Filed electronically with the Securities and Exchange Commission
on December 3, 1998
File No. 33-61433
File No. 811-7331
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 4 /X/
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 /X/
-
KEMPER VALUE PLUS GROWTH FUND
-----------------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, IL 60606
--------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 312-537-7000
--------------
Philip J. Collora, Vice President and Secretary
Kemper Value Plus Growth Fund
222 South Riverside Plaza, Chicago, IL 60606
--------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/__/ Immediately upon filing pursuant to paragraph (b)
/__/ 60 days after filing pursuant to paragraph (a) (1)
/__/ 75 days after filing pursuant to paragraph (a) (2)
/__/ On __________________ pursuant to paragraph (b)
/X/ On February 1, 1999 pursuant to paragraph (a) (1)
/__/ On __________________ pursuant to paragraph (a) (2) of Rule 485.
If Appropriate, check the following box:
/__/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
KEMPER VALUE PLUS GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
- ------
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
<S> <C> <C>
1. Front and Back Cover Pages FRONT AND BACK COVER
2. Risk/Return Summary: GROWTH STOCK INVESTING
Investments, Risks and Investment Approach
Performance Principal Risk Factors
ABOUT THE FUNDS
Investment Objective and Strategies
Principal Risks
Past Performance
Principal Strategies and Investments
Related Risks
3. Risk/Return Summary: Fee ABOUT THE FUNDS
Table Expense Information
4. Investment Objectives, GROWTH STOCK INVESTING
Principal Investment Investment Approach
Strategies and Related Risks Principal Risk Factors
ABOUT THE FUNDS
Investment Objective and Strategies
Principal Risks
Principal Strategies and Investments
Related Risks
5. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Management, Organization and INVESTMENT MANAGER
Capital Structure PORTFOLIO MANAGEMENT
7. Shareholder Information ABOUT YOUR INVESTMENT
Choosing a Share Class
Buying Shares
Selling and Exchanging Shares
Distribution and Taxes
Transaction Information
8. Distribution Arrangements ABOUT THE FUNDS
Expense Information
9. Financial Highlights ABOUT THE FUNDS
Information Financial Highlights
Cross Reference - Page 1
<PAGE>
KEMPER VALUE PLUS GROWTH FUND
CROSS-REFERENCE SHEET
(continued)
Items Required By Form N-1A
---------------------------
PART B
- ------
Item No. Item Caption Statement of Additional Information Caption
-------- ------------ -------------------------------------------
10. Cover Page and Table COVER PAGE
of Contents TABLE OF CONTENTS
11. Fund History SHAREHOLDER RIGHTS
12. Description of the INVESTMENT RESTRICTIONS
Fund and Its INVESTMENT POLICIES AND TECHNIQUES
Investments and Risks
13. Management of the Fund INVESTMENT MANAGER AND UNDERWRITER
OFFICERS AND TRUSTEES
14. Control Persons and OFFICERS AND TRUSTEES
Principal Holders of
Securities
15. Investment Advisory INVESTMENT MANAGER AND UNDERWRITER
and Other Services
16. Brokerage Allocation PORTFOLIO TRANSACTIONS
and Other Practices
17. Capital Stock and SHAREHOLDER RIGHTS
Other Securities
18. Purchase, Redemption PURCHASE, REPURCHASE AND REDEMPTION OF SHARES
and Pricing of Shares NET ASSET VALUE
SPECIAL FEATURES
19. Taxation of the Fund DIVIDENDS AND TAXES
20. Underwriters INVESTMENT MANAGER AND UNDERWRITER
21. Calculation of PERFORMANCE
Performance Data
22. Financial Statements PERFORMANCE
</TABLE>
Cross Reference - Page 2
<PAGE>
KEMPER EQUITY FUNDS - GROWTH STYLE
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 1, 1999
CLASS I SHARES
Kemper Aggressive Growth Fund
Kemper Classic Growth Fund
Kemper Blue Chip Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Technology Fund
Kemper Quantitative Equity Fund
Kemper Total Return Fund
Kemper Value + Growth Fund
The above funds currently offer four classes of shares to provide investors with
different purchasing options. These are Class A, Class B and Class C shares,
which are described in the prospectus, and Class I shares, which are described
in the prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of Scudder
Kemper Investments, Inc. ("Scudder Kemper") and its affiliates and rollover
accounts from those plans; (2) the following investment advisory clients of
Scudder Kemper and its investment advisory affiliates that invest at least $1
million in a Fund: unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and self-directed retirement
plans); unaffiliated banks and insurance companies purchasing for their own
accounts; and endowment funds of unaffiliated non-profit organizations; (3)
investment-only accounts for large qualified plans, with at least $50 million in
total plan assets or at least 1000 participants; (4) trust and fiduciary
accounts of trust companies and bank trust departments providing fee based
advisory services that invest at least $1 million in a Fund on behalf of each
trust; and (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a Fund. Class I shares
currently are available for purchase only from Kemper Distributors, Inc.
("KDI"), principal underwriter for the Funds, and, in the case of category 4
above, elected dealers authorized by KDI. 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.
<PAGE>
The following information supplements the indicated sections of the prospectus.
Average Annual Total Returns - Class I shares
One Year Five Years Ten Years
For periods ended
December 31, 1998
Kemper Aggressive
Growth Fund
Kemper Classic
Growth Fund
Kemper Blue Chip
Fund
Kemper Growth Fund
Kemper Small
Capitalization Equity
Fund
Kemper Technology
Fund
Kemper Quantitative
Equity Fund
Kemper Total Return
Fund
Kemper Value +
Growth Fund
S&P 500 Stock Index __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Maximum Maximum Redemption Exchange Maximum
Sales Sales Fee Fee Deferred
Charge on Charge on Sales
Purchases Reinvested Charge (as
(as a % of Dividends a % of
offering redemption
price) proceeds)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Kemper Aggressive Growth Fund
- ------------------------------------------------------------------------------------------------------
Kemper Classic Growth Fund
- ------------------------------------------------------------------------------------------------------
2
<PAGE>
Kemper Blue Chip Fund
- ------------------------------------------------------------------------------------------------------
Kemper Growth Fund
- ------------------------------------------------------------------------------------------------------
Kemper Small Capitalization Equity Fund
- ------------------------------------------------------------------------------------------------------
Kemper Technology Fund
- ------------------------------------------------------------------------------------------------------
Kemper Quantitative Equity Fund
- ------------------------------------------------------------------------------------------------------
Kemper Total Return Fund
- ------------------------------------------------------------------------------------------------------
Kemper Value + Growth Fund
- ------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Investment Rule 12b-1 fees Other expenses Total fund
management fee operating
expenses
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Kemper Aggressive Growth Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Classic Growth Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Blue Chip Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Growth Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Small Capitalization Equity Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Technology Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Quantitative Equity Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Total Return Fund
- -----------------------------------------------------------------------------------------------------------
Kemper Value + Growth Fund
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Aggressive
Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Classic
Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Blue Chip
Fund
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Growth
Fund
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Small
Capitalization Equity
Fund
- ---------------------------------------------------------------------------------------------------------------------------
3
<PAGE>
Kemper Technology
Fund
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Quantitative
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Total Return
Fund
- ---------------------------------------------------------------------------------------------------------------------------
Kemper Value +
Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
FINANCIAL HIGHLIGHTS - TO BE UPDATED
Kemper Aggressive Growth Fund
Kemper Classic Growth Fund
Kemper Blue Chip Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Technology Fund
Kemper Quantitative Equity Fund
Kemper Total Return Fund
Kemper Value + Growth Fund
SPECIAL FEATURES
Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Zurich Money Funds--Zurich Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper and its affiliates and (ii) Class I shares of
any other "Kemper Mutual Fund" listed under "Special Features--Class A
Shares--Combined Purchases" in the prospectus. Conversely, shareholders of
Zurich Money Funds--Zurich Money Market Fund who have purchased shares because
they are participants in tax-exempt retirement plans of Scudder Kemper and its
affiliates may exchange their shares for Class I shares of "Kemper Mutual Funds"
to the extent that they are available through their plan. Exchanges will be made
at the relative net asset values of the shares. Exchanges are subject to the
limitations set forth in the prospectus under "Special Features--Exchange
Privilege--General."
February 1, 1999
4
<PAGE>
LONG TERM
INVESTING
IN A
SHORT TERM
WORLD
February 1, 1999
Prospectus
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
Kemper Equity Funds
Growth Style
Kemper Aggressive Growth Fund
Kemper Classic Growth Fund
Kemper Blue Chip Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Technology Fund
Kemper Quantitative Equity Fund
Kemper Total Return Fund
Kemper Value + Growth Fund
The Securities and Exchange Commission does not make any
judgements as to whether any mutual fund is a good investment.
Nor does it judge the accuracy or completeness of any
mutual fund prospectus. It is a federal offense to suggest otherwise.
<PAGE>
CONTENTS
Stock Investing.............................................................3
Investment approach.......................................................3
Principal risk factors....................................................3
ABOUT THE FUNDS................................................................4
Kemper Aggressive Growth Fund...............................................4
Kemper Classic growth Fund.................................................12
Kemper Blue Chip Fund......................................................20
Kemper Growth Fund.........................................................27
Kemper Small Capitalization Equity Fund....................................34
Kemper Technology Fund.....................................................41
Kemper Quantitative Equity Fund............................................48
Kemper Total Return Fund...................................................55
Kemper Value + Growth Fund.................................................63
Investment Manager.......................................................69
ABOUT YOUR INVESTMENT.........................................................74
Choosing a share class...................................................74
Buying shares............................................................76
Selling and exchanging shares............................................80
Distributions and taxes..................................................81
Transaction information..................................................82
2
<PAGE>
GROWTH STOCK INVESTING
Investment approach
The funds described in this prospectus invest in "growth stocks" - shares of
companies that are expected to experience rapid growth, resulting from strong
sales, talented management and dominant market positions. Because of their
anticipated return potential, these stocks are generally in storng demand, and
tend to carry relatifely high price-to-earnings rations (P/E) relative to the
overall stock market. The investmetn manager invests ror the funds using a
"growth at a reasonable price" philosophy by conductin rigorous analysis of the
companies' fundmental strenth and assessing overall economic conditions to
uncover companies that are trading at reasonable prices, but that still have the
potentail for strong growth.
Each fund approaches stock investing with a different style and risk profile.
An investment in the common stock of a company represents a proportionate
ownership interest in that company. Therefore, the fund participates in the
success or failure of any company in which it holds stock. Compared to other
classes of financial assets, such as bonds or cash equivalents, common stocks
have historically offered the greatest potential for gain on your investment.
However, the market value of common stocks can fluctuate significantly,
reflecting such things as the business performance of the issuing company,
investors' perceptions of the company or the overall stock market and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless.
Principal risk factors
There are market and investment risks with any security and the value of an
investment in the funds will fluctuate over time.
Stock Market. Each fund's returns and net asset value will go up and down, and
it is possible to lose money invested in a fund. Stock market movements will
affect the funds' share prices on a daily basis. Declines are possible both in
the overall stock market or in the types of securities held by the funds.
Portfolio Strategy. The portfolio management team's skill in choosing
appropriate investments for the funds will determine in large part the funds'
ability to achieve their respective investment objectives.
3
<PAGE>
Growth Stocks. Because of their perceived return potential, growth stocks are
typically in demand and tend to carry relatively high prices. Growth stocks
generally experience greater share price fluctuations as the market reacts to
changing perceptions of the underlying companies' growth potential and broader
economic activity.
ABOUT THE FUNDS
KEMPER AGGRESSIVE GROWTH FUND
Investment objective and principal strategies
Kemper Aggressive Growth Fund seeks capital appreciation through the use of
aggressive investment techniques. The fund's investment objective and policies
may be changed without a vote of shareholders.
In seeking to achieve its objective, the fund invests primarily in equity
securities of U.S. companies that the investment manager believes offer the best
opportunities for capital appreciation at any given time. The investment manager
pursues a flexible investment strategy in the selection of securities, not
limited to any particular investment sector, industry or company size; and it
may, depending upon market circumstances, emphasize the securities of small,
medium or large-sized companies from time to time. The fund may invest a
significant portion of its assets in initial public offerings ("IPOs"), which
are typically securities of small, unseasoned issuers.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. To the extent that the fund takes aggressive investment
positions, the fund may underperform in markets that favor more conservative
growth stock funds.
Non-diversified. Because it is classified as "non-diversified", the fund may
invest a relatively high percentage of its assets in a limited number of
issuers. Accordingly, the fund's investment returns are more likely to be
impacted by changes in the market value and returns of any one portfolio
holding.
4
<PAGE>
In addition, investing a significant percentage in one or more market sectors
creates exposure to financial, economic, business and other developments
affecting issuers in that sector.
5
<PAGE>
KEMPER AGGRESSIVE GROWTH FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C S&P 500 Stock
Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
6
<PAGE>
KEMPER AGGRESSIVE GROWTH FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
7
<PAGE>
KEMPER AGGRESSIVE GROWTH FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
Under normal conditions, the fund will invest at least 65%, and may invest up to
100%, of its total assets in equity securities.
The investment manager uses a disciplined approach to stock selection and
fundamental research to help it identify quality "growth" companies whose stocks
are selling at reasonable prices. Growth stocks are stocks of companies whose
earnings per share are expected by the investment manager to grow faster than
the market average. Growth stocks tend to trade at higher price to earnings
(P/E) ratios than the general market, but the investment manager believes that
the potential of such stocks for above average earnings more than justifies
their price. The investment manager relies heavily upon the fundamental analysis
and research of its large research staff, and will generally seek to invest in
growth companies whose value may not be fully recognized by the market at large.
8
<PAGE>
KEMPER AGGRESSIVE GROWTH FUND
Such companies may be:
o Expected to achieve accelerating earnings growth, perhaps due to strong
demand for their products or services;
o Undervalued, based upon price/earnings ratios, price/book value ratios and
other measures;
o Undergoing financial restructuring;
o Involved in takeover or arbitrage situations;
o Expected to benefit from evolving market cycles or changing economic
conditions; or
o Representing special situations, such as changes in management or
favorable regulatory developments.
Because of the flexible nature of the fund's investment policies, the fund may
have a higher portfolio turnover than a typical equity mutual fund. To some
extent, the fund may trade in securities for the short term. In addition, the
investment manager may use market volatility in an attempt to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
undervalued positions and to sell or reduce overvalued holdings. For example,
during market declines, the fund may add to positions in favored securities,
while becoming more aggressive as it gradually reduces the number of companies
represented in its portfolio. Conversely, in rising markets, the fund may reduce
or eliminate fully valued positions, while becoming more conservative as it
gradually increases the number of companies in its portfolio.
Although the fund will not invest 25% or more of its total assets in any one
industry, it may, from time to time, invest 25% or more of its total assets in
one or more market sectors, such as the technology sector.
While not a principal strategy, the fund may purchase foreign securities and
engage in related foreign currency transactions and lend its portfolio
securities, may utilize financial futures contracts and options, and may hold
cash and other temporary investments such as repurchase agreements.
9
<PAGE>
KEMPER AGGRESSIVE GROWTH FUND
From time to time, the fund may invest up to 100% of its assets 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 for temporary defensive purposes. Defensive
investments should serve to lessen volatility in an adverse market, although
they will also generate lower returns than most other kinds of investments in
most markets. Because this defensive policy differs from the fund's investment
objective, the fund may not achieve its goals during a defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
Related risks
If the aggressive growth types of stocks the fund invests in do not produce
expected earnings results, they may lose significant share value.
To the extent that the fund concentrates its investments in a market sector,
financial, economic, business and other developments affecting issuers in that
sector may have a greater effect on the fund than if it had not concentrated its
assets in that sector.
At times, the fund may engage in short-term trading of portfolio securities,
which could produce higher brokerage costs and taxable distributions.
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
10
<PAGE>
KEMPER AGGRESSIVE GROWTH FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
11
<PAGE>
KEMPER CLASSIC GROWTH FUND
Investment objective and principal strategies
Kemper Classic Growth Fund seeks to provide long-term growth of capital with
reduced share price volatility compared to other growth mutual funds. The fund's
investment objective and policies may be changed without a vote of shareholders.
The fund invests in common stocks to achieve its objective. The fund is broadly
diversified and conservatively managed, with attention paid to stock valuation
and risk. The fund invests in firms that have a record of sustained earnings,
growth distinguished by solid management, a strong franchise and dominance in
their market niche - in short, firms with strong growth potential. While current
income is not a stated objective of the fund, many of the fund's securities may
provide regular dividends, which are also expected to grow over time.
The fund is intended to be a core equity component of a long-term portfolio and,
as such, can be an excellent retirement investment vehicle. As part of an
investment plan geared towards retirement or long-term investment, the fund can
complement an individual portfolio consisting of more or less aggressive funds,
considering individual timeframes and tolerance for risk. As an investment for
those already in their retirement years, this fund seeks long-term growth, but
with less share price volatility than other growth funds.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. To the extent that the fund seeks to moderate share price
volatility compared with other growth stock mutual funds, the fund may
underperform in markets that favor more aggressive growth stock funds.
12
<PAGE>
KEMPER CLASSIC GROWTH FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 20.73% (the second quarter of 1997), and the fund's lowest
return for a calendar quarter was -15.24% (the third quarter of 1997). The
fund's year-to-date total return as of 9/30/98 was -2.14.
Average Annual Total Returns
Class A Class B Class C S&P 500 Stock
Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
13
<PAGE>
KEMPER CLASSIC GROWTH FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
14
<PAGE>
KEMPER CLASSIC GROWTH FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
Under normal market conditions, the fund invests primarily in a diversified
portfolio of common stocks which the investment manager believes offers
above-average appreciation potential while also offering the potential for less
share price volatility than other growth mutual funds.
In seeking such investments, the investment manager focuses its investments in
high quality, medium- to large-sized U.S. companies with leading competitive
positions. Using in-depth fundamental company research, along with proprietary
financial quality, stock rating and risk measures, the investment manager looks
for companies with:
strong and sustainable earnings growth
a proven ability to add value over time
reasonable stock market valuations.
These companies often have important business franchises, leading products,
services or technologies, or dominant marketing and distribution systems.
15
<PAGE>
KEMPER CLASSIC GROWTH FUND
The fund seeks to reduce the overall impact of fluctuations in the stock market
and individual security price volatility. The fund employs a three-step process
designed to help identify less volatile growth stocks. The fund's management
team begins with a universe of quality companies with market capitalizations
greater than $750 million. Then they narrow the universe using fundamental and
quantitative analysis to filter out stocks based on three factors:
strong fundamentals -include stocks of companies that they believe have the
ability to deliver powerful and consistent earnings growth
attractive valuations -exclude stocks that they believe are priced too high
based on expectations for the company
potential risk factors -exclude stocks that they believe are likely to decline
sharply on any negative news.
The fund allocates its investments among different industries and companies, and
adjusts its portfolio securities based on long-term investment considerations as
opposed to short-term trading. The fund emphasizes U.S. investments, although it
can commit a portion of its assets to the equity securities of foreign growth
companies that meet the criteria applicable to domestic investments.
While not a principal strategy, the fund may invest in convertible securities
and debt securities rated in the top four categories by a nationally recognized
statistical rating services, may utilize financial futures contracts and
options, and may hold cash and other temporary investments such as repurchase
agreements.
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
16
<PAGE>
17
<PAGE>
KEMPER CLASSIC GROWTH FUND
Related risks
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
18
<PAGE>
KEMPER CLASSIC GROWTH FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the fund's financial
statements, is included in the annual report, which is available upon request
(see back cover).
To Be Updated
19
<PAGE>
KEMPER BLUE CHIP FUND
Investment objective and principal strategies
Kemper Blue Chip Fund seeks growth of capital and of income. The fund's
investment objective and policies may be changed without a vote of shareholders.
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.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. To the extent that the fund invests in larger, more
established companies, the fund may underperform in markets that favor more
aggressive growth stock funds
20
<PAGE>
KEMPER BLUE CHIP FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C S&P 500 Stock
Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
21
<PAGE>
KEMPER BLUE CHIP FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
22
<PAGE>
KEMPER BLUE CHIP FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
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.
23
<PAGE>
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.
24
<PAGE>
KEMPER BLUE CHIP FUND
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.
While not a principal strategy, the fund may invest in preferred stocks, debt
securities and securities convertible into or exchangeable for common stocks,
including warrants and rights, purchase foreign securities, engage in related
foreign currency transactions and lend its portfolio securities, may utilize
financial futures contracts and options, and may hold cash and other temporary
investments such as repurchase agreements.
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
Related risks
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
25
<PAGE>
KEMPER BLUE CHIP FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
26
<PAGE>
KEMPER GROWTH FUND
Investment objective and principal strategies
Kemper Growth Fund seeks growth of capital through professional management and
diversification of investments in securities it believes to have potential for
capital appreciation. The fund's investment objective and policies may be
changed without a vote of shareholders.
Most investments will be in common stocks of companies with above-average growth
prospects.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. If the growth stocks the fund invests in do not produce the
expected earnings growth, their share price may drop, correspondingly effecting
the fund's net asset value.
27
<PAGE>
KEMPER GROWTH FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C S&P 500 Stock
Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
28
<PAGE>
KEMPER GROWTH FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
29
<PAGE>
KEMPER GROWTH FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
In seeking to achieve its objective, it will be the fund's policy to invest
primarily in securities that it believes offer the potential for increasing the
fund's total asset value.
Some of the factors the fund's management will consider in making its
investments are:
o patterns of increasing growth in sales and earnings
o the development of new or improved products or services
o favorable outlooks for growth in the industry
o the probability of increased operating efficiencies
o emphasis on research and development
o cyclical conditions
o other signs that a company is expected to show greater than average
capital appreciation and earnings growth.
30
<PAGE>
KEMPER GROWTH FUND
In seeking to obtain capital appreciation, the fund may trade in securities for
the short-term. To this extent, the fund will be engaged in trading operations
based on short-term market considerations as distinct from long-term investment
based upon fundamental valuation of securities. However, the fund will emphasize
fundamental research in attempting to identify under-valued situations that it
hopes will appreciate over the longer term. The fund's investment policy may
involve a somewhat greater risk than is inherent in the ordinary investment
security. Since any income received from such securities will be entirely
incidental, an investor should not consider a purchase of fund shares as
equivalent to a complete investment program.
While not a principal strategy, the fund may invest in convertible securities
(including warrants), such as bonds and preferred stocks, purchase foreign
securities, engage in related foreign currency transactions and lend its
portfolio securities. In addition, the fund may utilize financial futures
contracts and options, and may hold cash and other temporary investments such as
repurchase agreements.
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
Related risks
At times, the fund may engage in short-term trading of portfolio securities,
which could produce higher brokerage costs and taxable distributions.
31
<PAGE>
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
32
<PAGE>
KEMPER GROWTH FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
33
<PAGE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
Investment objective and principal strategies
Kemper Small Capitalization Equity Fund seeks maximum appreciation of investors'
capital. Current income will not be a significant factor. The fund's investment
objective and policies may be changed without a vote of shareholders.
The fund invests principally in the common stock of smaller companies. 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.
Principal risks
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.
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. The fund's investment focus on smaller companies involves
greater risk than a fund that invests primarily in larger, more established
companies.
34
<PAGE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C ______ Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The ______ Index is a commonly recognized unmanaged measure of _______. Index
returns assume reinvestment of dividends and, unlike the fund's returns, do not
reflect any fees or expenses.
35
<PAGE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
36
<PAGE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
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.
Currently, the investment manager believes that investment opportunities may be
found among the following:
o companies engaged in high technology fields such as electronics, medical
technology, computer software and specialty retailing
o 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
o companies supplying new or rapidly growing services to consumers and
businesses in such fields as automation, data processing, communications,
marketing and finance
o companies having innovative concepts or ideas.
37
<PAGE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
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.
While not a principal strategy, the fund may invest in convertible securities
and debt securities, may lend portfolio securities, may utilize financial
futures contracts and options, and may hold cash and other temporary investments
such as repurchase agreements.
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
38
<PAGE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
Related risks
Investments in securities of companies with small market capitalizations are
generally considered to offer greater opportunity for appreciation and to
involve greater risks of depreciation than securities of companies with larger
market capitalizations. Since the securities of such companies are not as
broadly traded as those of companies with larger market capitalizations, these
securities are often subject to wider and more abrupt fluctuations in market
price.
Among the reasons for the greater price volatility of these securities are the
less certain growth prospects of smaller firms, a lower degree of liquidity in
the markets for such stocks compared to larger capitalization stocks, and the
greater sensitivity of small companies to changing economic conditions. In
addition to exhibiting greater volatility, small company stocks may, to a
degree, fluctuate independently of larger company stocks. Small company stocks
may decline in price as large company stock prices rise, or rise in price as
large company stock prices decline. Investors should therefore expect that the
share value of the fund may be more volatile than the shares of a fund that
invests in larger capitalization stocks.
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
39
<PAGE>
KEMPER SMALL CAPITALIZATION EQUITY FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
40
<PAGE>
KEMPER TECHNOLOGY FUND
Investment objective and principal strategies
Kemper Technology Fund seeks growth of capital. The fund's investment objective
and policies may be changed without a vote of shareholders.
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, 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.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. Because many of the companies benefiting from technological
advances are smaller in size, the fund's involves greater risk than a fund that
invests primarily in larger, more established companies. Also, emphasis by the
fund on technology companies involves greater risk than investment in a broader
range of sectors and securities.
41
<PAGE>
KEMPER TECHNOLOGY FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C ______ Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The ______ Index is a commonly recognized unmanaged measure of ________. Index
returns assume reinvestment of dividends and, unlike the fund's returns, do not
reflect any fees or expenses.
42
<PAGE>
KEMPER TECHNOLOGY FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
43
<PAGE>
KEMPER TECHNOLOGY FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
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.
The fund invests principally in the common stock of technology companies.
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. Examples of the types of industries the
fund may invest in are:
o aerospace
o chemistry
o electronics
o genetic engineering
o geology
o information sciences (including computers and computer software)
o metallurgy
o medicine (including pharmacology, biotechnology and biophysics)
o oceanography.
44
<PAGE>
KEMPER TECHNOLOGY FUND
This investment policy permits the investment manager to seek stocks having
superior growth potential in virtually any industry in which they may be found.
While not a principal strategy, the fund may invest in entities, such as limited
partnerships or trusts, that invest primarily in the securities of technology
companies; invest in convertible securities and debt securities; may lend
portfolio securities; may utilize financial futures contracts and options; and
may hold cash and other temporary investments such as repurchase agreements.
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
45
<PAGE>
KEMPER TECHNOLOGY FUND
Related risks
Investments in securities of companies with small market capitalizations are
generally considered to offer greater opportunity for appreciation and to
involve greater risks of depreciation than securities of companies with larger
market capitalizations. Since the securities of such companies are not as
broadly traded as those of companies with larger market capitalizations, these
securities are often subject to wider and more abrupt fluctuations in market
price.
Among the reasons for the greater price volatility of these securities are the
less certain growth prospects of smaller firms, a lower degree of liquidity in
the markets for such stocks compared to larger capitalization stocks, and the
greater sensitivity of small companies to changing economic conditions. In
addition to exhibiting greater volatility, small company stocks may, to a
degree, fluctuate independently of larger company stocks. Small company stocks
may decline in price as large company stock prices rise, or rise in price as
large company stock prices decline. Investors should therefore expect that the
share value of the fund may be more volatile than the shares of a fund that
invests in larger capitalization stocks.
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
46
<PAGE>
KEMPER TECHNOLOGY FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
47
<PAGE>
KEMPER QUANTITATIVE EQUITY FUND
Investment objective and principal strategies
Kemper Quantitative Equity Fund seeks growth of capital and reduction of risk
through professional management of a diversified portfolio of equity securities.
The fund's investment objective and policies may not be changed without a vote
of shareholders.
In seeking to achieve the fund's objectives, the investment manager emphasizes
the use of fundamental research and advanced quantitative technology.
The investment manager uses a disciplined approach to stock selection and
fundamental research to help it identify quality "growth" companies, whose
stocks are selling at reasonable prices based upon their earnings potential and
whose earnings are growing faster than the market average. The investment
manager conducts a regimented review process that applies the results of
research generated by the investment manager's analytical staff to well defined
quantitative factors (e.g., return on equity, earnings per share growth) and
qualitative factors (e.g., industry growth, market share).
The investment manager uses advanced quantitative technology to attempt to
reduce the degree by which the volatility of the portfolio differs from the
volatility of the market for growth stocks generally.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. To the extent that the fund seeks to moderate share price
volatility compared with other growth stock mutual funds, the fund may
underperform in markets that favor more aggressive growth stock funds.
48
<PAGE>
KEMPER QUANTITATIVE EQUITY FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C S&P 500 Stock
Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
49
<PAGE>
KEMPER QUANTITATIVE EQUITY FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
50
<PAGE>
KEMPER QUANTITATIVE EQUITY FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
Under normal conditions, the fund will invest at least 65%, and may invest up to
100%, of its total assets in equity securities. Normally, the fund's primary
investments will be common stocks of large, well capitalized companies.
The investment manager believes that there are identifiable macro-economic
factors that are major contributors to the volatility of the stock market.
Examples of these factors include economic growth and the direction of long-term
interest rates and the credit spread, which is the spread between Treasury and
corporate fixed income securities.
51
<PAGE>
KEMPER QUANTITATIVE EQUITY FUND
In selecting among the growth stocks identified as being eligible for inclusion
in the fund's portfolio, the investment manager applies advanced quantitative
techniques to help structure the portfolio so that normally it is neutrally
weighted to these macro-economic factors. These techniques involve the use of
computer modeling to help select a portfolio of securities believed to be
attractive while simultaneously maintaining a neutral macroeconomic posture.
Neutral weighting means that the exposure of the fund's portfolio to the effect
of these macro-economic factors is, in the view of the investment manager,
generally the same as the exposure of the market for growth stocks as a whole.
The purpose of this process is to reduce the degree by which the volatility of
the portfolio differs from the volatility of the market for growth stocks and to
increase the importance of fundamental research and stock selection in the
management process.
While not a principal strategy, the fund may invest in convertible securities
and debt securities, may utilize financial futures contracts and options, and
may hold cash and other temporary investments such as repurchase agreements.
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
52
<PAGE>
KEMPER QUANTITATIVE EQUITY FUND
Related risks
Depending upon economic and market conditions, the investment manager may at
times under- or overweight the portfolio with respect to certain macro-economic
factors. In those circumstances, the return potential as well as the risk
profile of the fund's portfolio may be increased relative to the market for
growth stocks generally. However, a primary goal of portfolio structuring for
the fund is to reduce those risks and the investment manager would normally not
be expected to so weight the portfolio.
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
53
<PAGE>
KEMPER QUANTITATIVE EQUITY FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
54
<PAGE>
KEMPER TOTAL RETURN FUND
Investment objective and principal strategies
Kemper Total Return Fund seeks the highest total return, a combination of income
and capital appreciation, consistent with reasonable risk. The fund's investment
objective and policies may be changed without a vote of shareholders.
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. 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. Fixed
income investments may be of any rating, and may include lower-rated high
yield/high risk securities.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. To the extent that the fund seeks to moderate share price
volatility compared with other growth stock mutual funds, the fund may
underperform in markets that favor more aggressive growth stock funds.
Investments in high yield securities (often referred to as "junk bonds") are
more likely to be effected by negative developments in their issuer or industry,
and entail relatively greater risk of loss of income and principal than
investments in higher rated securities. Market prices of high yield securities
may fluctuate more than market prices of higher rated securities.
55
<PAGE>
KEMPER TOTAL RETURN FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C S&P 500 Stock
Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
56
<PAGE>
KEMPER TOTAL RETURN FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
57
<PAGE>
KEMPER TOTAL RETURN FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
The fund follows a highly flexible program of investing in bonds and common
stocks in pursuit of its goal of total return.
The fixed income securities the fund invests in 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 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.
58
<PAGE>
While not a principal strategy, the fund may invest in convertible securities
and debt securities, may lend portfolio securities, may utilize financial
futures contracts and options, and may hold cash and other temporary investments
such as repurchase agreements.
59
<PAGE>
KEMPER TOTAL RETURN FUND
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
Related risks
Lower-rated and non-rated securities, which are commonly referred to as "junk
bonds," have widely varying characteristics and quality. 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. The market values
of such securities tend to reflect individual corporate developments to a
greater extent than do those of higher rated securities, which react primarily
to fluctuations in the general level of interest rates. Such lower rated
securities also are more sensitive to economic conditions than are higher rated
securities. Adverse publicity and investor perceptions regarding lower rated
bonds, whether or not based on 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.
The fund may have difficulty disposing of certain junk bonds because they may
have a thin trading market. Because not all dealers maintain markets in all high
yield securities, the fund anticipates that such securities could be sold only
to a limited number of dealers or institutional investors. The lack of a liquid
secondary market may have an adverse effect on the market price and the fund's
ability to dispose of particular issues and may also make it more difficult for
the fund to obtain accurate market quotations for purposes of valuing the fund's
assets. Market quotations generally are available on many high yield issues only
from a limited number of dealers and may not necessarily represent firm bids of
such dealers or prices for actual sales.
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
60
<PAGE>
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
61
<PAGE>
KEMPER TOTAL RETURN FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
62
<PAGE>
KEMPER VALUE + GROWTH FUND
Investment objective and principal strategies
Kemper Value+Growth Fund seeks growth of capital through professional management
of a portfolio of growth and value stocks. 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. The fund's investment objective and policies
may be changed without a vote of shareholders.
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 fund may invest in the stocks of companies of any size. Typically stocks of
both types will have a market capitalization in excess of $1 billion.
Principal risks
The fund's principal risks are associated with investing in the stock market and
the investment manager's skill in managing the fund's portfolio. Please refer to
"Stock Investing" at the front of this prospectus for details.
Management Style. To the extent that the fund seeks to moderate share price
volatility by investing in both value and growth stocks, the fund may
underperform in markets that strongly favor pure growth or value funds.
63
<PAGE>
KEMPER VALUE + GROWTH FUND
Past performance
The chart and table that follow illustrate the changes in the fund's performance
from year to year, as well as performance over time. Of course, past performance
is not necessarily an indication of future performance.
Total returns for years ended December 31
- --------------------------------------------------------------------------------
BAR CHART
- --------------------------------------------------------------------------------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was ___% (cite quarter), and the fund's lowest return for a
calendar quarter was -___% (cite quarter).
Average Annual Total Returns
Class A Class B Class C S&P 500 Stock
Index
For periods ended
December 31, 1998
One Year __.__% __.__% __.__% __.__%
Five Years __.__% __.__% __.__% __.__%
Ten Years __.__% __.__% __.__% __.__%
The S&P 500 Stock Index is a commonly recognized unmanaged measure of 500 widely
held common stocks. Index returns assume reinvestment of dividends and, unlike
the fund's returns, do not reflect any fees or expenses.
64
<PAGE>
KEMPER VALUE + GROWTH FUND
Expense information
The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.
- --------------------------------------------------------------------------------
Shareholder fees: Fees charged directly to your account in the fund for various
transactions.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases (as a % of
offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None None None
- --------------------------------------------------------------------------------
Redemption Fee None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (as a % of
redemption proceeds) None(1) 4% 1%
- --------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
- --------------------------------------------------------------------------------
Annual fund operating expenses: Paid by the fund before it distributes its net
investment income. These are expressed as a percentage of the fund's average
daily net assets for the year ended _______.
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Investment management fee
- --------------------------------------------------------------------------------
Rule 12b-1 fees
- --------------------------------------------------------------------------------
Other expenses
- --------------------------------------------------------------------------------
Total fund operating expenses
- --------------------------------------------------------------------------------
65
<PAGE>
KEMPER VALUE + GROWTH FUND
Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 1 Year
- ----------------------------------------------------------------------------------------------------
3 Years 3 Years
- ----------------------------------------------------------------------------------------------------
5 Years 5 Years
- ----------------------------------------------------------------------------------------------------
10 Years 10 Years
- ----------------------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
The allocation between growth and value stocks in the fund's portfolio will be
made by the investment manager's Quantitative Research Department with the help
of a proprietary model that evaluates macro-economic factors such as the
strength of the economy, interest rates and special factors concerning growth
and value stocks.
Historically, the performance of growth and value stocks has tended to be
counter-cyclical, i.e., when one was in favor, the other was out of favor
relative to the equity market in general. Through the allocation process, the
investment manager will seek to weight the portfolio more heavily in the type of
stocks that are believed to present greater return opportunities at the time.
The neutral allocation between growth and value stocks would be 50%/50%. 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.
66
<PAGE>
KEMPER VALUE + GROWTH FUND
In managing the growth portion of the portfolio, the investment manager
emphasizes stock selection and fundamental research in seeking to enhance
long-term performance potential. The investment manager considers a number of
quantitative and qualitative factors in considering whether to invest in a stock
including high return on equity and earnings growth rate, low level of debt,
strong balance sheet, good management and industry leadership.
In managing the value portion of the portfolio, the investment manager seeks
stocks it believes to be undervalued. The principal factor considered is P/E
ratios. In selecting among stocks with low P/E ratios, the investment manager
considers other factors such as financial strength, book to market value,
earnings and dividend growth rates, return on equity and earnings estimates.
While not a principal strategy, the fund may invest in convertible securities
and debt securities, may lend portfolio securities, may utilize financial
futures contracts and options, and may hold cash and other temporary investments
such as repurchase agreements.
From time to time, the fund may invest up to 100% of its assets in short-term
high-grade debt securities, cash and cash equivalents for temporary defensive
purposes. Defensive investments should serve to lessen volatility in an adverse
market, although they will also generate lower returns than most other kinds of
investments in most markets. Because this defensive policy differs from the
fund's investment objective, the fund may not achieve its goals during a
defensive period.
More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.
Related risks
Investing in foreign securities involves other considerations including limited
information, higher brokerage costs, different accounting standards and thinner
trading markets as compared to U.S. markets. In addition, investing in foreign
securities, and to a greater extent emerging markets, involves special risks
including changes in foreign currency exchange rates and political and economic
instability.
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KEMPER VALUE + GROWTH FUND
Financial highlights
The table below is intended to help you understand the fund's financial
performance for the past several years. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report, which is available upon request (see back cover).
To Be Updated
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<PAGE>
Investment Manager
The funds retain the investment management firm of Scudder Kemper Investments,
Inc., Two International Place, Boston, MA, to manage their daily investment and
business affairs subject to the policies established by the funds' Boards.
Scudder Kemper Investments, Inc. actively manages the funds' investments.
Professional management can be an important advantage for investors who do not
have the time or expertise to invest directly in individual securities. Scudder
Kemper Investments, Inc. is one of the largest and most experienced investment
management organizations worldwide. It is one of the ten largest mutual fund
companies in the U.S., managing more than $230 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts.
Each fund pays Scudder Kemper Investments a graduated monthly investment
management fee. Fees paid for each fund's most recently completed fiscal year
are show below:
Kemper Aggressive Growth Fund 0.__%
Kemper Classic Growth Fund 0.__%
Kemper Blue Chip Fund 0.__%
Kemper Growth Fund 0.__%
Kemper Small Capitalization Equity Fund 0.__%
Kemper Technology Fund 0.__%
Kemper Quantitative Equity Fund 0.__%
Kemper Total Return Fund 0.__%
Kemper Value + Growth Fund 0.__%
* Add footnotes as needed for expense caps.
Portfolio management
The funds are managed by teams of investment professionals who each play an
important role in a fund's management process. Team members work together to
develop investment strategies and select securities for a fund's portfolio. They
are supported by the investment manager's large staff of economists, research
analysts, traders and other investment specialists who work in the investment
manager's offices across the United States and abroad. The investment manager
believes its team
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<PAGE>
approach benefits fund investors by bringing together many disciplines and
leveraging its extensive resources.
The following investment professionals are associated with the funds as
indicated:
Kemper Aggressive Growth Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Kurt R. Stalzer - 1997 Joined Scudder Kemper in 1997. He
Lead Portfolio began his investment career in 1982.
Manager
- --------------------------------------------------------------------------------
David Burshtan - 1998 Joined Scudder Kemper in 1995. He
Portfolio Manager began his investment career in 1988.
Kemper Classic Growth Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
William F. Gadsden - Joined Scudder Kemper in ______. He
Co-Lead Portfolio began his investment career in ______.
Manager
- --------------------------------------------------------------------------------
Bruce F. Beaty - Joined Scudder Kemper in ______. He
Co-Lead Portfolio began his investment career in ______.
Manager
Kemper Blue Chip Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Tracy McCormick Joined Scudder Kemper in ______. She
Chester - Lead began her investment career in ______.
Portfolio Manager
- --------------------------------------------------------------------------------
Steven Reynolds - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
- --------------------------------------------------------------------------------
Gary Langbaum - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
- --------------------------------------------------------------------------------
Maureen Lentz - Joined Scudder Kemper in ______. She
Portfolio Manager began her investment career in ______.
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<PAGE>
Kemper Growth Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Steven Reynolds - Joined Scudder Kemper in ______. He
Lead Portfolio began his investment career in ______.
Manager
- --------------------------------------------------------------------------------
Tracy McCormick Joined Scudder Kemper in ______. She
Chester - Portfolio began her investment career in ______.
Manager
- --------------------------------------------------------------------------------
Gary Langbaum - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
- --------------------------------------------------------------------------------
Maureen Lentz - Joined Scudder Kemper in ______. She
Portfolio Manager began her investment career in ______.
Kemper Small Capitalization Equity Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Kurt R. Stalzer - Joined Scudder Kemper in ______. He
Lead Portfolio began his investment career in ______.
Manager
- --------------------------------------------------------------------------------
David Burshtan - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
Kemper Technology Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Tracy McCormick Joined Scudder Kemper in ______. She
Chester - Lead began her investment career in ______.
Portfolio Manager
- --------------------------------------------------------------------------------
Jim Burkart - Joined Scudder Kemper in ______. She
Portfolio Manager began her investment career in ______.
Kemper Quantitative Equity Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Philip Fortuna - Joined Scudder Kemper in ______. He
Lead Portfolio began his investment career in ______.
Manager
- --------------------------------------------------------------------------------
Shahram Tajbakhsh - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
- --------------------------------------------------------------------------------
Robert D. Tymoczko - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
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<PAGE>
72
<PAGE>
Kemper Total Return Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Gary A. Langbaum - Joined Scudder Kemper in ______. He
Lead Portfolio began his investment career in ______.
Manager
Kemper Value + Growth Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Philip Fortuna - Joined Scudder Kemper in ______. He
Lead Portfolio began his investment career in ______.
Manager
- --------------------------------------------------------------------------------
Karla Grant - Joined Scudder Kemper in ______. She
Portfolio Manager began her investment career in ______.
- --------------------------------------------------------------------------------
Shahram Tajbakhsh - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
- --------------------------------------------------------------------------------
Robert D. Tymoczko - Joined Scudder Kemper in ______. He
Portfolio Manager began his investment career in ______.
Year 2000 Readiness
Like other mutual funds and financial and business organizations worldwide, the
funds could be adversely affected if computer systems on which a fund relies,
which primarily include those used by the investment manager, its affiliates or
other service providers, are unable to correctly process date-related
information on and after January 1, 2000. This risk is commonly called the Year
2000 Issue. Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the funds' business and
operations. The investment manager has commenced a review of the Year 2000 Issue
as it may affect the funds and is taking steps it believes are reasonably
designed to address the Year 2000 Issue, although there can be no assurances
that these steps will be sufficient. In addition, there can be no assurances
that the Year 2000 Issue will not have an adverse effect on the companies whose
securities are held by a fund or on global markets or economies generally.
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<PAGE>
ABOUT YOUR INVESTMENT
Choosing a share class
Each fund provides investors with the option of purchasing shares in the
following ways:
Class A Shares Offered at net asset value plus a maximum sales charge of
5.75% of the offering price. Reduced sales charges apply
to purchases of $50,000 or more. Class A shares purchased
at net asset value under the Large Order NAV Purchase
Privilege may be subject to a 1% contingent deferred
sales charge if redeemed within one year of purchase and
a .50% contingent deferred sales change if redeemed
during the second year of purchase.
Class B Shares Offered at net asset value without an initial sales
charge, but subject to a 0.75% Rule 12b-1 distribution
fee and a contingent deferred sales charge that declines
from 4% to zero on certain redemptions made within six
years of purchase. Class B shares automatically convert
into Class A shares (which have lower ongoing expenses)
six years after purchase.
Class C Shares Offered at net asset value without an initial sales
charge, but subject to a 0.75% Rule 12b-1 distribution
fee and a 1% contingent deferred sales charge on
redemptions made within one year of purchase. Class C
shares do not convert into another class.
When placing purchase orders, investors must specify whether the order is for
Class A, Class B or Class C shares. Each class of shares represents interests in
the same portfolio of investments of a fund.
The decision as to which class to choose depends on a number of factors,
including the amount and intended length of the investment. Investors 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. For more information about the three sales
arrangements, consult your financial representative or the Shareholder Service
Agent. Be aware that financial services firms may receive different compensation
depending upon which class of shares they
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<PAGE>
sell.
Special features
Class A Shares -- Combined Purchases. Each fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of most Kemper
Funds.
Class A Shares -- Letter of Intent. The same reduced sales charges for Class A
shares also apply to the aggregate amount of purchases made by any purchaser
within a 24-month period under a written Letter of Intent ("Letter") provided by
Kemper Distributors. 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.
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 Funds (computed at the maximum offering price at the
time of the purchase for which the discount is applicable) already owned by the
investor.
Exchange Privilege -- General. Shareholders of Class A, Class B and Class C
shares may exchange their shares for shares of the corresponding class of Kemper
Mutual Funds. Shares of a Kemper Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Fund, or from a Money Market Fund, may not be exchanged thereafter until they
have been owned for 15 days (the "15 Day Hold Policy").
For purposes of determining any 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.
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<PAGE>
Buying shares
Class A Shares
Public
Offering Price.
Including Sales
Charge
<TABLE>
<CAPTION>
Amount of Purchase Sales Charge Sales Charge as a
as a % of % of Net Amount
Offering Price Invested
-------------- --------
<S> <C> <C>
Less than $50,000 5.75%
$50,000 but less than $100,000 4.50
$100,000 but less than $250,000 3.50
$250,000 but less than $500,000 2.60
$500,000 but less than $1 million 2.00
$1 million and over 0.00**
</TABLE>
**Redemption of shares may be subject to a contingent deferred
sales charge as discussed below.
NAV Purchases Class A shares of a fund may be purchased at net asset value
by:
o shareholders in connection with the investment or
reinvestment of income and capital gain dividends
o a participant-directed qualified retirement plan or a
participant-directed non-qualified deferred compensation
plan or a participant-directed qualified retirement plan
which is not sponsored by a K-12 school district,
provided in each case that such plan has not less than
200 eligible employees
o any purchaser with Kemper Funds investment totals of at
least $1,000,000
o unitholders of unit investment trusts sponsored by
Ranson & Associates, Inc. or its predecessors through
reinvestment programs described in the prospectuses of
such trusts that have such programs
o 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
o persons who purchase shares through bank trust
departments that process such trades through an
automated, integrated mutual fund clearing program
provided by a third party clearing firm
o registered representatives and employees of
broker-dealers having selling group agreements with
Kemper Distributors
o officers, directors, and employees of service agents of
the funds
o members of the plaintiff class in the proceeding known
as Howard and Audrey Tabankin, et al. v. Kemper
Short-Term Global Income Fund, et. al., Case No. 93 C
5231 (N.D.IL)
o selected employees (including their spouses and
dependent children) of banks and other financial
services firms that provide administrative services
related to the funds pursuant to an agreement with
Kemper Distributors or one of its affiliates
o certain professionals who assist in the promotion of
Kemper Funds pursuant to personal services contracts
with Kemper Distributors, for themselves or members of
their families
o in connection with the acquisition of the assets of or
merger or consolidation with another investment company
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<PAGE>
Class A Shares (cont.)
o shareholders who owned shares of Kemper Value Series,
Inc. ("KVS") on September 8, 1995, and have continuously
owned shares of KVS (or a Kemper Fund acquired by
exchange of KVS shares) since that date, for themselves
or members of their families
o any trust, pension, profit-sharing or other benefit plan
for only such persons.
o persons who purchase shares of the fund through Kemper
Distributors as part of an automated billing and wage
deduction program administered by RewardsPlus of America
o through certain investment advisers registered under the
Investment Advisers Act of 1940 and other financial
services firms that adhere to certain standards
established by Kemper Distributors, including a
requirement that such shares be sold for the benefit of
their clients participating in an investment advisory
program under which such clients pay a fee to the
investment advisor or other firm for portfolio
management and other services. Such shares are sold for
investment purposes and on the condition that they will
not be resold except through redemption or repurchase by
the funds
Contingent A contingent deferred sales charge may be imposed upon
Deferred Sales redemption of Class A shares purchased under the Large Order
Charge NAV Purchase Privilege as follows: 1% if they are redeemed
within one year of purchase and .50% if redeemed during the
second year following purchase. The charge will not be imposed
upon redemption of reinvested dividends or share appreciation.
The contingent deferred sales charge will be waived in the
event of:
o redemptions under a fund's Systematic Withdrawal Plan at
a maximum of 10% per year of the net asset value of the
account
o redemption of shares of a shareholder (including a
registered joint owner) who has died
o 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)
o redemptions by a participant-directed qualified
retirement plan or a participant-directed non-qualified
deferred compensation plan or a participant-directed
qualified retirement plan which is not sponsored by a
K-12 school district
o redemptions by employer sponsored employee benefit plans
using the subaccount record keeping system made
available through the Shareholder Service Agent
o redemptions of shares whose dealer of record at the time
of the investment notifies Kemper Distributors that the
dealer waives the commission applicable to such Large
Order NAV Purchase
Distribution None
Fee
Exchange Class A shares may be exchanged for each other at their
Privilege relative net asset values. Shares of Money Market Funds and
Kemper Cash Reserves Fund acquired by purchase (not including
shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange Class A shares purchased
under the Large Order NAV Purchase Privilege may be exchanged
for Class A shares of any Kemper Fund or a Money Market Fund
without paying any contingent deferred sales charge. If the
Class A shares received on exchange are redeemed thereafter, a
contingent deferred sales charge may be imposed
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<PAGE>
Class B Shares
Public Offering Net asset value per share without any sales charge at the time
Price of purchase
Contingent A contingent deferred sales charge may be imposed upon
Deferred Sales redemption of Class B shares. There is no such charge upon
Charge redemption of any share appreciation or reinvested dividends.
The charge is computed at the following rates applied to the
value of the shares redeemed excluding amounts not subject to
the charge.
Year of Redemption
After Purchase: First Second Third Fourth Fifth Sixth
---------------------------------------------------------------
Contingent Deferred
Sales Charge: 4% 3% 3% 2% 2% 1%
---------------------------------------------------------------
The contingent deferred sales charge will be waived:
o 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)
o for redemptions made pursuant to any IRA systematic
withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal
periodic payments described in Code Section
72(t)(2)(A)(iv) prior to age 59 1/2
o for redemptions made pursuant to a systematic withdrawal
plan (see "Special Features -- Systematic Withdrawal
Plan" below)
o 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
o in the event of the death of the shareholder (including
a registered joint owner)
The contingent deferred sales charge will also be waived in
connection with the following redemptions of shares held by
employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the
Shareholder Service Agent:
o 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)
o redemptions in connection with retirement distributions
(limited at any one time to 10% of the total value of
plan assets invested in a fund
o redemptions in connection with distributions qualifying
under the hardship provisions of the Code
o redemptions representing returns of excess contributions
to such plans
Distribution 0.75%
Fee
Conversion Class B shares of a fund will automatically convert to Class A
Feature shares of the same fund six years after issuance on the basis
of the relative net asset value per share. 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.
Exchange Class B shares of a fund and Class B shares of most Kemper
Privilege Funds may be exchanged for each other at their relative net
asset values without a contingent deferred sales charge.
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<PAGE>
Class C Shares
Public Offering Net asset value per share without any sales charge at the time
Price of purchase
Contingent A contingent deferred sales charge of 1% may be imposed upon
Deferred Sales redemption of Class C shares redeemed within one year of
Charge purchase. The charge will not be imposed upon redemption of
reinvested dividends or share appreciation. The contingent
deferred sales charge will be waived in the event of:
o 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
o redemptions by employer sponsored employee benefit plans
(or their participants) using the subaccount record
keeping system made available through the Shareholder
Service Agent
o redemption of shares of a shareholder (including a
registered joint owner) who has died
o 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)
o redemptions under a fund's Systematic Withdrawal Plan at
a maximum of 10% per year of the net asset value of the
account
o redemption of shares by an employer sponsored employee
benefit plan that offers funds in addition to Kemper
Funds and whose dealer of record has waived the advance
of the first year administrative service and
distribution fees applicable to such shares and agrees
to receive such fees quarterly
o redemption of shares purchased through a
dealer-sponsored asset allocation program maintained on
an omnibus record-keeping system provided the dealer of
record has waived the advance of the first year
administrative services and distribution fees applicable
to such shares and has agreed to receive such fees
quarterly
Distribution 0.75%
Fee
Conversion None
Feature
Exchange Class C shares of a fund and Class C shares of most Kemper
Privilege Funds may be exchanged for each other at their relative net
asset values. Class C shares may be exchanged without a
contingent deferred sales charge.
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Selling and exchanging 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.
Share certificates
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. 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.
Repurchases (confirmed redemptions)
A request for repurchase may be communicated by a shareholder through a
securities dealer or other financial services firm to Kemper Distributors, which
each fund has authorized to act as its agent. There is no charge by Kemper
Distributors with respect to repurchases; however, dealers or other firms may
charge customary commissions for their services. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
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Reinvestment privilege
Under certain circumstances, a shareholder who has redeemed Class A shares may
reinvest up to the full amount redeemed at net asset value at the time of the
reinvestment. 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. The reinvestment privilege may be terminated or modified at any
time.
Distributions and taxes
Dividends and capital gains distributions
Each fund normally distributes dividends of net investment income as follows:
annually for Kemper Aggressive Growth, Classic Growth, Growth, Quantitative,
Small Cap, Technology and Value+Growth Funds; semi-annually for the Blue Chip
Fund; and quarterly for the Total Return Fund. Each fund distributes any net
realized short-term and long-term capital gains at least annually. The quarterly
distribution to shareholders of the Total Return Fund may include short-term
capital gains.
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 will normally be reinvested in
shares of the same class of that same fund. However, by writing to the
Shareholder Service Agent, you may choose to have dividends of a fund invested
in shares of the same class of another Kemper fund at the net asset value of
that class and fund. To use this privilege, you must maintain a minimum account
value of $1,000 in the fund distributing the dividends. The funds will reinvest
dividend checks (and future dividends) in shares of that same fund and class if
checks are returned as undeliverable. Dividends and other distributions in the
aggregate amount of $10 or less are automatically reinvested in shares of the
same fund unless you request that such policy not be applied to your account.
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<PAGE>
Taxes
Generally, dividends from net investment income are taxable to you as ordinary
income. Long-term capital gains distributions, if any, are taxable to you as
long-term capital gains, regardless of how long you have owned your shares.
Short-term capital gains and any other taxable income distributions are taxable
to you as ordinary income. A portion of dividends from ordinary income may
qualify for the dividends-received deduction for corporations.
Any dividends or capital gains distributions declared in October, November or
December with a record date in such month and paid during the following January
are taxable to you as if paid on December 31 of the calendar year in which they
were declared.
A sale or exchange of shares is a taxable event and may result in a capital gain
or loss which may be long-term or short-term, generally depending on how long
you owned the shares. Shareholders of a fund may be subject to state, local and
foreign taxes on fund distributions and dispositions of fund shares. You should
consult your tax advisor regarding the particular tax consequences of an
investment in a fund.
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, is taxable to the shareholder.
The fund sends you detailed tax information about the amount and type of its
distributions by January 31 of the following year.
Transaction information
Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
the funds as of the close of regular trading on the New York Stock Exchange
(NYSE), normally 4:00 p.m. eastern time, on each day the NYSE is open for
trading. Market prices are used to determine the value of the funds' assets, but
when reliable market quotations are unavailable, a fund may use procedures
established by its Board of Trustees.
The net asset value per share of each fund is the value of one share and is
determined separately for each class by dividing the value of a fund's net
assets attributable to 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
the fund will generally be lower than that of the Class A shares of a fund
because of the higher annual expenses borne by the Class B and Class C shares.
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Processing time
All requests to buy and sell shares that are received in good order by the
funds' transfer agent by the close of regular trading on the NYSE are executed
at the net asset value per share calculated at the close of trading that day
(subject to any applicable sales load or contingent deferred sales charge).
Orders received by dealers or other financial services firms prior to the
determination of net asset value and received by the funds' transfer agent prior
to the close of its business day will be confirmed at a price based on the net
asset value effective on that day. If an order is accompanied by a check drawn
on a foreign bank, funds must normally be collected before shares will be
purchased.
Signature guarantees
A signature guarantee is required when you sell more than $100,000 worth of
shares. You can obtain one from most brokerage houses and financial
institutions, although not from a notary public. The funds will normally send
you the proceeds within one business day following your request, but may take up
to seven business days (or longer in the case of shares recently purchased by
check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
funds and their transfer agent each reserves the right to reject purchases of
fund shares (including exchanges) for any reason including when there is
evidence of a pattern of frequent purchases and sales made in response to
short-term fluctuations in a fund's share price.
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 its shares or a class of its shares
to new investors. During the period of such suspension, persons who are already
shareholders normally are permitted to continue to purchase additional shares
and to have dividends reinvested.
Minimum balances
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.
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<PAGE>
Because of the high cost of maintaining small accounts, the funds may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent.
Third party transactions
If you buy and sell shares of a fund through a member of the National
Association of Securities Dealers, Inc. (other than the funds' transfer agent),
that member may charge a fee for that service. This prospectus should be read in
connection with such firms' material regarding their fees and services.
Redemption-in-kind
The funds reserve the right to honor any request for redemption or repurchase
order by making payment in whole or in part in readily marketable securities
("redemption in kind"). These securities will be chosen by the fund and valued
as they are for purposes of computing the fund's net asset value. A shareholder
may incur transaction expenses in converting these securities to cash.
Rule 12b-1 plan
Each fund has adopted a plan under Rule 12b-1 that provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by the
transfer agent to pay for distribution and services for those classes. Because
12b-1 fees are paid out of fund assets on an ongoing basis, they will, over
time, increase the cost of investment and may cost more than other types of
sales charges.
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Additional information about the funds may be found in the Statement of
Additional Information, the Shareholder Service Guide and in shareholder
reports. The Statement of Additional Information contains more detailed
information on fund investments and operations. The Shareholder Service Guide
contains more detailed information about purchases and sales of fund shares. The
semiannual and annual shareholder reports contain a discussion of the market
conditions and the investment strategies that significantly affected the funds'
performance during the last fiscal year, as well as a listing of portfolio
holdings and financial statements. These and other fund documents may be
obtained without charge from the following sources:
- --------------------------------------------------------------------------------
By Phone: In Person:
- --------------------------------------------------------------------------------
Call Kemper at: Public Reference Room
1-800-621-1048 Securities and Exchange Commission,
Washington, D.C.
(Call 1-800-SEC-0330
for more information).
- --------------------------------------------------------------------------------
By Mail: By Internet:
- --------------------------------------------------------------------------------
Kemper Distributors, Inc. http://www.sec.gov
222 South Riverside Plaza http://www.kemper.com
Chicago, IL 60606-5808
or
Public Reference Section,
Securities and Exchange Commission,
Washington, D.C. 20549-6009
(a duplication fee is charged)
- --------------------------------------------------------------------------------
The Statement of Additional Information is incorporated by reference into this
prospectus (is legally a part of this prospectus).
Investment Company Act file numbers:
Kemper Aggressive Growth Fund 811-XXX Kemper Small Capitalization Equity Fund
Kemper Classic Growth Fund 811-XXX Kemper Technology Fund
Kemper Blue Chip Fund 811-XXX Kemper Quantitative Equity Fund
Kemper Growth Fund 811-XXX Kemper Total Return Fund
Kemper Value + Growth Fund
Printed with SOYINK Printed on recycled paper
85
KEMPER EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999
Kemper Aggressive Growth Fund ("Aggressive Growth Fund")
Kemper Blue Chip Fund ("Blue Chip Fund")
Kemper Growth Fund ("Growth Fund")
Kemper Quantitative Equity Fund ("Quantitative Fund")
Kemper Small Capitalization Equity Fund ("Small Cap Fund")
Kemper Technology Fund ("Technology Fund")
Kemper Total Return Fund ("Total Return Fund")
Kemper Value Plus Growth Fund ("Value+Growth Fund")
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
combined Statement of Additional Information for each of the funds (the "Funds")
listed above. It should be read in conjunction with the combined prospectus of
the Funds dated February 1, 1999. The prospectus may be obtained without charge
from the Funds and is also available along with other related materials on the
SEC's Internet web site (http://www.sec.gov).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS 2
INVESTMENT POLICIES AND TECHNIQUES 13
PORTFOLIO TRANSACTIONS 22
INVESTMENT MANAGER AND UNDERWRITER 24
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES 34
DIVIDENDS AND TAXES 46
PERFORMANCE 53
OFFICERS AND TRUSTEES 70
SHAREHOLDER RIGHTS 75
APPENDIX--RATINGS OF FIXED INCOME INVESTMENTS 78
The financial statements appearing in each Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference. The Annual Report for the
Fund for which this Statement of Additional Information is requested accompanies
this document.
KEF-13 2/99
printed on recycled paper
<PAGE>
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions which,
together with the investment objective and fundamental policies of such Fund,
cannot be changed without approval of a majority of its outstanding voting
shares. As defined in the Investment Company Act of 1940, this means the lesser
of the vote of (a) 67% of the shares of the Fund present at a meeting where more
than 50% of the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund.
The Aggressive Growth Fund has elected to be classified as a non-diversified
open-end investment fund. The Blue Chip Fund, Growth Fund, Quantitative Fund,
Small Cap Fund, Technology Fund, Total Return Fund and Value+Growth Fund have
elected to be classified as diversified open-end investment funds.
The Aggressive Growth Fund may not, as a fundamental policy:
1.
2.
3.
4. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
5. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
6.
7.
8.
2
<PAGE>
9. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
10. Purchase physical commodities or contracts relating to physical
commodities.
11. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
12. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond that specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund has
adopted the following non-fundamental restrictions, which may be changed by the
Board of Trustees without shareholder approval. The Aggressive Growth Fund may
not:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Purchase more than 3% of the stock of another investment company or
purchase stock of other investment companies equal to more than 5% of
the Fund's total assets (valued at time of purchase) in the case of
any one other investment company and 10% of such assets (valued at
time of purchase) in the case of all other investment companies in
the aggregate. Any such purchases are to be made in the open market
where no profit to a sponsor or dealer results from the purchase,
other than the customary broker's commission, except for securities
acquired as part of a merger, consolidation or acquisition of assets.
iii. Invest more than 15% of its net assets in illiquid securities.
iv. Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it
purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations
thereof or similar options; however, the Fund may buy or sell options
on financial futures contracts.
v. With respect to 50% of its total assets, purchase securities of any
issuer (other than obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities) if, as a result, more
than 5% of the total value of the Fund's assets would be invested in
securities of that issuer, except that all or substantially all of
the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund.
vi. Invest more than 25% of its total assets in a single issuer (other
than obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities), except that all or substantially all
of the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund.
vii. 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
3
<PAGE>
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.
viii. Pledge, hypothecate, mortgage or otherwise encumber its assets except
to secure borrowings permitted by restriction number 5 above. (The
collateral arrangements with respect to options, financial futures,
foreign currency transactions and delayed delivery transactions and
any margin payments in connection therewith are not deemed to be
pledges or other encumbrances.)
ix. Purchase more than 10% of any class of voting securities of any
issuer, except that all or substantially all of the assets of the
Fund may be invested in another registered investment company having
the same investment objective and substantially similar investment
policies as the Fund.
x. 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.
The Blue Chip Fund may not, as a fundamental policy:
1.
2. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
3. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
4.
5.
6.
4
<PAGE>
7.
8. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
9. Purchase physical commodities or contracts relating to physical
commodities.
10. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
11. Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
12. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Blue Chip
Fund may not:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Purchase securities of other open-end investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
iii. Invest more than 15% of its net assets in illiquid securities.
iv. 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.
v. Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by
restriction number (4) above. (The collateral arrangements with
respect to options, financial futures and delayed delivery
transactions and any margin payments in connection therewith are not
deemed to be pledges or other encumbrances.)
vi. Purchase more than 10% of any class of voting securities of any
issuer, except that all or substantially all of the assets of the
Fund may be invested in another registered investment company having
the same investment objective and substantially similar investment
policies as the Fund.
5
<PAGE>
vii. 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.
viii. 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.
ix. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or
instrumentalities) if, as a result, more than 5% of the total value
of the Fund's assets would be invested in securities of that issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund.
The Growth Fund and the Value+Growth Fund, each may not, as a fundamental
policy:
1.
2.
3. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
4. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
5.
6.
7. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
8. Purchase physical commodities or contracts relating to physical
commodities.
9. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
6
<PAGE>
10. Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
11. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Growth
Fund did not borrow money as permitted by investment restriction number 4 in the
latest fiscal year and neither Fund has a present intention of borrowing during
the current year. The Fund has adopted the following non-fundamental
restrictions, which may be changed by the Board of Trustees without shareholder
approval. The Growth Fund and the Value+Growth Fund, each may not:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Purchase securities of other investment companies, ePagexcept in
connection with a merger, consolidation, reorganization or
acquisition of assets.
iii. Invest more than 15% of its net assets in illiquid securities.
iv. 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.
v. Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund. All debt securities and all preferred stocks are each
considered as one class.
vi. 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.
vii. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that
all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
The Small Cap Fund may not, as a fundamental policy:
1.
2.
3. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
7
<PAGE>
4. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
5.
6.
7. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
8. Purchase physical commodities or contracts relating to physical
commodities.
9. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
10. Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
11. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Small Cap
Fund may not:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
iii. Invest more than 15% of its net assets in illiquid securities.
iv. 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.
v. Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund. All debt securities and all preferred stocks are each
considered as one class.
8
<PAGE>
vi. 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.
vii. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that
all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
The Technology Fund may not, as a fundamental policy:
1.
2.
3. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
4. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
5.
6.
7. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
8. Purchase physical commodities or contracts relating to physical
commodities.
9. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
9
<PAGE>
10. Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
11. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Technology Fund did not borrow money as permitted by investment restriction
number 4 in the latest fiscal year and has no present intention of borrowing
during the current year. The Technology Fund adopted the following
non-fundamental restrictions, which may be changed by the Board of Trustees
without shareholder approval. The Fund may not:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market of securities of
closed-end investment companies where no underwriter or dealer's
commission or profit, other than customary broker's commission, is
involved and only if immediately thereafter not more than (i) 3% of
the total outstanding voting stock of such company is owned by it,
(ii) 5% of its total assets would be invested in any one such
company, and (iii) 10% of total assets would be invested in such
securities.
iii. Invest more than 15% of its net assets in illiquid securities.
iv. 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.
v. Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund. All debt securities and all preferred stocks are each
considered as one class.
vi. 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.
vii. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that
all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
The Total Return Fund may not, as a fundamental policy:
1.
2.
10
<PAGE>
3. Make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
4. Borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
5.
6.
7. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
8. Purchase physical commodities or contracts relating to physical
commodities.
9. Engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.
10. Issue senior securities except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
11. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Total
Return Fund may not:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
iii. Invest more than 15% of its net assets in illiquid securities.
11
<PAGE>
iv. 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.
v. Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by
restriction number (4) above. (The collateral arrangements with
respect to options, financial futures and delayed delivery
transactions and any margin payments in connection therewith are not
deemed to be pledges or other encumbrances.)
vi. Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund. All debt securities and all preferred stocks are each
considered as one class.
vii. 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.
viii. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that
all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
The Quantitative Fund may not, as a fundamental policy:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as
a result, more than 5% of the Fund's total assets would be invested in
securities of that issuer, except that all or substantially all of the
assets of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar investment
policies as the Fund.
2. Purchase more than 10% of any class of securities of any issuer, except
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective
and substantially similar investment policies as the Fund. All debt
securities and all preferred stocks are each considered as one class.
3. Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term
obligations in accordance with its objective and policies are not
prohibited and the Fund may lend its portfolio securities as described
under "Investment Objectives and Policies" in the prospectus.
4. Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to
exceed 5% of the Fund's net assets; or pledge the Fund's securities or
receivables or transfer or assign or otherwise encumber them in an amount
exceeding the amount of the borrowing secured thereby.
5. Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
6. Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may it purchase put or call
options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
7. Invest 25% or more of its total assets in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water,
communications, electric and gas utilities shall each be considered a
separate industry.
12
<PAGE>
8. Invest in commodities or commodity futures contracts, although it may buy
or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of
issuers which invest or deal in real estate.
9. Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that
all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective
and substantially similar investment policies as the Fund.
10. Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and the Fund has no present intention of borrowing during the
current year. The Quantitative Fund adopted the following non-fundamental
restrictions, which may be changed by the Board of Trustees without shareholder
approval. The Fund may not:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market of securities of
closed-end investment companies where no underwriter or dealer's
commission or profit, other than customary broker's commission, is
involved and only if immediately thereafter not more than (i) 3% of
the total outstanding voting stock of such company is owned by it,
(ii) 5% of its total assets would be invested in any one such
company, and (iii) 10% of total assets would be invested in such
securities.
iii. Invest more than 15% of its net assets in illiquid securities.
Master/feeder fund structure. The Board of Trustees of [each/the] Fund[s] has
the discretion to retain the current distribution arrangement for a Fund while
investing in a master fund in a master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. Each Fund may engage in options transactions and may engage in
financial futures transactions in accordance with its respective investment
objectives and policies. The Blue Chip, Growth, Small Cap, Total Return and
Value+Growth Funds each may invest in put and call options but may not write
(sell) options. The Aggressive Growth, Quantitative and Technology Funds may
write (sell) covered call options and secured put options and may purchase put
and call options. Each such Fund intends to engage in such transactions if it
appears to the investment manager to be advantageous for the Fund to do so in
order to pursue its investment objective and also to hedge against the effects
of market risks but not for speculative purposes. The use of futures and
options, and possible benefits and attendant risks, are discussed below along
with information concerning other investment policies and techniques.
When a defensive position is deemed advisable, all or a significant portion of
each 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. It is impossible to predict for how long such alternative strategies
may be utilized.
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SPECIAL RISK FACTORS
Non-Diversified. The Investment Company Act of 1940 (the "1940 Act") classifies
investment companies as either "diversified" or "non-diversified." All of the
Funds, except the Aggressive Growth Fund, are diversified funds under the 1940
Act. As a non-diversified fund, the Aggressive Growth Fund may invest a greater
proportion of its assets in the obligations of a small number of issuers, and
may be subject to greater risk and substantial losses as a result of changes in
the financial condition or the market's assessment of the issuers. While not
limited by the 1940 Act as to the proportion of its assets that it may invest in
obligations of a single issuer, the Aggressive Growth Fund will comply with the
diversification requirements imposed by the Internal Revenue Code for
qualification as a regulated investment company. Accordingly, the Aggressive
Growth Fund will not, as a non-fundamental policy: (i) purchase more than 10% of
any class of voting securities of any issuer; (ii) with respect to 50% of its
total assets, purchase securities of any issuer (other than U.S. Government
Securities) if, as a result, more than 5% of the total value of the Fund's
assets would be invested in securities of that issuer; and (iii) invest more
than 25% of its total assets in a single issuer (other than U.S. Government
Securities). The Aggressive Growth Fund does not currently expect that it would
invest more than 10% of its total assets in a single issuer (other than U.S.
Government Securities).
OTHER CONSIDERATIONS-HIGH YIELD (HIGH RISK) BONDS. The Total Return Fund may
invest a portion of its assets in fixed income securities that are in the lower
rating categories of recognized rating agencies or are non-rated. These lower
rated or non-rated fixed income securities are considered, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation and generally will
involve more credit risk than securities in the higher rating categories.
The market values of such securities tend to reflect individual corporate
developments to a greater extent than do those of higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower rated securities also tend to be more sensitive to economic conditions
than are higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, regarding lower rated bonds may
depress the prices for such securities. These and other factors adversely
affecting the market value of high yield securities will adversely affect the
Fund's net asset value. Although some risk is inherent in all securities
ownership, holders of fixed income securities have a claim on the assets of the
issuer prior to the holders of common stock. Therefore, an investment in fixed
income securities generally entails less risk than an investment in common stock
of the same issuer.
High yield securities frequently are issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such high yielding
securities often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the securities of such issuers generally is greater than is the case with higher
rated securities. For example, during an economic downturn or recession, highly
leveraged issuers of high yield securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss from default by the
issuer is significantly greater for the holders of high yielding securities
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer.
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.
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."
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Foreign Securities. The Funds invest primarily in securities that are publicly
traded in the United States; but, they have discretion to invest a portion of
their assets in foreign securities that are traded principally in securities
markets outside the United States. The Funds may also invest without limit in
U.S. Dollar denominated American Depository Receipts ("ADRs"), which are bought
and sold in the United States. 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."
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based on the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
Emerging Markets. While each Fund's investments in foreign securities will be
principally in developed countries, a Fund may make investments in developing or
"emerging" countries, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. A developing or emerging market country can be
considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most Western European countries. Currently,
investing in many emerging markets may not be desirable or 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
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emerging market securities to be illiquid. The inability of a Fund to make
intended securities purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security caused by settlement problems could result either in losses to a Fund
due to subsequent declines in value of the portfolio security or, if a Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. Certain emerging markets may lack clearing facilities
equivalent to those in developed countries. Accordingly, settlements can pose
additional risks in such markets and ultimately can expose the Fund to the risk
of losses resulting from a Fund's inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for a Fund's portfolio securities in such
markets may not be readily available. At such times 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 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 may include privately negotiated
investments in a government- or state-owned or controlled company or enterprise
that has not yet conducted an initial equity offering, investments in the
initial offering of equity securities of a state enterprise or former state
enterprise and investments in the securities of a state enterprise following its
initial equity offering.
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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.
Derivatives. In addition to options, financial futures and foreign currency
transactions, consistent with its objective, each Fund may invest in a broad
array of financial instruments and securities in which the value of the
instrument or security is "derived" from the performance of an underlying asset
or a "benchmark" such as a security index, an interest rate or a currency
("derivatives"). Derivatives are most often used in an effort to manage
investment risk, to increase or decrease exposure to an asset class or benchmark
(as a hedge or to enhance return), or to create an investment position
indirectly (often because it is more efficient or less costly than direct
investment). There is no guarantee that these results can be achieved through
the use of derivatives.
The types of derivatives used by each Fund and the techniques employed by the
investment manager may change over time as new derivatives and strategies are
developed or regulatory changes occur.
REGULATORY RESTRICTIONS. To the extent required to comply with applicable
regulation, when purchasing a futures contract, writing a put option or entering
into a forward currency exchange purchase, a Fund will maintain eligible
securities in a segregated account. A Fund will use cover in connection with
selling a futures contract.
A Fund will not engage in transactions in financial futures contracts or options
thereon for speculation, but only in an attempt to hedge against changes in
interest rates or market conditions affecting the value of securities that the
Fund holds or intends to purchase.
OPTIONS ON SECURITIES. The Aggressive Growth, Quantitative, and Technology Funds
may write (sell) "covered" call options on securities as long as the Fund owns
the underlying securities subject to the option or an option to purchase the
same underlying securities, having an exercise price equal to or less than the
exercise price of the "covered" option, or will establish and maintain for the
term of the option a segregated account consisting of cash or other liquid
securities ("eligible securities") to the extent required by applicable
regulation in connection with the optioned securities. The Aggressive Growth,
Quantitative and Technology Funds may write "covered" put options provided that,
as long as the Fund is obligated as a writer of a put option, the Fund will own
an option to sell the underlying securities subject to the option, having an
exercise price equal to or greater than the exercise price of the "covered"
option, or it will deposit and maintain
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in a segregated account eligible securities having a value equal to or greater
than the exercise price of the option. A call option gives the purchaser the
right to buy, and the writer the obligation to sell, the underlying security at
the exercise price during or at the end of the option period. A put option gives
the purchaser the right to sell, and the writer the obligation to buy, the
underlying security at the exercise price during or at the end of the option
period. The premium received for writing an option will reflect, among other
things, the current market price of the underlying security, the relationship of
the exercise price to such market price, the price volatility of the underlying
security, the option period, supply and demand and interest rates. The Funds may
write (for the Quantitative, and Technology Funds) or purchase spread options,
which are options for which the exercise price may be a fixed dollar spread or
yield spread between the security underlying the option and another security
that is used as a bench mark. The exercise price of an option may be below,
equal to or above the current market value of the underlying security at the
time the option is written. The buyer of a put who also owns the related
security is protected by ownership of a put option against any decline in that
security's price below the exercise price less the amount paid for the option.
The ability to purchase put options allows a Fund to protect capital gains in an
appreciated security it owns, without being required to actually sell that
security. At times a Fund would like to establish a position in a security upon
which call options are available. By purchasing a call option, a Fund is able to
fix the cost of acquiring the security, this being the cost of the call plus the
exercise price of the option. This procedure also provides some protection from
an unexpected downturn in the market, because a Fund is only at risk for the
amount of the premium paid for the call option which it can, if it chooses,
permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium, plus the interest income on the eligible securities that
have been segregated. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However,
this would be offset in whole or in part by gain from the premium received and
any interest income earned on the eligible securities that have been segregated.
EXCHANGE-LISTED OPTIONS. The Funds may deal in exchange-listed options. Exchange
listed options are issued by a regulated intermediary such as the Options
Clearing Corporation ("OCC"), which guarantees the performance of the
obligations of the parties to such options. The discussion below uses the OCC as
an example, but is also applicable to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally settle
by physical delivery of the underlying security or currency, although in the
future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
A Fund's ability to close out its position as a purchaser or seller of an OCC or
exchange listed put or call option is dependent, in part, upon the liquidity of
the option market. Among the possible reasons for the absence of a liquid option
market on an exchange are: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities including reaching daily price
limits; (iv) interruption of the normal operations of the OCC or an exchange;
(v) inadequacy of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue the trading
of options (or a particular class or series of options), in which event the
relevant market for that option on that exchange would cease to exist, although
outstanding options on that exchange would generally continue to be exercisable
in accordance with their terms.
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The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OVER-THE-COUNTER OPTIONS. The Funds may also 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.
The Funds understand the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Funds have adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Funds' portfolios. A brief description of
such procedures is set forth below.
A Fund will only engage in OTC options transactions with dealers that have been
specifically approved by the investment manager pursuant to procedures adopted
by the Fund's Board of Trustees. The investment manager believes that the
approved dealers should be able to enter into closing transactions if necessary
and, therefore, present minimal credit risks to a Fund. The investment manager
will monitor the credit-worthiness of the approved dealers on an ongoing basis.
A Fund currently will not engage in OTC options transactions if the amount
invested by the Fund in OTC options, plus (for the Aggressive Growth,
Quantitative and Technology Funds) a "liquidity charge" related to OTC options
written by the Fund, plus the amount invested by the Fund in illiquid
securities, would exceed 15% of the Fund's net assets. The "liquidity charge"
referred to above is computed as described below.
The Aggressive Growth, Quantitative and Technology Funds anticipate entering
into agreements with dealers to which the Fund sells OTC options. Under these
agreements either Fund would have the absolute right to repurchase the OTC
options from the dealer at any time at a price no greater than a price
established under the agreements (the "Repurchase Price"). The "liquidity
charge" referred to above for a specific OTC option transaction will be the
Repurchase Price related to the OTC option less the intrinsic value of the OTC
option. The intrinsic value of an OTC call option for such purposes will be the
amount by which the current market value of the underlying security exceeds the
exercise price. In the case of an OTC put option, intrinsic value will be the
amount by which the exercise price exceeds the current market value of the
underlying security. If there is no such agreement requiring a dealer to allow
either Fund to repurchase a specific OTC option written by the Fund, the
"liquidity charge" will be the current market value of the assets serving as
"cover" for such OTC option.
OPTIONS ON SECURITIES INDICES. The Blue Chip, Growth, Small Cap, Total Return
and Value+Growth Funds may purchase, and the Aggressive Growth, Quantitative and
Technology Funds may purchase and write, call and put options on securities
indices in an attempt to hedge against market conditions affecting the value of
securities that the Fund owns or intends to purchase, and not for speculation.
Through the writing or purchase of index options, a Fund can achieve many of the
same objectives as through the use of options on individual 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
19
<PAGE>
securities index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the securities index upon
which the option is based is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Unlike security options, all
settlements are in cash and gain or loss depends upon price movements in the
market generally (or in a particular industry or segment of the market), rather
than upon price movements in individual securities. Price movements in
securities that the Fund owns or intends to purchase will probably not correlate
perfectly with movements in the level of an index since the prices of such
securities may be affected by somewhat different factors and, therefore, the
Fund bears the risk that a loss on an index option would not be completely
offset by movements in the price of such securities.
When the Aggressive Growth, Quantitative or Technology Fund writes an option on
a securities index, it will segregate, and mark-to-market, eligible securities
to the extent required by applicable regulations. In addition, where a Fund
writes a call option on a securities index at a time when the contract value
exceeds the exercise price, the Fund will segregate and mark-to-market, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess.
A Fund may also purchase and sell options on other appropriate indices, as
available, such as foreign currency indices. Options on futures contracts and
index options involve risks similar to those risks relating to transactions in
financial futures contracts described below. Also, an option purchased by a Fund
may expire worthless, in which case the Fund would lose the premium paid
therefor.
FINANCIAL FUTURES CONTRACTS. The Funds may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or an amount of foreign currency or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might affect adversely the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.
Although some futures contracts by their terms call for the actual delivery or
acquisition of securities or other assets, in most cases a party will close out
the contractual commitment before delivery without having to make or take
delivery of the underlying assets by purchasing (or selling, as the case may be)
on a commodities exchange an identical futures contract calling for delivery in
the same month. Such a transaction, if effected through a member of an exchange,
cancels the obligation to make or take delivery of the underlying securities or
other assets. All transactions in the futures market are made, offset or
fulfilled through a clearing house associated with the exchange on which the
contracts are traded. A Fund will incur brokerage fees when it purchases or
sells contracts, and will be required to maintain margin deposits. At the time a
Fund enters into a futures contract, it is required to deposit with its
custodian, on behalf of the broker, a specified amount of cash or eligible
securities, called "initial margin." The initial margin required for a futures
contract is set by the exchange on which the contract is traded. Subsequent
payments, called "variation margin," to and from the broker are made on a daily
basis as the market price of the futures contract fluctuates. The costs incurred
in connection with futures transactions could reduce a Fund's return. Futures
contracts entail risks. If the investment manager's judgment about the general
direction of markets or exchange rates is wrong, the overall performance may be
poorer than if no such contracts had been entered into.
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
20
<PAGE>
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities or other
assets and movements in the prices of futures contracts, a correct forecast of
market trends by the investment manager may still not result in a successful
hedging transaction. If any of these events should occur, the Fund could lose
money on the financial futures contracts and also on the value of its portfolio
assets.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. A Fund may purchase and write call and
put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. A Fund would be required
to deposit with its custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by it. A Fund will
establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities." Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above. Also, an option purchased by a Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.
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 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.
21
<PAGE>
Should forward prices increase, the Fund would suffer a loss to the extent the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain that might result should the value of such
currency increase. A Fund may have to convert its holdings of foreign currencies
into U.S. Dollars from time to time in order to meet such needs as Fund expenses
and redemption requests. Although foreign exchange dealers do not charge a fee
for conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
A Fund will not enter into forward contracts or maintain a net exposure in such
contracts when the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets
denominated in that currency. A Fund segregates eligible securities to the
extent required by applicable regulation in connection with forward foreign
currency exchange contracts entered into for the purchase of a foreign currency.
A Fund generally does not enter into a forward contract with a term longer than
one year.
SHORT SALES AGAINST-THE-BOX. The Aggressive Growth, and Blue Chip Funds may make
short sales against-the-box for the purpose of, but not limited to, deferring
realization of loss when deemed advantageous for federal income tax purposes. A
short sale "against-the-box" is a short sale in which a Fund owns at least an
equal amount of the securities sold short or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and at least equal in amount to, the securities sold short. A
Fund may engage in such short sales only to the extent that not more than 10% of
the Fund's total assets (determined at the time of the short sale) is held as
collateral for such sales. Each Fund does not currently intend, however, to
engage in such short sales to the extent that more than 5% of its net assets
will be held as collateral therefor during the current year.
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.
PORTFOLIO TRANSACTIONS
Brokerage
Allocation of brokerage is supervised by the Advisor.
The primary objective of the Advisor in placing orders for the purchase and sale
of securities for a Fund is to obtain the most favorable net results, taking
into account such factors as price, commission where applicable, size of order,
difficulty of execution and skill required of the executing broker/dealer. The
Advisor seeks to evaluate the overall reasonableness of brokerage commissions
paid (to the extent applicable) through the familiarity of the Distributor with
commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Advisor
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
The Funds' purchases and sales of fixed-income securities are generally placed
by the Advisor with primary market makers for these securities on a net basis,
without any brokerage commission being paid by a Fund. Trading does, however,
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Advisor's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses
22
<PAGE>
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. The Advisor is
authorized when placing portfolio transactions for a Fund to pay a brokerage
commission in excess of that which another broker might charge for executing the
same transaction on account of execution of services and the receipt of
research, market or statistical information. The Advisor may place orders with
broker/dealers on the basis that the broker/dealer has or has not sold shares of
a Fund. In effecting transactions in over-the-counter securities, orders are
placed with the principal market makers for the security being traded unless,
after exercising care, it appears that more favorable results are available
elsewhere.
To the maximum extent feasible, it is expected that the Advisor will place
orders for portfolio transactions through the Distributor"", which is a
corporation registered as a broker-dealer and a subsidiary of the Advisor; the
Distributor will place orders on behalf of the Funds with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Funds for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Advisor, it is the opinion of
the Advisor that such information only supplements the Advisor's own research
effort since the information must still be analyzed, weighed and reviewed by the
Advisor's staff. Such information may be useful to the Advisor in providing
services to clients other than a Fund, and not all such information is used by
the Advisor in connection with a Fund. Conversely, such information provided to
the Advisor by broker/dealers through whom other clients of the Advisor effect
securities transactions may be useful to the Advisor in providing services to a
Fund.
The Trustees review from time to time whether the recapture for the benefit of a
Fund of some portion of the brokerage commissions or similar fees paid by a Fund
on portfolio transactions is legally permissible and advisable.
Each Fund's average portfolio turnover rate is the ratio of the lesser of sales
or purchases to the monthly average value of the portfolio securities owned
during the year, excluding all securities with maturities or expiration dates at
the time of acquisition of one year or less. A higher rate involves greater
brokerage transaction expenses to a Fund and may result in the realization of
net capital gains, which would be taxable to shareholders when distributed.
Purchases and sales are made for a Fund's portfolio whenever necessary, in
management's opinion, to meet a Fund's objective.
The table below shows total brokerage commissions paid by each Fund for the last
three fiscal years and, for the most recent fiscal year, the percentage thereof
that was allocated to firms based upon research information provided.
<TABLE>
<CAPTION>
Allocated to Firms Based on
Fund Fiscal 1998 Research in Fiscal 1998 Fiscal 1997 Fiscal 1996
- ---- ----------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C>
Aggressive To be updated To be updated $ 27,000* $ N.A.
Blue Chip $ 2,664,000 $ 1,661,000
Growth $ 11,676,000 $ 9,535,000
Quantitative $ 21,000 $ 9,000
Small Cap $ 6,618,000 $ 6,362,000
Technology $ 3,329,000 $ 4,438,000
Total Return $ 7,170,000 $ 6,335,000
Value+Growth $ 142,000 $ 66,000
</TABLE>
* For the period December 31, 1996 to September 30, 1997.
23
<PAGE>
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper" or "the
Advisor"), 345 Park Avenue, New York, New York, is each Fund's investment
manager. Scudder Kemper is approximately 70% owned by Zurich Financial Services,
a newly formed global insurance and financial services company. The balance of
the Advisor is owned by its officers and employees. Pursuant to investment
management agreements, Scudder Kemper acts as each Fund's investment advisor,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of a Fund if elected to such positions. Each investment
management agreement provides that each Fund pays the charges and expenses of
its operations, including the fees and expenses of the trustees (except those
who are affiliated with officers or employees of Scudder Kemper), independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, brokerage commissions or
transaction costs, costs of calculating net asset value and maintaining all
accounting records related thereto, taxes and membership dues. Each Fund bears
the expenses of registration of its shares with the Securities and Exchange
Commission, while Kemper Distributors, Inc. ("KDI"), as principal underwriter,
pays the cost of qualifying and maintaining the qualification of each Fund's
shares for sale under the securities laws of the various states.
The investment management agreements provide that Scudder Kemper shall not be
liable for any error of judgment or of law, or for any loss suffered by a Fund
in connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Scudder Kemper in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under each agreement.
Each Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually by a majority of
the trustees who are not parties to such agreement or interested persons of any
such party except in their capacity as trustees of the Fund and by the
shareholders of the Fund subject thereto or the Board of Trustees. Each Fund's
investment management agreement may be terminated at any time upon 60 days
notice by either party, or by a majority vote of the outstanding shares of the
Fund subject thereto, and will terminate automatically upon assignment. If
additional Funds 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.
Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by
Scudder Kemper. The investment management agreements provide that Scudder Kemper
shall act as each Fund's investment Advisor, manage its investments and provide
it with various services and facilities.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Advisor, with the balance
owned by the Advisor's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) and the financial services businesses of B.A.T Industries
p.l.c. ("B.A.T") were combined to form a new global insurance and financial
services company known as Zurich Financial Services, Inc. By way of a dual
holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
Upon consummation of this transaction, each Fund's existing investment
management agreement with Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the current
investment management agreement, except for the date of execution and
termination. This agreement became effective upon the termination of the then
current investment management agreement and will be submitted for shareholder
approval at a special meeting currently scheduled to conclude in December 1998.
24
<PAGE>
The Funds (other than the Aggressive Growth Fund and the Small Cap Fund) pay
Scudder Kemper investment management fees, payable monthly, at 1/12 of the
annual rates shown below. The Aggressive Growth Fund and the Small Cap Fund each
pay a base annual management fee, payable monthly, at the annual rate of 0.65%
of the average daily net assets of the Fund. This base fee is subject to upward
or downward adjustment on the basis of the investment performance of the Class A
shares of the Fund compared with the performance of the Standard & Poor's 500
Stock Index as described herein. After the effect of the adjustment, the
management fee rate for the Aggressive Growth Fund may range between 0.45% and
0.85% and the management fee rate for the Small Cap Fund may range between 0.35%
and 0.95%.
Blue Chip,
Growth,
Quantitative,
Technology
and Total Value+
Return Growth
Average Daily Net Assets Funds Fund
$0 - $250 million 0.58% 0.72%
$250 million - $1 billion 0.55 0.69
$1 billion - $2.5 billion 0.53 0.66
$2.5 billion - $5 billion 0.51 0.64
$5 billion - $7.5 billion 0.48 0.60
$7.5 billion - $10 billion 0.46 0.58
$10 billion - $12.5 billion 0.44 0.56
Over $12.5 billion 0.42 0.54
25
<PAGE>
The Small Cap Fund pays a base annual investment management fee, payable
monthly, at the rate of 0.65% of the average daily net assets of the Fund. This
base fee is subject to upward or downward adjustment on the basis of the
investment performance of the Class A shares of the Fund 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 0.05% 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 0.30% of the average daily net assets.
Conversely, the compensation payable by the Small Cap Fund will be reduced by an
annual rate of 0.05% 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 0.30% of the average net assets. The total fee on
an annual basis can range from 0.35% to 0.95% of average daily net assets. The
Small Cap Fund's investment performance during any twelve month period is
measured by the percentage difference between (a) the opening net asset value of
one Class A share of the Fund and (b) the sum of the closing net asset value of
one Class A share of the Fund plus the value of any income and capital gain
dividends on such share during the period treated as if reinvested in Class A
shares of the Fund at the time of distribution. The performance of the Index is
measured by the percentage change in the Index between the beginning and the end
of the twelve month period with cash distributions on the securities which
comprise the Index being treated as reinvested in the Index at the end of each
month following the payment of the dividend. Each monthly calculation of the
incentive portion of the fee may be illustrated as follows: if over the
preceding twelve month period the Small Cap Fund's adjusted net asset value
applicable to one Class A share went from $10.00 to $11.00 (10% appreciation),
and the Index, after adjustment, went from 100 to 104 (or only 4%), the entire
incentive compensation would have been earned by Scudder Kemper. On the other
hand, if the Index rose from 100 to 110 (10%), no incentive fee would have been
payable. A rise in the Index from 100 to 116 (16%) would have resulted in the
minimum monthly fee of 1/12 of 0.35%. Since the computation is not cumulative
from year to year, an additional management fee may be payable with respect to a
particular year, although the Small Cap Fund's performance over some longer
period of time may be less favorable than that of the Index. Conversely, a lower
management fee may be payable in a year in which the performance of the Fund's
Class A shares' is less favorable than that of the Index, although the
performance of the Fund's Class A shares over a longer period of time might be
better than that of the Index.
The Aggressive Growth Fund pays a base annual investment management fee, payable
monthly, at the rate of 0.65 of 1% of the average daily net assets of the Fund.
This base fee is subject to upward or downward adjustment on the basis of the
investment performance of the Class A shares of the Fund as compared with the
performance of the Standard & Poor's 500 Stock Index (the "Index"). The
Aggressive Growth Fund will pay an additional monthly fee at an annual rate of
0.02% of such average daily net assets for each percentage point (fractions to
be prorated) by which the performance of the Class A shares of the Fund exceeds
that of the Index for the immediately preceding twelve months; provided that
such additional monthly fee shall not exceed 1/12 of 0.20% of the average daily
net assets. Conversely, the compensation payable by the Aggressive Growth Fund
will be reduced by an annual rate of 0.02% of such average daily net assets for
each percentage point (fractions to be prorated) by which the performance of the
Class A shares of the Fund falls below that of the Index, provided that such
reduction in the monthly fee shall not exceed 1/12 of 0.20% of the average net
assets. The total fee on an annual basis can range from 0.45% to 0.85% of
average daily net assets. The Aggressive Growth Fund's investment performance
during any twelve month period is measured by the percentage difference between
(a) the opening net asset value of one Class A share of the Fund and (b) the sum
of the closing net asset value of one Class A share of the Fund plus the value
of any income and capital gain dividends on such share during the period treated
as if reinvested in Class A shares of the Fund at the time of distribution. The
performance of the Index is measured by the percentage change in the Index
between the beginning and the end of the twelve month period with cash
distributions on the securities which comprise the Index being treated as
reinvested in the Index at the end of each month following the payment of the
dividend. Each monthly calculation of the incentive portion of the fee may be
illustrated as follows: if over the preceding twelve month period the Aggressive
Growth Fund's adjusted net asset value applicable to one Class A share went from
$10.00 to $11.50 (15% appreciation), and the Index, after adjustment, went from
100 to 104 (or only 4%), the entire incentive compensation
26
<PAGE>
would have been earned by Scudder Kemper. On the other hand, if the Index rose
from 100 to 115 (15%), no incentive fee would have been payable. A rise in the
Index from 100 to 125 (25%) would have resulted in the minimum monthly fee of
1/12 of 0.45%. Since the computation is not cumulative from year to year, an
additional management fee may be payable with respect to a particular year,
although the Aggressive Growth Fund's performance over some longer period of
time may be less favorable than that of the Index. Conversely, a lower
management fee may be payable in a year in which the performance of the Fund's
Class A shares is less favorable than that of the Index, although the
performance of the Fund's Class A shares over a longer period of time might be
better than that of the Index.
The investment management fees paid by each Fund for its last three fiscal years
are shown in the table below.
Fund Fiscal 1998 Fiscal 1997 Fiscal 1996
- ---- ----------- ----------- -----------
Aggressive+ To be updated $ 37,000(1) --
Blue Chip $ 2,018,000 1,198,000
Growth $14,576,000 13,994,000
Quantitative $ 46,000 11,000(2)
Small Cap $ 3,193,000(3) 4,418,000(4)
Technology $ 6,532,000 5,582,000
Total Return $17,084,000 15,825,000
Value+Growth $ 474,000 131,000*
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* Amounts shown are after expense waiver.
(1) Fee was increased $1,000 from $36,000 base fee.
(2) For the period February 15, 1996 to November 30, 1996.
(3) Fee was decreased $2,617,000 from $5,810,000 base fee.
(4) Fee was decreased $670,000 from $5,088,000 base fee.
(5) Fee was decreased $766,000 from $4,039,000 base fee.
(6) For the period October 16, 1995 to November 30, 1995.
FUND ACCOUNTING AGENT. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of Scudder
Kemper, is responsible for determining the daily net asset value per share of
the Funds and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to the Funds; however, subject to Board
approval, some time in the future, SFAC may seek payment for its services under
this agreement.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606, an affiliate of
Scudder Kemper, is the principal underwriter and distributor for the shares of
each Fund and acts as agent of each Fund in the continuous offering of its
shares. KDI bears all its expenses of providing services pursuant to the
distribution agreements, including the payment of any commissions. Each Fund
pays the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI, as principal underwriter, pays for
the printing and distribution of copies thereof used in connection with the
offering of shares to prospective investors. KDI also pays for supplementary
sales literature and advertising costs.
Each distribution agreement continues in effect from year to year so long as
such continuance is approved for each class at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to a
class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
Investment Company Act of 1940. The agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of
27
<PAGE>
the agreement. The provisions concerning the continuation, amendment and
termination of the distribution agreement are on a Fund by Fund basis and for
each Fund on a class by class basis.
Class A Shares. KDI receives no compensation from the Funds as principal
underwriter for Class A shares and pays all expenses of distribution of each
Fund's Class A shares under the distribution agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of each Fund's shares. The
following information concerns the underwriting commissions paid in connection
with the distribution of each Fund's Class A shares for the fiscal years noted.
<TABLE>
<CAPTION>
Commissions Retained by Commissions Underwriter Commissions Paid to
Fund Fiscal Year Underwriter Paid to All Firms Kemper Affiliated Firms
- ---- ----------- ----------- ----------------- -----------------------
<S> <C> <C> <C> <C>
Aggressive 1998
1997+ $ 7,000 111,000 5,000
1996 N.A. N.A. N.A.
Blue Chip 1998
1997 $ 124,000 1,101,000 7,000
1996 $ 72,000 424,000 11,000
Growth 1998
1997 $ 296,000 1,523,000 9,000
1996 $ 327,000 2,075,000 57,000
Quantitative 1998
1997 $ 2,000 18,000 0
1996* $ 1,000 5,000 0
Small Cap 1998
1997 $ 104,000 705,000 0
1996 $ 130,000 849,000 16,000
Technology 1998
1997 $ 181,000 853,000 7,000
1996 $ 198,000 869,000 37,000
Total Return 1998
1997 $ 191,000 1,591,000 0
1996 $ 225,000 1,697,000 79,000
Value+Growth 1998
1997 $ 40,000 538,000 0
1996 $ 33,000 238,000 15,000
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* For the period February 15, 1996 to November 30, 1996.
** For the period October 16, 1995 to November 30, 1995.
Class B Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund under a Rule 12b-1 Plan, payable monthly, at the annual
rate of 0.75% of average daily net assets of each Fund attributable to Class B
shares. This fee is accrued daily as an expense of Class B shares. KDI also
receives any contingent deferred sales charges. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Class B Shares." KDI currently
compensates firms for sales of Class B shares at a commission rate of 3.75%.
Class C Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund under a Rule 12b-1 Plan, payable monthly, at the annual
rate of 0.75% of average daily net assets of each Fund attributable to Class C
shares. This fee is accrued daily as an expense of Class C shares. KDI currently
advances to firms the first year distribution fee at a rate of 0.75% of the
purchase price of Class C shares. For periods after the first year, KDI
currently pays firms for sales of
28
<PAGE>
Class C shares a distribution fee, payable quarterly, at an annual rate of 0.75%
of net assets attributable to Class C shares maintained and serviced by the firm
and the fee continues until terminated by KDI or a Fund. KDI also receives any
contingent deferred sales charges. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charges--Class C Shares".
Class B Shares and Class C Shares. Each Fund has adopted a plan under Rule 12b-1
that provides for fees payable as an expense of the Class B shares and Class C
shares that are used by KDI to pay for distribution and services for those
classes. Because 12b-1 fees are paid out of fund assets on an ongoing basis,
they will, over time, increase the cost of an investment and cost more than
other types of sales charges.
Expenses of the Funds and of KDI in connection with the Rule 12b-1 Plans for the
Class B and Class C Shares are set forth below. A Portion of the marketing sales
and operating expenses shown below could be considered overhead expense.
29
<PAGE>
<TABLE>
<CAPTION>
Total Commissions
Distribution Contingent Commissions Paid by
Fees Paid by Deferred Sales Paid by Underwriter to
Fund Class Fiscal Fund to Charges to Underwriter Affiliated
B Shares Year Underwriter Underwriter to Firms Firms
- -------- ---- ----------- ----------- -------- -----
<S> <C> <C> <C> <C> <C>
Aggressive 1998
1997+ $ 13,000 11,000 122,000 0
1996 N.A. N.A. N.A. N.A.
Blue Chip 1998
1997 $ 659,000 128,000 1,885,000 0
1996 $ 233,000 41,000 521,000 3,000
Growth 1998
1997 $ 6,426,000 1,183,000 3,193,000 0
1996 $ 6,149,000 1,494,000 3,522,000 53,000
Quantitative 1998
1997 $ 13,000 0 40,000 0
1996* $ 3,000 0 4,000 0
Small Cap 1998
1997 $ 1,930,000 417,000 1,308,000 0
1996 $ 1,743,000 389,000 1,370,000 18,000
Technology 1998
1997 $ 698,000 179,000 1,272,000 0
1996 $ 413,000 102,000 974,000 28,000
Total Return 1998
1997 $ 8,705,000 1,382,000 3,769,000 0
1996 $ 8,464,000 2,089,000 3,572,000 64,000
Value+Growth 1998
1997 $ 195,000(a) 28,000 656,000 0
1996 $ 65,000 4,000 320,000 15,000
<CAPTION>
Other Distribution Expenses Paid by Underwriter
Advertising Marketing Misc.
Fund Class and Prospectus and Sales Operating Interest
B Shares Literature Printing Expenses Expenses Expenses
- -------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Aggressive
12,000 1,000 3,000 1,000 4,000
Blue Chip
189,000 13,000 530,000 97,000 238,000
117,000 10,000 232,000 76,000 85,000
Growth
563,000 39,000 1,424,000 199,000 48,000
1,020,000 88,000 2,049,000 284,000 188,000
277,000
Quantitative
3,000 0 9,000 22,000 5,000
7,000 1,000 17,000 4,000 1,000
Small Cap
222,000 15,000 564,000 97,000 426,000
384,000 34,000 781,000 125,000 380,000
Technology
162,000 11,000 442,000 77,000 295,000
309,000 28,000 572,000 121,000 191,000
54,000
Total Return
517,000 36,000 1,391,000 193,000 44,000
1,100,000 100,000 2,139,000 344,000 438,000
809,000
Value+Growth
65,000 5,000 184,000 30,000 104,000
88,000 7,000 160,000 41,000 40,000
3,000 1,000
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* For the period February 15, 1996 to November 30, 1996.
** For the period October 16, 1995 to November 30, 1995.
(a) Amounts shown after expense waiver.
30
<PAGE>
<TABLE>
<CAPTION>
Total Distribution
Distribution Contingent Distribution Fees Paid by
Fees Paid by Deferred Sales Fees Paid by Underwriter to
Fund Class Fiscal Fund to Charges to Underwriter Affiliated
C Shares Year Underwriter Underwriter to Firms Firms
- -------- ---- ----------- ----------- -------- -----
<S> <C> <C> <C> <C> <C>
1998
Aggressive 1997+ $ 6,000 5,000 16,000 0
1996 N.A. N.A. N.A. N.A.
1995 N.A. N.A. N.A. N.A.
1998
Blue Chip 1997 $ 49,000 3,000 72,000 0
1996 $ 12,000 0 18,000 0
1995 $ 5,000 N.A. 5,000 0
1998
Growth 1997 $110,000 1,000 123,000 0
1996 $ 57,000 0 73,000 0
1995 $ 23,000 N.A. 22,000 6,000
1998
Quantitative 1997 $ 8,000 0 2,000 0
1996* $ 3,000 0 0 0
1995 N.A. N.A. N.A. N.A.
1998
Small Cap 1997 $ 62,000 2,000 63,000 0
1996 $ 35,000 0 42,000 0
1995 $ 13,000 N.A. 13,000 4,000
1998
Technology 1997 $ 51,000 3,000 66,000 0
1996 $ 21,000 1,000 32,000 0
1995 $ 5,000 N.A. 4,000 1,000
1998
Total Return 1997 $109,000 2,000 123,000 0
1996 $ 60,000 0 69,000 0
1995 $ 26,000 N.A. 25,000 5,000
1998
Value+Growth 1997 $ 8,000(a) 1,000 20,000 0
1996 $ 2,000 0 7,000 0
1995** $ 0 N.A. 0 0
<CAPTION>
Other Distribution Expenses Paid by Underwriter
Advertising Marketing Misc.
Fund Class and Prospectus and Sales Operating Interest
C Shares Literature Printing Expenses Expenses Expenses
- -------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Aggressive 7,000 1,000 20,000 0 1,000
N.A. N.A. N.A. N.A. N.A.
N.A. N.A. N.A. N.A. N.A.
Blue Chip 26,000 2,000 52,000 18,000 12,000
14,000 1,000 28,000 1,000 5,000
3,000 1,000 13,000 8,000 2,000
Growth 44,000 3,000 110,000 8,000 36,000
48,000 4,000 89,000 8,000 18,000
12,000 2,000 70,000 15,000 7,000
Quantitative 0 0 0 9,000 2,000
7,000 0 15,000 6,000 1,000
N.A. N.A. N.A. N.A. N.A.
Small Cap 21,000 1,000 53,000 9,000 21,000
30,000 3,000 60,000 3,000 11,000
6,000 1,000 36,000 14,000 4,000
Technology 24,000 2,000 66,000 2,000 19,000
34,000 3,000 67,000 2,000 8,000
4,000 1,000 19,000 10,000 2,000
Total Return 35,000 2,000 94,000 2,000 36,000
49,000 4,000 97,000 5,000 20,000
13,000 2,000 72,000 15,000 9,000
Value+Growth 7,000 1,000 20,000 2,000 7,000
13,000 1,000 23,000 8,000 3,000
1,000 0 1,000 1,000 0
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* For the period February 15, 1996 to November 30, 1996.
** For the period October 16, 1995 to November 30, 1995.
(a) Amount shown after expense waiver.
31
<PAGE>
<TABLE>
<CAPTION>
Distribution Distribution Deferred Sales
Expenses Incurred Fees Paid by Charges Paid
by Underwriter Fund to Underwriter to Underwriter
Fund Class B Class C Class B Class C Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth* $ To be updated
Blue Chip
Growth
Quantitative
Small Cap
Technology
Total Return
Value+Growth
</TABLE>
*For the period December 31, 1996 to September 30, 1997.
(a) Amounts shown are after expense waiver.
If a Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of a Fund to make payments to KDI pursuant to the Plan will cease
and the Fund will not be required to make any payments past the termination
date. Thus, there is no legal obligation for the Fund to pay any expenses
incurred by KDI in excess of its fees under a Plan, if for any reason the Plan
is terminated in accordance with its terms. Future fees under a Plan may or may
not be sufficient to reimburse KDI for its expenses incurred.
ADMINISTRATIVE SERVICES. 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 0.25% of average daily net assets of Class A, B and C shares of each
Fund.
KDI enters into related arrangements with various broker-dealer firms and other
service or administrative firms ("firms"), that provide services and facilities
for their customers or clients who are shareholders of a Fund. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding the Fund, assistance to
clients in changing dividend and investment options, account designations and
addresses and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. For Class A shares, KDI
pays each firm a service fee, normally payable quarterly, at an annual rate of
up to 0.25% of the net assets in Fund accounts that it maintains and services
attributable to Class A shares commencing with the month after investment. With
respect to Class B and Class C shares, KDI currently advances to firms the
first-year service fee at a rate of up to 0.25% of the purchase price of such
shares. For periods after the first year, KDI currently intends to pay firms a
service fee at an annual rate of up to 0.25% (calculated monthly and normally
paid quarterly) of the net assets attributable to Class B and Class C shares
maintained and serviced by the firm and the fee continues until terminated by
KDI or the Fund. Firms to which service fees may be paid include broker-dealers
affiliated with KDI.
The following information concerns the administrative services fee paid by each
Fund.
[To be updated]
<TABLE>
<CAPTION>
Administrative Service Fees Paid by Fund
Service Fees Paid Service Fees Paid
by Administrator by Administrator
Fund Fiscal Year Class A Class B Class C to Firms to Affiliated firms
- ---- ----------- ------- ------- ------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
To be updated
1998
Aggressive 1997+ $ 7,000 4,000 2,000 24,000 0
1996 N.A. N.A. N.A. N.A. N.A.
1995 N.A. N.A. N.A. N.A. N.A.
1998
Blue Chip 1997 $ 598,000 220,000 16,000 886,000 0
1996 $ 415,000 78,000 4,000 512,000 15,000
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Administrative Service Fees Paid by Fund
Service Fees Paid Service Fees Paid
by Administrator by Administrator
Fund Fiscal Year Class A Class B Class C to Firms to Affiliated firms
- ---- ----------- ------- ------- ------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1995 $ 361,000 19,000 2,000 386,000 69,000
1998
Growth 1997 $4,000,000 2,093,000 36,000 6,149,000 41,000
1996 $3,929,000 2,016,000 19,000 5,983,000 138,000
1995 $3,633,000 1,721,000 8,000 5,301,000 693,000
1998
Quantitative 1997 $ 3,000 0 1,000 7,000 0
1996** $ 1,000 1,000 1,000 1,000 0
1995 N.A. N.A. N.A. N.A. N.A.
1998
Small Cap 1997 $1,376,000 632,000 21,000 2,027,000 7,000
1996 $1,315,000 580,000 12,000 1,918,000 34,000
1995 $1,141,000 442,000 4,000 1,579,000 334,000
1998
Technology 1997 $1,682,000 228,000 17,000 1,955,000 0
1996 $1,460,000 138,000 7,000 1,607,000 15,000
1995 $1,187,000 56,000 2,000 1,269,000 116,000
1998
Total Return 1997 $4,683,000 2,813,000 36,000 7,603,000 22,000
1996 $4,252,000 2,772,000 20,000 7,049,000 194,000
1995 $4,047,000 2,710,000 9,000 6,685,000 1,010,000
1998
Value+Growth 1997* $ 71,000 73,000 4,000 169,000 0
1996 $ 22,000 25,000 2,000 57,000 2,000
1995*** $ 0 0 0 5,000 0
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to September
30, 1997.
* Amounts shown after expense waiver.
** For the period February 15, 1996 to November 30, 1996.
*** For the period October 16, 1995 to November 30, 1995.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fee that it receives
from a Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of a Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record. The Board of Trustees of a Fund,
in its discretion, may approve basing the fee to KDI on all Fund assets in the
future.
Certain trustees or officers of a Fund are also directors or officers of Scudder
Kemper or KDI as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of each Fund maintained in the United States. The Chase Manhattan Bank, Chase
MetroTech Center, Brooklyn, New York 11245, as custodian, has custody of all
securities and cash of each Fund held outside of the United States. They attend
to the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by each Fund. IFTC is also each Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of Scudder Kemper, serves as
"Shareholder Service Agent" of each Fund and, as such, performs all of IFTC's
duties as transfer agent and dividend paying agent. IFTC receives as transfer
agent, and pays to KSvC, annual account fees of $6 per account plus account set
up, transaction and maintenance charges, annual fees associated with the
contingent deferred sales charge (Class B only) and out-of-pocket expense
reimbursement. IFTC's fee is reduced by certain earnings credits in favor of the
Fund. The following shows for each Fund's 1998 fiscal year the shareholder
service fees IFTC remitted to KSvC.
33
<PAGE>
Fund Fees IFTC Paid to KSvC
- ---- ----------------------
Aggressive* To be updated
Blue Chip
Growth
Quantitative
Small Cap
Technology
Total Return
Value+Growth
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Funds' independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Funds' annual financial statements, review certain
regulatory reports and the Funds' federal income tax returns, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Funds.
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
Alternative Purchase Arrangements. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase, and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each 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 5.75% None Initial sales charge waived
of the public offering price or reduced for certain
purchases
Class B Maximum contingent deferred sales 0.75% Shares convert to Class A
charge of 4% of redemption proceeds; shares six years after
declines to zero after six years issuance
Class C Contingent deferred sales charge of 1% 0.75% No conversion feature
of redemption proceeds for
redemptions made during first year
after purchase
</TABLE>
The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an
34
<PAGE>
automatic investment plan, such as Bank Direct Deposit, Payroll Direct Deposit
or Government Direct Deposit, the minimum initial and subsequent investment is
$50. These minimum amounts may be changed at any time in management's
discretion.
Share certificates will not be issued unless requested in writing and may not be
available for certain types of account registrations. It is recommended that
investors not request share certificates unless needed for a specific purpose.
You cannot redeem shares by telephone or wire transfer or use the telephone
exchange privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond worth 2% or more of the certificate value is normally required).
Initial Sales Charge Alternative--Class A Shares. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
Sales Charge
Allowed
to Dealers
As a As a as a
Percentage Percentage Percentage of
of of Net Offering
Amount of Purchase Offering Price Asset 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.
Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which Scudder Kemper or an affiliate does not serve as
investment manager ("non-Kemper Fund") provided that: (a) the investor has
previously paid either an initial sales charge in connection with the purchase
of the non-Kemper Fund shares redeemed or a contingent deferred sales charge in
connection with the redemption of the non-Kemper Fund shares, and (b) the
purchase of Fund shares is made within 90 days after the date of such
redemption. To make such a purchase at net asset value, the investor or the
investor's dealer must, at the time of purchase, submit a request that the
purchase be processed at net asset value pursuant to this privilege. KDI may in
its discretion compensate firms for sales of Class A shares under this privilege
at a commission rate of 0.50% of the amount of Class A shares purchased. The
redemption of the shares of the non-Kemper Fund is, for Federal income tax
purposes, a sale upon which a gain or loss may be realized.
Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such Fund or other Kemper Mutual
Funds listed under "Special Features--Class A Shares--Combined Purchases" totals
at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a), a participant-directed
non-qualified deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district, provided in each
case that such plan has not less than 200 eligible employees (the "Large Order
NAV Purchase Privilege"). Redemption within two years of shares purchased under
the Large Order NAV Purchase Privilege may be
35
<PAGE>
subject to a contingent deferred sales charge. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Large Order NAV Purchase Privilege."
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of a Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer sponsored
employee benefit plans using the subaccount recordkeeping system made available
through KSvC. For purposes of determining the appropriate commission percentage
to be applied to a particular sale, KDI will consider the cumulative amount
invested by the purchaser in a Fund and other Kemper Mutual Funds listed under
"Special Features--Class A Shares--Combined Purchases," including purchases
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features referred to above. The privilege of purchasing Class A shares
of a Fund at net asset value under the Large Order NAV Purchase Privilege is not
available if another net asset value purchase privilege also applies.
Effective on February 1, 1996, Class A shares of a Fund or any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be purchased at net asset value in any amount by members of the plaintiff
class in the proceeding known as Howard and Audrey Tabankin, et al. v. Kemper
Short-Term Global Income Fund, et al., Case No. 93 C 5231 (N.D. IL). This
privilege is generally non-transferrable and continues for the lifetime of
individual class members and for a ten year period for non-individual class
members. To make a purchase at net asset value under this privilege, the
investor must, at the time of purchase, submit a written request that the
purchase be processed at net asset value pursuant to this privilege specifically
identifying the purchaser as a member of the "Tabankin Class." Shares purchased
under this privilege will be maintained in a separate account that includes only
shares purchased under this privilege. For more details concerning this
privilege, class members should refer to the Notice of (1) Proposed Settlement
with Defendants; and (2) Hearing to Determine Fairness of Proposed Settlement,
dated August 31, 1995, issued in connection with the aforementioned court
proceeding. For sales of Fund shares at net asset value pursuant to this
privilege, KDI may in its discretion pay investment dealers and other financial
services firms a concession, payable quarterly, at an annual rate of up to 0.25%
of net assets attributable to such shares maintained and serviced by the firm. A
firm becomes eligible for the concession based upon assets in accounts
attributable to shares purchased under this privilege in the month after the
month of purchase and the concession continues until terminated by KDI. The
privilege of purchasing Class A shares of a Fund at net asset value under this
privilege is not available if another net asset value purchase privilege also
applies.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.
Class A shares of a Fund may be purchased at net asset value in any amount by
certain professionals who assist in the promotion of Kemper Funds pursuant to
personal services contracts with KDI, for themselves or members of their
families. KDI in its discretion may compensate financial services firms for
sales of Class A shares under this privilege at a commission rate of 0.50% of
the amount of Class A shares purchased.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase shares of the Fund through KDI as part of an automated billing and wage
deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.
Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
a Fund, its investment manager, its principal underwriter or certain affiliated
companies, for themselves or members of their families; (b) registered
representatives and employees of broker-dealers having selling group agreements
with KDI and officers, directors and employees of service agents of the Funds,
for themselves or their spouses or dependent children; (c) shareholders who
owned shares of Kemper Value Fund, Inc. ("KVF") on September 8, 1995, and have
continuously owned shares of KVF (or a Kemper Fund acquired by exchange of KVF
shares) since that date, for themselves or members of their families; and (d)
any trust, pension, profit-sharing or other benefit plan for only such persons.
Class A shares may be sold at net asset value in any amount to selected
employees (including their spouses and dependent children) of banks and other
financial services firms that provide administrative services related to order
placement and payment to facilitate transactions in shares of the Funds for
their clients pursuant to an agreement with KDI or one of its affiliates. Only
those employees of such banks and other firms who as part of their usual duties
provide services related to transactions in Fund shares may purchase Fund Class
A shares at net asset value hereunder. Class A shares may be
36
<PAGE>
sold at net asset value in any amount to unit investment trusts sponsored by
Ranson & Associates, Inc. In addition, unitholders of unit investment trusts
sponsored by Ranson & Associates, Inc. or its predecessors may purchase a Fund's
Class A shares at net asset value through reinvestment programs described in the
prospectuses of such trusts that have such programs. Class A shares of a Fund
may be sold at net asset value through certain investment Advisors registered
under the Investment Advisors Act of 1940 and other financial services firms
that adhere to certain standards established by KDI, including a requirement
that such shares be sold for the benefit of their clients participating in an
investment advisory program under which such clients pay a fee to the investment
Advisor or other firm for portfolio management and other services. Such shares
are sold for investment purposes and on the condition that they will not be
resold except through redemption or repurchase by the Funds. The Funds may also
issue Class A shares at net asset value in connection with the acquisition of
the assets of or merger or consolidation with another investment company, or to
shareholders in connection with the investment or reinvestment of income and
capital gain dividends.
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 Funds who originally acquired their
shares as Initial Shares of Kemper Portfolios, formerly known as Kemper
Investment Portfolios ("KIP"), hold them subject to the same conversion period
schedule as that of their KIP Portfolio. Class B shares representing Initial
Shares of a former KIP Portfolio will automatically convert to Class A shares of
the applicable Fund six years after issuance of the Initial Shares for shares
issued on or after February 1, 1991 and seven years after issuance of the
Initial Shares for shares issued before February 1, 1991. The purpose of the
conversion feature is to relieve holders of Class B shares from the distribution
services fee when they have been outstanding long enough for KDI to have been
compensated for distribution related expenses. For purposes of conversion to
Class A shares, shares purchased through the reinvestment of dividends and other
distributions paid with respect to Class B shares in a shareholder's Fund
account will be converted to Class A shares on a pro rata basis.
Purchase of Class C Shares. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full amount
of the investor's purchase payment will be invested in Class C shares for his or
her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at a
rate of 0.75% of the purchase price of such shares. For periods after the first
year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."
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
37
<PAGE>
be subject to various state laws regarding the services described above and may
be required to register as dealers pursuant to state law. If banking firms were
prohibited from acting in any capacity or providing any of the described
services, management would consider what action, if any, would be appropriate.
KDI does not believe that termination of a relationship with a bank would result
in any material adverse consequences to a Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of the Fund sold under the following conditions: (i) the purchased
shares are held in a Kemper IRA account, (ii) the shares are purchased as a
direct "roll over" of a distribution from a qualified retirement plan account
maintained on a participant subaccount record keeping system provided by KSvC,
(iii) the registered representative placing the trade is a member of ProStar, a
group of persons designated by KDI in acknowledgment of their dedication to the
employee benefit plan area; and (iv) the purchase is not otherwise subject to a
commission.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of the Funds. Non cash compensation includes luxury merchandise and trips to
luxury resorts. In some instances, such discounts, commissions or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Funds, or other funds underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other
financial services firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of its business day will be
confirmed at a price based on the net asset value effective on that day ("trade
date"). The Funds reserve the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may take
significantly longer for a check drawn on a foreign bank than for a check drawn
on a domestic bank. Therefore, if an order is accompanied by a check drawn on a
foreign bank, funds must normally be collected before shares will be purchased.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Funds' shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Funds' shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Funds through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Funds through the Shareholder Service Agent for
these services. This statement of additional information should be read in
connection with such firms' material regarding their fees and services.
The Funds reserve the right to withdraw all or any part of the offering made by
this statement of additional information and to reject purchase orders. Also,
from time to time, each Fund may temporarily suspend the offering of any class
of its shares to new investors. During the period of such suspension, persons
who are already shareholders of such class of such Fund normally are permitted
to continue to purchase additional shares of such class and to have dividends
reinvested.
Shareholders should direct their inquiries to KSvC, 811 Main Street, Kansas
City, Missouri 64105-2005 or to the firm from which they received this statement
of additional information.
As described herein, shares of a Fund are sold at their public offering price,
which is the net asset value per share of the Fund next determined after an
order is received in proper form plus, with respect to Class A shares, an
initial sales charge. The minimum initial investment is $1,000 and the minimum
subsequent investment is $100 but such minimum amounts may be changed at any
time. An order for the purchase of shares that is accompanied by a check drawn
on a foreign bank (other than a check drawn on a Canadian bank in U.S. Dollars)
will not be considered in proper form and will not be processed unless and until
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
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<PAGE>
be determined in advance. The amount received by a shareholder upon redemption
or repurchase may be more or less than the amount paid for such shares depending
on the market value of the Fund's portfolio securities at the time.
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 herein.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B or Class C shares, by certain classes of persons or
through certain types of transactions, are 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
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 herein.
The Funds have authorized certain members of the National Association of
Securities Dealers, Inc. ("NASD"), other than Kemper Distributors, Inc. ("KDI")
to accept purchase and redemption orders for the Fund's shares. Those brokers
may also designate other parties to accept purchase and redemption orders on the
Fund's behalf. Orders for purchase or redemption will be deemed to have been
received by the Fund when such brokers or their authorized designees accept the
orders. Subject to the terms of the contract between the Fund and the broker,
ordinarily orders will be priced as the Fund's net asset value next computed
after acceptance by such brokers or their authorized designees. Further, if
purchases or redemptions of the Fund's shares are arranged and settlement is
made at an investor's election through any other authorized NASD member, that
member may, at its discretion, charge a fee for that service. The Board of
Trustees or Directors as the case may be ("Board") of the Fund and KDI each has
the right to limit the amount of purchases by, and to refuse to sell to, any
person. The Board and KDI may suspend or terminate the offering of shares of the
Fund at any time for any reason.
REDEMPTION OR REPURCHASE OF SHARES
General. Any shareholder may require a Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Funds' transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When a Fund is asked to redeem shares for which it may not have yet received
good payment (i.e., purchases by check, Express-Transfer or Bank Direct
Deposit), it may delay transmittal of redemption proceeds until it has
determined that
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<PAGE>
collected funds have been received for the purchase of such shares, which will
be up to 10 days from receipt by a Fund of the purchase amount. The redemption
within two years of Class A shares purchased at net asset value under the Large
Order NAV Purchase Privilege may be subject to a contingent deferred sales
charge (see "Purchase of Shares--Initial Sales Charge Alternative--Class A
Shares"), the redemption of Class B shares within six years may be subject to a
contingent deferred sales charge (see "Contingent Deferred Sales Charge--Class B
Shares" below), and the redemption of Class C shares within the first year
following purchase may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge--Class C Shares" below).
Because of the high cost of maintaining small accounts, effective January 1998,
the Funds may assess a quarterly fee of $9 on an account with a balance below
$1,000 for the quarter. The fee will not apply to accounts enrolled in an
automatic investment program, Individual Retirement Accounts or employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. A Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The shareholder will bear the risk of loss,
including loss resulting from fraudulent or unauthorized transactions, so long
as reasonable verification procedures are followed. Verification procedures
include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.
Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. The Funds reserve the right to terminate or modify
this privilege at any time.
Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which each Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the Fund next determined after receipt of a
request by KDI. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of KDI's business day will be confirmed at
the net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of the Fund
effective on that day and normally
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the proceeds will be sent to the designated account the following business day.
Delivery of the proceeds of a wire redemption of $250,000 or more may be delayed
by the Fund for up to seven days if Scudder Kemper deems it appropriate under
then current market conditions. Once authorization is on file, the Shareholder
Service Agent will honor requests by telephone at 1-800-621-1048 or in writing,
subject to the limitations on liability described under "General" above. The
Funds are not responsible for the efficiency of the federal wire system or the
account holder's financial services firm or bank. The Funds currently do not
charge the account holder for wire transfers. The account holder is responsible
for any charges imposed by the account holder's firm or bank. There is a $1,000
wire redemption minimum (including any contingent deferred sales charge). To
change the designated account to receive wire redemption proceeds, send a
written request to the Shareholder Service Agent with signatures guaranteed as
described above or contact the firm through which shares of the Fund were
purchased. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be redeemed by wire transfer until such shares have been owned
for at least 10 days. Account holders may not use this privilege to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Funds reserve the right to
terminate or modify this privilege at any time.
Contingent Deferred Sales Charge--Large Order NAV Purchase Privilege. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if they
are redeemed during the second year after purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a), a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares whose
dealer of record at the time of the investment notifies KDI that the dealer
waives the discretionary commission applicable to such Large Order NAV Purchase.
Contingent Deferred Sales Charge--Class B Shares. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed excluding amounts not subject to the charge.
Contingent
Deferred
Sales
Year of Redemption After Purchase Charge
First 4%
Second 3%
Third 3%
Fourth 2%
Fifth 2%
Sixth 1%
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:
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Contingent Deferred Sales Charge
Shares Purchased
Year of on or after
Redemption Shares Purchased February 1, 1991
After on or after and Before
Purchase March 1, 1998 March 31, 1993
- -------- ------------- --------------
First 4% 3%
Second 3% 3%
Third 3% 2%
Fourth 2% 2%
Fifth 2% 1%
Sixth 1% 1%
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to satisfy required minimum distributions after age 70 1/2 from an
IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent: (a) redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent deferred
sales charge and the conversion privilege), (b) redemptions in connection with
retirement distributions (limited at any one time to 10% of the total value of
plan assets invested in a Fund), (c) redemptions in connection with
distributions qualifying under the hardship provisions of the Internal Revenue
Code and (d) redemptions representing returns of excess contributions to such
plans.
Contingent Deferred Sales Charge--Class C Shares. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (limited to 10% of the
net asset value of the account during the first year, see "Special
Features--Systematic Withdrawal Plan"), (d) for redemptions made pursuant to any
IRA systematic withdrawal based on the shareholder's life expectancy including,
but not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts), (f) for any participant-directed redemption
of shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service Agent
and (g) redemption of shares by an employer sponsored employee benefit plan that
offers funds in addition to Kemper Funds and whose dealer of record has waived
the advance of the first year administrative service and distribution fees
applicable to such shares and agrees to receive such fees quarterly.
Contingent Deferred Sales Charge--General. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of a Fund's Class B shares and that 16 months
later the value of the shares has grown by $1,000 through reinvested dividends
and by an additional $1,000 of share appreciation to a total of $12,000. If the
investor were then to redeem the entire $12,000 in share value, the contingent
deferred sales charge would be payable only with respect to $10,000 because
neither the $1,000 of reinvested dividends nor the $1,000 of share appreciation
is subject to the charge. The charge would be at the rate of 3% ($300) because
it was in the second year after the purchase was made.
The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for
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the investment is received. For example, an investment made in December, 1996
will be eligible for the second year's charge if redeemed on or after December
1, 1997. In the event no specific order is requested when redeeming shares
subject to a contingent deferred sales charge, the redemption will be made first
from shares representing reinvested dividends and then from the earliest
purchase of shares. KDI receives any contingent deferred sales charge directly.
Reinvestment Privilege. A shareholder who has redeemed Class A shares of a Fund
or any other Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of the Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
a Fund or of the other listed Kemper Mutual Funds. A shareholder of a Fund or
other Kemper Mutual Fund who redeems Class A shares purchased under the Large
Order NAV Purchase Privilege (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares") or Class B shares or Class C shares and incurs a
contingent deferred sales charge may reinvest up to the full amount redeemed at
net asset value at the time of the reinvestment, in Class A shares, Class B
shares or Class C shares, as the case may be, of a Fund or of other Kemper
Mutual Funds. The amount of any contingent deferred sales charge also will be
reinvested. These reinvested shares will retain their original cost and purchase
date for purposes of the contingent deferred sales charge. Also, a holder of
Class B shares who has redeemed shares may reinvest up to the full amount
redeemed, less any applicable contingent deferred sales charge that may have
been imposed upon the redemption of such shares, at net asset value in Class A
shares of a Fund or of the other Kemper Mutual Funds listed under "Special
Features--Class A Shares--Combined Purchases." Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Mutual
Funds available for sale in the shareholder's state of residence as listed under
"Special Features--Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of shares of a
Fund, the reinvestment in shares of a Fund may be subject to the "wash sale"
rules if made within 30 days of the redemption, resulting in a postponement of
the recognition of such loss for federal income tax purposes. The reinvestment
privilege may be terminated or modified at any time.
SPECIAL FEATURES
Class A Shares--Combined Purchases. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following funds: Kemper Technology Fund, Kemper Total Return Fund, Kemper Growth
Fund, Kemper Small Capitalization Equity Fund, Kemper Income and Capital
Preservation Fund, Kemper Municipal Bond Fund, Kemper Diversified Income Fund,
Kemper High Yield Series, Kemper U.S. Government Securities Fund, Kemper
International Fund, Kemper State Tax-Free Income Series, Kemper Adjustable Rate
U.S. Government Fund, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper
Target Equity Fund (series are subject to a limited offering period), Kemper
Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund, Kemper U.S.
Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper Value+Growth
Fund, Kemper Value Fund, Inc., Kemper Quantitative Equity Fund, Kemper Horizon
Fund, Kemper Europe Fund, Kemper Asian Growth Fund, Kemper Aggressive Growth
Fund and Kemper Global/International Series, Inc. ("Kemper Mutual Funds").
Except as noted below, there is no combined purchase credit for direct purchases
of shares of Zurich Money Funds, Cash Equivalent Fund, Tax-Exempt California
Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund or
Investors Cash Trust ("Money Market Funds"), which are not considered "Kemper
Mutual Funds" for purposes hereof. For purposes of the Combined Purchases
feature described above as well as for the Letter of Intent and Cumulative
Discount features described below, employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent may include: (a) Money Market Funds as "Kemper Mutual
Funds", (b) all classes of shares of any Kemper Mutual Fund and (c) the value of
any other plan investment, such as guaranteed investment contracts and employer
stock, maintained on such subaccount record keeping system.
Class A Shares--Letter of Intent. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus or statement of additional
information, 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
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under the Letter are less than the intended amount and thereby qualify only for
a higher sales charge than actually paid, the appropriate number of escrowed
shares are redeemed and the proceeds used toward satisfaction of the obligation
to pay the increased sales charge. The Letter for an employer sponsored employee
benefit plan maintained on the subaccount record keeping system available
through the Shareholder Service Agent may have special provisions regarding
payment of any increased sales charge resulting from a failure to complete the
intended purchase under the Letter. A shareholder may include the value (at the
maximum offering price) of all shares of such Kemper Mutual Funds held of record
as of the initial purchase date under the Letter as an "accumulation credit"
toward the completion of the Letter, but no price adjustment will be made on
such shares. Only investments in Class A shares are included in this privilege.
Class A Shares--Cumulative Discount. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the above mentioned Kemper Mutual Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already owned
by the investor.
Class A Shares--Availability of Quantity Discounts. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
Exchange Privilege. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds and the Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the Offering Period for such
series as described in the applicable prospectus or statement of additional
information. Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account Trust, Investors Municipal Cash Fund and Investors Cash Trust are
available on exchange but only through a financial services firm having a
services agreement with KDI.
Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of another Kemper Mutual Fund or a Money
Market Fund under the exchange privilege described above without paying any
contingent deferred sales charge at the time of exchange. If the Class A shares
received on exchange are redeemed thereafter, a contingent deferred sales charge
may be imposed in accordance with the foregoing requirements provided that the
shares redeemed will retain their original cost and purchase date for purposes
of the contingent deferred sales charge.
Class B Shares. Class B shares of a Fund and Class B shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class B
shares may be exchanged without a contingent deferred sales charge being imposed
at the time of exchange. For purposes of the contingent deferred sales charge
that may be imposed upon the redemption of the Class B shares received on
exchange, amounts exchanged retain their original cost and purchase date.
Class C Shares. Class C shares of a Fund and Class C shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class C
shares may be exchanged without a contingent deferred sales charge being imposed
at the time of exchange. For determining whether there is a contingent deferred
sales charge that may be imposed upon the redemption of the Class C shares
received by exchange, they retain the cost and purchase date of the shares that
were originally purchased and exchanged.
General. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged thereafter until
they have been owned for 15 days (the "15-Day Hold Policy"). For purposes of
determining whether the 15-Day Hold Policy applies to a particular exchange, the
value of the shares to be exchanged shall be computed by aggregating the value
of shares being exchanged for all accounts under common control, discretion or
advice, including without limitation accounts administered by a financial
services firm offering market timing, asset allocation or similar services. The
total value of shares being exchanged must at least equal the minimum investment
requirement of the Kemper Fund into which they are being exchanged. Exchanges
are made based on relative dollar values of the shares involved in the exchange.
There is no service fee for an exchange; however, dealers or other firms may
charge for their services in effecting exchange transactions.
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Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis of such shares. Shareholders interested in
exercising the exchange privilege may obtain prospectuses of the other funds
from dealers, other firms or KDI. Exchanges may be accomplished by a written
request to KSvC, Attention: Exchange Department, P.O. Box 419557, Kansas City,
Missouri 64141-6557, or by telephone if the shareholder has given authorization.
Once the authorization is on file, the Shareholder Service Agent will honor
requests by telephone at 1-800-621-1048, subject to the limitations on liability
under "Redemption or Repurchase of Shares--General." Any share certificates must
be deposited prior to any exchange of such shares. During periods when it is
difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to use the telephone exchange privilege. The exchange privilege is not
a right and may be suspended, terminated or modified at any time. Exchanges may
only be made for funds that are available for sale in the shareholder's state of
residence. Currently, Tax-Exempt California Money Market Fund is available for
sale only in California and the portfolios of Investors Municipal Cash Fund are
available for sale only in certain states.
Systematic Exchange Privilege. The owner of $1,000 or more of any class of the
shares of a Kemper Mutual Fund or Money Market Fund may authorize the automatic
exchange of a specified amount ($100 minimum) of such shares for shares of the
same class of another such Kemper Fund. If selected, exchanges will be made
automatically until the privilege is terminated by the shareholder or the Kemper
Fund. Exchanges are subject to the terms and conditions described above under
"Exchange Privilege," except that the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange is not applicable. This privilege may not
be used for the exchange of shares held in certificated form.
EXPRESS-Transfer. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in a Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from any person to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares--General." Once enrolled in
EXPRESS-Transfer, a shareholder can initiate a transaction by calling Kemper
Shareholder Services toll free at 1-800-621-1048 Monday through Friday, 8:00
a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege by
sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").
Bank Direct Deposit. A shareholder may purchase additional shares of a Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, investments are made automatically (maximum $50,000) from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account. By enrolling in Bank Direct Deposit, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
Clearing House debits against the designated account at a bank or other
financial institution. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting the Shareholder
Service Agent for appropriate forms. A shareholder may terminate his or her Plan
by sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination by a shareholder will become effective within thirty
days after the Shareholder Service Agent has received the request. A Fund may
immediately terminate a shareholder's Plan in the event that any item is unpaid
by the shareholder's financial institution. The Funds may terminate or modify
this privilege at any time.
Payroll Direct Deposit and Government Direct Deposit. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Fund account each payment period. A shareholder
may terminate participation in these
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programs by giving written notice to the shareholder's employer or government
agency, as appropriate. (A reasonable time to act is required.) A Fund is not
responsible for the efficiency of the employer or government agency making the
payment or any financial institutions transmitting payments.
Systematic Withdrawal Plan. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. The minimum periodic
payment is $100. The maximum annual rate at which Class B shares may be redeemed
(and Class A shares purchased under the Large Order NAV Purchase Privilege and
Class C shares in their first year following the purchase) under a systematic
withdrawal plan is 10% of the net asset value of the account. Shares are
redeemed so that the payee will receive payment approximately the first of the
month. Any income and capital gain dividends will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested and fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, a Fund will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.
KDI will waive the contingent deferred sales charge on redemptions of Class A
shares purchased under the Large Order NAV Purchase Privilege, Class B shares
and Class C shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or the Funds.
Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
o Individual Retirement Accounts ("IRAs") with IFTC as custodian. This
includes Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE"), IRA accounts and Simplified Employee Pension Plan ("SEP") IRA
accounts and prototype documents.
o 403(b)(7) Custodial Accounts also with IFTC as custodian. This type of plan
is available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and materials
for establishing them are available from the Shareholder Service Agent upon
request. The brochures for plans with IFTC as custodian describe the current
fees payable to IFTC for its services as custodian. Investors should consult
with their own tax Advisors before establishing a retirement plan.
DIVIDENDS AND TAXES
Dividends. Each Fund normally distributes dividends of net investment income as
follows: annually for the Aggressive Growth, Quantitative, Small Cap, Technology
and Value+Growth Funds; semi-annually for the Blue Chip Fund; and quarterly for
the Total Return Fund. Each Fund distributes any net realized short-term and
long-term capital gains at least annually. The quarterly distribution to
shareholders of the Total Return Fund may include short-term capital gains.
Dividends paid by a Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
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
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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 herein.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
Fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset value;
or
(2) To receive income and capital gain dividends in cash.
Any dividends of a Fund that are reinvested normally will be reinvested in
shares of the same class of that same Fund. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have dividends of a Fund
invested in shares of the same class of another Kemper Fund at the net asset
value of such class of such other fund. See "Special Features--Class A
Shares--Combined Purchases" for a list of such other Kemper Funds. To use this
privilege of investing dividends of a Fund in shares of another Kemper Fund,
shareholders must maintain a minimum account value of $1,000 in the Fund
distributing the dividends. The Funds will reinvest dividend checks (and future
dividends) in shares of that same Fund and class if checks are returned as
undeliverable. Dividends and other distributions of a Fund in the aggregate
amount of $10 or less are automatically reinvested in shares of the Fund unless
the shareholder requests that such policy not be applied to the shareholder's
account.
Taxes. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, will not be liable
for federal income taxes to the extent its earnings are distributed. Such
qualification does not involve governmental supervision or management of
investment practices or policy.
A regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including net short-term capital gain) and generally is
not subject to federal income tax to the extent that it distributes annually its
investment company taxable income and net realized capital gains in the manner
required under the Code.
Dividends derived from net investment income and net short-term capital gains
are taxable to shareholders as ordinary income and long-term capital gain
dividends are taxable to shareholders as long-term capital gain regardless of
how long the shares have been held and whether received in cash or shares.
Long-term capital gain dividends received by individual shareholders are taxed
at a maximum rate of 20% on gains realized by a Fund from securities held more
than 18 months and at a maximum rate of 28% on gains realized by a Fund from
securities held more than 12 months but not more than 18 months. Dividends
declared in October, November or December to shareholders of record as of a date
in one of those months and paid during the following January are treated as paid
on December 31 of the calendar year declared. A portion of the dividends paid by
the Funds may qualify for the dividends received deduction available to
corporate shareholders.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a
return of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing gains
realized on sales of securities, such dividends would be a return of investment
though taxable as stated above.
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
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recognized will generally be treated as long-term and 40% as short-term.
However, although certain forward contracts on foreign currency are
marked-to-market, the gain or loss is generally ordinary under Section 988 of
the Code. In addition, the straddle rules of the Code would require deferral of
certain losses realized on positions of a straddle to the extent that the Fund
had unrealized gains in offsetting positions at year end.
Gains and losses attributable to fluctuations in the value of foreign currencies
will be characterized generally as ordinary gain or loss under Section 988 of
the Code. For example, if a Fund sold a foreign bond and part of the gain or
loss on the sale was attributable to an increase or decrease in the value of a
foreign currency, then the currency gain or loss may be treated as ordinary
income or loss. If such transactions result in greater net ordinary income, the
dividends paid by the Fund will be increased; if the result of such transactions
is lower net ordinary income, a portion of dividends paid could be classified as
a return of capital.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of a Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 of the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. Each Fund intends to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax. If any net realized long-term
capital gains in excess of net realized short-term capital losses are retained
by a Fund for reinvestment, requiring federal income taxes to be paid thereon by
a Fund, the Fund intends to elect to treat such capital gains as having been
distributed to shareholders. As a result, each shareholder will report such
capital gains as long-term capital gains, will be able to claim a relative share
of federal income taxes paid by the Fund on such gains as a credit against
personal federal income tax liability, and will be entitled to increase the
adjusted tax basis on Fund shares by the difference between a pro rata share of
such gains owned and the individual tax credit.
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 above under
"Special Features--Class A Shares--Combined Purchases" (other than shares of
Kemper Cash Reserves Fund not acquired by exchange from another Kemper Mutual
Fund) may reinvest the amount redeemed at net asset value at the time of the
reinvestment in shares of any Fund or in shares of a Kemper Mutual Fund within
six months of the redemption as described above under "Redemption or Repurchase
of Shares--Reinvestment Privilege." If redeemed shares were purchased after
October 3, 1989 and were held less than 91 days, then the lesser of (a) the
sales charge waived on the reinvested shares, or (b) the sales charge incurred
on the redeemed shares, is included in the basis of the reinvested shares and is
not included in the basis of the redeemed shares. If a shareholder realized a
loss on the redemption or exchange of a Fund's shares and reinvests in shares of
the same Fund 30 days before or after the redemption or exchange, the
transactions may be subject to the wash sale rules resulting in a postponement
of the recognition of such loss for federal income tax purposes. An exchange of
a Fund's shares for shares of another fund is treated as a redemption and
reinvestment for federal income tax purposes upon which gain or loss may be
recognized.
A Fund's investment income derived from foreign securities may be subject to
foreign income taxes withheld at the source. Because the amount of a Fund's
investments in various countries will change from time to time, it is not
possible to determine the effective rate of such taxes in advance. A Fund may
invest in shares of certain foreign corporations which may be classified under
the Code as passive foreign investment companies ("PFICs"). If a Fund receives a
so-called "excess distribution" with respect to PFIC stock, the Fund itself may
be subject to a tax on a portion of the excess distribution. Certain
distributions from a PFIC as well as gains from the sale of the PFIC shares are
treated as "excess distributions." In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which the Fund held the PFIC shares. The Fund will be subject to tax on the
portion, if any, of an excess distribution that is allocated to prior Fund
taxable years and an interest factor will be added to the tax, as if the tax had
been payable in such prior taxable years. Excess distributions allocated to the
current taxable year are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might have been
classified as capital gain.
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A Fund may make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U.S. federal income taxation.
At the end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign company's stock exceeds the Fund's adjusted basis in these shares; any
mark to market losses and any loss from an actual disposition of shares would be
deductible as ordinary loss to the extent of any net mark to market gains
included in income in prior years. The effect of the election would be to treat
excess distributions and gain on dispositions as ordinary income which is not
subject to a fund level tax when distributed to shareholders as a dividend.
Alternatively, a Fund may elect to include as income and gain its share of the
ordinary earnings and net capital gain of certain foreign investment companies
in lieu of being taxed in the manner described above.
Equity options (including covered call options on portfolio stock) and
over-the-counter options on debt securities written or purchased by a Fund will
be subject to tax under Section 1234 of the Code. In general, no loss is
recognized by a Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a lapse or sale
of the option, on the Fund's holding period for the option, and in the case of
an exercise of a put option, on the Fund's holding period for the underlying
stock. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock or substantially identical stock in the Fund's portfolio. If a
Fund writes a put or call option, no gain is recognized upon its receipt of a
premium. If the option lapses or is closed out, any gain or loss is treated as a
short-term capital gain or loss. If a call option is exercised, any resulting
gain or loss is a short-term or long-term capital gain or loss depending on the
holding period of the underlying stock. The exercise of a put option written by
a Fund is not a taxable transaction for the Fund.
Many futures contracts and certain foreign currency forward contracts entered
into by a Fund and all listed non-equity options written or purchased by a Fund
(including options on futures contracts and options on broad-based stock
indices) will be governed by Section 1256 of the Code. Absent a tax election to
the contrary, gain or loss attributable to the lapse, exercise or closing out of
any such position generally will be treated as 60% long-term and 40% short-term
capital gain or loss, and on the last trading day of the Fund's fiscal year, all
outstanding Section 1256 positions will be marked to market (i.e. treated as if
such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term. Under
Section 988 of the Code, discussed below, foreign currency gain or loss from
foreign currency-related forward contracts and similar financial instruments
entered into or acquired by a Fund will be treated as ordinary income. Under
certain circumstances, entry into a futures contract to sell a security may
constitute a short sale for federal income tax purposes, causing an adjustment
in the holding period of the underlying security or a substantially identical
security in the Fund's portfolio.
Positions of a Fund which consist of at least one stock and at least one other
position with respect to a related security which substantially diminishes a
Fund's risk of loss with respect to such stock could be treated as a "straddle"
which is governed by Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in the holding periods of stock or securities
and conversion of short-term capital losses into long-term capital losses. An
exception to these straddle rules exists for certain "qualified covered call
options" on stock written by the Fund.
Positions of a Fund which consist of at least one position not governed by
Section 1256 and at least one futures or forward contract or non-equity option
governed by Section 1256 which substantially diminishes a Fund's risk of loss
with respect to such other position will be treated as a "mixed straddle."
Although mixed straddles are subject to the straddle rules of Section 1092 of
the Code, certain tax elections exist for them which reduce or eliminate the
operation of these rules. The Fund intends to monitor its transactions in
options and futures and may make certain tax elections in connection with these
investments.
Notwithstanding any of the foregoing, recent tax law changes may require a Fund
to recognize gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if a Fund enters into a short sale, offsetting
notional principal contract, futures or forward contract transaction with
respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.
49
<PAGE>
Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, and on disposition of certain options, futures contracts and
forward contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income
Dividends from domestic corporations are expected to comprise a substantial part
of each Fund's gross income. To the extent that such dividends constitute a
portion of a Fund's gross income, a portion of the income distributions of the
Fund may be eligible for the deduction for dividends received by corporations.
Shareholders will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent the shares of a Fund with
respect to which the dividends are received are treated as debt-financed under
federal income tax law, and is eliminated if either those shares or the shares
of the Fund are deemed to have been held by a Fund or the shareholder, as the
case may be, for less than 46 days during the 90-day period beginning 45 days
before the shares become ex-dividend.
Properly designated distributions of the excess of net long-term capital gain
over net short-term capital loss are taxable to shareholders as long-term
capital gain, regardless of the length of time the shares of the Fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
The Funds will be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of a Fund may be subject to state and local taxes on distributions
received from a Fund and on redemptions of the Fund's shares. Each distribution
is accompanied by a brief explanation of the form and character of the
distribution. In January of each year the Fund issues to each shareholder a
statement of the federal income tax status of all distributions.
Each Fund is organized as a Massachusetts business trust and is not liable for
any income or franchise tax in the Commonwealth of Massachusetts, provided that
it qualifies as a regulated investment company for federal income tax purposes.
50
<PAGE>
A qualifying individual may make a deductible IRA contribution for any taxable
year only if (i) neither the individual nor his or her spouse (unless filing
separate returns) is an active participant in an employer's retirement plan, or
(ii) the individual (and his or her spouse, if applicable) has an adjusted gross
income below a certain level ($40,050 for married individuals filing a joint
return, with a phase-out of the deduction for adjusted gross income between
$40,050 and $50,000; $25,050 for a single individual, with a phase-out for
adjusted gross income between $25,050 and $35,000). However, an individual not
permitted to make a deductible contribution to an IRA for any such taxable year
may nonetheless make nondeductible contributions up to $2,000 to an IRA (up to
$2,000 per individual for married couples if only one spouse has earned income)
for that year. There are special rules for determining how withdrawals are to be
taxed if an IRA contains both deductible and nondeductible amounts. In general,
a proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
spousal IRA even if the spouse has earnings in a given year if the spouse elects
to be treated as having no earnings (for IRA contribution purposes) for the
year.
Distributions by a Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
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. 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 Advisors regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends and periodic
investment and redemption programs. Information for income tax purposes,
including, when appropriate, information regarding any foreign taxes and
credits, will be provided after the end of the calendar year. Shareholders are
encouraged to retain copies of their account confirmation statements or year-end
statements for tax reporting purposes. However, those who have incomplete
records may obtain historical account transaction information at a reasonable
fee.
When more than one shareholder resides at the same address, certain reports and
communications to be delivered to such shareholders may be combined in the same
mailing package, and certain duplicate reports and communications may be
eliminated. Similarly, account statements to be sent to such shareholders may be
combined in the same mailing package or consolidated into a single statement.
However, a shareholder may request that the foregoing policies not be applied to
the shareholder's account.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on amounts constituting ordinary income received
by him or her, where such amounts are treated as income from U.S. sources under
the Code.
Dividend and interest income received by a Fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Shareholders should consult their tax advisors about the application of the
provisions of tax law described in this Statement of Additional Information in
light of their particular tax situations.
51
<PAGE>
NET ASSET VALUE
The net asset value per share of a Fund is the value of one share and is
determined separately for each class by dividing the value of a Fund's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will generally be lower than that of the Class A shares of a Fund
because of the higher expenses borne by the Class B and Class C shares. The net
asset value of shares of a Fund is computed as of the close of regular trading
(the "value time") on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
Portfolio securities for which market quotations are readily available are
generally valued at market value as of the value time in the manner described
below. All other securities may be valued at fair value as determined in good
faith by or under the direction of the Board.
With respect to the Funds with securities listed primarily on foreign exchanges,
such securities may trade on days when the Fund's net asset value is not
computed; and therefore, the net asset value of a Fund may be significantly
affected on days when the investor has no access to the Fund.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Stock Market Inc.
("Nasdaq") is valued at its most recent sale price. Lacking any sales, the
security is valued at the most recent bid quotation. The value of an equity
security not quoted on Nasdaq, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities are valued at prices supplied by a pricing agent(s) which
reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board believes approximates market value. If it is not possible to value a
particular debt security pursuant to these valuation methods, the value of such
security is the most recent bid quotation supplied by a bona fide marketmaker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment manager of the particular fund may calculate the price
of that debt security, subject to limitations established by the Board.
An exchange-traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such exchange.
Lacking any sales, the options contract is valued at the Calculated Mean.
Lacking any Calculated Mean, the options contract is valued at the most recent
bid quotation in the case of a purchased options contract, or the most recent
asked quotation in the case of a written options contract. An options contract
on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate on the
valuation date.
If a security is traded on more than one exchange, or upon one or more exchanges
and in the over-the-counter market, quotations are taken from the market in
which the security is traded most extensively.
If, in the opinion of the Valuation Committee of the Board of Trustees, the
value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which, in the discretion of the Valuation Committee, most fairly
reflects market value of the property on the valuation date.
Following the valuations of securities or other portfolios assets in terms of
the currency in which the market quotation used is expressed ("Local Currency"),
the value of these portfolio assets in terms of U.S. dollars is calculated by
converting the Local Currency into U.S. dollars at the prevailing currency
exchange rate on the valuation date.
52
<PAGE>
PERFORMANCE
A Fund may advertise several types of performance information for a class of
shares, including "yield" and "average annual total return" and "total return."
Performance information will be computed separately for each class. Each of
these figures is based upon historical results and is not representative of the
future performance of any class of a Fund. A Fund with fees or expenses being
waived or absorbed by Scudder Kemper may also advertise performance information
before and after the effect of the fee waiver or expense absorption.
A 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 or Class C shares includes the effect of the
applicable contingent deferred sales charge that may be imposed at the end of
the period. The redeemable value is then divided by the initial investment, and
this quotient is taken to the Nth root (N representing the number of years in
the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Average annual total return may also be calculated
without deducting the maximum sales charge.
Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for purposes of the Fund's "Financial Highlights" table
in the Fund's financial statements and prospectus. Total return performance for
a specific period is calculated by first taking an investment (assumed below to
be $10,000) ("initial investment") in a Fund's shares on the first day of the
period, either adjusting or not adjusting to deduct the maximum sales charge (in
the case of Class A shares), and computing the "ending value" of that investment
at the end of the period. The total return percentage is then determined by
subtracting the initial investment from the ending value and dividing the
remainder by the initial investment and expressing the result as a percentage.
The ending value in the case of Class B and Class C shares may or may not
include the effect of the applicable contingent deferred sales charge that may
be imposed at the end of the period. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Total return may also be shown as
the increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B and Class C shares
would be reduced if such charge were included. Total return figures for Class A
shares for various periods are set forth in the tables below.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one-, five- and ten-year periods ending on a recent calendar quarter
(or if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
A Fund's performance figures are based upon historical results and are not
representative of future performance. Each Fund's Class A shares are sold at net
asset value plus a maximum sales charge of 5.75% of the offering price. Class B
shares and Class C shares are sold at net asset value. Redemptions of Class B
shares may be subject to a contingent deferred sales charge that is 4% in the
first year following the purchase, declines by a specified percentage thereafter
and becomes zero after six years. Redemption of Class C shares may be subject to
a 1% contingent deferred sales charge in the first year following purchase.
Average annual total return figures do, and total return figures may, include
the effect of the contingent deferred sales charge for the Class B shares and
Class C shares that may be imposed at the end of the period in question.
Performance figures for the Class B shares and Class C shares not including the
effect of the applicable contingent deferred sales charge would be reduced if it
were included. 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
53
<PAGE>
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.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged bond indexes including, but not limited to, the Salomon
Brothers High Grade Corporate Bond Index, the Lehman Brothers Adjustable Rate
Index, the Lehman Brothers Aggregate Bond Index, the Lehman Brothers Government/
Corporate Bond Index, the Salomon Brothers Long-Term High Yield Index, the
Salomon Brothers 30 Year GNMA Index and the Merrill Lynch Market Weighted Index
and may also be compared to the performance of other mutual funds or mutual fund
indexes with similar objectives and policies as reported by independent mutual
fund reporting services such as Lipper Analytical Services, Inc. (""Lipper").
Lipper performance calculations are based upon changes in net asset value with
all dividends reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit and other bank products, money market
funds and U.S. Treasury obligations. Bank product performance may be based upon,
among other things, the BANK RATE MONITOR National Index(TM) or various
certificate of deposit indexes. 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. Economic indicators
may include, without limitation, indicators of market rate trends and cost of
funds, such as Federal Home Loan Bank Board 11th District Cost of Funds Index
("COFI").
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 returns and net asset value will fluctuate and shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above. Additional
information about each Fund's performance also appears in its Annual Report to
Shareholders, which is available without charge from the applicable Fund.
The figures below show performance information for various periods. Comparative
information for certain indices is also included. Please note the differences
and similarities between the investments which a Fund may purchase and the
investments measured by the applicable indices. The net asset values and returns
of each class of shares of the Funds will also fluctuate. No adjustment has been
made for taxes payable on dividends. The periods indicated were ones of
fluctuating securities prices and interest rates.
54
<PAGE>
AGGRESSIVE GROWTH FUND -- SEPTEMBER 30, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending Percentage
TOTAL $10,000 Gain Dividends Value Increase Value Increase
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1) (1)
- ----- --- ---------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 12,500 0 0 12,500 25.0 13,263 32.6
Class B Shares
Life of
Fund(+) 13,179 0 0 12,779 27.8 13,179 31.8
Class C Shares
Life of
Fund(+) 13,189 0 0 13,089 30.9 13,189 31.9
<CAPTION>
Dow Russell
Jones 3000(R) U.S.
TOTAL Industrial Standard Consumer Growth Lipper Treasury
RETURN Average & Poor's Price Index Growth Bill Index
TABLE (3) 500 (4) Index (5) (13) Fund (9) (8)
- ----- --- ------- --------- ---- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 24.9 29.6 1.6 28.8 27.2 2.6
Class B Shares
Life of
Fund(+) 24.9 29.6 1.6 28.8 27.2 2.6
Class C Shares
Life of
Fund(+) 24.9 29.6 1.6 28.8 27.2 2.6
</TABLE>
<TABLE>
<CAPTION>
Fund Fund Dow Jones
AVERAGE ANNUAL TOTAL Fund Class Class B Class C Industrial Standard &
RETURN TABLE A Shares Shares Shares Average (3) Poor's 500 (4)
- ------------ -------- ------ ------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 34.7 38.7 43.2 34.6 41.3
<CAPTION>
U.S.
AVERAGE ANNUAL TOTAL Consumer Russell 3000(R) Lipper Growth Treasury Bill
RETURN TABLE Price Index (5) Growth Index (13) Fund (9) Index(8)
- ------------ --------------- ----------------- -------- --------
<S> <C> <C> <C> <C>
Life of Fund(+) 2.2 40.1 37.9 3.4
</TABLE>
(+) Since December 31, 1996 for Class A, B and C shares.
55
<PAGE>
BLUE CHIP FUND -- OCTOBER 31, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending Percentage
TOTAL $10,000 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(+) 18,513 4,905 9,387 32,805 228.1 34,810 248.1
Five Years 13,096 2,336 4,287 19,719 97.2 20,928 109.3
One Year 9,719 881 1,346 11,946 19.5 12,678 26.8
Year to
Date 11,247 0 52 11,299 13.0 11,985 19.9
Class B Shares
Life of
Fund(++) 14,317 2,000 3,008 19,125 91.3 19,325 93.3
One Year 10,304 934 1,324 12,262 22.6 12,562 25.6
Year to
Date 11,898 0 7 11,505 15.1 11,905 19.1
Class C Shares
Life of
Fund(++) 14,382 2,002 3,036 * * 19,420 94.2
One Year 10,315 931 1,325 * * 12,571 25.7
Year to
Date 11,897 0 10 11,807 18.1 11,907 19.1
<CAPTION>
Dow Russell
Jones 1000(R) U.S.
TOTAL Industrial Standard Consumer Growth Lipper Treasury
RETURN Average & Poor's Price Index Growth Bill Index
TABLE (3) 500 (4) Index (5) (13) Fund (9) (8)
- ----- --- ------- --------- ---- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 451.5 432.4 40.0 439.0 351.1 72.6
Five Years 161.4 147.1 14.0 132.8 130.4 25.8
One Year 25.8 32.1 2.1 30.5 28.0 5.2
Year to
Date 17.2 25.4 1.9 23.8 21.5 2.6
Class B Shares
Life of
Fund(++) 114.6 116.9 9.6 120.2 92.9 19.9
One Year 25.8 32.1 2.1 30.5 28.0 5.2
Year to
Date 17.2 25.4 1.9 23.8 21.5 2.6
Class C Shares
Life of
Fund(++) 114.6 116.9 9.6 120.2 92.9 19.9
One Year 25.8 32.1 2.1 30.5 28.0 5.2
Year to
Date 17.2 25.4 1.9 23.8 21.5 2.6
</TABLE>
<TABLE>
<CAPTION>
Fund Fund Dow Jones
AVERAGE ANNUAL TOTAL Fund Class Class B Class C Industrial
RETURN TABLE A Shares Shares Shares Average (3)
- ------------ -------- ------ ------ -----------
<S> <C> <C> <C> <C>
Life of Fund(+) 12.7 * * 18.7
Life of Fund(++) * 20.9 21.4 25.0
Five Years 14.5 * * 21.2
One Year 19.5 22.6 25.7 25.8
<CAPTION>
U.S.
AVERAGE ANNUAL TOTAL Standard & Consumer Russell 1000(R) Lipper Growth Treasury Bill
RETURN TABLE Poor's 500 (4) Price Index (5) Growth Index (6) Fund (9) Index (8)
- ------------ -------------- --------------- ----------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 18.3 3.5 18.5 16.4 5.7
Life of Fund(++) 25.4 2.7 26.0 21.2 5.4
Five Years 19.8 2.7 18.4 18.2 4.7
One Year 32.1 2.1 30.5 28.0 5.2
</TABLE>
(+) Since November 23, 1987 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
56
<PAGE>
GROWTH FUND -- SEPTEMBER 30, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending
TOTAL $10,000 Gain Dividends Value Increase Value
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1)
- ----- --- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 28,916 291,840 134,747 455,503 4,455.0 483,520
Ten Years 10,618 13,544 6,975 31,137 211.4 33,042
Five Years 11,138 5,109 1,921 18,168 81.7 19,278
One Year 8,472 1,936 899 11,307 13.1 11,997
Year to
Date 11,170 0 0 11,170 11.7 11,854
Class B Shares
Life of
Fund(++) 11,321 4,195 1,742 17,058 70.6 17,258
One Year 8,817 2,083 968 11,604 16.0 11,868
Year to
Date 11,761 0 0 11,361 13.6 11,761
Class C Shares
Life of
Fund(++) 11,390 4,209 1,747 * * 17,346
One Year 8,838 2,082 967 * * 11,887
Year to
Date 11,787 0 0 11,687 16.9 11,787
<CAPTION>
Dow Russell
Percentage Jones 1000(R) U.S.
TOTAL Increase Industrial Standard Consumer Growth Lipper Treasury
RETURN (unadjusted) Average & Poor's Price Index Growth Bill Index
TABLE (1) (3) 500 (4) Index (5) (13) Fund (9) (8)
- ----- --- --- ------- --------- ---- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 4,735.2 3,030.1 3,351.3 402.2 NA 2,788.9 705.0
Ten Years 230.4 316.4 295.2 40.2 292.6 250.6 72.6
Five Years 92.8 175.5 156.8 14.1 145.3 137.7 25.8
One Year 20.0 37.7 40.4 2.2 36.3 34.6 5.2
Year to
Date 18.5 24.9 29.6 1.6 28.5 25.6 2.6
Class B Shares
Life of
Fund(++) 72.6 128.7 124.3 9.3 128.6 98.6 19.9
One Year 18.7 37.7 40.4 2.2 36.3 34.6 5.2
Year to
Date 17.6 24.9 29.6 1.6 28.5 25.6 2.6
Class C Shares
Life of
Fund(++) 73.5 128.7 124.3 9.3 128.6 98.6 19.9
One Year 18.9 37.7 40.4 2.2 36.3 34.6 5.2
Year to
Date 17.9 24.9 29.6 1.6 28.5 25.6 2.6
</TABLE>
<TABLE>
<CAPTION>
Fund Fund Dow Jones
AVERAGE ANNUAL TOTAL Fund Class Class B Class C Industrial
RETURN TABLE A Shares Shares Shares Average (3)
- ------------ -------- ------ ------ -----------
<S> <C> <C> <C> <C>
Life of Fund(+) 12.9 * * 11.6
Life of Fund(++) * 17.3 17.9 28.1
Ten Years 12.0 * * 15.3
Five Years 12.7 * * 22.5
One Year 13.1 16.0 18.9 37.7
<CAPTION>
U.S.
AVERAGE ANNUAL TOTAL Standard & Consumer Russell 1000(R) Lipper Growth Treasury Bill
RETURN TABLE Poor's 500 (4) Price Index (5) Growth Index (6) Fund (9) Index (8)
- ------------ -------------- --------------- ----------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 11.9 5.3 NA 11.3 6.9
Life of Fund(++) 27.4 2.7 28.2 22.8 5.6
Ten Years 14.7 3.4 14.7 13.4 5.6
Five Years 20.8 2.7 19.7 18.9 4.7
One Year 40.4 2.2 36.3 34.6 5.2
</TABLE>
(+) Since April 4, 1966 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
57
<PAGE>
QUANTITATIVE EQUITY FUND -- NOVEMBER 30, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending
TOTAL $10,000 Gain Dividends Value Increase Value
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1)
- ----- --- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 12,927 0 228 13,155 31.6 13,958
One Year 11,042 0 195 11,237 12.4 11,925
Class B Shares
Life of
Fund(+) 13,516 0 240 13,456 34.6 13,756
One Year 11,630 0 207 11,537 15.4 11,837
Year to
Date 12,011 0 0 11,611 16.1 12,011
Class C Shares
Life of
Fund(+) 13,536 0 241 * * 13,777
One Year 11,638 0 207 * * 11,845
Year to
Date 12,019 0 0 11,919 19.2 12,019
<CAPTION>
Dow Russell
Percentage Jones 1000(R) U.S.
TOTAL Increase Industrial Standard Consumer Growth Lipper Treasury
RETURN (unadjusted) Average & Poor's Price Index Growth Bill Index
TABLE (1) (3) 500 (4) Index (5) (13) Fund (9) (8)
- ----- --- --- ------- --------- ---- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 39.6 50.6 55.8 4.7 51.0 44.5 7.9
One Year 19.3 22.2 28.5 1.9 26.5 23.6 5.2
Class B Shares
Life of
Fund(+) 37.6 50.6 55.8 4.7 51.0 44.5 7.9
One Year 18.4 22.2 28.5 1.9 26.5 23.6 5.2
Year to
Date 20.1 23.4 31.1 1.9 29.0 26.0 2.6
Class C Shares
Life of
Fund(+) 37.8 50.6 55.8 4.7 51.0 44.5 7.9
One Year 18.5 22.2 28.5 1.9 26.5 23.6 5.2
Year to
Date 20.2 23.4 31.1 1.9 29.0 26.0 2.6
</TABLE>
<TABLE>
<CAPTION>
Fund Fund Dow Jones
AVERAGE ANNUAL TOTAL Fund Class Class B Class C Industrial
RETURN TABLE A Shares Shares Shares Average (3)
- ------------ -------- ------ ------ -----------
<S> <C> <C> <C> <C>
Life of Fund(+) 16.6 18.0 19.6 25.7
<CAPTION>
U.S.
AVERAGE ANNUAL TOTAL Standard & Consumer Russell 1000(R) Lipper Growth Treasury Bill
RETURN TABLE Poor's 500 (4) Price Index (5) Growth Index (6) Fund (9) Index (8)
- ------------ -------------- --------------- ----------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 28.1 2.6 26.5 22.8 4.4
</TABLE>
(+) Since February 15, 1996 for Class A, B and C shares.
58
<PAGE>
SMALL CAP FUND -- SEPTEMBER 30, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage
TOTAL $10,000 Gain Dividends Value Increase Ending Value
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1)
- ----- --- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of Fund (+) 37,607 229,569 70,009 337,185 3,271.9 357,753
Ten Years 11,240 18,189 4,396 33,825 238.3 35,898
Five Years 14,327 7,554 1,007 22,888 128.9 24,283
One Year 10,725 864 121 11,710 17.1 12,429
Year to Date 12,000 0 0 12,000 20.0 12,727
Class B Shares
Life of Fund
(++) 13,522 4,432 794 18,548 85.5 18,748
One Year 11,219 933 131 11,983 19.8 12,283
Year to Date 12,607 0 0 12,207 22.1 12,607
Class C Shares
Life of Fund
(++) 13,505 4,434 795 * * 18,734
One Year 11,221 935 131 * * 12,287
Year to Date 12,612 0 0 12,512 25.1 12,612
<CAPTION>
Percentage
TOTAL Increase Dow Jones Standard Consumer Russell 1000(R)
RETURN (unadjusted) Industrial & Poor's Price Wilshire Growth Index
TABLE (1) Average (3) 500 (4) Index (5) 4500 (6)
- ----- --- ----------- ------- --------- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of Fund (+) 3,477.5 2,788.1 2,763.2 350.3 NA NA
Ten Years 259.0 316.4 295.2 40.2 251.3 292.6
Five Years 142.8 175.5 156.8 14.1 148.8 145.3
One Year 24.3 37.7 40.4 2.2 32.1 36.3
Year to Date 27.3 24.9 29.6 1.6 27.5 28.5
Class B Shares
Life of Fund
(++) 87.5 128.7 124.3 9.3 101.5 128.6
One Year 22.8 37.7 40.4 2.2 32.1 36.3
Year to Date 26.1 24.9 29.6 1.6 27.5 28.5
Class C Shares
Life of Fund
(++) 87.3 128.7 124.3 9.3 101.5 128.6
One Year 22.9 37.7 40.4 2.2 32.1 36.3
Year to Date 26.1 24.9 29.6 1.6 27.5 28.5
</TABLE>
<TABLE>
<CAPTION>
Dow Jones
AVERAGE ANNUAL TOTAL Fund Class Fund Class Fund Class C Industrial
RETURN TABLE A Shares B Shares Shares Average (3)
- ------------ -------- -------- ------ -----------
<S> <C> <C> <C> <C>
Life of Fund(+) 13.1 * * 12.5
Life of Fund(++) * 20.3 20.7 28.1
Ten Years 13.0 * * 15.3
Five Years 18.0 * * 22.5
One Year 17.1 19.8 22.9 37.7
<CAPTION>
AVERAGE ANNUAL TOTAL Standard & Consumer Price Wilshire Russell 1000(R) Growth
RETURN TABLE Poor's 500 (4) Index (5) 4500 Index (6)
- ------------ -------------- --------- ---- ---------
<S> <C> <C> <C> <C>
Life of Fund(+) 12.4 5.4 NA NA
Life of Fund(++) 27.4 2.7 23.4 28.2
Ten Years 14.7 3.4 13.4 14.7
Five Years 20.8 2.7 20.0 19.7
One Year 40.4 2.2 32.1 36.3
</TABLE>
(+) Since February 20, 1969 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA -- Not Available.
59
<PAGE>
TECHNOLOGY FUND -- OCTOBER 31, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage
TOTAL $10,000 Gain Dividends Value Increase Ending Value
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1)
- ----- --- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 55,343 3,623,143 665,479 4,343,965 43,339.7 4,611,214
Ten Years 10,521 26,801 3,488 40,810 308.1 43,309
Five Years 12,434 10,959 1,138 24,531 145.3 26,035
One Year 9,405 1,635 0 11,040 10.4 11,711
Year to Date 10,330 0 0 10,330 3.3 10,960
Class B Shares
Life of
Fund(++) 12,552 7,134 971 20,457 104.6 20,657
One Year 9,820 1,771 0 11,296 13.0 11,591
Year to Date 10,876 0 0 10,476 4.8 10,876
Class C Shares
Life of
Fund(++) 12,652 7,152 973 * * 20,777
One Year 9,836 1,762 0 * * 11,598
Year to Date 10,878 0 0 10,778 7.8 10,878
<CAPTION>
Percentage
TOTAL Increase Dow Jones Standard Consumer Russell 1000(R)
RETURN (unadjusted) Industrial & Poor's Price Growth Index
TABLE (1) Average (3) 500 (4) Index (5) (6)
- ----- --- ----------- ------- --------- ---
<S> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 46,012.1 34,104.0 41,183.2 559.6 NA
Ten Years 333.1 407.2 387.0 40.2 392.5
Five Years 160.4 161.4 147.1 14.0 132.8
One Year 17.1 25.8 32.1 2.1 30.5
Year to Date 9.6 17.2 25.4 1.9 23.8
Class B Shares
Life of
Fund(++) 106.6 114.6 116.9 9.6 120.2
One Year 15.9 25.8 32.1 2.1 30.5
Year to Date 8.8 17.2 25.4 1.9 23.8
Class C Shares
Life of
Fund(++) 107.8 114.6 116.9 9.6 120.2
One Year 16.0 25.8 32.1 2.1 30.5
Year to Date 8.8 17.2 25.4 1.9 23.8
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL Fund Class A Fund Class B Fund Class C
RETURN TABLE Shares Shares Shares
- ------------ ------ ------ ------
<S> <C> <C> <C>
Life of Fund(+) 13.2 * *
Life of Fund(++) * 23.3 23.8
Ten Years 15.1 * *
Five Years 19.7 * *
One Year 10.4 13.0 16.0
<CAPTION>
Dow Jones
AVERAGE ANNUAL TOTAL Industrial Standard & Poor's Consumer Price Russell 1000(R) Growth
RETURN TABLE Average (3) 500 (4) Index (5) Index (6)
- ------------ ----------- ------- --------- ---------
<S> <C> <C> <C> <C>
Life of Fund(+) 12.6 13.0 3.9 NA
Life of Fund(++) 25.0 25.4 2.7 26.0
Ten Years 17.6 17.2 3.4 17.3
Five Years 21.2 19.8 2.7 18.4
One Year 25.8 32.1 2.1 30.5
</TABLE>
(+) Since September 7, 1948 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
60
<PAGE>
TOTAL RETURN FUND -- OCTOBER 31, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending
TOTAL $10,000 Gain Dividends Value Increase Value
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1)
- ----- --- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of Fund (+) 26,872 169,595 234,049 430,516 4,205.2 457,048
Ten Years 14,765 7,446 9,220 31,431 214.3 33,342
Five Years 10,618 3,511 2,815 16,944 69.4 17,970
One Year 9,474 1,007 728 11,209 12.1 11,895
Year to Date 10,608 0 221 10,829 8.3 11,485
Class B Shares
Life of Fund
(++) 12,262 1,918 1,601 15,581 55.8 15,781
One Year 10,053 1,069 664 11,486 14.9 11,786
Year to Date 11,240 0 157 10,997 10.0 11,397
Class C Shares
Life of Fund
(++) 12,272 1,922 1,645 * * 15,839
One Year 10,053 1,068 671 * * 11,792
Year to Date 11,239 0 161 11,30 13.0 11,400
<CAPTION>
Dow
Jones Russell Lehman
TOTAL Percentage Industrial Standard Consumer 1000(R) Lipper Bros.
RETURN Increase Average & Poor's Price Growth Balanced Gov't/Corp.
TABLE (unadjusted) (3) 500 (4) Index (5) Index (6) Fund (11) Index (12)
- ----- ------------ --- ------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of Fund (+) 4,470.5 3,538.3 3,978.3 423.0 NA 2,455.0 *
Ten Years 233.4 407.2 387.0 40.2 392.5 231.5 140.9
Five Years 79.7 161.4 147.1 14.0 132.8 86.5 44.4
One Year 19.0 25.8 32.1 2.1 30.5 20.1 8.8
Year to Date 14.9 17.2 25.4 1.9 23.8 16.2 8.1
Class B Shares
Life of Fund
(++) 57.8 114.6 116.9 9.6 120.2 64.0 33.4
One Year 17.9 25.8 32.1 2.1 30.5 20.1 8.8
Year to Date 14.0 17.2 25.4 1.9 23.8 16.2 8.1
Class C Shares
Life of Fund
(++) 58.4 114.6 116.9 9.6 120.2 64.0 33.4
One Year 17.9 25.8 32.1 2.1 30.5 20.1 8.8
Year to Date 14.0 17.2 25.4 1.0 23.8 16.2 8.1
</TABLE>
<TABLE>
<CAPTION>
Dow Jones
ANNUAL TOTAL RETURN Fund Class A Fund Class Fund Class Industrial
TABLE Shares B Shares C Shares Average (3)
- ----- ------ -------- ------ -----------
<S> <C> <C> <C> <C>
Life of Fund (+) 11.8 * * 11.3
Life of Fund (++) * 13.9 14.4 25.0
Ten Years 12.1 * * 17.6
Five Years 11.1 * * 21.2
One Year 12.1 14.9 17.9 25.8
<CAPTION>
Consumer Lehman Bros
ANNUAL TOTAL RETURN Standard & Price Index Russell 1000(R) Lipper Balanced Gov't/Corp.
TABLE Poor's 500 (4) (5) Growth Index (6) Fund (11) Index (12)
- ----- -------------- --- ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Life of Fund (+) 11.6 5.0 NA 10.1 *
Life of Fund (++) 25.4 2.7 26.0 15.6 8.8
Ten Years 17.2 3.4 17.3 12.7 9.2
Five Years 19.8 2.7 18.4 13.3 7.6
One Year 32.1 2.1 30.5 20.1 8.8
</TABLE>
(+) Since March 2, 1964 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
61
<PAGE>
VALUE+GROWTH FUND -- NOVEMBER 30, 1998 TO BE UPDATED
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending
$10,000 Gain Dividends Value Increase Value
TOTAL RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1)
- ----- --- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 14,503 123 897 15,523 55.2 16,471
One Year 10,640 90 658 11,388 13.9 12,083
Year to Date 11,622 0 0 11,622 16.2 12,327
Class B Shares
Life of Fund
(S) 15,126 129 945 15,900 59.0 16,200
One Year 11,201 96 699 11,696 17.0 11,996
Year to Date 12,240 0 0 11,840 18.4 12,240
Class C Shares
Life of Fund
(+) 15,126 129 945 * * 16,200
One Year 11,191 96 699 * * 11,986
Year to Date 12,230 0 0 12,130 21.3 12,230
<CAPTION>
Dow
Percentage Jones Russell U.S.
Increase Industrial Standard Consumer 1000(R) Lipper Treasury
TOTAL RETURN (unadjusted) Average & Poor's Price Growth Balanced Bill
TABLE (1) (3) 500 (4) Index (5) Index (6) Fund (9) Index (8)
- ----- --- --- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares
Life of
Fund(+) 64.7 71.0 70.9 5.5 66.0 51.6 10.7
One Year 20.8 22.2 28.5 1.9 26.5 23.6 5.2
Year to Date 23.3 23.4 31.1 1.9 29.0 26.0 2.6
Class B Shares
Life of Fund
(S) 62.0 71.0 70.9 5.5 66.0 51.6 10.7
One Year 20.0 22.2 28.5 1.9 26.5 23.6 5.2
Year to Date 22.4 23.4 31.1 1.9 29.0 26.0 2.6
Class C Shares
Life of Fund
(+) 62.0 71.0 70.9 5.5 66.0 51.6 10.7
One Year 19.9 22.2 28.5 1.9 26.5 23.6 5.2
Year to Date 22.3 23.4 31.1 1.9 29.0 26.0 2.6
</TABLE>
<TABLE>
<CAPTION>
Dow Jones
ANNUAL TOTAL Fund Class Fund Class Fund Class Industrial
RETURN TABLE A Shares B Shares C Shares Average (3)
- ------------ -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 22.9 24.3 25.4 28.6
<CAPTION>
ANNUAL TOTAL Standard & Consumer Price Russell 1000(R) Lipper Balanced U.S. Treasury
RETURN TABLE Poor's 500 (4) Index (5) Growth Index (6) Fund (9) Bill Index (8)
- ------------ -------------- --------- ---------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 28.6 2.5 27.5 21.6 4.9
</TABLE>
(+) Since October 16, 1995 for Class A, B and C shares.
62
<PAGE>
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75%. The Initial Investment for Class B and Class C
shares was not adjusted. Amounts were adjusted for Class B shares for the
contingent deferred sales charge that may be imposed at the end of the
period based upon the schedule for shares sold currently, see "Redemption
or Repurchase of Shares" in the prospectus. No adjustments were made to
Class C shares. Amounts were adjusted for Class C shares for the contingent
deferred sales charge that may be imposed for periods less than one year.
(2) Includes short-term capital gain dividends, if any.
(3) The Dow Jones Industrial Average is an unmanaged unweighted average of
thirty blue chip industrial corporations listed on the New York Stock
Exchange. Assumes reinvestment of dividends. Source is Towers Data Systems.
(4) The Standard & Poor's 500 Stock Index is an unmanaged weighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(5) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(6) The Russell 1000(R) Growth Index is an unmanaged index comprised of common
stocks of larger U.S. companies with greater than average growth
orientation and represents the universe of stocks from which
"earnings/growth" money managers typically select. Assumes reinvestment of
dividends. Source is Lipper Analytical Services, Inc.
(7) The Lipper Growth and Income Fund Index is a net asset value weighted index
of the performance of certain mutual funds tracked by Lipper Analytical
Services, Inc. The largest mutual funds within the Lipper "growth and
income investment" objective category are included in the index.
Performance is based on changes in net asset value with all dividends
reinvested and with no adjustment for sales charges. Source is Towers Data
Systems.
(8) The U.S. Treasury Bill Index is an unmanaged index based on the average
monthly yield of Treasury Bills maturing in 6 months. Source is Towers Data
Systems.
(9) The Lipper Growth Fund Index is a net asset value weighted index of the
performance of certain mutual funds tracked by Lipper Analytical Services,
Inc. The largest mutual funds within the Lipper "growth investment"
objective category are included in the index. Performance is based on
changes in net asset value with all dividends reinvested and with no
adjustment for sales changes. Source is Towers Data Systems.
(10) The Wilshire 4500 Index Trust is a capitalization-weighted index, including
all of the securities in the Wilshire 5000 Index with the exception of the
S&P 500 securities.
(11) The Lipper Balanced Fund Index is a net asset value weighted index of the
performance of certain mutual funds tracked by Lipper Analytical Services,
Inc., New York, New York. The largest mutual funds within the Lipper
"balanced investment" objective category are included in the index.
Performance is based on changes in net asset value with all dividends
reinvested and with no adjustment for sales charges. Source is Towers Data
Systems.
(12) The Lehman Brothers Government/Corporate Bond Index is on a total return
basis and is comprised of all publicly issued, non-convertible, domestic
debt of the U.S. Government or any agency thereof, quasi-federal
corporation, or corporate debt guaranteed by the U.S. Government and all
publicly issued, fixed-rate, non-convertible, domestic debt of the three
major corporate classifications: industrial, utility, and financial. Only
notes and bonds with a minimum outstanding principal amount of $1,000,000
and a minimum of one year to maturity are included. Bonds included must
have a rating of at least Baa by Moody's Investors Service, Inc., BBB by
Standard & Poor's Corporation or in the case of bank bonds not rated by
either Moody's or S&P, BBB by Fitch Investors Service. This index is
unmanaged. Source is Towers Data Systems.
(13) The Russell 3000(R) Index is an unmanaged index comprised of 3000 of the
largest capitalized U.S. domiciled companies whose common stocks trade in
the U.S. This portfolio of securities represents approximately 98 percent
of the investable U.S. equity market.
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.
63
<PAGE>
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 AveragesE (All
Taxable). As reported by IBC/Donoghue's, all investment results represent total
return (annualized results for the period net of management fees and expenses)
and one year investment results are effective annual yields assuming
reinvestment of dividends.
The following tables illustrate an assumed $10,000 investment in Class A shares
of each Fund, which includes the current maximum sales charge of 5.75%, with
income and capital gain dividends reinvested in additional shares. Each table
covers the period from commencement of operations of the Fund to December 31,
1998.
AGGRESSIVE GROWTH FUND (12/31/96)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
--------- -----------------------------------
ANNUAL ANNUAL
YEAR INCOME CAPITAL GAIN REINVESTED REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
----- ---------- ---------- ---------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
1996 $ 0 $0 $ 9,425 $ 0 $0 $ 9,425
1997 546 0 11,994 577 0 12,571
1998
</TABLE>
BLUE CHIP FUND (11/23/87)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL ANNUAL CAPITAL
YEAR INCOME GAIN REINVESTED REINVESTED
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME CAPITAL GAIN TOTAL
12/31 REINVESTED REINVESTED* INVESTMENT DIVIDENDS* DIVIDENDS VALUE
----- ---------- ----------- ---------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
1987 $ 0 $ 0 $ 9,519 $ 0 $ 0 $ 9,519
1988 339 0 8,545 342 0 8,887
1989 220 0 10,650 659 0 11,309
1990 134 0 10,776 806 0 11,582
1991 531 712 14,284 1,657 786 16,727
1992 185 0 13,949 1,810 768 16,527
1993 897 374 13,392 2,647 1,118 17,157
1994 269 27 12,472 2,733 1,068 16,273
1995 1,201 714 14,932 4,497 2,006 21,435
1996 3,027 1,993 15,517 7,743 4,112 27,372
1997 3,455 928 17,057 12,023 5,466 34,546
1998
</TABLE>
64
<PAGE>
GROWTH FUND (4/4/66)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
----- ---------- ---------- ---------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
1966 $ 0 $ 0 $ 8,920 $ 0 $ 0 $ 8,916
1967 75 954 13,165 77 984 14,220
1968 121 1,278 15,103 211 2,371 17,684
1969 242 836 12,897 410 2,862 16,168
1970 306 0 12,137 726 2,692 15,548
1971 313 652 13,794 1,143 3,757 18,692
1972 280 765 13,907 1,419 4,544 19,876
1973 322 0 11,089 1,471 3,622 16,174
1974 384 0 7,779 1,383 2,541 11,698
1975 368 0 10,809 2,295 3,530 16,626
1976 376 0 13,689 3,303 4,471 21,452
1977 383 0 13,757 3,715 4,495 21,963
1978 661 572 15,439 4,827 5,613 25,879
1979 852 3,998 18,775 6,772 10,900 36,439
1980 1,097 5,842 23,439 9,656 19,407 52,502
1981 1,053 2,201 19,253 8,955 18,257 46,465
1982 1,364 1,691 23,346 12,515 24,081 59,942
1983 4,257 5,471 25,476 17,849 31,659 74,984
1984 1,772 6,113 20,973 16,409 32,242 69,624
1985 2,313 8,923 22,822 20,376 45,166 88,364
1986 3,785 22,963 18,803 20,481 60,930 100,214
1987 12,643 22,692 13,065 26,916 65,975 105,956
1988 3,977 0 13,963 32,949 70,505 117,417
1989 2,844 0 17,907 45,201 90,420 153,528
1990 2,898 6,132 17,495 47,095 94,866 159,456
1991 7,496 5,963 27,552 82,490 156,017 266,059
1992 542 542 27,009 81,412 153,492 261,913
1993 1,631 16,494 25,552 78,674 161,958 266,184
1994 0 3,505 23,701 72,977 153,770 250,448
1995 8,987 24,887 27,981 95,333 206,954 330,268
1996 30,446 65,524 24,393 113,668 246,187 384,248
1997 37,100 24,439 24,467 152,226 272,111 448,804
1998
</TABLE>
65
<PAGE>
QUANTITATIVE EQUITY (2/15/96)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
--------- -----------------------------------
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
----- ----------- ---------- ---------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
1996 $188 $ 0 $10,694 $189 $ 0 $10,883
1997 333 202 12,411 556 204 13,171
1998
</TABLE>
SMALL CAP FUND (2/20/69)
<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>
1969 $ 94 $ 0 $ 9,179 $ 95 $ 0 $ 9,274
1970 172 0 8,924 275 0 9,199
1971 117 243 10,868 463 267 11,598
1972 121 634 10,925 583 890 12,398
1973 193 0 7,745 615 631 8,991
1974 197 0 4,953 585 403 5,941
1975 192 0 7,585 1,096 618 9,299
1976 162 0 9,915 1,605 808 12,328
1977 223 0 10,981 2,007 895 13,883
1978 358 1,527 11,548 2,469 2,471 16,488
1979 1,455 1,845 14,009 4,521 4,932 23,462
1980 1,770 1,232 18,670 7,745 7,771 34,186
1981 829 1,607 16,916 7,931 8,811 33,658
1982 657 1,201 20,472 10,389 12,108 42,969
1983 1,386 3,307 23,170 13,087 16,875 53,132
1984 1,082 0 20,934 12,916 15,247 49,097
1985 1,217 1,482 25,386 17,035 20,161 62,582
1986 581 11,279 24,104 16,782 30,928 71,814
1987 5,059 17,848 15,990 16,510 39,485 71,985
1988 1,062 0 16,982 18,656 41,931 77,569
1989 2,370 0 20,896 25,344 51,599 97,839
1990 1,325 6,405 18,019 23,288 51,425 92,732
1991 4,370 7,283 27,925 40,971 87,829 156,725
1992 0 12,972 25,613 37,580 93,726 156,919
1993 578 9,825 28,161 41,914 113,195 183,270
1994 0 10,437 25,566 38,053 113,583 177,202
1995 7,520 26,809 28,303 50,068 154,057 232,428
1996 2,709 19,351 29,548 55,007 180,376 264,931
1997 845 33,380 31,574 59,670 227,911 319,155
1998
</TABLE>
66
<PAGE>
TECHNOLOGY FUND (9/7/48)
<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>
1948 $ 0 $ 0 $10,127 $ 0 $ 0 $10,127
1949 305 112 10,907 354 125 11,386
1950 618 510 12,490 1,046 659 14,195
1951 722 569 13,608 1,870 1,312 16,790
1952 700 303 15,158 2,854 1,779 19,791
1953 812 595 14,325 3,494 2,292 20,111
1954 962 1,308 22,406 6,656 5,050 34,112
1955 1,129 1,681 24,367 8,426 7,310 40,103
1956 1,286 1,973 24,873 9,890 9,466 44,229
1957 1,362 2,109 20,485 9,344 9,912 39,741
1958 1,356 1,883 29,557 15,178 16,404 61,139
1959 1,430 2,771 34,283 19,144 22,002 75,429
1960 1,591 3,018 32,615 19,858 24,191 76,664
1961 1,498 3,620 37,426 24,332 31,506 93,264
1962 1,482 2,766 29,367 20,530 27,753 77,650
1963 1,686 3,388 32,152 24,207 33,809 90,168
1964 2,026 3,949 34,220 27,804 39,936 101,960
1965 2,279 5,209 41,983 36,626 54,459 133,068
1966 2,421 7,556 36,878 34,531 56,060 127,469
1967 2,347 16,506 43,123 42,726 83,106 168,955
1968 2,661 29,453 38,354 40,541 104,411 183,306
1969 4,067 15,134 30,970 36,388 98,699 166,057
1970 4,576 2,306 29,156 39,278 95,450 163,884
1971 4,307 7,228 31,519 46,839 111,044 189,402
1972 3,573 9,256 32,320 51,550 123,411 207,281
1973 4,092 0 26,202 45,665 100,050 171,917
1974 5,036 0 19,704 38,853 75,239 133,796
1975 5,503 0 26,160 57,435 99,889 183,484
1976 5,671 0 31,983 76,277 122,122 230,382
1977 6,134 3,081 30,127 78,198 118,387 226,712
1978 8,346 6,127 34,852 99,253 143,347 277,452
1979 8,825 14,677 42,911 132,292 192,861 368,064
1980 11,331 22,789 59,831 198,060 293,649 551,540
1981 12,949 29,973 46,878 166,926 259,055 472,859
1982 15,945 18,664 53,122 207,300 312,576 572,998
1983 22,078 88,219 53,165 228,712 402,902 684,779
1984 18,122 67,505 44,050 206,394 401,017 651,461
1985 11,304 43,186 51,561 253,748 516,719 822,028
1986 11,483 185,857 46,920 240,583 653,079 940,582
1987 28,099 200,645 38,481 222,331 744,271 1,005,083
1988 25,656 56,631 36,414 236,256 763,523 1,036,193
1989 35,011 36,281 42,828 314,484 935,927 1,293,237
1990 25,588 29,491 41,138 327,604 930,196 1,298,939
1991 18,709 328,427 47,131 395,051 1,432,891 1,875,073
1992 0 216,548 41,055 344,122 1,467,648 1,852,825
1993 0 127,584 42,953 360,038 1,666,453 2,069,449
1994 0 304,928 41,308 346,245 1,916,846 2,304,399
1995 164,768 336,598 49,199 591,597 2,649,098 3,289,894
1996 0 594,714 50,496 607,192 3,305,808 3,963,496
1997 29,776 678,228 44,805 569,410 3,631,208 4,245,423
1998
</TABLE>
67
<PAGE>
TOTAL RETURN FUND (3/2/64)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
--------- -----------------------------------
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
----- ----------- ---------- ---------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
1964 $ 286 $ 36 $ 9,775 $ 280 $ 35 $10,090
1965 485 75 10,249 788 113 11,150
1966 498 133 9,337 1,195 238 10,770
1967 528 533 10,367 1,854 821 13,042
1968 576 934 11,552 2,685 1,869 16,106
1969 705 186 9,608 2,880 1,734 14,222
1970 787 91 9,977 3,851 1,899 15,727
1971 798 308 10,806 4,991 2,382 18,179
1972 913 475 11,102 6,040 2,937 20,079
1973 1,095 0 9,502 6,202 2,514 18,218
1974 1,164 0 7,370 5,841 1,950 15,161
1975 1,251 0 9,324 8,721 2,467 20,512
1976 1,412 0 11,920 12,712 3,153 27,785
1977 1,580 689 11,517 13,873 3,777 29,167
1978 1,997 2,026 11,173 15,386 5,733 32,292
1979 2,493 3,239 12,547 19,958 9,982 42,487
1980 3,872 2,955 15,545 29,058 15,524 60,127
1981 2,893 2,272 14,278 29,458 16,532 60,268
1982 4,254 2,803 15,771 37,194 21,076 74,041
1983 8,825 3,719 16,256 47,149 25,542 88,947
1984 4,093 1,005 15,142 48,081 24,798 87,961
1985 5,472 2,977 17,891 62,603 32,510 113,004
1986 6,471 12,816 18,069 69,383 45,459 132,911
1987 5,213 3,478 16,564 67,975 45,219 129,758
1988 7,763 0 16,991 77,756 46,384 141,131
1989 7,619 0 19,432 96,645 53,047 169,124
1990 10,289 0 19,029 105,091 51,947 176,067
1991 8,001 6,055 24,999 146,974 74,795 246,768
1992 6,616 9,754 23,957 147,512 81,449 252,918
1993 10,120 22,863 23,578 155,228 103,420 282,226
1994 6,437 0 20,901 143,755 91,675 256,331
1995 12,811 11,545 24,265 179,922 118,210 322,467
1996 23,184 34,012 23,886 200,221 150,791 374,858
1997 31,868 39,103 23,934 232,013 190,663 446,610
1998
</TABLE>
VALUE+GROWTH FUND (10/16/95)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
--------- -----------------------------------
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
----- ----------- ---------- ---------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
1995 $ 0 $ 0 $10,030 $ 0 $ 0 $10,030
1996 724 99 11,766 727 100 12,593
1997 372 159 14,146 1,252 282 15,680
</TABLE>
* Includes short-term capital gain dividends.
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
68
<PAGE>
performance cannot be guaranteed. Lipper publishes performance analyses on a
regular basis. Each category includes funds with a variety of objectives,
policies and market and credit risks that should be considered in reviewing
these rankings.
AGGRESSIVE GROWTH FUND
Lipper Mutual Fund
Performance Analysis
Capital Appreciation Funds
One Year (Period ended 12/31/98)
The Lipper Capital Appreciation Fund category includes funds which aim to
maximize capital appreciation.
BLUE CHIP FUND
Lipper Mutual Fund
Performance Analysis
Growth & Income Funds
Ten Year (Period ended 12/31/9)
Five Year (Period ended 12/31/9)
One Year (Period ended 12/31/9)
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
Lipper Mutual Fund
Performance Analysis
Growth Funds
Ten Years (Period ended 12/31/9)
Five Years (Period ended 12/31/9)
One Year (Period ended 12/31/9)
The Lipper Growth Funds category includes funds which normally invest in
companies whose long-term earnings are expected to grow significantly faster
than the earnings of the stocks represented in the major unmanaged stock
indices.
QUANTITATIVE FUND
Lipper Mutual Fund
Performance Analysis
Growth Funds
One Year (Period ended 12/31/9)
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.
69
<PAGE>
SMALL CAP FUND
Lipper Mutual Fund
Performance Analysis
Small Cap Company
Growth Funds
Ten Years (Period ended 12/31/9)
Five Years (Period ended 12/31/9)
One Year (Period ended 12/31/9)
The Lipper Small Company Growth Fund category includes funds which by prospectus
or portfolio practice limit their investments to companies on the basis of the
size of the company.
TECHNOLOGY FUND
Lipper Mutual Fund
Performance Analysis
Science &
Technology Funds
Ten Years (Period ended 12/31/98)
Five Years (Period ended 12/31/98)
One Year (Period ended 12/31/98)
The Lipper Science & Technology Funds category includes funds which invest 65%
of their equity portfolio in science and technology stocks.
TOTAL RETURN FUND
Lipper Mutual Fund
Performance Analysis
Balanced Funds
Ten Years (Period ended 12/31/98)
Five Years (Period ended 12/31/98)
One Year (Period ended 12/31/98)
The Lipper Balanced Fund category includes funds whose primary objectives are to
conserve principal by maintaining at all times a balanced portfolio of both
stock and bonds. Typically, the stock/bond ratio ranges around 60% to 40%.
VALUE + GROWTH FUND
Lipper Mutual Fund
Performance Analysis
Growth & Income
One Year (Period ended 12/31/98)
The Lipper Growth & Income Fund category includes funds which combine a growth
of earnings orientation and an income requirement for level and/or rising
dividends.
OFFICERS AND TRUSTEES
The officers and trustees of the Funds, their birth dates, their principal
occupations and their affiliations, if any, with the Advisor and KDI are listed
below. All persons named as trustees also serve in similar capacities for other
funds advised by the Advisor.
70
<PAGE>
[To be Updated]
All Funds:
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Advisor and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Advisor. :
DAVID W. BELIN (6/20/28), Trustee, 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A.O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); formerly, Vice
President, Head of International Operations, FMC Corporation (manufacturer of
machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.
DANIEL PIERCE (3/18/34), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Advisor.
WILLIAM P. SOMMERS (7/22/33), Trustee, 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); formerly, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton Inc. (management consulting
firm)(retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
EDMOND D. VILLANI (3/4/47), Trustee*, 345 Park Avenue, New York, New York;
President, Chief Executive Officer and Managing Director, Advisor.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Advisor; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Assistant Secretary,
Advisor.
JERARD K. HARTMAN, Vice President*, 345 Park Avenue, New York, New York; Senior
Vice President, Advisor.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Advisor; formerly, Head of Broker Dealer
Division of an unaffiliated investment management firm during 1997; prior
thereto, President of Client Management Services of an unaffiliated investment
management firm from 1991 to 1996.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Advisor.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Advisor; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Advisor.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
BRENDA LYONS, Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
71
<PAGE>
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Advisor; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Advisor; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Advisor and KDI.
72
<PAGE>
Aggressive Growth Fund & Small Cap Fund:
STEVEN H. REYNOLDS
Blue Chip Fund and Technology Fund:
TRACY McCORMICK CHESTER (9/27/54), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President, Scudder Kemper; formerly, Portfolio
Manager for Fiduciary Management; prior thereto, independent consultant managing
private accounts.
Quantitative Fund & Value+Growth Fund:
PHILIP S. FORTUNA
Total Return Fund:
GARY A. LANGBAUM (12/16/48), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Executive Vice President, Scudder Kemper.
*Interested persons of the Fund as defined in the Investment Company Act of
1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during
each Fund's 1998 fiscal year except that the information in the last column is
for calendar year 1998.
Aggregate Compensation From Fund
<TABLE>
<CAPTION>
Total
Compensation
From Fund and
Kemper Fund
Complex
Total Value+ Paid
Name of Trustee Aggressive (a) Blue Chip Growth Quantitative Small Cap Tech Return Growth Trustees**
- --------------- ------------- --------- ------ ----------- --------- ---- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Belin*
Lewis A. Burnham
Donald L. Dunaway*
Robert B. Hoffman
Donald R. Jones
Shirley D. Peterson
William P. Sommers
</TABLE>
(a) No compensation for services as fee schedule not established. It is
anticipated that a fee schedule will be established in the future.
* Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with Kemper funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds -- Zurich Money
Market Fund. Total deferred amounts and interest accrued through each
Fund's fiscal year are $0, $15,600, $65,900, $800, $42,600, $57,700,
$77,500 and $1,500 for Mr. Belin and $0, $14,600, $44,400, $900, $26,700,
$34,900, $50,200 and $1,700 for Mr. Dunaway for the Aggressive, Blue Chip,
Growth, Quantitative, Small Cap, Technology, Total Return and Value+Growth
Funds, respectively.
** Includes compensation for service on the boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as a trustee of 26 Kemper
funds with 46 fund portfolios.
73
<PAGE>
As of January 7, 1999, To be updated except for Steven H. Reynolds, who
beneficially owned 2.01 percent of the Aggressive Growth Fund, and William M.
Knapp, who beneficially owned 1.31 percent of the Quantitative Fund, the
officers and trustees of the Funds, as a group, owned less than 1% of the then
outstanding shares of each Fund and no person owned of record 5% or more of the
outstanding shares of any class of any Fund, except the persons indicated in the
chart below.
Name and Addres % Owned Fund Class
- --------------- ------- ---- -----
Scudder Kemper Investments, Inc.**
Accounting Department
222 S. Riverside Plaza
Chicago, IL 60606
NFSC*
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
Scudder Kemper Investments, Inc.**
Accounting Department
222 S. Riverside Plaza
Chicago, IL 60606
BHC Securities, Inc.*
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
NFSC*
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
PaineWebber*
Mutual Fund Department
1000 Harbor Blvd.
8th Floor
Weehawken, NJ 07087-6727
BHC Securities, Inc.*
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
Edward D. Jones & Co.*
201 Progress Parkway
Maryland Hts, MO 63043-3009
MLPFSS*
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
74
<PAGE>
Name and Addres % Owned Fund Class
- --------------- ------- ---- -----
Scudder Kemper Investments, Inc.**
Accounting Department
222 S. Riverside Plaza
Chicago, IL 60606
John E. Susong**
7181 Chagrin Rd.
Chagrin Falls, OH 44023
NFSC*
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
PaineWebber*
Mutual Fund Department
1000 Harbor Blvd.
8th Floor
Weehawken, NJ 07087-6727
PaineWebber FBO*
Michael Sequall
13835 North 107th Street
Longmont, CO 80501
Wolf C. Neumann, M.D.**
3400 Goltingen
Karl - Grueneklee - STR 4C
Germany
NFSC*
One World Financial Center
200 Liberty Street, 4th Floor
New York, NY 10281-1003
BT Alex Brown Incorporated
P.O. Box 1346
Baltimore, MD 21203
Scudder Kemper Retirement Plans
222 S. Riverside Plaza
Chicago, IL 60606
* Record and beneficial owner.
** Record owner only.
SHAREHOLDER RIGHTS
The Funds are open-end management investment companies, organized as separate
business trusts under the laws of Massachusetts. The Aggressive Growth Fund was
organized as a business trust under the laws of Massachusetts on October 3,
1996. The Blue Chip Fund was organized as a business trust under the laws of
Massachusetts on May 28, 1987. The Growth Fund was organized as a business trust
under the laws of Massachusetts on October 24, 1985 and, effective January 31,
1986, that Fund pursuant to a reorganization succeeded to the assets and
liabilities of Kemper Growth Fund, Inc., a Maryland corporation organized in
1965. The Quantitative Fund was organized as a business trust under the laws of
75
<PAGE>
Massachusetts on June 12, 1995. The Small Cap Fund was organized as a business
trust under the laws of Massachusetts on October 24, 1985 and, effective January
31, 1986, that Fund pursuant to a reorganization succeeded to the assets and
liabilities of Kemper Summit Fund, Inc., a Maryland corporation organized in
1968. Prior to February 1, 1992, the Small Cap Fund was known as "Kemper Summit
Fund." The Technology Fund was organized as a business trust under the laws of
Massachusetts on October 24, 1985 as Technology Fund and changed its name to
Kemper Technology Fund effective February 1, 1988. Effective January 31, 1986,
Technology Fund pursuant to a reorganization succeeded to the assets and
liabilities of Technology Fund, Inc., a Maryland corporation originally
organized as a Delaware corporation in 1948. Technology Fund was known as
Television Fund, Inc. until 1950 and as Television-Electronics Fund, Inc. until
1968. The Total Return Fund was organized as a business trust under the laws of
Massachusetts on October 24, 1985 and, effective January 31, 1986, that Fund
pursuant to a reorganization succeeded to the assets and liabilities of Kemper
Total Return Fund, Inc., a Maryland corporation organized in 1963. The Total
Return Fund was known as Balanced Income Fund, Inc. until 1972 and as Supervised
Investors Income Fund, Inc. until 1977. The Value+Growth Fund was organized as a
business trust under the laws of Massachusetts on June 14, 1995 under the name
Kemper Value Plus Growth Fund and does business as Kemper Value+Growth Fund.
The Technology Fund and the Quantitative Fund each may in the future seek to
achieve its investment objective by pooling its assets with assets of other
mutual funds for investment in another investment company having the same
investment objective and substantially the same investment policies and
restrictions as such Fund. The purpose of such an arrangement is to achieve
greater operational efficiencies and to reduce costs. It is expected that any
such investment company will be managed by Scudder Kemper in substantially the
same manner as the corresponding Fund. Shareholders of a Fund will be given at
least 30 days' prior notice of any such investment, although they will not be
entitled to vote on the action. Such investment would be made only if the
Trustees determine it to be in the best interests of the respective Fund and its
shareholders.
Currently, each Fund offers four classes of shares. These are Class A, Class B
and Class C shares, as well as Class I shares, which have different expenses,
which may affect performance. Class I shares are available for purchase
exclusively by the following categories of institutional investors: (1)
tax-exempt retirement plans (Profit Sharing, 401(k), Money Purchase Pension and
Defined Benefit Plans) of Scudder Kemper Investments, Inc. ("Scudder Kemper")
and its affiliates and rollover accounts from those plans; (2) the following
investment advisory clients of Scudder Kemper and its investment advisory
affiliates that invest at least $1 million in a Fund: unaffiliated benefit
plans, such as qualified retirement plans (other than individual retirement
accounts and self-directed retirement plans); unaffiliated banks and insurance
companies purchasing for their own accounts; and endowment funds of unaffiliated
non-profit organizations; (3) investment-only accounts for large qualified
plans, with at least $50 million in total plan assets or at least 1000
participants; (4) trust and fiduciary accounts of trust companies and bank trust
departments providing fee based advisory services that invest at least $1
million in a Fund on behalf of each trust; and (5) policy holders under
Zurich-American Insurance Group's collateral investment program investing at
least $200,000 in a Fund. The Board of Trustees of a Fund may authorize the
issuance of additional classes and additional Portfolios if deemed desirable,
each with its own investment objectives, policies and restrictions. Since the
Funds may offer multiple Portfolios, each is known as a "series company." Shares
of a Fund have equal noncumulative voting rights except that Class B and Class C
shares have separate and exclusive voting rights with respect to each Fund's
Rule 12b-1 Plan. Shares of each class also have equal rights with respect to
dividends, assets and liquidation of such Fund subject to any preferences (such
as resulting from different Rule 12b-1 distribution fees), rights or privileges
of any classes of shares of the Fund. Shares of each Fund are fully paid and
nonassessable when issued, are transferable without restriction and have no
preemptive or conversion rights. The Funds are not required to hold annual
shareholder meetings and do not intend to do so. However, they will hold special
meetings as required or deemed desirable for such purposes as electing trustees,
changing fundamental policies or approving an investment management agreement.
Subject to the Agreement and Declaration of Trust of each Fund, shareholders may
remove trustees. If shares of more than one Portfolio for any Fund are
outstanding, shareholders will vote by Portfolio and not in the aggregate or by
class except when voting in the aggregate is required, under the 1940 Act, such
as for the election of trustees or when voting by class is appropriate.
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
76
<PAGE>
or supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Fund, or any registration of the Fund with the Securities and
Exchange Commission or any state, or as the trustees may consider necessary or
desirable. The shareholders also would vote upon changes in fundamental
investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) each Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of a Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, each
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
Each Fund's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of a Fund
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of a Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
Each Fund's Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Fund or any Portfolio or class by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of each Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of a Fund and each Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.
77
<PAGE>
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. 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.
78
<PAGE>
KEMPER VALUE PLUS GROWTH FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
-------- ---------
<S> <C> <C>
(a) Agreement and Declaration of Trust
(Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on or about July 31, 1995.)
(b) By-laws
(Incorporated by reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A which was filed on September 29, 1995.)
(c)(1) Written Instrument Establishing and Designating Separate Classes of Shares
(Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A which was filed on
September 29, 1995)
(c)(2) Amended and Restated Written Instrument Establishing and Designating
Separate Classes of Shares
(Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A which was filed on December
23, 1996)
(d)(1) Investment Advisory Contract (IMA) between the Registrant, on behalf of
Kemper Value Plus Growth Fund, and Scudder Kemper Investments, Inc. dated
December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
(d)(2) Investment Advisory Contract (IMA) between the Registrant, on behalf of
Kemper Value Plus Growth Fund, and Scudder Kemper Investments, Inc. dated
September 7, 1998 is filed herein.
(e)(1) Underwriting and Distribution Services Agreement between the Registrant, on
behalf of Kemper Value Plus Growth Fund, and Kemper Distributors, Inc. dated
December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
(e)(2) Underwriting and Distribution Services Agreement between the Registrant, on
behalf of Kemper Value Plus Growth Fund, and Kemper Distributors, Inc. dated
August 1, 1998 is filed herein.
(e)(3) Underwriting and Distribution Services Agreement between the Registrant, on
behalf of Kemper Value Plus Growth Fund, and Kemper Distributors, Inc. dated
September 7, 1998 is filed herein.
(f) Inapplicable.
Part C-Page 1
<PAGE>
(g)(1) Custodian Agreement between the Registrant, on behalf of Kemper Value Plus
Growth Fund, and Investors Fiduciary Trust Company.
(Incorporated by reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A which was filed on September 29, 1995.)
Foreign Custody Agreement between the Registrant, on behalf of Kemper Value
(g)(2) Plus Growth Fund, and The Chase Manhattan Bank.
(Incorporated by reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A which was filed on September 29, 1995.)
(h)(1) Agency Agreement.
(Incorporated by reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A which was filed on September 29, 1995.)
(h)(2) Administrative Services Agreement between the Registrant and Kemper
Distributors, Inc. dated April 1, 1997.
(Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
Supplement to Agency Agreement between Registrant and Investors Fiduciary
(h)(3) Trust Company dated June 1, 1997.
(Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
Fund Accounting Agreement between Kemper Value Plus Growth Fund and Scudder
(h)(4) Fund Accounting Corporation dated December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
(i) Inapplicable.
(j) Report and Consent of Independent Auditors to be filed by Amendment.
(k) Inapplicable.
(l) Inapplicable.
(m)(1) Rule 12b-1 Plan between Kemper Value Plus Growth Fund (Class B Shares) and
Kemper Distributors, Inc. dated August 1, 1998 is filed herein.
(m)(2) Rule 12b-1 Plan between Kemper Value Plus Growth Fund (Class C Shares) and
Kemper Distributors, Inc. dated August 1, 1998 is filed herein.
(n) Financial Data Schedule to be filed by Amendment.
(o) Rule 18f-3 Plan.
Part C-Page 2
<PAGE>
(Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A which was filed on December
23, 1996.)
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
Item 25. Indemnification.
- -------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 23(a) hereto, which is incorporated herein by reference) provides in
effect that the Registrant will indemnify its officers and trustees under
certain circumstances. However, in accordance with Section 17(h) and 17(i) of
the Investment Company Act of 1940 and its own terms, said Article of the
Agreement and Declaration of Trust does not protect any person against any
liability to the Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Item 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Part C-Page 3
<PAGE>
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Part C-Page 4
<PAGE>
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
Luxembourg B 34.564
*** Toronto, Ontario, Canada
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman,
British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
James L. Greenawalt President None.
Thomas W. Littauer Director, Chief Executive Officer Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer and Vice President
James J. McGovern Chief Financial Officer and Vice None.
President
Linda J. Wondrack Vice President and Chief Compliance Vice President
Officer
Paula Gaccione Vice President None.
Michael E. Harrington Vice President None.
Robert A. Rudell Vice President None.
William M. Thomas Vice President None.
Part C-Page 5
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Elizabeth C. Werth Vice President Assistant Secretary.
Todd N. Gierke Assistant Treasurer None.
Philip J. Collora Assistant Secretary Vice President and Secretary.
Paul J. Elmlinger Assistant Secretary None.
Diane E. Ratekin Assistant Secretary None.
Daniel Pierce Director, Chairman Trustee
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None.
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105 or, in the case of records concerning transfer agency functions, at the
offices of IFTC and of the shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services.
- -------- --------------------
Inapplicable.
Item 30. Undertakings.
- -------- -------------
Inapplicable.
Part C-Page 6
<PAGE>
SIGNATURES
----------
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 1st day of
December 1998.
By /s/ Mark S. Casady
-------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on December 1, 1998 on behalf of
the following persons in the capacities indicated.
SIGNATURE TITLE
- --------- -----
/s/ Mark S. Casady
- -------------------------
Mark S. Casady President
/s/ Daniel Pierce
- --------------------------------------
Daniel Pierce* Chairman and Trustee
/s/ David W. Belin
- --------------------------------------
David W. Belin* Trustee
/s/ Lewis A. Burnham
- --------------------------------------
Lewis A. Burnham* Trustee
/s/ Donald L. Dunaway
- --------------------------------------
Donald L. Dunaway* Trustee
/s/ Robert B. Hoffman
- --------------------------------------
Robert B. Hoffman* Trustee
/s/ Donald R. Jones
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson
- --------------------------------------
Shirley D. Peterson* Trustee
/s/ William P. Sommers
- --------------------------------------
William P. Sommers* Trustee
/s/ Edmond D. Villani
- --------------------------------------
Edmond D. Villani* Trustee
/s/ John R. Hebble
- --------------------------------------
John R. Hebble Treasurer (Principal Financial
and Accounting Officer)
By: /s/ Philip J. Collora
---------------------
Philip J. Collora*
* Philip J. Collora signs this document pursuant to powers of attorney
filed with Post-Effective Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A filed on January 27, 1998.
<PAGE>
File No. 33-61433
File No. 811-7331
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 4
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 5
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
KEMPER VALUE PLUS GROWTH FUND
<PAGE>
KEMPER VALUE PLUS GROWTH FUND
EXHIBIT INDEX
Exhibit 23(d)(2)
Exhibit 23(e)(2)
Exhibit 23(e)(3)
Exhibit 23(m)(1)
Exhibit 23(m)(2)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Value Plus Growth Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Value Plus Growth Fund
Ladies and Gentlemen:
KEMPER VALUE PLUS GROWTH FUND (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Value Plus Growth Fund (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth.
Accordingly, the Trust on behalf of the Fund agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
<PAGE>
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
2
<PAGE>
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this Agreement which is obligated to provide
services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
3
<PAGE>
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .72 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000, the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .69 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .66 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .64 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .60 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .58 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds $10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be 1/12
of .56 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds $12,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .54 of 1 percent of such portion; over any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
4
<PAGE>
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until March 1, 1998, and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Value Plus
Growth Fund" refers to the Trustees under the Declaration collectively as
Trustees and not as individuals or personally, and that no shareholder of the
Fund, or Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of the Fund to any extent
whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
5
<PAGE>
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code. This
Agreement shall supersede all prior investment advisory or management agreements
entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER VALUE PLUS GROWTH FUND, on behalf of
Kemper Value Plus Growth Fund
By: /s/Mark S. Casady
----------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/S. R. Beckwith
----------------------------
Treasurer
6
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 1st day of August, 1998, between KEMPER VALUE PLUS GROWTH
FUND, a Massachusetts business trust (the "Fund"), and KEMPER DISTRIBUTORS,
INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as agent for distribution of
shares of beneficial interest (hereinafter called "shares") of the Fund in
jurisdictions wherein shares of the Fund may legally be offered for sale;
provided, however, that the Fund in its absolute discretion may (a) issue or
sell shares directly to holders of shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; or (b) issue or
sell shares at net asset value to the shareholders of any other investment
company, for which KDI shall act as exclusive distributor, who wish to exchange
all or a portion of their investment in shares of such other investment company
for shares of the Fund. KDI shall appoint various financial service firms
("Firms") to provide distribution services to investors. The Firms shall provide
such office space and equipment, telephone facilities, personnel, literature
distribution, advertising and promotion as is necessary or beneficial for
providing information and distribution services to existing and potential
clients of the Firms. KDI may also provide some of the above services for the
Fund.
KDI accepts such appointment as distributor and principal underwriter
and agrees to render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless expressly
provided herein or otherwise authorized, shall have no authority to act for or
represent the Fund in any way. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will,
pursuant to separate written contracts, appoint various Firms to provide
advertising, promotion and other distribution services contemplated hereunder
directly to or for the benefit of existing and potential shareholders who may be
clients of such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell such
part of the authorized shares of the Fund remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
<PAGE>
("Securities Act"), at prices determined as hereinafter provided and on terms
hereinafter set forth, all subject to applicable federal and state laws and
regulations and to the Fund's organizational documents.
2. KDI shall sell shares of the Fund to or through qualified Firms in
such manner, not inconsistent with the provisions hereof and the then effective
registration statement (and related prospectus) of the Fund under the Securities
Act, as KDI may determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the Fund without
prior consent of the Fund. In addition to sales made by it as agent of the Fund,
KDI may, in its discretion, also sell shares of the Fund as principal to persons
with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold
by KDI shall be so offered or sold at a price per share determined in accordance
with the then current prospectus. The price the Fund shall receive for all
shares purchased from it shall be the net asset value used in determining the
public offering price applicable to the sale of such shares. Any excess of the
sales price over the net asset value of the shares of the Fund sold by KDI as
agent shall be retained by KDI as a commission for its services hereunder. KDI
may compensate Firms for sales of shares at the commission levels provided in
the Fund's prospectus from time to time. KDI may pay other commissions, fees or
concessions to Firms, any may pay them to others in its discretion, in such
amounts as KDI shall determine from time to time. KDI shall be entitled to
receive and retain any applicable contingent deferred sales charge as described
in the Fund's prospectus. KDI shall also receive any distribution services fee
payable by the Fund as provided in the Fund's Amended and Restated 12b-1 Plan,
as amended from time to time (the "Plan").
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price or net asset value, as
applicable, of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered
under the Securities Act for sale as herein contemplated such shares as KDI
shall reasonably request and as the Securities and Exchange Commission shall
permit to be so registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
<PAGE>
5. KDI shall issue and deliver or shall arrange for various Firms to
issue and deliver on behalf of the Fund such confirmations of sales made by it
pursuant to this Agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund the amount due
the Fund for the sale of such shares. Certificates shall be issued or shares
registered on the transfer books of the Fund in such names and denominations as
KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the extent
that it shall have received purchase orders therefor. KDI will not make, or
authorize Firms or others to make (a) any short sales of shares of the Fund; or
(b) any sales of such shares to any Board member or officer of the Fund or to
any officer or Board member of KDI or of any corporation or association
furnishing investment advisory, managerial or supervisory services to the Fund,
or to any corporation or association, unless such sales are made in accordance
with the then current prospectus relating to the sale of such shares. KDI, as
agent of and for the account of the Fund, may repurchase the shares of the Fund
at such prices and upon such terms and conditions as shall be specified in the
current prospectus of the Fund. In selling or reacquiring shares of the Fund for
the account of the Fund, KDI will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or reacquisition,
as the case may be, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by KDI or any employee,
representative or agent of KDI. KDI will observe and be bound by all the
provisions of the Fund's organizational documents (and of any fundamental
policies adopted by the Fund pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), notice of which shall have been given to KDI) which
at the time in any way require, limit, restrict, prohibit or otherwise regulate
any action on the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by KDI under
this Agreement or the Plan. The Fund will pay or cause to be paid expenses
(including the fees and disbursements of its own counsel) of any registration of
the Fund and its shares under the United States securities laws and expenses
incident to the issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent. KDI will pay
all expenses (other than expenses which one or more Firms may bear pursuant to
any agreement with KDI) incident to the sale and distribution of the shares
issued or sold hereunder, including, without limiting the generality of the
foregoing, all (a) expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other literature,
advertising and selling aids in connection with the offering of the shares for
sale (except that such expenses need not include expenses incurred by the Fund
in connection with the preparation, typesetting, printing and distribution of
any registration statement or prospectus, report or other communication to
shareholders in their capacity as such), (b) expenses of advertising in
connection with such offering and (c) expenses (other than the Fund's auditing
expenses) of qualifying or continuing the qualification of the shares for sale
and, in connection therewith, of qualifying or continuing the qualification of
<PAGE>
the Fund as a dealer or broker under the laws of such states as may be
designated by KDI under the conditions herein specified. No transfer taxes, if
any, which may be payable in connection with the issue or delivery or shares
sold as herein contemplated or of the certificates for such shares shall be
borne by the Fund, and KDI will indemnify and hold harmless the Fund against
liability for all such transfer taxes.
8. This Agreement shall become effective on the date hereof and shall
continue until October 16, 1999; and shall continue from year to year thereafter
only so long as such continuance is approved in the manner required by the
Investment Company Act.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by KDI on sixty (60) days' written notice to the other party. The
Fund may effect termination with respect to any class of any series of the Fund
by a vote of (i) a majority of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement, or in any other agreement related to the
Plan, or (ii) a majority of the outstanding voting securities of such series or
class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon KDI's failure to fulfill
any of its obligations hereunder.
All material amendments to this Agreement must be approved by a vote of
a majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as
set forth in the Plan. Termination of this Agreement shall not affect the right
of KDI to receive payments on any unpaid balance of the compensation earned
prior to such termination, as set forth in the Plan.
9. KDI will not use or distribute, or authorize the use, distribution
or dissemination by Firms or others in connection with the sale of Fund shares
any statements other than those contained in the Fund's current prospectus,
except such supplemental literature or advertising as shall be lawful under
federal and state securities laws and regulations. KDI will furnish the Fund
with copies of all such material.
10. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
<PAGE>
other party may designate for the receipt of such notice.
12. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust, and all amendments thereto, all of which are
on file with the Secretary of The Commonwealth of Massachusetts, and the
limitation of shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by its representatives
as such representatives and not individually, and the obligations of the Fund
hereunder are not binding upon any of the Trustees, officers or shareholders of
the Fund individually but are binding upon only the assets and property of the
Fund. With respect to any claim by KDI for recovery of any liability of the Fund
arising hereunder allocated to a particular series or class, whether in
accordance with the express terms hereof or otherwise, KDI shall have recourse
solely against the assets of that series or class to satisfy such claim and
shall have no recourse against the assets of any other series or class for such
purpose.
13. This Agreement shall be construed in accordance with applicable
federal law and with the laws of The Commonwealth of Massachusetts.
14. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all prior agreements between the
parties relating to the subject matter hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be
executed as of the day and year first above written.
KEMPER VALUE PLUS GROWTH FUND
By: /s/Mark S. Casady
-------------------------------
Title: President
----------------------------
ATTEST:
- -------------------------------------
Title:
-------------------------------
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
-------------------------------
Title: President
----------------------------
ATTEST:
/s/Joan V. Pearson
- -------------------------------------
Title: Executive Assistant
-------------------------------
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 7th day of September, 1998, between KEMPER VALUE PLUS GROWTH
FUND, a Massachusetts business trust (the "Fund"), and KEMPER DISTRIBUTORS,
INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as agent for distribution of
shares of beneficial interest (hereinafter called "shares") of the Fund in
jurisdictions wherein shares of the Fund may legally be offered for sale;
provided, however, that the Fund in its absolute discretion may (a) issue or
sell shares directly to holders of shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; or (b) issue or
sell shares at net asset value to the shareholders of any other investment
company, for which KDI shall act as exclusive distributor, who wish to exchange
all or a portion of their investment in shares of such other investment company
for shares of the Fund. KDI shall appoint various financial service firms
("Firms") to provide distribution services to investors. The Firms shall provide
such office space and equipment, telephone facilities, personnel, literature
distribution, advertising and promotion as is necessary or beneficial for
providing information and distribution services to existing and potential
clients of the Firms. KDI may also provide some of the above services for the
Fund.
KDI accepts such appointment as distributor and principal underwriter
and agrees to render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless expressly
provided herein or otherwise authorized, shall have no authority to act for or
represent the Fund in any way. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will,
pursuant to separate written contracts, appoint various Firms to provide
advertising, promotion and other distribution services contemplated hereunder
directly to or for the benefit of existing and potential shareholders who may be
clients of such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell such
part of the authorized shares of the Fund remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
<PAGE>
("Securities Act"), at prices determined as hereinafter provided and on terms
hereinafter set forth, all subject to applicable federal and state laws and
regulations and to the Fund's organizational documents.
2. KDI shall sell shares of the Fund to or through qualified Firms in
such manner, not inconsistent with the provisions hereof and the then effective
registration statement (and related prospectus) of the Fund under the Securities
Act, as KDI may determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the Fund without
prior consent of the Fund. In addition to sales made by it as agent of the Fund,
KDI may, in its discretion, also sell shares of the Fund as principal to persons
with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold
by KDI shall be so offered or sold at a price per share determined in accordance
with the then current prospectus. The price the Fund shall receive for all
shares purchased from it shall be the net asset value used in determining the
public offering price applicable to the sale of such shares. Any excess of the
sales price over the net asset value of the shares of the Fund sold by KDI as
agent shall be retained by KDI as a commission for its services hereunder. KDI
may compensate Firms for sales of shares at the commission levels provided in
the Fund's prospectus from time to time. KDI may pay other commissions, fees or
concessions to Firms, any may pay them to others in its discretion, in such
amounts as KDI shall determine from time to time. KDI shall be entitled to
receive and retain any applicable contingent deferred sales charge as described
in the Fund's prospectus. KDI shall also receive any distribution services fee
payable by the Fund as provided in the Fund's Amended and Restated 12b-1 Plan,
as amended from time to time (the "Plan").
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price or net asset value, as
applicable, of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered
under the Securities Act for sale as herein contemplated such shares as KDI
shall reasonably request and as the Securities and Exchange Commission shall
permit to be so registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
<PAGE>
5. KDI shall issue and deliver or shall arrange for various Firms to
issue and deliver on behalf of the Fund such confirmations of sales made by it
pursuant to this Agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund the amount due
the Fund for the sale of such shares. Certificates shall be issued or shares
registered on the transfer books of the Fund in such names and denominations as
KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the extent
that it shall have received purchase orders therefor. KDI will not make, or
authorize Firms or others to make (a) any short sales of shares of the Fund; or
(b) any sales of such shares to any Board member or officer of the Fund or to
any officer or Board member of KDI or of any corporation or association
furnishing investment advisory, managerial or supervisory services to the Fund,
or to any corporation or association, unless such sales are made in accordance
with the then current prospectus relating to the sale of such shares. KDI, as
agent of and for the account of the Fund, may repurchase the shares of the Fund
at such prices and upon such terms and conditions as shall be specified in the
current prospectus of the Fund. In selling or reacquiring shares of the Fund for
the account of the Fund, KDI will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or reacquisition,
as the case may be, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by KDI or any employee,
representative or agent of KDI. KDI will observe and be bound by all the
provisions of the Fund's organizational documents (and of any fundamental
policies adopted by the Fund pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), notice of which shall have been given to KDI) which
at the time in any way require, limit, restrict, prohibit or otherwise regulate
any action on the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by KDI under
this Agreement or the Plan. The Fund will pay or cause to be paid expenses
(including the fees and disbursements of its own counsel) of any registration of
the Fund and its shares under the United States securities laws and expenses
incident to the issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent. KDI will pay
all expenses (other than expenses which one or more Firms may bear pursuant to
any agreement with KDI) incident to the sale and distribution of the shares
issued or sold hereunder, including, without limiting the generality of the
foregoing, all (a) expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other literature,
advertising and selling aids in connection with the offering of the shares for
sale (except that such expenses need not include expenses incurred by the Fund
in connection with the preparation, typesetting, printing and distribution of
any registration statement or prospectus, report or other communication to
shareholders in their capacity as such), (b) expenses of advertising in
connection with such offering and (c) expenses (other than the Fund's auditing
expenses) of qualifying or continuing the qualification of the shares for sale
and, in connection therewith, of qualifying or continuing the qualification of
<PAGE>
the Fund as a dealer or broker under the laws of such states as may be
designated by KDI under the conditions herein specified. No transfer taxes, if
any, which may be payable in connection with the issue or delivery or shares
sold as herein contemplated or of the certificates for such shares shall be
borne by the Fund, and KDI will indemnify and hold harmless the Fund against
liability for all such transfer taxes.
8. This Agreement shall become effective on the date hereof and shall
continue until October 16, 1999; and shall continue from year to year thereafter
only so long as such continuance is approved in the manner required by the
Investment Company Act.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by KDI on sixty (60) days' written notice to the other party. The
Fund may effect termination with respect to any class of any series of the Fund
by a vote of (i) a majority of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement, or in any other agreement related to the
Plan, or (ii) a majority of the outstanding voting securities of such series or
class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon KDI's failure to fulfill
any of its obligations hereunder.
All material amendments to this Agreement must be approved by a vote of
a majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as
set forth in the Plan. Termination of this Agreement shall not affect the right
of KDI to receive payments on any unpaid balance of the compensation earned
prior to such termination, as set forth in the Plan.
9. KDI will not use or distribute, or authorize the use, distribution
or dissemination by Firms or others in connection with the sale of Fund shares
any statements other than those contained in the Fund's current prospectus,
except such supplemental literature or advertising as shall be lawful under
federal and state securities laws and regulations. KDI will furnish the Fund
with copies of all such material.
10. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
<PAGE>
other party may designate for the receipt of such notice.
12. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust, and all amendments thereto, all of which are
on file with the Secretary of The Commonwealth of Massachusetts, and the
limitation of shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by its representatives
as such representatives and not individually, and the obligations of the Fund
hereunder are not binding upon any of the Trustees, officers or shareholders of
the Fund individually but are binding upon only the assets and property of the
Fund. With respect to any claim by KDI for recovery of any liability of the Fund
arising hereunder allocated to a particular series or class, whether in
accordance with the express terms hereof or otherwise, KDI shall have recourse
solely against the assets of that series or class to satisfy such claim and
shall have no recourse against the assets of any other series or class for such
purpose.
13. This Agreement shall be construed in accordance with applicable
federal law and with the laws of The Commonwealth of Massachusetts.
14. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all prior agreements between the
parties relating to the subject matter hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be
executed as of the day and year first above written.
KEMPER VALUE PLUS GROWTH FUND
By: /s/Mark S. Casady
-------------------------------
Title: President
----------------------------
ATTEST:
- -------------------------------------
Title:
-------------------------------
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
-------------------------------
Title: President
----------------------------
ATTEST:
/s/Joan V. Pearson
- -------------------------------------
Title: Executive Assistant
-------------------------------
Fund: Kemper Value Plus Growth Fund (the "Fund")
Class: Class B (the "Class")
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund and for the Class (as noted and defined above) by a
majority of the members of the Fund's Board (the "Board"), including a majority
of the Board members who are not "interested persons" of the Fund and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan (the "Qualified Board Members") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Fund attributable to the Class and such fee shall be charged only
to the Class. For the month and year in which this Plan becomes effective or
terminates, there shall be an appropriate proration of the distribution services
fee set forth in Paragraph 1 hereof on the basis of the number of days that the
Plan and any agreements related to the Plan are in effect during the month and
year, respectively. The distribution services fee shall be in addition to and
shall not be reduced or offset by the amount of any contingent deferred sales
charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Fund: Kemper Value Plus Growth Fund (the "Fund")
Class: Class C (the "Class")
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund and for the Class (as noted and defined above) by a
majority of the members of the Fund's Board (the "Board"), including a majority
of the Board members who are not "interested persons" of the Fund and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan (the "Qualified Board Members") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Fund attributable to the Class and such fee shall be charged only
to the Class. For the month and year in which this Plan becomes effective or
terminates, there shall be an appropriate proration of the distribution services
fee set forth in Paragraph 1 hereof on the basis of the number of days that the
Plan and any agreements related to the Plan are in effect during the month and
year, respectively. The distribution services fee shall be in addition to and
shall not be reduced or offset by the amount of any contingent deferred sales
charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
