAID TO TRUSTEES**
- --------------------- --------- ------ --------- ------ ------------ ------ ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Belin*...... $1,800 $5,800 $3,400 $3,900 $6,000 $0 $0 $112,200
Lewis A. Burnham..... $1,700 $5,000 $2,700 $3,000 $4,900 $0 $0 $ 90,100
Donald L. Dunaway*... $2,000 $6,100 $3,500 $3,900 $6,200 $0 $0 $115,400
Robert B. Hoffman.... $1,700 $4,800 $2,600 $2,900 $4,800 $0 $0 $ 87,400
Donald R. Jones...... $1,800 $5,200 $2,900 $3,100 $5,100 $0 $0 $ 94,300
Shirley D.
Peterson***........ $ 0 $ 0 $ 0 $ 0 $ 0 $0 $0 $ 0
William P. Sommers... $1,600 $4,700 $2,600 $2,800 $4,600 $0 $0 $ 84,100
</TABLE>

- ---------------

* Includes current fees deferred and interest pursuant to deferred
compensation agreements with the Funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Market Fund -- Money
Market Portfolio.

** Includes compensation for service as a trustee on twenty-four fund boards
(including two funds no longer in existence). Also includes amounts for new
funds estimated as if they had existed at the beginning of the year, except
that no amounts are included for Value+Growth Fund since no fee schedule has
been established for that Fund.

*** No amounts are included for Ms. Peterson because she was elected a trustee
on June 15, 1995.

As of , 1995, 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 Fund, except that
Kemper Clearing Corp. Omnibus Account, 111 Kilbourn Avenue, Milwaukee, Wisconsin
owned of record % of the Blue Chip Fund and KFS owned all the shares of
Value+Growth Fund.

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

B-38
<PAGE> 97

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 KFS 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-39
<PAGE> 98

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder

Kemper Value+Growth Fund

We have audited the accompanying statement of net assets of Kemper Value Plus
Growth Fund (doing business as Kemper Value+Growth Fund) as of , 1995.
This statement of net assets is the responsibility of the Trust's management.
Our responsibility is to express an opinion on this statement of net assets
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 statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.

In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Kemper Value+Growth Fund at
, 1995 in conformity with generally accepted accounting principles.

Chicago, Illinois

, 1995

B-40
<PAGE> 99

KEMPER VALUE+GROWTH FUND

STATEMENT OF NET ASSETS-- , 1995

<TABLE>
<S> <C>
ASSETS
Cash.................................................................................. $100,000
========

NET ASSETS
Net assets, applicable to shares of beneficial interest (unlimited number of shares
authorized, no par value) outstanding as follows:
Class A--3,508.772
Class B--3,508.772
Class C--3,508.772.................................................................. $100,000
========

THE PRICING OF SHARES
Net asset value and redemption price per share
Class A............................................................................. $ 9.50
Class B*............................................................................ $ 9.50
Class C............................................................................. $ 9.50
Maximum offering price per share
Class A (net asset value, plus 6.10% of net asset value or 5.75% of offering
price)........................................................................... $ 10.08
Class B (net asset value)........................................................... $ 9.50
Class C (net asset value)........................................................... $ 9.50
</TABLE>

- ---------------

* Subject to contingent deferred sales charge.

NOTES:

Kemper Value Plus Growth Fund doing business as Kemper Value+Growth Fund (the
"Trust"), was organized as a business trust under the laws of The Commonwealth
of Massachusetts on June 12, 1995; All Class A, Class B and Class C shares of
beneficial interest of the Trust were issued to Kemper Financial Services, Inc.
("KFS"), the investment manager for such series, on , 1995. The
Trust may establish multiple series; currently one series has been established.

The costs of organization of the Fund will be paid by KFS.

B-41
<PAGE> 100

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-42
<PAGE> 101

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-43
<PAGE> 102

KEMPER VALUE PLUS 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:

Statement of Net Assets.*

Report of Independent Auditors.*

Schedules I, II, III, IV, V, VI and VII are omitted as the required
information is not present.

(b) Exhibits

<TABLE>
<S> <C>
99.B1. Agreement and Declaration of Trust.
99.B2. By-Laws.*
99.B3. Inapplicable.
99.B4(a). Text of Share Certificate.*
99.B4(b). Written Instrument Establishing and Designating Separate Classes of
Shares.*
99.B5(a). Investment Management Agreement.*
99.B5(b). Sub-Advisory Agreement.*
99.B6(a). Underwriting and Distribution Services Agreement.*
99.B6(b). Form of Selling Group Agreement.*
99.B7. Inapplicable.
99.B8(a). Custody Agreement (Form 1).*
99.B8(b). Custody Agreement (Form 2).*
99.B9. Agency Agreement.*
99.B9(c). Administrative Services Agreement.*
99.B10. Legal Opinion and Consent.*
99.B11. Consent of Independent Auditors.*
99.B12. Inapplicable.
99.B13. Subscription Agreement.*
99.B14(a). Kemper Retirement Plan Prototype.*
99.B14(b). Model Individual Retirement Account.*
99.B15. See 6(a) above (Class B and Class C shares).
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.*
99.B24. Powers of Attorney.
</TABLE>

- ---------------
* To be filed before the effective date of the Registration Statement.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Inapplicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of July 1, 1995, there were no holders of record of the shares of
Registrant.

C-1
<PAGE> 103

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.

ITEM 28.(A) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Information pertaining to business and other connections of the
Registrant's investment adviser and sub-advisor is hereby incorporated by
reference to the section of the Prospectus captioned "Investment Manager and
Underwriter," and to the section of the Statement of Additional Information
captioned "Investment Manager and Underwriter."

Kemper Financial Services, Inc., investment adviser of the Registrant, is
investment adviser of the following:

Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Kemper Money Market Fund
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund

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Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund,
Sterling Funds and Kemper International Bond Fund.

Dreman Value Advisors, Inc., sub-advisor of Kemper Value Plus Growth Fund
will be the investment adviser for Kemper-Dreman Fund, Inc. in addition to
institutional accounts.

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Item 28(b)(i) Business and Other Connections of Officers
and Directors of Kemper Financial Services Inc.,
the Investment Advisor

BORIS, JAMES R.
Director, Kemper Financial Services, Inc.
Director, INVEST Financial Corporation
Director, INVEST Financial Corporation Holding Company
Executive Vice President, Kemper Corporation
Director, Executive Vice President, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
Director, Kemper Sales Company
Director, Chairman and CEO, Kemper Securities, Inc.

MATHIS, DAVID B.
Director, Kemper Financial Services, Inc.
Director, Federal Kemper Life Assurance Company
Director, Fidelity Life Association
Director, Chairman and Chief Executive Officer, Kemper Corporation
Director, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
Director, Kemper Securities Holdings, Inc.
Director, Kemper Securities, Inc.
Director, IMC Global, Inc.
Trustee, Kemper Mutual Funds
Trustee, Kemper Closed-End Funds
Trustee, Kemper International Bond Fund

TIMBERS, STEPHEN B.
Director, Chairman, Chief Executive Officer and Chief Investment Officer,
Kemper Financial Services, Inc.
Director, Kemper Advisors, Inc.
Director, Vice President, Kemper Asset Holdings, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Kemper Asset Management Company
Director, Chairman, Kemper Service Company
Director, Federal Kemper Life Assurance Company
Director, Vice President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, Galaxy Offshore, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corp.
Trustee and President, Kemper Closed-End Funds
Director, President and Chief Operating Officer, Kemper
Corporation
Director, Chairman, President and Chief Executive Officer, Kemper Financial
Companies, Inc.
Director, President, Kemper International Management, Inc.
Trustee and Vice President, Kemper Investors Fund
Director, Kemper Investors Life Insurance Company

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Trustee and President, Kemper Mutual Funds
Director, Vice President, Kemper Portfolio Corp.
Director, Vice President, Kemper Real Estate, Inc.
Director, Kemper Securities, Inc.
Director, Kemper Securities Holdings, Inc.
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Director, Vice President, KFC Portfolio Corp.
Director, Vice President, KI Aaron Rents, Inc.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Director, Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
Trustee, Vice President, Sterling Funds
Director, The LTV Corporation
Director, Gillett Holdings, Inc.
Director, Investment Analysts Society of Chicago

NEAL, JOHN E.
Director, President and Chief Operating Officer, Kemper Financial Services,
Inc.
Director, President, Kemper Advisors, Inc.
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Kemper Asset Management Company
Director, Supervised Service Company
Director, Ardenwood Financial Corporation
Director, Avondale Redmond, Inc.
Director, Bedford Holding Company
Director, Black Mountain, Inc.
Director, Brannan Resources, Inc.
Director, Butterfield Financial Corporation
Director, Camelot Financial Corporation

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Director, Clay Capital, Inc.
Director, Concord Aviation, Inc.
Director, Coast Broadcasting Company
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, FKLA Loire Court, Inc.
Director, President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Lafayette Apartments
Director, Lafayette Hills, Inc.
Director, Margarita Village Retirement Community
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Business Centre
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Red Hill Associates, Inc.
Director, Seagate Associates, Inc.
Director, Seattle Gateway, Inc.
Director, Sutter Street, Inc.
Director, Technology Way, Inc.
Director, Time DC, Inc.
Director, Tourelle, Inc.
Director, Two Corporate Center
Director, Venture Way, Inc.
Director, President, Kemper Portfolio Corporation
Director, President, KFC Portfolio Corporation
Director, President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI LaFiesta Square, Inc.
Director, President, KI Lafayette BART, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.

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Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Enterprise Centers, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, RespiteCare
Director, President, SMS Realty Corp.
Director, Urban Shopping Centers, Inc.

PETERS, JOHN E.
Director, Senior Executive Vice President, Kemper Financial
Services, Inc.
Director, Senior Vice President, Kemper Advisors, Inc.
Director, President, Kemper Distributors, Inc.
Director, President, Kemper Sales Company
Vice President, Kemper Asset Management Company
Vice President, Kemper Closed-End Funds
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Mutual Funds
Vice President, Kemper Target Equity Fund
Director, Kemper Service Company
Vice President, Sterling Funds

FITZPATRICK, JOHN H.
Director, Chief Financial Officer, Kemper Financial Services, Inc.
Director, Ardenwood Financial Corporation
Director, Camelot Financial Corporation
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kacor Trust Deed Company
Director, Senior Vice President and Chief Financial Officer,
Federal Kemper
Life Assurance Company
Senior Vice President, Chief Financial Officer, Fidelity Life Association
Director, Vice President, FKLA Loire Court, Inc.

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Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Director, Executive Vice President and Chief Financial Officer,
Kemper Corporation
Director, Executive Vice President and Chief Financial
Officer, Kemper Financial Companies, Inc.
Senior Vice President, Kemper Investors Life Insurance Company
Director, Senior Vice President, Kemper Real Estate Management
Company
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Director, Vice President, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Margarita Retirement Community, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Montgomery Gallery, Inc.
Director, One Corporate Centre, Inc.
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Property, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Seattle Gateway, Inc.
Director, SMS Realty Corporation
Director, Sutter Street, Inc.
Director, Time DC, Inc.
Director, Two Corporate Center
Director, Vice President, KFC Portfolio Corp.
Director, Vice President, KI Aaron Rents, Inc.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI Lafayette BART, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Director, Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.

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Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.

BEIMFORD, JR., JOSEPH P.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Municipal Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund

CHAPMAN II, WILLIAM E.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.

COTNER, C. BETH
Executive Vice President, Kemper Financial Services, Inc.
Trustee, Kemper Financial Services, Inc., Profit Sharing Plan
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Sterling Funds

COXON, JAMES H.
Executive Vice President, Kemper Financial Services, Inc.
Director, Vice President, Galaxy Offshore, Inc.
Executive Vice President, Kemper Asset Management Company

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FERRO, DENNIS H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper International Fund
Director, Managing Director-Equities, Kemper Investment Management
Company Limited
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
Vice President, The Growth Fund of Spain, Inc.

GREENAWALT, JAMES L.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
Director, Kemper Sales Company

JOHNS, GORDON K.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Global Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper International Bond Fund
Vice President, Kemper International Management, Inc.
Managing Director and Joint Secretary, Kemper Investment
Management Company Limited
Vice President, Kemper Multi-Market Income Trust
Director, Thames Heritage Parade Limited

LANGBAUM, GARY A.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Total Return Fund
Vice President, Kemper Investors Fund

SILIGMUELLER, DALE S.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Service Company
Director, Executive Vice President, Supervised Service Company,
Inc.
Director, Kemper Advisors, Inc.

BUKOWSKI, DANIEL J.
Senior Vice President, Kemper Financial Services, Inc.

BUTLER, DAVID H.
Senior Vice President, Kemper Financial Services, Inc.

CERVONE, DAVID M.
Senior Vice President, Kemper Financial Services, Inc.

CESSINE, ROBERT S.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Diversified Income Fund

CHESTER, TRACY McCORMICK
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Blue Chip Fund

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Vice President, Kemper Target Equity Fund

COLLECCHIA, FRANK E.
Senior Vice President, Kemper Financial Services, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company
Senior Investment Officer, Fidelity Life Association
Vice President, FKLA Loire Court, Inc.
Vice President, FLA First Nationwide, Inc.
Vice President, FLA Plate Building, Inc.
Vice President, Galaxy Offshore, Inc.
Senior Investment Officer, Kemper Investors Life Insurance
Company
Vice President, KI Aaron Rents, Inc.
Vice President, KI Arnold Industrial, Inc.
Vice President, KI Canyon Park, Inc.
Vice President, KI Dublin Boulevard, Inc.
Vice President, KI Lafayette BART, Inc.
Vice President, KI LaFiesta Square, Inc.
Vice President, KI Monterey Research, Inc.
Vice President, KI Olive Street, Inc.
Vice President, KI Thornton Boulevard, Inc.
Vice President, KR 77 Fitness Center, Inc.
Vice President, KR Avondale Redmond, Inc.
Vice President, KR Black Mountain, Inc.
Vice President, KR Brannan Resources, Inc.
Vice President, KR Clay Capital, Inc.
Vice President, KR Cranbury, Inc.
Vice President, KR Delta Wetlands, Inc.
Vice President, KR Gainesville, Inc.
Vice President, KR Gulf Coast Factory Shops, Inc.
Vice President, KR Halawa Associates, Inc.
Vice President, KR Hotels, Inc.
Vice President, KR Lafayette Apartments, Inc.
Vice President, KR Palm Plaza, Inc.
Vice President, KR Red Hill Associates, Inc.
Vice President, KR Seagate/Gateway North, Inc.
Vice President, KR Venture Way, Inc.
Vice President, KR Walnut Creek, Inc.

COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Kemper Financial
Services, Inc.
Vice President and Secretary, Kemper Closed-End Funds
Assistant Secretary, Kemper International Management, Inc.
Vice President and Secretary, Kemper Investors Fund
Vice President and Secretary, Kemper Mutual Funds
Vice President and Secretary, Kemper Target Equity Fund
Vice President and Secretary, Sterling Funds
Vice President and Secretary, Kemper International Bond Fund

DIERENFELDT, DAVID F.
Senior Vice President, Associate General Counsel,
Assistant Secretary and Compliance Officer, Kemper Financial

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Services, Inc.
Secretary, Kemper Advisors, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services
Insurance Agency, Inc.
Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Kemper Asset Management Company
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company
Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Sales Company
Secretary, Kemper Service Company
Secretary, Supervised Service Company, Inc.

DUDASIK, PATRICK H.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Advisors, Inc.
Vice President and Treasurer, Kemper Asset Management Company
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Director, Treasurer and Chief Financial Officer, Kemper Sales Company
Treasurer and Chief Financial Officer, Kemper Service Company
Treasurer and Chief Financial Officer, Supervised Service Company,
Inc.
Director and Treasurer, Kemper Investment Management Company
Limited

DUFFY, JEROME L.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Closed-End Funds
Treasurer, Kemper International Bond Fund
Treasurer, Kemper Investors Fund
Treasurer, Kemper Mutual Funds
Treasurer, Kemper Target Equity Fund
Treasurer, Sterling Funds

GLASSMAN, HARVEY
Senior Vice President, Kemper Financial Services, Inc.

GOERS, RICHARD A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund

GUENTHER, HAROLD E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Galaxy Offshore, Inc.

HUSSEY, KAREN A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund

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Vice President, Kemper Small Capitalization Equity Fund

INNES, BRUCE D.
Vice President, Kemper Financial Services, Inc.
Co-President, International Association of Corporate and
Professional Recruiters

KLEIN, GEORGE
Senior Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Asset Management
Company

KORTH, FRANK D.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund

McNAMARA, MICHAEL A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund

MIER, CHRISTOPHER J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Sterling Funds

MURRIHY, MAURA J.
Senior Vice President, Kemper Financial Services, Inc.

NATHANSON, IRA
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Corporation

NEEL, JAMES R.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Kemper Asset Management Company

RACHWALSKI, JR. FRANK J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Portfolios
Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund

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<PAGE> 115

REGNER, THOMAS M.
Senior Vice President, Kemper Financial Services, Inc.

RESIS, JR., HARRY E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund

SCHUMACHER, ROBERT T.
Senior Vice President, Kemper Financial Services, Inc.

SLOAN, PAUL F.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Portfolios
Vice President, Kemper U.S. Government Securities Fund
Vice President, Kemper Adjustable Rate U.S. Government Fund

BURROW, DALE R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust

BYRNES, ELIZABETH A.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust

CHIEN, CHRISTINE
First Vice President, Kemper Financial Services, Inc.

DeMAIO, CHRIS C.
First Vice President, Kemper Financial Services, Inc.
Vice President and Chief Accounting Officer, Kemper Service
Company
Vice President and Chief Accounting Officer, Supervised Service
Company, Inc.

DEXTER, STEPHEN P.
First Vice President, Kemper Financial Services, Inc.

DOYLE, DANIEL J.
First Vice President, Kemper Financial Services, Inc.

FENGER, JAMES E.
First Vice President, Kemper Financial Services, Inc.

FISHER, REMY M.
First Vice President, Kemper Financial Services, Inc.

C-14
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HALE, DAVID D.
First Vice President, Kemper Financial Services, Inc.

HARRINGTON, MICHAEL E.
First Vice President, Kemper Financial Services, Inc.

HORTON, ROBERT J.
First Vice President, Kemper Financial Services, Inc.

JACOBS, PETER M.
First Vice President, Kemper Financial Services, Inc.

KEELEY, MICHELLE M.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios

KIEL, CAROL L.
First Vice President, Kemper Financial Services, Inc.

LAUGHLIN, ANN M.
First Vice President, Kemper Financial Services, Inc.

LENTZ, MAUREEN P.
First Vice President, Kemper Financial Services, Inc.

McCRINDLE-PETRARCA, SUSAN
First Vice President, Kemper Financial Services, Inc.

PAYNE, III, ROBERT D.
First Vice President, Kemper Financial Services, Inc.

PANOZZO, ROBERTA L.
First Vice President, Kemper Financial Services, Inc.

RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant Secretary,
Kemper Financial Services, Inc.
Assistant Secretary, Kemper Distributors, Inc.

SILVIA, JOHN E.
First Vice President, Kemper Financial Services, Inc.

STUEBE, JOHN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund

THOUIN-LEERKAMP, EDITH A.
First Vice President, Kemper Financial Services, Inc.
Director-European Equities, Kemper Investment Management Company
Limited

TRUTTER, JONATHAN W.

C-15

<PAGE> 117

First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund

VINCENT, CHRISTOPHER T.
First Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Asset Management Company

WILLSON, STEPHEN R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust

WITTNEBEL, MARK E.
First Vice President, Kemper Financial Services, Inc.

CARNEY, ANNE T.
Vice President, Kemper Financial Services, Inc.

COHEN, JERRI I.
Vice President, Kemper Financial Services, Inc.

GERACI, AUGUST L.
Vice President, Kemper Financial Services, Inc.

GERICKE, KATHLEEN E.
Vice President, Kemper Financial Services, Inc.

GOLAN, JAMES S.
Vice President, Kemper Financial Services, Inc.

HESS, THOMAS L.
Vice President, Kemper Financial Services, Inc.

HUOT, LISA L.
Vice President, Kemper Financial Services, Inc.

KARWOWSKI, KENNETH F.
Vice President, Kemper Financial Services, Inc.

KNAPP, WILLIAM M.
Vice President, Kemper Financial Services, Inc.

KOCH, DEBORAH L.
Vice President, Kemper Financial Services, Inc.

KOVACS, WILLIAM P.
Vice President and Assistant Secretary, Kemper Financial Services, Inc.

KRANZ, KATHY J.
Vice President, Kemper Financial Services, Inc.

KRUEGER, PAMELA D.

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<PAGE> 118
Vice President, Kemper Financial Services, Inc.

LeFEBVRE, THOMAS J.
Vice President, Kemper Financial Services, Inc.

MANGIPUDI, V. RAO
Vice President, Kemper Financial Services, Inc.

McGOVERN, KAREN B.
Vice President, Kemper Financial Services, Inc.

MILLER, MAUREEN A.
Vice President, Kemper Financial Services, Inc.

MINER, EDWARD
Vice President, Kemper Financial Services, Inc.

MITCHELL, KATHERINE H.
Vice President, Kemper Financial Services, Inc.

PANOZZO, ALBERT R.
Vice President, Kemper Financial Services, Inc.

PONTECORE, SUSAN E.
Vice President, Kemper Financial Services, Inc.

QUADRINI, LISA L.
Vice President, Kemper Financial Services, Inc.

RADIS, STEVE A.
Vice President, Kemper Financial Services, Inc.

ROKOSZ, PAUL A.
Vice President, Kemper Financial Services, Inc.

SMITH, ROBERT G.
Vice President, Kemper Financial Services, Inc.

TEPPER, SHARYN A.
Vice President, Kemper Financial Services, Inc.

WERTH, ELIZABETH C.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Distributors, Inc.
Assistant Secretary, Kemper Mutual Funds
Assistant Secretary, Kemper International Bond Fund
Assistant Secretary, Kemper Target Equity Fund
Assistant Secretary, Sterling Funds

WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.

ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.

28(b)(ii) Business and Other Connections of Officers and Directors of Dreman
Value Advisors, Inc., the Sub-Advisor

ANGLEY, JOHN E.
Director, Dreman Value Advisors, Inc.
President, Kemper Asset Management Company

For the following persons, see Item 28(b)(i) for information
NEAL, JOHN E.
PETERS, JOHN E.
SILIGMUELLER, DALE S.
TIMBERS, STEPHEN B.

C-17
<PAGE> 119

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Kemper Distributors, Inc. acts as principal underwriter and distributor
of the Registrant's shares, the Kemper Mutual Funds, Kemper Investors Fund and
Kemper International Bond Fund.

(b) Information on the officers and directors of Kemper Distributors, Inc.
is set forth below. The principal business address is 120 South LaSalle Street,
Chicago, Illinois 60603.

<TABLE>
<CAPTION>
POSITIONS AND
OFFICES WITH
NAME POSITIONS AND OFFICES REGISTRANT
- ---- --------------------- -------------
<S> <C> <C>
John E. Peters Principal, Director and President Vice President
William E. Chapman, II Director, Executive Vice President None
James L. Greenawalt Director, Executive Vice President None
John E. Neal Director None
Stephen B. Timbers Director President, Trustee
Patrick H. Dudasik Financial Principal, Treasurer and Chief Financial Officer None
Linda A. Bercher Senior Vice President None
Terry Cunningham Senior Vice President None
Daniel T. O'Lear Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
David F. Dierenfeldt Vice President, Secretary None
Thomas V. Bruns Vice President None
Carlene D. Merold Vice President None
Jeff M. Warland Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Kathleen A. Gallichio Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
</TABLE>

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 the investment manager, Kemper Financial
Services, Inc. and the principal underwriter, Kemper Distributors, Inc., 120
South LaSalle Street, Chicago, Illinois 60603, the offices of the sub-advisor,
Dreman Value Advisors, Inc., 10 Exchange Place, Jersey City, New Jersey 07302 or
at the offices of the custodian and transfer agent, Investors Fiduciary Trust
Company, 127 West 10th Street, 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) Registrant undertakes to file a Post-Effective Amendment using
financial statements of Registrant which need not be certified, within four to
six months from the effective date of the Registration Statement.

(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-18
<PAGE> 120

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
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 31st day of
July, 1995.

KEMPER VALUE PLUS GROWTH FUND

By /s/ Stephen Timbers
-----------------------------
Stephen B. Timbers, President

Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below on
July 31, 1995 on behalf of the following persons in the
capacities indicated.

Signature Title
--------- -----

/s/ Stephen Timbers President
---------------------------------- (Principal
Stephen B. Timbers Executive Officer)
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/David B. Mathis* Trustee
---------------------------------

/s/Shirley D. Peterson* Trustee
---------------------------------

/s/William P. Sommers* Trustee
---------------------------------

/s/ Jerome Duffy Treasurer (Principal
--------------------------------- Financial and
Jerome L. Duffy Accounting Officer)

*Philip J. Collora signs this document pursuant to powers of
attorney filed herewith.

/s/ Philip Collora
---------------------------------
Philip J. Collora
<PAGE> 121

KEMPER VALUE PLUS GROWTH FUND

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
REFERENCE
------------
<S> <C> <C>
Exhibits
99.B1. Agreement and Declaration of Trust.
99.B2. By-Laws.*
99.B3. Inapplicable.
99.B4(a). Text of Share Certificate.*
99.B4(b). Written Instrument Establishing and Designating Separate
Classes of Shares.*
99.B5(a). Investment Management Agreement.*
99.B5(b). Sub-Advisory Agreement.*
99.B6(a). Underwriting and Distribution Services Agreement.*
99.B6(b). Form of Selling Group Agreement.*
99.B7. Inapplicable.
99.B8(a). Custody Agreement (Form 1).*
99.B8(b). Custody Agreement (Form 2).*
99.B9. Agency Agreement.*
99.B9(c). Administrative Services Agreement.*
99.B10. Legal Opinion and Consent.*
99.B11. Consent of Independent Auditors.*
99.B12. Inapplicable.
99.B13. Subscription Agreement.*
99.B14(a). Kemper Retirement Plan Prototype.*
99.B14(b). Model Individual Retirement Account.*
99.B15. See 6(a) above (Class B and Class C shares).
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.*
99.B24. Powers of Attorney.
</TABLE>

- ---------------
* To be filed before the effective date of the Registration Statement.

<PAGE> 1
EXHIBIT 99.B1

KEMPER VALUE PLUS GROWTH FUND

AGREEMENT AND DECLARATION OF TRUST

AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts, this 14th day of June, 1995, by the Trustees
hereunder, and by the holders of shares of beneficial interest to
be issued hereunder as hereinafter provided.

WITNESSETH

WHEREAS, the Trustees hereunder are desirous of forming a
trust for the purposes of carrying on the business of a
management investment company; and

WHEREAS, in furtherance of such purposes, the Trustees are
acquiring and may hereafter acquire assets and properties, to
hold and manage as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the
provisions hereinafter set forth;

NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets and properties which
they may from time to time acquire in any manner as Trustees
hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the
holders from time to time of shares in this Trust as hereinafter
set forth.

ARTICLE I

Name and Definitions

Name and Registered Agent

Section 1. This Trust shall be known as Kemper Value Plus
Growth Fund and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to
time determine. The registered agent for the Trust in
Massachusetts shall be CT Corporation System whose address is 2
Oliver Street, Boston, Massachusetts or such other person as the
Trustees may from time to time designate.

Definitions

Section 2. Whenever used herein, unless otherwise required
by the context or specifically provided:

<PAGE> 2

(a) The "Trust" refers to the Massachusetts voluntary
association established by this Agreement and Declaration of
Trust, as amended from time to time, pursuant to Massachusetts
General Laws, Chapter 182;

(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV and then in
office;

(c) "Shares" mean the equal proportionate transferable
units of interest into which the beneficial interest in the Trust
shall be divided from time to time or, if more than one series or
class of shares is authorized under or pursuant to Article III,
the equal proportionate transferable units of interest into which
each such series or class shall be divided from time to time;

(d) "Shareholder" means a record owner of Shares;

(e) The "1940 Act" refers to the Investment Company Act of
1940 (and any successor statute) and the Rules and Regulations
thereunder, all as amended from time to time;

(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter" and
"vote of a majority of the outstanding voting securities" shall
have the meanings given them in the 1940 Act;

(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;

(h) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time;

(i) "Net asset value" shall have the meaning set forth in
Section 6 of Article VI hereof;

(j) The terms "series" or "series of Shares" refers to the
one or more separate investment portfolios of the Trust
authorized under or pursuant to Article III into which the assets
and liabilities of the Trust may be divided and the Shares of the
Trust representing the beneficial interest of Shareholders in
such respective portfolios; and

(k) The terms "class" or "class of Shares" refers to the
division of Shares representing any series into two or more
classes authorized under or pursuant to Article III.

<PAGE> 3

ARTICLE II

Nature and Purpose

The Trust is a voluntary association (commonly known as a
business trust) of the type referred to in Chapter 182 of the
General Laws of the Commonwealth of Massachusetts. The Trust is
not intended to be, shall not be deemed to be, and shall not be
treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or
Shareholders or any of them for any purpose be deemed to be, or
be treated in any way whatsoever as though they were, liable or
responsible hereunder as partners or joint venturers. The
purpose of the Trust is to engage in, operate and carry on the
business of an open-end management investment company and to do
any and all acts or things as are necessary, convenient,
appropriate, incidental or customary in connection therewith.

ARTICLE III

Division of Beneficial Interest

Section 1. The Shares of the Trust shall be issued in one
or more series as the Trustees may, without Shareholder approval,
authorize from time to time. Each series shall be preferred over
all other series in respect of the assets allocated to that
series as hereinafter provided. The beneficial interest in each
series shall at all times be divided into Shares (without par
value) of such series, each of which shall, except as provided in
the following sentence, represent an equal proportionate interest
in such series with each other Share of the same series, none
having priority or preference over another Share of the same
series. The Trustees may, without Shareholder approval, divide
the Shares of any series into two or more classes, Shares of each
such class having such preferences and special or relative rights
or privileges (including conversion rights, if any) as the
Trustees may determine. The number of Shares authorized shall be
unlimited, and the Shares so authorized may be represented in
part by fractional Shares. The Trustees may from time to time
divide or combine the shares of any series or class into a
greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class.
Without limiting the authority of the Trustees set forth in this
Section 1 to establish and designate any further series or class,
the Trustees hereby establish and designate one series of Shares
to be known as the "Initial Portfolio." The establishment and
designation of any series or class of Shares in addition to the
foregoing shall be effective upon the execution by a majority of
the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and

<PAGE> 4

preferences of such series or class. As provided in Article IX,
Section 1 hereof, any series or class of Shares (whether or not
there shall then be Shares outstanding of said series or class)
may be terminated by the Trustees by written notice to the
Shareholders of such series or class or by the vote of the
Shareholders of such series or class entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter. In the event of any such termination, a majority of the
then Trustees shall execute an instrument setting forth the
termination of such series or class.

Ownership of Shares

Section 2. The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer or similar
agent. No certificates certifying the ownership of Shares shall
be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer
of Shares and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent of the Trust,
as the case may be, shall be conclusive as to who are the
Shareholders of each series or class and as to the number of
Shares of each series or class held from time to time by each
Shareholder.

Investment in the Trust; Assets of a Series

Section 3. The Trustees may issue Shares of the Trust to
such persons and on such terms and, subject to any requirements
of law, for such consideration, which may consist of cash or
tangible or intangible property or a combination thereof, as they
may from time to time authorize.

All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall, irrevocably belong to
such series of Shares for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of
account of the Trust and are herein referred to as "assets of"
such series. Any allocation of the assets of a series among any
classes of Shares of such series shall be made in a manner
consistent with the preferences and special or relative rights or
privileges of such classes.

Right to Refuse Orders

Section 4. The Trust by action of its Trustees shall have
the right to refuse to accept any subscription for its Shares at

<PAGE> 5

any time without any cause or reason therefore whatsoever.
Without limiting the foregoing, the Trust shall have the right
not to accept subscriptions under circumstances or in amounts as
the Trustees in their sole discretion consider to be
disadvantageous to existing Shareholders and the Trust may from
time to time set minimum and/or maximum amounts which may be
invested in Shares by a subscriber.

Order in Proper Form

Section 5. The criteria for determining what constitutes an
order in proper form and the time of receipt of such an order by
the Trust shall be prescribed by resolution of the Trustees.

When Shares Become Outstanding

Section 6. Shares subscribed for and for which an order in
proper form has been received shall be deemed to be outstanding
as of the time of acceptance of the order therefor and the
determination of the net price thereof, which price shall be then
deemed to be an asset of the Trust.

Merger or Consolidation

Section 7. In connection with the acquisition of all or
substantially all the assets or stock of another investment
company, investment trust, or of a company classified as a
personal holding company under Federal Income Tax laws, the
Trustees may issue or cause to be issued Shares of a series or
class and accept in payment therefor, in lieu of cash, such
assets at their market value, or such stock at the market value
of the assets held by such investment company or investment
trust, either with or without adjustment for contingent costs or
liabilities.

No Preemptive Rights, Etc.

Section 8. Shareholders shall have no preemptive or other
right to receive, purchase or subscribe for any additional Shares
or other securities issued by the Trust. The Shareholders shall
have no appraisal rights with respect to their Shares and, except
as otherwise determined by the Trustees in their sole discretion,
shall have no exchange or conversion rights with respect to their
Shares.

Status of Shares and Limitation of Personal Liability

Section 9. Shares shall be deemed to be personal property
giving only the rights provided in this instrument. Every
Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of the
Declaration of Trust and to have become a party thereto. The

<PAGE> 6

death of a Shareholder during the continuance of the Trust shall
not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees,
but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any
title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.

Shareholder Inspection Rights

Section 10. Any Shareholder or his agent may inspect and
copy during normal business hours any of the following documents
of the Trust: By-Laws, minutes of the proceedings of the
Shareholders and annual financial statements of the Trust,
including a balance sheet and financial statements of operations.
The foregoing rights of inspection of Shareholders of the Trust
are the exclusive and sole rights of the Shareholders with
respect thereto and no Shareholder of the Trust shall have, as a
Shareholder, the right to inspect or copy any of the books,
records or other documents of the Trust except as specifically
provided in this Section 10 of this Article III or except as
otherwise determined by the Trustees.

ARTICLE IV

The Trustees

Number, Designation, Election, Term, Etc.

Section 1.

(a) Initial Trustee. Upon his execution of this
Declaration of Trust or a counterpart hereof or some other
writing in which he accepts such Trusteeship and agrees to the
provisions hereof, Antonio DeSpirito III shall become a Trustee
hereof.

(b) Number. The Trustees serving as such, whether named
above or hereafter becoming Trustees, may increase or decrease
the number of Trustees to a number other than the number
theretofore determined which number shall not be less than three
nor more than fifteen except during the period prior to any sale
of Shares pursuant to any public offering. No decrease in the
number of Trustees shall have the effect of removing any Trustee

<PAGE> 7

from office prior to the expiration of his term, but the number
of Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 1.

(c) Term and Election. Each Trustee, whether named above
or hereafter becoming a Trustee, shall serve as a Trustee until
the next meeting of Shareholders, if any, called for the purpose
of considering the election or re-election of such Trustee or of
a successor to such Trustee, and until the election and
qualification of his successor, if any, elected at such meeting,
or until such Trustee sooner dies, resigns, retires or is
removed. Upon the election and qualification of a new Trustee,
the Trust estate shall vest in the new Trustee (together with the
continuing or other new Trustees) without any further act or
conveyance. Prior to any sale of Shares pursuant to any public
offering, the initial Trustee named above (and any individual
appointed by such initial Trustee to act as sole Trustee) shall
have the right to appoint other persons as Trustees each to serve
as Trustees as aforesaid until the first meeting of Shareholders
called for the purpose of the election or re-election of such
Trustee or of a successor to such Trustee.

(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to the Chairman of the
Board, if any, the President or the Secretary of the Trust, and
such resignation or retirement shall take effect upon such
delivery or upon such later date as is specified in such
instrument.

(e) Removal. Any Trustee may be removed for cause at any
time by written instrument, signed by at least a majority of the
number of Trustees prior to such removal, specifying the date
upon which such removal shall become effective. Any Trustee may
be removed with or without cause (i) by the vote of the
Shareholders entitled to vote more than fifty percent (50%) of
the votes entitled to be cast on the matter voting together
without regard to series or class at any meeting called for such
purpose, or (ii) by a written consent filed with the custodian of
the Trust's portfolio securities and executed by the Shareholders
entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter voting together without regard
to series or class.

Whenever ten or more Shareholders of record who have been
such for at least six months preceding the date of application,
and who hold in the aggregate Shares constituting at least one
percent of the outstanding Shares of the Trust, shall apply to
the Trustees in writing, stating that they wish to communicate
with other Shareholders with a view to obtaining signatures to a
request for a meeting to consider removal of a Trustee and
accompanied by a form of communication and request that they wish

<PAGE> 8

to transmit, the Trustees shall within five business days after
receipt of such application inform such applicants as to the
approximate cost of mailing to the Shareholders of record the
proposed communication and form of request. Upon the written
request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing,
the Trustees shall, within reasonable promptness, mail such
material to all Shareholders of record at their addresses as
recorded on the books of the Trust. Notwithstanding the
foregoing, the Trustees may refuse to mail such material on the
basis and in accordance with the procedures set forth in the last
two paragraphs of Section 16(c) of the 1940 Act.

(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation the
death, resignation, retirement, removal or incapacity of any of
the Trustees, or resulting from an increase in the number of
Trustees by the other Trustees may (but so long as there are at
least three remaining Trustees at all times subsequent to any
sale of Shares pursuant to any public offering, need not unless
required by the 1940 Act) be filled either by a majority of the
remaining Trustees, even if less than a quorum, through the
appointment in writing of such other person as such remaining
Trustees in their discretion shall determine or, whenever deemed
appropriate by the remaining Trustees, by the election by the
Shareholders, at a meeting called for such purpose, of a person
to fill such vacancy. Upon the appointment or election and
qualification of a new Trustee as aforesaid, the Trust estate
shall vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance, except that any
such appointment or election in anticipation of a vacancy to
occur by reason of retirement, resignation, or increase in number
of Trustees to be effective at a later date shall become
effective only at or after the effective date of said retirement,
resignation, or increase in number of Trustees.

(g) Mandatory Election by Shareholders. Notwithstanding
the foregoing provisions of this Section 1, the Trustees shall
call a meeting of the Shareholders for the election of one or
more Trustees at such time or times as may be required in order
that the provisions of the 1940 Act may be complied with, and the
authority hereinabove provided for the Trustees to appoint any
successor Trustee or Trustees shall be restricted if such
appointment would result in failure of the Trust to comply with
any provision of the 1940 Act.

(h) Effect of Death, Resignation, Etc. The death,
resignation, retirement, removal or incapacity of the Trustees,
or any one of them, shall not operate to annul or terminate the
Trust or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration
of Trust.

<PAGE> 9

(i) No Accounting. Except under circumstances which would
justify his removal for cause, no person ceasing to be a Trustee
as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required
to make an accounting to the Shareholders or remaining Trustees
upon such cessation.

Powers

Section 2. The Trustees, subject only to the specific
limitations contained in this Declaration of Trust or otherwise
imposed by the 1940 Act or other applicable law, shall have,
without further or other authorization and free from any power or
control of the Shareholders, full, absolute and exclusive power,
control and authority over the Trust assets and the business and
affairs of the Trust to the same extent as if the Trustees were
the sole and absolute owners thereof in their own right and to do
all such acts and things as in their sole judgment and discretion
are necessary and incidental to, or desirable for the carrying
out of any of the purposes of the Trust or conducting the
business of the Trust. Any determination made in good faith by
the Trustees of the purposes of the Trust or the existence of any
power or authority hereunder shall be conclusive. In construing
the provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to the
Trustees. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with this Declaration of Trust
containing provisions relating to the business of the Trust, the
conduct of its affairs, its rights or powers and the rights or
powers of its Shareholders, Trustees, officers, employees and
other agents and may amend and repeal them to the extent that
such By-Laws do not reserve that right to the Shareholders; fill
vacancies in their number, including vacancies resulting from
increases in their number, unless a vote of the Trust's
Shareholders is required to fill such vacancies pursuant to the
1940 Act; elect and remove such officers and appoint and
terminate such agents as they consider appropriate; appoint from
their own number, and terminate, any one or more committees
consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session,
exercise some or all of the powers and authority of the Trustees
as the Trustees may determine; appoint an advisory board, the
members of which shall not be Trustees and need not be
Shareholders; employ one or more investment advisers or managers
as provided in Section 6 of this Article IV; employ one or more
custodians of the assets of the Trust and authorize such
custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of
securities; retain a transfer agent or a Shareholder services
agent, or both; provide for the distribution of Shares by the
Trust, through one or more principal underwriters or otherwise;
set record dates for the determination of Shareholders with

<PAGE> 10

respect to various matters; and in general delegate such
authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of
the Trust or to any such custodian or underwriter.

In furtherance of and not in limitation of the foregoing,
the Trustees shall have power and authority:

(a) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of, to lend or to pledge, to trade in or deal in
securities or interests of all kinds, however evidenced, or
obligations of all kinds, however evidenced, or rights, warrants,
or contracts to acquire such securities, interests, or
obligations, of any private or public company, corporation,
association, general or limited partnership, trust or other
enterprise or organization, foreign or domestic, or issued or
guaranteed by any national or state government, foreign or
domestic, or their agencies, instrumentalities or subdivisions
(including but not limited to, bonds, debentures, bills, time
notes and all other evidences of indebtedness); negotiable or
non-negotiable instruments; any and all futures contracts;
government securities and money market instruments (including but
not limited to, bank certificates of deposit, finance paper,
commercial paper, bankers acceptances, and all kinds of
repurchase agreements);

(b) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of foreign currencies, and funds and exchanges, and make
deposits in banks, savings banks, trust companies, and savings
and loan associations, foreign or domestic;

(c) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop, and dispose of (by sale or
otherwise) any property, real or personal, and any interest
therein;

(d) To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the Trust;

(e) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property;
and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;

(f) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;

<PAGE> 11

(g) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust
or in the name of a custodian, subcustodian or other depositary
or a nominee or nominees or otherwise;

(h) Subject to the provisions of Article III, to allocate
assets, liabilities, income and expenses of the Trust to a
particular series of Shares or to apportion the same among two or
more series, provided that any liabilities or expenses incurred
by a particular series shall be payable solely out of the assets
of that series; and to the extent necessary or appropriate to
give effect to the preferences and special or relative rights or
privileges of any classes of Shares, to allocate assets,
liabilities, income and expenses of a series to a particular
class of Shares of that series or to apportion the same among two
or more classes of Shares of that series;

(i) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security or property of which is or was held in the
Trust; to consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer, and to pay calls
or subscriptions with respect to any security held in the Trust;

(j) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security
to, any such committee, depositary or trustee, and to delegate to
them such power and authority with relation to any security
(whether or not so deposited or transferred) as the Trustees
shall deem proper, and to agree to pay, and to pay, such portion
of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;

(k) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;

(l) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;

(m) To borrow funds;

(n) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;
and to mortgage and pledge the Trust property or any part thereof
to secure any of or all such obligations;

(o) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the

<PAGE> 12

conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of
distributions and principal on its portfolio investments, and
insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such
office or position, or by reason of any action alleged to have
been taken or omitted by any such person as Shareholder, Trustee,
officer, employee, agent, investment adviser or manager,
principal underwriter, or independent contractor, including any
action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and

(p) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry
out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.

The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees of common law trusts. Except as otherwise provided
herein or from time to time in the By-Laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (if a quorum by present), within
or without Massachusetts, including any meeting held by means of
a conference telephone or other communications equipment by means
of which all persons participating in the meeting can communicate
with each other simultaneously and participation by such means
shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.

Payment of Expenses, Allocation of Liabilities

Section 3. The Trustees are authorized to pay or to
cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred
or arising in connection with the Trust, or in connection with
the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser
or manager, principal underwriter, auditor, counsel, custodian,
transfer agent, shareholder servicing agent, and such other
agents or independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.

<PAGE> 13

The assets of a particular series of Shares shall be charged
with the liabilities (including, in the discretion of the
Trustees or their delegate, accrued expenses and reserves)
incurred in respect of such series (but not with liabilities
incurred in respect of any other series) and such series shall
also be charged with its share of any other liabilities. Any
allocation of the liabilities of a series among classes of Shares
of that series shall be done in a manner consistent with the
preferences and special or relative rights or privileges of such
classes. The determination of the Trustees shall be final and
conclusive as to the amount of liabilities to be charged to one
or more particular series or class. The Trustees may delegate
from time to time the power to make such allocation to one or
more Trustees or to an agent of the Trust appointed for such
purpose. The liabilities with which a series is so charged are
herein referred to as the "liabilities of" such series.

Section 4. The Trustees shall have the power, as
frequently as they may determine, to cause each Shareholder to
pay directly, in advance or arrears, for charges for the Trust's
custodian or transfer or shareholder service or similar agent, an
amount fixed from time to time by the Trustees, by setting off
such charges due from such Shareholder from declared but unpaid
dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full
and/or fractional Shares which represents the outstanding amount
of such charges due from such Shareholder.

Ownership of Assets of the Trust

Section 5. Title to all of the assets of each series of
the Trust and of the Trust shall at all times be considered as
vested in the Trustees.

Advisory, Management and Distribution

Section 6. Subject to a favorable vote of a majority of
the outstanding voting securities of a series of the Trust, the
Trustees may on behalf of such series, at any time and from time
to time, contract for exclusive or nonexclusive advisory and/or
management services for such series with a corporation, trust,
association or other organization, every such contract to comply
with such requirements and restrictions as may be set forth in
the By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of such series shall be held
uninvested and to make changes in such series' investments. The
Trustees may also, at any time and from time to time, contract
with a corporation, trust, association or other organization,

<PAGE> 14

appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with
such requirements and restrictions as may be set forth in the By-
Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.

The fact that:

(a) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, advisor, principal underwriter, or distributor
or agent of or for any corporation, trust, association, or other
organization, or of or for any parent or affiliate of any
organization, with which an advisory or management or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the
Trust, or that

(b) any corporation, trust, association or other
organization with which an advisory or management or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract may have been or may hereafter
be made also has an advisory or management contract, or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract with one or more other
corporati, trusts, associations, or other organizations, or has
other businesses or interests shall not affect the validity of
any such contract or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing the same or
create any liability or accountability to the Trust or its
Shareholders.

ARTICLE V

Shareholders' Voting Powers and Meetings

Voting Powers

Section 1. Subject to the voting provisions of one or
more classes of Shares, the Shareholders shall have power to vote
only: (a) for the election or removal of Trustees as provided in
Article IV, Section 1; (b) with respect to any investment adviser
or manager as provided in Article IV, Section 6; (c) with respect
to any termination or reorganization of the Trust or any series
or class thereof to the extent and as provided in Article IX,
Section 1; (d) with respect to any amendment of this Declaration
of Trust to the extent and as provided in Article IX, Section 4;
and (e) with respect to such additional matters relating to the
Trust as may be required by law, the 1940 Act, this Declaration

<PAGE> 15

of Trust, the By-Laws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency) or
any state, or as the Trustees may consider necessary or desir-
able.

Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote.
Notwithstanding any other provision of the Declaration of Trust,
on any matter submitted to a vote of Shareholders all Shares of
the Trust then entitled to vote shall, except to the extent
otherwise required or permitted by the preferences and special or
relative rights or privileges of any classes of Shares, be voted
by individual series and not in the aggregate or by class, except
(a) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual series; and (b) when the Trustees
have determined that the matter affects only the interests of one
or more series or classes, then only Shareholders of such series
or class shall be entitled to vote thereon. There shall be no
cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy.

A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless
at or prior to the exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger.

Until Shares of any series or class are issued, the Trustees
may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be
taken by Shareholders of such series or class.

Shareholder Meetings

Section 2. Meetings of Shareholders (including meetings
involving only one or more but less than all series or classes)
may be called and held from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Such
meetings shall be held at the principal office of the Trust as
set forth in the By-Laws of the Trust or at any such other place
within the United States as may be designated in the call
thereof, which call shall be made by the Trustees or the
President of the Trust. Meetings of Shareholders may be called
by the Trustees or such other person or persons as may be
specified in the By-Laws upon written application by Shareholders
holding at least twenty-five percent (25%) (or ten percent (10%)

<PAGE> 16

if the purpose of the meeting is to determine if a Trustee is to
be removed from office) of the Shares then outstanding of all
series and classes entitled to vote at such meeting requesting a
meeting be called for a purpose requiring action by the
Shareholders as provided herein or in the By-Laws which purpose
shall be specified in any such written application.

Shareholders shall be entitled to at least seven days'
written notice of any meeting of the Shareholders.

Quorum and Required Vote

Section 3. The presence at a meeting of Shareholders in
person or by proxy of Shareholders entitled to vote at least
thirty percent (30%) of all votes entitled to be cast at the
meeting of each series or class entitled to vote as a series or
class shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or
of this Declaration of Trust permits or requires that the holders
of Shares shall vote in the aggregate and not as a series or
class, then the presence in person or by proxy of Shareholders
entitled to vote at least thirty percent (30%) of all votes
entitled to be cast at the meeting (without regard to series or
class) shall constitute a quorum. Any lesser number, however,
shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set
for the original meeting without the necessity of further notice.

Except when a larger vote is required by any provisions of
the 1940 Act, this Declaration of Trust or the By-Laws, a
majority of the Shares of each series or class voted on the
matter shall decide that matter insofar as that series or class
is concerned, provided that where any provision of law, this
Declaration of Trust or the By-Laws permits or requires that the
holders of Shares vote in the aggregate and not as a series or
class, then a majority of the Shares voted on any matter (without
regard to series or class) shall decide such matter and a
plurality shall elect a Trustee.

Action by Written Consent

Section 4. Any action taken by Shareholders may be taken
without a meeting if Shareholders entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter of each series or class or, where any provision of law,
this Declaration of Trust or the By-Laws permits or requires that
the holders of Shares vote in the aggregate and not as a series
or class, if Shareholders entitled to vote more than fifty
percent (50%) of the votes entitled to be cast thereon (without
regard to series or class) (or in either case such larger vote as
shall be required by any provision of this Declaration of Trust
or the By-Laws) consent to the action in writing and such written

16
<PAGE> 17

consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.

Additional Provisions

Section 5. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.

ARTICLE VI

Distributions, Redemptions and Repurchases,
and Determination of Net Asset Value

Distributions

Section 1. The Trustees may in their sole discretion
from time to time distribute to the Shareholders of any series
such income and gains, accrued or realized, as the Trustees may
determine, after providing for actual and accrued expenses and
liabilities of such series (including such reserves as the
Trustees may establish) determined in accordance with this
Declaration of Trust and good accounting practices. The Trustees
shall have full discretion to determine which items shall be
treated as income and which items as capital and their
determination shall be binding upon the Shareholders.
Distributions to any series, if any be made, shall be in Shares
of such series, in cash or otherwise and on a date or dates
determined by the Trustees. At any time and from time to time in
their discretion, the Trustees may distribute to the Shareholders
of any series as of a record date or dates determined by the
Trustees, in Shares of such series, in cash or otherwise, all or
part of any gains realized on the sale or disposition of property
of the series or otherwise, or all or part of any other principal
of the Trust attributable to the series. Except to the extent
otherwise required or permitted by the preferences and special or
relative rights or privileges of any classes of Shares of that
series, each distribution pursuant to this Section 1 shall be
made ratably according to the number of Shares of the series held
by the several Shareholders on the applicable record date
thereof, provided that distributions from assets of a series may
only be made to the holders of the Shares of such series and
provided that no distributions need be made on Shares purchased
pursuant to orders received, or for which payment is made, after
such time or times as the Trustees may determine. Any
distribution to the Shareholders of a particular class of Shares
shall be made to such Shareholders pro rata in proportion to the
number of Shares of such class held by each of them. Any
distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with this Declaration of
Trust. The Trustees have the power, in their discretion, to

<PAGE> 18

distribute for any year amounts sufficient to enable the Trust to
qualify as a "regulated investment company" under the Internal
Revenue Code as amended (or any successor thereto) to avoid any
liability for federal income tax in respect of that year.

Redemptions and Repurchases

Section 2. Any holder of Shares of the Trust may, by
presentation of a request in proper form, together with his
certificates, if any, for such Shares, in proper form for
transfer to the Trust or duly authorized agent of the Trust,
request redemption of his shares for the net asset value thereof
determined and computed in accordance with the provisions of this
Section 2 and the provisions of Section 6 of this Article VI.

Upon receipt by the Trust or its duly authorized agent, as
the case may be, of such a request for redemption of Shares in
proper form, such Shares shall be redeemed at the net asset value
per share of the particular series or class next determined after
such request is received or determined as of such other time
fixed by the Trustees as may be permitted or required by the 1940
Act. The criteria for determining what constitutes a request for
redemption in proper form and the time of receipt of such request
shall be fixed by the Trustees.

The obligation of the Trust to redeem its Shares as set
forth above in this Section 2 shall be subject to the condition
that such obligation may be suspended by the Trust by or under
authority of the Trustees during any period or periods when and
to the extent permissible under the 1940 Act. If there is such a
suspension, any Shareholder may withdraw any request for
redemption which has been received by the Trust during any such
period and the applicable net asset value with respect to which
would but for such suspension be calculated as of a time during
such period. Upon such withdrawal, the Trust shall return to the
Shareholder the certificates therefor, if any.

The Trust may also purchase, repurchase or redeem Shares in
accordance with such other methods, upon such other terms and
subject to such other conditions as the Trustee may from time to
time authorize at a price not exceeding the net asset value of
such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made. Shares redeemed or
repurchased by the Trust hereunder shall be cancelled upon such
redemption or repurchase without further action by the Trust or
the Trustees and the number of issued and outstanding Shares of
the relevant series and class shall thereupon be reduced by such
amount.

<PAGE> 19

Payment for Shares Redeemed

Section 3. Payment of the redemption price for Shares
redeemed pursuant to this Article VI shall be made by the Trust
or its duly authorized agent after receipt by the Trust or its
duly authorized agent of a request for redemption in proper form
(together with any certificates for such Shares as provided in
Section 2 above) in accordance with procedures and subject to
conditions prescribed by the Trustees; provided, however, that
payment may be postponed during the period in which the
redemption of Shares is suspended under Section 2 above. Subject
to any generally applicable limitation imposed by the Trustees,
any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or
partly in kind, instead of in cash. Such payment in kind shall
be made by distributing securities or other property,
constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other
property then held by the series of Shares being redeemed,
purchased or repurchased (but not necessarily involving a portion
of each of the series' holdings) and taken at their value used in
determining the net asset value of the Shares in respect of which
payment is made.

Redemptions at the Option of the Trust

Section 4. The Trust shall have the right at its option
and at any time and from time to time to redeem Shares of any
Shareholder at the net asset value thereof as determined in
accordance with Section 6 of this Article VI, if at such time
such Shareholder owns fewer shares of a series or class than, or
Shares of a series or class having an aggregate net asset value
of less than, an amount determined from time to time by the
Trustees. Any such redemption at the option of the Trust shall
be made in accordance with such other criteria and procedures for
determining the Shares to be redeemed, the redemption date and
the means of effecting such redemption as the Trustees may from
time to time authorize.

Additional Provisions Relating to Dividends, Redemptions and
Repurchases

Section 5. The completion of redemption, purchase or
repurchase of Shares shall constitute a full discharge of the
Trust and the Trustees with respect to such Shares. No dividend
or distribution (including, without limitation, any distribution
paid upon termination of the Trust or of any series or class)
with respect to, nor any redemption or repurchase of, the Shares
of any series or class shall be effected by the Trust other than
from the assets of such series.

<PAGE> 20

Determination of Net Asset Value

Section 6. The term "net asset value" of each Share of a
series or class as of any particular time shall be the quotient
obtained by dividing the value, as at such time, of the net
assets of such series or class (i.e., the value of the assets of
such series or class less the liabilities of such series or
class, exclusive of liabilities represented by the Shares of such
series or class) by the total number of Shares of such series or
class outstanding at such time, all determined and computed in
accordance with the Trust's current prospectus.

The Trustees, or any officer, or officers or agent of the
Trust designated for the purpose by the Trustees shall determine
the net asset value of the Shares of each series or class, and
the Trustees shall fix the time or times as of which the net
asset value of the Shares of each series or class shall be
determined and shall fix the periods during which any such net
asset value shall be effective as to sales, redemptions and
repurchases of, and other transactions in, the Shares of such
series or class, except as such times and periods for any such
transaction may be fixed by other provisions of this Declaration
of Trust or by the By-Laws.

Determinations in accordance with this Section 6 made in
good faith shall be binding on all parties concerned.

How Long Shares are Outstanding

Section 7. Shares of the Trust surrendered to the Trust
for redemption by it pursuant to the provisions of Section 2 of
this Article VI shall be deemed to be outstanding until the
redemption price thereof is determined pursuant to this Article
VI and, thereupon and until paid, the redemption price thereof
shall be deemed to be a liability of the Trust. Shares of the
Trust purchased by the Trust in the open market shall be deemed
to be outstanding until confirmation of purchase thereof by the
Trust and, thereupon and until paid, the purchase price thereof
shall be deemed to be a liability of the Trust. Shares of the
Trust redeemed by the Trust pursuant to Section 4 of this Article
VI shall be deemed to be outstanding until said Shares are deemed
to be redeemed in accordance with procedures adopted by the
Trustees pursuant to said Section 4.

ARTICLE VII

Compensation and Limitation of Liability
of Trustees and Shareholders

Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust if the rate thereof is
prescribed by such Trustees. Nothing herein shall in any way

<PAGE> 21

prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and
payment for the same by the Trust, it being recognized that such
employment may result in such Trustee being considered an
Affiliated Person or an Interested Person.

Limitation of Liability

Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer,
agent, employee, investment adviser or manager, principal
underwriter or custodian, nor shall any Trustee be responsible
for the act or omission of any other Trustee. Nothing in this
Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the
office of Trustee.

Every note, bond, contract, instrument, certificate, Share
or undertaking and every other act or thing whatsoever executed
or done by or on behalf of the Trust or the Trustees or any of
them in connection with the Trust shall be conclusively deemed to
have been executed or done only in or with respect to their or
his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.

Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets
and property of the Trust or a particular series of Shares, and
may contain such further recital as he or they may deem
appropriate, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.

All persons extending credit to, contracting with or having
any claim against the Trust or a particular series of Shares
shall look only to the assets of the Trust or the assets of that
particular series of Shares, as the case may be, for payment
under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be
personally liable therefor.

<PAGE> 22

Trustees' Good Faith Action, Expert Advice, No Bond or Surety

Section 3. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable only for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and
operation of this Declaration of Trust and their duties as
Trustees hereunder, and shall be under no liability for any act
or omission in accordance with such advice or for failing to
follow such advice. In discharging their duties, the Trustees,
when acting in good faith, shall be entitled to rely upon the
books of account of the Trust and upon written reports made to
the Trustees by any officer appointed by them, any independent
public accountant and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee
of any other party to any contract entered into pursuant to
Section 2 of Article IV. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.

Liability of Third Persons Dealing with Trustees

Section 4. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the
Trust or upon its order.

ARTICLE VIII

Indemnification

Subject to the exceptions and limitations contained in this
Article, every person who is, or has been, a Trustee or officer
of the Trust (including persons who serve at the request of the
Trust as directors, officers or trustees of another organization
in which the Trust has an interest as a shareholder, creditor or
otherwise) hereinafter referred to as a "Covered Person", shall
be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been such a Trustee,
director or officer and against amounts paid or incurred by him
in settlement thereof.

<PAGE> 23

No indemnification shall be provided hereunder to a Covered
Person:

(a) against any liability to the Trust or its Shareholders
by reason of a final adjudication by the court or other body
before which the proceeding was brought that he engaged in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;

(b) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or

(c) in the event of a settlement or other disposition not
involving a final adjudication (as provided in paragraph (a) or
(b)) and resulting in a payment by a Covered Person, unless there
has been either a determination that such Covered Person did not
engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or
other disposition or a reasonable determination, based on a
review of readily available facts (as opposed to a full trial-
type inquiry) that he did not engage in such conduct:

(i) by a vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or

(ii) by written opinion of independent legal
counsel.

The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who
has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel other than Covered
Persons may be entitled by contract or otherwise under law.

Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding subject to a claim for
indemnification under this Article shall be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification
under this Article, provided that either:

(a) such undertaking is secured by a surety bond or some
other appropriate security or the Trust shall be insured against

<PAGE> 24

losses arising out of any such advances; or

(b) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees
then in office act on the matter) or independent legal counsel in
a written opinion shall determine, based upon a review of the
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.

As used in this Article, a "Disinterested Trustee" is one
(a) who is not an "interested person" of the Trust, as defined in
the 1940 Act (including anyone who has been exempted from being
an "interested person" by any rule, regulation or order of the
Commission), and (b) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending.

As used in this Article, the words "claim", "action", "suit"
or "proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall
include without limitation, attorneys' fees, cost, judgments,
amounts paid in settlement, fines, penalties and other
liabilities.

In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or
other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability but only out of the
assets of the particular series of Shares of which he or she is
or was a Shareholder; provided, however, there shall be no
liability or obligation of the Trust arising hereunder to
reimburse any Shareholder for taxes paid by reason of such
Shareholder's ownership of Shares or for losses suffered by
reason of any changes in value of any Trust assets.

ARTICLE IX

Miscellaneous

Duration, Termination and Reorganization of Trust

Section 1. Unless terminated as provided herein, the
Trust shall continue without limitation of time. The Trust may
be terminated at any time by the Trustees by written notice to
the Shareholders without a vote of the Shareholders of the Trust

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or by the vote of the Shareholders entitled to vote more than
fifty percent (50%) of the votes of each series or class entitled
to be cast on the matter. Any series or class of Shares may be
terminated at any time by the Trustees by written notice to the
Shareholders of such series or class without a vote of the
Shareholders of such series or class or by the vote of the
Shareholders of such series or class entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter.

Upon termination of the Trust or of any one or more series
or classes of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued
or anticipated, of the particular series or class as may be
determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees consider appropriate reduce to
the extent necessary the remaining assets of the particular
series to distributable form in cash or other securities, or any
combination thereof, and distribute the proceeds to the
Shareholders of the series or class involved, ratably according
to the number of Shares of such series or class held by the
several Shareholders of such series or class on the date of
termination. Any such distributions with respect to any series
which has one or more classes of Shares outstanding shall be made
ratably to such classes in the same proportion as the number of
Shares of each class bears to the total number of Shares of the
series, except to the extent otherwise required or permitted by
the preferences and special or relative rights or privileges of
any classes of Shares of any such series.

At any time by the affirmative vote of the Shareholders of
the affected series entitled to vote more than fifty percent
(50%) of the votes entitled to be cast on the matter, the
Trustees may sell, convey and transfer the assets of the Trust,
or the assets belonging to any one or more series, to another
trust, partnership, association or corporation organized under
the laws of any state of the United States, or to the Trust to be
held as assets belonging to another series of the Trust, in
exchange for cash, shares or other securities (including, in the
case of a transfer to another series of the Trust, Shares of such
other series) with such transfer being made subject to or with
the assumption by the transferee of, the liabilities belonging to
each series the assets of which are so distributed. Following
such transfer, the Trustees shall distribute such cash, shares or
other securities (giving due effect to the assets and liabilities
belonging to and any other differences among the various series
the assets belonging to which have so been transferred) among the
Shareholders of the series the assets belonging to which have
been so transferred; and if all the assets of the Trust have been
so distributed, the Trust shall be terminated.

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Filing of Copies, References, Headings

Section 2. The original or a copy of this instrument and
of each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by any officer of the Trust as to whether or not any
such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein",
"hereof", and "hereunder", shall be deemed to refer to this
instrument as amended from time to time. Headings are placed
herein for convenience of reference only and shall not be taken
as a part hereof or control or affect the meaning, construction
or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an
original.

Applicable Law

Section 3. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to
be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.

Amendments

Section 4. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of the
then Trustees when authorized so to do by vote of Shareholders
holding more than fifty percent (50%) of the Shares of each
series entitled to vote, except that an amendment which in the
determination of the Trustees shall affect the holders of one or
more series or classes of Shares but not the holders of all
outstanding series and classes shall be authorized by vote of the
Shareholders holding more than fifty percent (50%) of the Shares
entitled to vote of each series or class affected and no vote of
Shareholders of a series or class not affected shall be required.
Amendments having the purpose of changing the name of the Trust
or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision which is defective or
inconsistent with the 1940 Act or with the requirements of the

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Internal Revenue Code and the regulations thereunder for the
Trust's obtaining the most favorable treatment thereunder
available to regulated investment companies shall not require
authorization by Shareholder vote.

IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal for himself and his assigns, as of the day and year
first above written.

/s/ Antonio DeSpirito III
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(SEAL) Antonio DeSpirito III, Trustee

Residence Address:

145 Endicott St. Apt 12
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Boston, MA 02113
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COMMONWEALTH OF MASSACHUSETTS

County of Suffolk, ss.

Then personally appeared the above-named Antonio DeSpirito
III who acknowledged the foregoing instrument to be his free act
and deed, before me this 14 day of June, 1995.

/s/ Robert J. Barry
-------------------------------
Notary Public

My Commission Expires: 9-22-00
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EXHIBIT 99.B24.

POWER OF ATTORNEY
-----------------

The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as his attorney-in-fact to sign and file on his
behalf individually and in the capacity stated below such
registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper Value
Plus Growth Fund.