Filed electronically with the Securities and Exchange Commission
on January 29, 1999
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. 5 / X /
----
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 6 / 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)
/ / On February 1, 1999 pursuant to paragraph (a) (1)
/ / On __________________ pursuant to paragraph (a) (2) of Rule 485
/ X / On February 1, 1999 pursuant to paragraph (a)(3) 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
Part C - Page 1
<PAGE>
KEMPER EQUITY FUNDS -- GROWTH STYLE
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 1, 1999
------------------
CLASS I SHARES
------------------
KEMPER AGGRESSIVE GROWTH FUND
KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER SMALL CAPITALIZATION EQUITY FUND
KEMPER TECHNOLOGY 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 funds' prospectus, and Class I shares, which are
described in the prospectus as supplemented hereby. When placing purchase
orders, investors must specify for which class of shares they are ordering.
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; and (6) investment
companies managed by Scudder Kemper that invest primarily in other investment
companies. 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, selected dealers authorized by KDI. Share certificates
are not available for Class I shares.
February 1, 1999
<PAGE>
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, typically will be
higher for Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
PAST PERFORMANCE
The charts and tables contained in the accompanying prospectus provide some
indication of the risks of investing in the funds by illustrating how the funds
have performed from year to year, and comparing this information to a broad
measure of market performance. Of course, past performance is not necessarily an
indication of future performance. Additional financial information for those
funds which currently have Class I shares outstanding is set forth below.
Average Annual Total Returns -- Class I shares
For periods ended Inception
December 31, 1998 One Year Life of Class of Class
----------------- -------- ------------- --------
Kemper Blue Chip Fund 15.77% 23.25% 11/22/95
Russell 1000 Index 27.02% 27.16% 11/30/95
The Russell 1000 Index is an unmanaged capitalization weighted price only index
comprised of the largest capitalized U.S. companies whose common stocks are
traded in the United States. This large capitalization market oriented index is
highly correlated with the S&P 500 Stock Index.
For periods ended Inception
December 31, 1998 One Year Life of Class of Class
----------------- -------- ------------- --------
Kemper Growth Fund 14.68% 17.93% 7/3/95
Kemper Technology Fund 43.91% 22.79% 7/3/95
Kemper Total Return Fund 16.79% 17.85% 7/3/95
Russell 1000 Growth Index 38.71% 30.54% 6/30/95
The Russell 1000 Growth Index is an unmanaged index comprised of common stocks
of larger U.S. companies with greater than average growth
<PAGE>
orientation and represents the universe of stocks from which "earnings/growth"
money managers typically select.
For periods ended Inception
December 31, 1998 One Year Life of Class of Class
----------------- -------- ------------- --------
Kemper Small (2.62)% 13.00% 7/3/95
Capitalization Equity Fund
Russell 2000 Index (2.55)% 11.67% 8/31/95
The Russell 2000 Index is an unmanaged capitalization weighted price only index
which is comprised of 2000 of the smallest stocks (on the basis of
capitalization) in the Russell 3000 Index.
EXPENSE INFORMATION
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the funds.
Shareholder fees: Fees paid directly from your investment.
<TABLE>
<CAPTION>
Maximum
Sales Maximum
Charge Deferred
(Load) Sales Maximum Sales
Imposed on Charge Charge (Load)
Purchases (Load) (as Imposed on
(as a % of a % of Reinvested
offering redemption Dividends/ Redemption Exchange
price) proceeds) Distributions Fee Fee
------ --------- ------------- --- ---
<S> <C> <C> <C> <C> <C>
Kemper Aggressive None None None None None
Growth Fund
Kemper Blue Chip None None None None None
Fund
Kemper Growth Fund None None None None None
Kemper Small None None None None None
Capitalization
Equity Fund
Kemper Technology None None None None None
Fund
Kemper Total Return None None None None None
Fund
Kemper Value+Growth None None None None None
Fund
</TABLE>
<PAGE>
Annual fund operating expenses: Expenses that are deducted from fund assets.
<TABLE>
<CAPTION>
Total
Annual
Fund
Management Distribution Other Operating
Fee (12b-1) Fees Expenses* Expenses*
--- ------------ --------- ---------
<S> <C> <C> <C> <C>
Kemper Aggressive Growth Fund 0.65% None 0.24% 0.89%
Kemper Blue Chip Fund 0.56% None 0.12% 0.68%
Kemper Growth Fund 0.54% None 0.11% 0.65%
Kemper Small Capitalization 0.36% None 0.12% 0.48%
Equity Fund
Kemper Technology Fund 0.55% None 0.12% 0.57%
Kemper Total Return Fund 0.53% None 0.11% 0.64%
Kemper Value+Growth Fund 0.72% None 0.18% 0.90%
</TABLE>
* Estimated for Kemper Aggressive Growth Fund and Kemper Value+Growth
Fund since no Class I shares were issued as of their most recent fiscal
year ends.
Example
This example is to help you compare the cost of investing in a fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown.
Fees and expenses if you sold shares after:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Kemper Aggressive Growth Fund $91 $284 $493 $1,096
Kemper Blue Chip Fund $69 $218 $379 $847
Kemper Growth Fund $66 $208 $362 $810
Kemper Small Capitalization $49 $154 $269 $604
Equity Fund
Kemper Technology Fund $68 $214 $373 $835
Kemper Total Return Fund $65 $205 $357 $798
Kemper Value+Growth Fund $92 $287 $498 $1,107
<PAGE>
FINANCIAL HIGHLIGHTS
No financial information is presented for Class I shares of Kemper Aggressive
Growth Fund and Kemper Value+Growth Fund since no Class I shares were issued as
of the respective fiscal years of the funds.
Kemper Blue Chip Fund
November
22, 1995 to
Year ended October 31, October 31,
CLASS I 1998 1997 1996
- -----------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $17.72 17.18 15.30
- ------------------------------------------------------------------------------
Income from investment operations:
Net investment income .21 .32 .36
- -----------------------------------------------------------------------------
Net realized and unrealized gain 1.19 3.58 2.96
- -----------------------------------------------------------------------------
Total from investment operations 1.40 3.90 3.32
- -----------------------------------------------------------------------------
Less dividends:
Distribution from net investment .25 .23 .24
income
- -----------------------------------------------------------------------------
Distribution from net realized 2.19 3.13 1.20
gain
- -----------------------------------------------------------------------------
Total dividends 2.44 3.36 1.44
- -----------------------------------------------------------------------------
Net asset value, end of period $16.68 17.72 17.18
- -----------------------------------------------------------------------------
Total return (not annualized) 8.53% 26.89 21.89
- -----------------------------------------------------------------------------
Ratios to average net assets (annualized)
Expenses .68% .70 1.31
- -----------------------------------------------------------------------------
Net investment income 1.23% 1.56 1.33
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Kemper Growth Fund
July 3 to
Year ended September 30, Sept. 30,
CLASS I 1998 1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $15.60 17.26 16.09 14.80
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .08 .19 .03
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (1.68) 2.61 2.74 1.26
(loss)
- -------------------------------------------------------------------------------------
Total from investment operations (1.63) 2.69 2.93 1.29
- -------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment -- -- .08 --
income
- -------------------------------------------------------------------------------------
Distribution from net realized gain 2.09 4.35 1.68 --
- -------------------------------------------------------------------------------------
Total dividends 2.09 4.35 1.76 --
- -------------------------------------------------------------------------------------
Net asset value, end of period $11.88 15.60 17.26 16.09
- -------------------------------------------------------------------------------------
Total return (not annualized) (11.45)% 20.51 20.19 8.72
- -------------------------------------------------------------------------------------
Ratios to average net assets (annualized)
Expenses .65% .70 .64 .59
- -------------------------------------------------------------------------------------
Net investment income .30% .43 1.08 .92
- -------------------------------------------------------------------------------------
<PAGE>
Kemper Small Capitalization Equity Fund
July 3 to
Year ended September 30, Sept. 30,
CLASS I 1998 1997 1996 1995
- -------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of $8.07 7.05 7.15 6.27
period
- -------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income -- .01 .01 --
- -------------------------------------------------------------------------------------
Net realized and unrealized (1.87) 1.58 .94 .88
gain (loss)
- -------------------------------------------------------------------------------------
Total from investment (1.87) 1.59 .95 .88
operations
- -------------------------------------------------------------------------------------
Less distribution from net .81 .57 1.05 --
realized gain
- -------------------------------------------------------------------------------------
Net asset value, end of period $5.39 8.07 7.05 7.15
- -------------------------------------------------------------------------------------
Total return (not annualized) (24.82)% 24.89 16.76 14.04
- -------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses .48% .53 .66 .79
- -------------------------------------------------------------------------------------
Net investment income (loss) .04% .17 .16 (.14)
- -------------------------------------------------------------------------------------
Kemper Technology Fund
July 3 to
Year ended October 31, October 31,
CLASS I 1998 1997 1996 1995
- -------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of $13.19 13.20 14.64 12.72
period
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.02) (.04) (.07) (.02)
- -------------------------------------------------------------------------------------
Net realized and unrealized gain .83 2.14 .76 1.94
- -------------------------------------------------------------------------------------
Total from investment operations .81 2.10 .69 1.92
- -------------------------------------------------------------------------------------
Less distribution from net realized 2.14 2.11 2.13 --
gain
- -------------------------------------------------------------------------------------
Net asset value, end of period $11.86 13.19 13.20 14.64
- -------------------------------------------------------------------------------------
Total return (not annualized) 8.44% 17.23 8.06 15.09
- -------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses .67% .74 .76 .65
- -------------------------------------------------------------------------------------
Net investment loss (.12)% (.27) (.49) (.33)
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Kemper Total Return Fund
July 3 to
Year ended October 31, October 31,
CLASS I 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $11.33 11.27 10.61 10.07
- ------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .34 .36 .32 .10
- ------------------------------------------------------------------------------------------------
Net realized and unrealized .77 1.55 1.23 .52
gain (loss)
- ------------------------------------------------------------------------------------------------
Total from investment 1.11 1.91 1.55 .62
operations
- ------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .35 .36 .39 .08
- ------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.55 1.49 .50 --
- ------------------------------------------------------------------------------------------------
Total dividends 1.90 1.85 .89 .08
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $10.54 11.33 11.27 10.61
- ------------------------------------------------------------------------------------------------
Total return (not annualized) 10.98% 19.40 15.64 6.21
- ------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized)
Expenses .64% .71 .72 .61
- ------------------------------------------------------------------------------------------------
Net investment income 3.12% 3.22 3.09 2.97
- ------------------------------------------------------------------------------------------------
</TABLE>
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 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.
<PAGE>
[LOGO] KEMPER FUNDS
Kemper Equity Funds
Growth Style
PROSPECTUS February 1, 1999
KEMPER EQUITY FUNDS GROWTH STYLE
222 South Riverside Plaza, Chicago, Illinois 60606 (800) 621-1048
This prospectus describes a choice of funds managed by Scudder Kemper
Investments, Inc.
Kemper Aggressive Growth Fund
Kemper Blue Chip Fund
Kemper Classic Growth Fund*
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Technology Fund
Kemper Total Return Fund
Kemper Value+Growth Fund
* Effective January 1, 1999. Kemper Classic Growth Fund refers to the Kemper
shares of Classic Growth Fund.
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
Contents
2 Growth Stock Investing
- --------------------------------------------------------------------------------
2 Investment approach
2 Principal risk factors
3 About The Funds
- --------------------------------------------------------------------------------
3 Kemper Aggressive Growth Fund
8 Kemper Blue Chip fund
13 Kemper Classic Growth Fund
18 Kemper Growth Fund
23 Kemper Small Capitalization Equity Fund
28 Kemper Technology Fund
33 Kemper Total Return Fund
39 Kemper Value+Growth Fund
44 Investment Manager
50 About Your Investment
- --------------------------------------------------------------------------------
50 Choosing a share class
52 Buying shares
57 Selling and exchanging shares
58 Distributions and taxes
59 Transaction information
<PAGE>
GROWTH STOCK INVESTING
INVESTMENT APPROACH
The funds, except Kemper Value+Growth Fund, described in this prospectus invest
primarily in "growth stocks" -- shares of companies that are expected to
experience rapid growth resulting from strong sales, talented management and
dominant market positions. Kemper Value+Growth Fund invests in both growth and
value stocks. Because of their anticipated return potential, growth stocks are
generally in strong demand and tend to carry relatively high price-to-earnings
ratios (P/E) relative to the overall stock market. The investment manager
invests for the funds using a "growth at a reasonable price" strategy that
involves analysis of the companies' fundamental strengths and assessing overall
economic conditions to uncover companies that the investment manager believes
are trading at reasonable prices but that still have the potential for strong
growth.
Each fund approaches stock investing with a different style and risk profile.
PRINCIPAL RISK FACTORS
There are market and investment risks with any security. The value of an
investment in the funds will fluctuate over time and it is possible to lose
money invested in the funds.
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.
Equity Investing. 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 a greater potential for
gain on 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.
Growth Investing. 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.
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.
Inflation. There is a possibility that the rising prices of goods and services
may have the effect of offsetting a fund's real return.
2 Growth Stock Investing
<PAGE>
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. Except as otherwise indicated, 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. The
investment manager 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.
The fund may invest 25% or more of its total assets in one or more market
sectors, such as the technology sector.
The investment manager considers a variety of factors to select stocks,
including sustainable, above average earnings growth relative to the overall
stock market, historic earnings, earnings estimates and company fundamentals.
The fund is intended for more aggressive investors who wish to address long-term
capital appreciation goals.
Principal risks
The fund's principal risks are associated with investing in the stock market,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio and inflation risk. You will find a discussion of these risks
under "Growth Stock Investing" at the front of this prospectus.
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.
Sector Investing. To the extent that the fund focuses 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
focused its assets in that sector.
Non-diversified. Because the fund is "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.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year, and
Kemper Aggressive Growth Fund 3
<PAGE>
comparing this information to a broad measure of market performance. Of course,
past performance is not necessarily an indication of future performance.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
Total returns for years ended December 31
[The information below was represented by a bar graph in the printed materials.]
1997 1998
---- ----
33.38% 13.98%
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 25.50% (the fourth quarter of 1998), and the fund's lowest
return for a calendar quarter was ?18.97% (the third quarter of 1998).
Average Annual Total Returns
For periods ended
Russell
December 31, 1998 Class A Class B Class C 3000 Index
----------------- ------- ------- ------- ----------
One Year 7.40% 10.11% 13.18% 24.14%
Five Years -- -- -- --
Ten Years -- -- -- --
Since Class Inception** 19.68% 21.04% 22.36% *
- -----------
* Index returns for the life of each class: 27.91% (12/31/96) for Class A, B
and C shares.
** Inception date for Class A, B and C shares is 12/31/96.
The Russell 3000 Index is an unmanaged index comprised of the largest
capitalized U.S. domiciled companies whose common stocks trade in the U.S. Index
returns assume reinvestment of dividends and, unlike the fund's returns, do not
reflect any fees or expenses.
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of 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.
4 Kemper Aggressive Growth Fund
<PAGE>
You will find details about fee discounts and waivers in the Buying shares and
Choosing a share class -- Special features sections of this prospectus.
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load)
Imposed on Purchases (as % of
offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
(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: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.38% 0.38% 0.38%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 1.08% 1.68% 1.63%
----- ----- -----
Total Annual Fund Operating Expenses 1.46% 2.81% 2.76%
Subject to the qualification described below, Scudder Kemper Investments, Inc.
has agreed to temporarily reimburse certain operating expenses to the extent
necessary to limit the fund's "Other Expenses" of Class A shares to 0.87%, Class
B to 0.99% and Class C to 0.97%; provided, however, transfer agency fees and
related out-of-pocket expenses will not be subject to this reimbursement.
Therefore, if transfer agency fees and related out-of-pocket expenses were to
exceed the limits upon Other Expenses for a particular class during the period
of the reimbursement (contrary to current estimates), such expenses would be
charged to the class in the actual amount incurred and Other Expenses for the
class would exceed the limits described above during the period. This
arrangement may be discontinued at any time. As a result, for the fiscal year
ended September 30, 1998, "Other Expenses" were reduced by 0.21%, 0.69% and
0.66% for Class A, Class B and Class C and actual total annual fund operating
expenses were 1.25% for Class A, 2.12% for Class B and 2.10% for Class C. The
information contained in the above table and the example below reflects the
expenses of the fund without taking into account any applicable fee waivers
and/or reimbursements.
Kemper Aggressive Growth Fund 5
<PAGE>
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. 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 returns vary from year to year, and may be higher or lower than
those shown. The example does not reflect sales charges (loads) on reinvested
dividends and other distributions. If these sales charges were included, your
costs would be higher.
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $715 $684 $379
3 Years $1,010 $1,171 $856
5 Years $1,327 $1,684 $1,459
10 Years $2,221 $2,514 $3,090
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $715 $284 $279
3 Years $1,010 $871 $856
5 Years $1,327 $1,484 $1,459
10 Years $2,221 $2,514 $3,090
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.
The investment manager relies heavily upon the fundamental analysis and research
of its large research staff, and will generally seek to invest in growth
companies whose value may not be fully recognized by the market at large.
Such companies may be:
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
6 Kemper Aggressive Growth Fund
<PAGE>
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 does not presently intend to do so, it may invest up to 25% of
its total assets in foreign securities.
Because the fund may engage in active and frequent trading of portfolio
securities, the fund may have higher transaction costs which would affect the
fund's performance over time. In addition, shareholders may incur taxes on any
realized capital gains.
For temporary defensive purposes, 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. Because this defensive policy
differs from the fund's investment objective, the fund may not achieve its goals
during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques that may impact fund performance,
including options, futures and other strategic transactions.
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.
Additional risk
If the aggressive growth types of stocks the fund invests in do not produce
expected earnings results, they may lose significant share value.
Foreign Investing. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
Kemper Aggressive Growth Fund 7
<PAGE>
KEMPER BLUE CHIP FUND
Investment objective and principal strategies
Kemper Blue Chip Fund seeks growth of capital and of income. Except as otherwise
indicated, the fund's investment objective and policies may be changed without a
vote of shareholders.
The fund invests in a diversified portfolio, emphasizing investments primarily
in U.S. common stocks of large, well known, high quality companies. Companies of
this general type are often referred to as "Blue Chip" companies and are similar
in size to those included in the Russell 1000 Index -- a widely used benchmark
of large stock performance. Such companies generally have an established history
of earnings and dividends. "Blue Chip" companies are generally identified by
their substantial capitalization, easy access to credit, good industry position
and superior management structure.
The fund may be appropriate for investors who wish to establish the foundation
of a growth-oriented portfolio, or for investors who wish to diversify an
investment portfolio into large-cap equity stocks.
Principal risks
The fund's principal risks are associated with investing in the stock market,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio and inflation risk. You will find a discussion of these risks
under "Growth Stock Investing" at the front of this prospectus.
Management Style. To the extent that the fund invests in larger, more
established companies, the fund may underperform in markets that do not favor
growth stock funds.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year, and
comparing this information to a broad measure of market performance. Of course,
past performance is not necessarily an indication of future performance.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
8 Kemper Blue Chip Fund
<PAGE>
Total returns for years ended December 31
[The information below was represented by a bar graph in the printed materials.]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
27.26% 2.41% 44.43% -1.20% 3.82% -5.16% 31.72% 27.70% 26.21% 14.40%
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 19.21% (the fourth quarter of 1998), and the fund's lowest
return for a calendar quarter was ?13.81% (the third quarter of 1990).
Average Annual Total Returns
For periods ended Russell
December 31, 1998 Class A Class B Class C 1000 Index
----------------- ------- ------- ------- ----------
One Year 7.84% 10.66% 13.58% 27.02%
Five Years 16.77% -- -- 23.37%
Ten Years 15.41% -- -- 19.03%
Since Class Inception** 13.17% 19.78% 20.14% *
- -----------
* Index returns for the life of each class: 19.47% (11/30/87) for Class A and
26.16% (5/31/94) for Class B and C shares.
** Inception dates for Class A, B and C shares are 11/23/87, 5/31/94 and
5/31/94, respectively.
The Russell 1000 Index is an unmanaged capitalization weighted price only index
comprised of the largest capitalized U.S. companies whose common stocks are
traded in the United States. Index returns assume reinvestment of dividends and,
unlike the fund's returns, do not reflect any fees or expenses.
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of 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
Choosing a share class -- Special features sections of this prospectus.
Kemper Blue Chip Fund 9
<PAGE>
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load) Imposed
on Purchases (as % of offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
(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: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.56% 0.56% 0.56%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 0.73% 0.79% 0.72%
----- ----- -----
Total Annual Fund Operating Expenses 1.29% 2.10% 2.03%
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown. The example does not reflect sales
charges (loads) on reinvested dividends and other distributions. If these sales
charges were included, your costs would be higher.
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $699 $613 $306
3 Years $960 $958 $637
5 Years $1,242 $1,329 $1,093
10 Years $2,042 $2,034 $2,358
10 Kemper Blue Chip Fund
<PAGE>
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $699 $213 $206
3 Years $960 $658 $637
5 Years $1,242 $1,129 $1,093
10 Years $2,042 $2,034 $2,358
Principal strategies and investments
Under normal market conditions, the fund will 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.
"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.
In general, the fund will seek to invest in those established, high quality
companies whose industries are experiencing favorable secular or cyclical
change. Thus, in seeking its objective the fund will endeavor to select its
investments from high quality companies operating in the more attractive
industries. To select stocks, the investment manager researches a variety of
factors, including historic and projected earnings growth rates, company
fundamentals and balance sheet data.
A stock is typically sold when, in the opinion of the investment manager, (i)
the stock has reached its fair market value and its appreciation potential is
limited, (ii) a company's fundamentals have deteriorated or (iii) the fund's
portfolio is too heavily weighted in a particular stock or industry sector.
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.
Although the fund does not presently intend to do so, it may invest up to 25% of
its total assets in foreign securities.
Because the fund may engage in active and frequent trading of portfolio
securities, the fund may have higher transaction costs which would affect the
Kemper Blue Chip Fund 11
<PAGE>
fund's performance over time. In addition, shareholders may incur taxes on any
realized capital gains.
For temporary defensive purposes, the fund may invest up to 100% of its assets
in short-term high-grade debt securities, cash and cash equivalents. Because
this defensive policy differs from the fund's investment objective, the fund may
not achieve its goals during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques that may impact fund performance,
including options, futures and other strategic transactions.
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.
Additional risk
Foreign Investing. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
12 Kemper Blue Chip Fund
<PAGE>
KEMPER CLASSIC GROWTH FUND
Investment objectives and principal strategies
Classic Growth Fund seeks to provide long-term growth of capital with reduced
share price volatility compared to other growth mutual funds. Except as
otherwise indicated, 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 managed, with attention paid to stock valuation and risk, in
order to attempt to moderate share price volatility. The fund focuses on firms
with a record of strong and sustainable earnings growth, solid management with a
proven ability to add value over time and reasonable stock market valuations --
in short, firms with solid 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 major component of the equity portion 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,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio and inflation risk. You will find a discussion of these risks
under "Growth Stock Investing" at the front of this prospectus.
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.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed, and comparing this
information to a broad measure of market performance. Of course, past
performance is not necessarily an indication of future performance. The fund
currently offers four classes of shares. The original class of shares is
designated Class S. This prospectus sets forth information about Classes A, B
and C. Because Classes A, B and C had not commenced operations as of 12/31/97,
the performance information set forth below is for Class S shares, and does not
reflect sales charges, which reduce return. All share classes invest in the same
underlying portfolio of securities and have the same management team. Because of
different fees and expenses, performance of share classes will differ.
Kemper Classic Growth Fund 13
<PAGE>
Total return for year ended December 31
[The information below was represented by a bar graph in the printed materials.]
1997
----
34.38%
For the period included in the bar chart, the Class S shares' highest return for
a calendar quarter was 20.73% (the second quarter of 1997), and the Class S
shares' lowest return for a calendar quarter was ?1.7% (the fourth quarter of
1997).
The Class A shares' year-to-date total return as of September 30, 1998 was
- -2.09%.
Average Annual Total Returns
For periods ended
December 31, 1997 Class S S&P 500 Index+
----------------- ------- --------------
One Year 34.86% 33.38%
Since Inception (9/9/96) 36.89% 34.18% (9/30/96)
- -----------
+ The Standard & Poor's (S&P) 500 Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on
the New York Stock Exchange and American Stock Exchange and traded on the
Nasdaq Stock Market, Inc. Index returns assume reinvestment of dividends
and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
Fee and expense information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of 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 Choosing a
share class -- Special features sections of this prospectus.
14 Kemper Classic Growth Fund
<PAGE>
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load)
Imposed on Purchases (as % of
offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge Imposed on
Reinvested Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
(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: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.70% 0.70% 0.70%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 1.04% 1.07% 1.55%
----- ----- -----
Total Annual Fund Operating Expenses 1.74% 2.52% 3.00%
For the fiscal year ended August 31, 1998, the fund received reimbursement in
the amount of 0.50%, 0.40% and 0.91% for Class A, B and C shares, respectively.
As a result, actual total fund operating expenses were 1.24%, 2.12% and 2.09%
for Class A, B and C shares, respectively. The investment manager has agreed to
continue to waive 0.25% of its management fee until December 31, 1999. The
information contained in the above table and the example below reflects the
expenses of the fund without taking into account any applicable fee waivers
and/or reimbursements.
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown.
Kemper Classic Growth Fund 15
<PAGE>
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $742 $665 $405
3 Years $1,091 $1,107 $927
5 Years $1,464 $1,567 $1,577
10 Years $2,509 N/A $3,318
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $742 $255 $303
3 Years $1,091 $785 $927
5 Years $1,464 $1,340 $1,577
10 Years $2,509 N/A $3,318
Principal strategies and investments
Under normal market conditions, the fund invests primarily in a diversified
portfolio of common stocks which the investment manager believes offer
above-average appreciation potential, while 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:
o strong and sustainable earnings growth
o solid management with a proven ability to add value over time
o reasonable stock market valuations.
These companies often have important business franchises, leading products,
services or technologies, or dominant marketing and distribution systems.
The fund employs a three-step process designed to help identify attractive
growth stocks. The fund's management team begins with a universe of quality
companies with market capitalizations greater than $2 billion. Then they narrow
the universe using fundamental and quantitative analysis to rank stocks based on
several factors including:
o strong fundamentals -- include stocks of companies that they believe have
the ability to deliver consistent earnings growth
o attractive valuations -- identify stocks that they believe are priced
attractively based on expectations for the company's growth prospects
o attractive share price performance -- a proven ability to create value for
shareholders over time.
16 Kemper Classic Growth Fund
<PAGE>
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.
For temporary defensive purposes, the fund may invest up to 100% of its assets
in short-term high-grade debt securities, cash and cash equivalents. Because
this defensive policy differs from the fund's investment objective, the fund may
not achieve its goal during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques which may impact fund performance,
including options, futures and other strategic transactions. The fund is limited
to 5% of net assets for initial margin and premium amounts on futures positions
considered speculative by the Commodities Futures Trading Commission.
More information about these and other investments and strategies is provided in
the Statement of Additional Information. Of course, there can be no guarantee
that by following these investment strategies, the fund will achieve its
objective.
Additional principal risks
Foreign investing risk. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
Kemper Classic Growth Fund 17
<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 that the investment manager
believes have the potential for capital appreciation. Except as otherwise
indicated, the fund's investment objective and policies may be changed without a
vote of shareholders. The fund invests primarily in a diversified portfolio of
large-capitalization U.S. common stocks of companies that the investment manager
believes have above-average growth prospects. Companies in which the fund
invests generally are similar in size to those included in the Russell 1000
Growth Index -- a widely used benchmark of larger stock performance. To select
securities with the potential for high growth, the investment manager evaluates
a variety of factors, historic and projected earnings rates, stock prices,
company balance sheets and fundamentals. The investment manager seeks stocks
that are reasonably priced relative to its analysis for their growth potential.
The fund may be appropriate for investors who are seeking to add a more
aggressive core equity holding.
Principal risks
The fund's principal risks are associated with investing in the stock market,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio and inflation risk. You will find a discussion of these risks
under "Growth Stock Investing" at the front of this prospectus.
Management Style. If the growth stocks the fund invests in do not produce the
expected earnings growth, their share price may drop and the fund's net asset
value would decline.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year, and
comparing this information to a broad measure of market performance. Of course,
past performance is not necessarily an indication of future performance.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
18 Kemper Growth Fund
<PAGE>
Total returns for years ended December 31
[The information below was represented by a bar graph in the printed materials.]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
30.75% 3.86% 66.85% -1.56% 1.63% -5.91% 31.87% 16.34% 16.80% 14.22%
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 27.57% (the fourth quarter of 1998), and the fund's lowest
return for a calendar quarter was -22.18% (the third quarter of 1998).
Average Annual Total Returns
For periods ended Russell 1000
December 31, 1998 Class A Class B Class C Growth Index
----------------- ------- ------- ------- ------------
One Year 7.64% 9.98% 13.37% 38.71%
Five Years 12.67% -- -- 25.70%
Ten Years 15.19% -- -- 20.57%
Since Class Inception** 12.78% 14.96% 15.44% *
- -----------
* Index returns for the life of each class: 29.05% (5/31/94) for Class B and
Class C shares. The index was not in existence on the A shares' inception
date.
** Inception dates for Class A, B and C shares are 4/4/66, 5/31/94 and
5/31/94, respectively.
The Russell 1000 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. Index returns assume reinvestment of dividends and, unlike the
fund's returns, do not reflect any fees or expenses.
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of 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
Choosing a share class -- Special features sections of this prospectus.
Kemper Growth Fund 19
<PAGE>
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load) Imposed
on Purchases (as % of offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
(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: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.54% 0.54% 0.54%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 0.50% 0.85% 0.69%
----- ----- -----
Total Annual Fund Operating Expenses 1.04% 2.14% 1.98%
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown. The example does not reflect sales
charges (loads) on reinvested dividends and other distributions. If these sales
charges were included, your costs would be higher.
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $675 $617 $301
3 Years $887 $970 $621
5 Years $1,116 $1,349 $1,068
10 Years $1,773 $1,932 $2,306
20 Kemper Growth Fund
<PAGE>
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $675 $217 $201
3 Years $887 $670 $621
5 Years $1,116 $1,149 $1,068
10 Years $1,773 $1,932 $2,306
Principal strategies and investments
In seeking to achieve its objective, the fund will invest primarily in equity
securities that the fund's investment manager believes offer the potential for
increasing the fund's total asset value.
Some of the factors the fund's portfolio management team 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; and
o other signs that a company is expected to show greater than average capital
appreciation and earnings growth.
In seeking to obtain capital appreciation, the investment manager seeks
reasonably priced securities that it believes have the potential to appreciate
at an above-average rate, relative to the stock market as a whole. The
investment manager anticipates making purchases and sales on the basis of
valuations and fundamentals. The fund attempts to identify under-valued
situations that it anticipates will appreciate over a longer time period.
However, because the valuations of growth-style securities may change more
rapidly than the valuations of other types of investments, the investment
manager expects to hold certain securities for a shorter period of time (that
is, under a year). The fund will emphasize fundamental research to select
securities.
The fund's investment policy may involve a higher level of risk than is inherent
in other types of investments. Since any income received from such securities
will be entirely incidental, an investor should not consider a purchase of fund
shares to be a complete investment program.
A stock is typically sold when, in the opinion of the portfolio manager, (i) the
stock has reached its fair market value, or (ii) the company's fundamentals have
deteriorated.
Although the fund does not presently intend to do so, it may invest up to 25% of
its total assets in foreign securities.
Kemper Growth Fund 21
<PAGE>
Because the fund may engage in active and frequent trading of portfolio
securities, the fund may have higher transaction costs that would affect the
fund's performance over time. In addition, shareholders may incur taxes on any
realized capital gains.
For temporary defensive purposes, the fund may invest up to 100% of its assets
in short-term high-grade debt securities, cash and cash equivalents. Because
this defensive policy differs from the fund's investment objective, the fund may
not achieve its goals during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques that may impact fund performance,
including options, futures and other strategic transactions.
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.
Additional risk
Foreign Investing. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
22 Kemper Growth Fund
<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. Except as otherwise
indicated, the fund's investment objective and policies may be changed without a
vote of shareholders.
The fund invests primarily in a diversified portfolio of domestic small company
stocks that the investment manager believes have the potential for long-term
capital growth. Companies in which the fund invests generally are similar in
size to those included in the Russell 2000 Index -- a widely used benchmark of
small stock performance. To select securities, the investment manager evaluates
a variety of factors, including historic earnings growth, projected earnings
growth, return on equity, debt to capital ratios, and company fundamentals. The
investment manager seeks attractive areas for investment opportunity arising
from such factors as technological advances, new marketing methods, and changes
in the economy and population.
The fund may be a good choice for investors seeking to add the growth potential
of small company stocks to a diversified portfolio and for investors who wish to
balance existing large capitalization holdings.
Principal risks
The fund's principal risks are associated with investing in the stock market,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio, and inflation risk. You will find a discussion of these under
"Growth Stock Investing" at the front of this prospectus.
Management Style. The fund's investment focus on smaller companies involves
greater risk than a fund that invests primarily in larger, more established
companies.
Small Company Risk. While small company stocks have historically outperformed
large company stocks, they also have been subject to greater investment risk.
The risks generally associated with small companies include more limited product
lines, markets and financial resources, lack of management depth or experience,
dependency on key personnel and vulnerability to adverse market and economic
developments. Accordingly, the prices of small company stocks tend to be more
volatile than prices of large company stocks. Further, the prices of small
company stocks are often adversely affected by limited trading volumes and the
lack of publicly available information.
Also, because small companies normally have fewer shares outstanding and these
shares generally trade less frequently than large companies, it may be more
difficult for the fund to buy and sell significant amounts of small company
shares without having an unfavorable impact on the shares' stock market price.
Kemper Small Capitalization Equity Fund 23
<PAGE>
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year, and
comparing this information to a broad measure of market performance. Of course,
past performance is not necessarily an indication of future performance.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
Total returns for years ended December 31
[The information below was represented by a bar graph in the printed materials.]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
26.13% -5.22% 69.01% -0.12% 16.79% -3.31% 31.17% 14.09% 20.47% -3.10%
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 24.87% (the first quarter of 1991), and the fund's lowest
return for a calendar quarter was ?27.85% (the fourth quarter of 1998).
Average Annual Total Returns
For periods ended Russell
December 31, 1998 Class A Class B Class C 2000 Index
----------------- ------- ------- ------- ----------
One Year -8.69% -6.88% -3.60% -2.55%
Five Years 9.76% -- -- 16.40%
Ten Years 14.17% -- -- 15.77%
Since Class Inception** 12.18% 11.87% 12.30% *
- -----------
* Index returns for the life of each class: 13.81% (5/31/94) for Class B and
Class C shares. The Index was not in existence on the A shares' inception
date.
** Inception dates for Class A, B and C shares are 2/20/69, 5/31/94 and
5/31/94, respectively.
The Russell 2000 Index is an unmanaged capitalization-weighted measure of
approximately 2000 small U.S. stocks. Index returns assume reinvestment of
dividends and, unlike the fund's returns, do not reflect any fees or expenses.
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of the fund. Each class
24 Kemper Small Capitalization Equity Fund
<PAGE>
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
Choosing a share class -- Special features sections of this prospectus.
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load)
Imposed on Purchases (as % of
offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
(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: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.36% 0.36% 0.36%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 0.54% 1.03% 0.95%
----- ----- -----
Total Annual Fund Operating Expenses 0.90% 2.14% 2.06%
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown. The example does not reflect sales
charges (loads) on reinvested dividends and other distributions. If these sales
charges were included, your costs would be higher.
Kemper Small Capitalization Equity Fund 25
<PAGE>
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $662 $617 $309
3 Years $845 $970 $646
5 Years $1,045 $1,349 $1,108
10 Years $1,619 $1,862 $2,390
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $662 $217 $209
3 Years $845 $670 $646
5 Years $1,045 $1,149 $1,108
10 Years $1,619 $1,862 $2,390
Principal strategies and investments
Under normal circumstances, the fund will invest at least 65% of its total
assets 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 these companies would be in the early stages of their life cycle.
Currently, the investment manager believes that investment opportunities may be
found among the following types of companies:
o companies engaged in high growth 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; and
o companies with innovative concepts or ideas.
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.
A stock is typically sold when, in the opinion of the portfolio manager, (i) the
stock has reached its fair market value and its appreciation potential is
limited, or (ii) a company's fundamentals have deteriorated.
Because the fund may engage in active and frequent trading of portfolio
securities, the fund may have higher transaction costs which would affect the
fund's performance over time. In addition, shareholders may incur taxes on any
realized capital gains.
Although the fund does not presently intend to do so, it may invest up to 25% of
its total assets in foreign securities.
26 Kemper Small Capitalization Equity Fund
<PAGE>
For temporary defensive purposes, the fund may invest up to 100% of its assets
in short-term high-grade debt securities, cash and cash equivalents. Because
this defensive policy differs from the fund's investment objective, the fund may
not achieve its goals during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques that may impact fund performance,
including options, futures and other strategic transactions.
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.
Additional risk
Foreign Investing. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
Kemper Small Capitalization Equity Fund 27
<PAGE>
KEMPER TECHNOLOGY FUND
Investment objective and principal strategies
Kemper Technology Fund seeks growth of capital. Except as otherwise indicated,
the fund's investment objective and policies may be changed without a vote of
shareholders.
The fund invests primarily in domestic common stocks of companies in the
technology sector 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. The investment manager considers a variety of factors in
selecting securities, including historic earnings growth, earnings growth
estimates, stock price, balance sheets, and company fundamentals.
Receipt of income from such securities will be entirely incidental.
The fund may be a good choice for more aggressive investors seeking to pursue
maximum capital appreciation.
Principal risks
The fund's principal risks are associated with investing in the stock market,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio and inflation risk. You will find a discussion of these risks
under "Growth Stock Investing" at the front of this prospectus.
Management Style. Because many of the companies benefiting from technological
advances are smaller in size, the fund 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.
Sector Investing. The fund emphasizes technology companies, therefore to the
extent that the fund focuses its investments in a market sector, financial,
business and other developments affecting issuers in that sector may have a
greater effect on the fund than if it had not focused its assets in that sector.
In addition, an investment in the fund may involve significantly greater risks
and greater volatility than a diversified equity mutual fund that is invested in
issuers in various sectors or industries. The fund is subject to the risk that a
particular group of related stocks will decline in price due to sector-specific
developments.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year, and
comparing this information to a broad measure of market performance. Of course,
past performance is not necessarily an indication of future performance.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
28 Kemper Technology Fund
<PAGE>
Total returns for years ended December 31
[The information below was represented by a bar graph in the printed materials.]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
24.81% 0.44% 44.35% -1.19% 11.69% 11.35% 42.77% 20.60% 7.11% 43.59%
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 37.51% (the fourth quarter of 1998), and the fund's lowest
return for a calendar quarter was ?16.80% (the third quarter of 1990).
Average Annual Total Returns
For periods ended Russell 1000
December 31, 1998 Class A Class B Class C Growth Index
----------------- ------- ------- ------- -------------
One Year 35.31% 39.17% 42.78% 38.71%
Five Years 22.69% -- -- 25.70%
Ten Years 18.69% -- -- 20.57%
Since Class Inception** 13.60% 25.61% 26.06% *
- -----------
* Index returns for the life of each class: 29.05% (5/31/94) for Class B and
Class C shares. The Index was not in existence on the A shares' inception
date.
** Inception dates for Class A, B and C shares are 9/7/48, 5/31/94 and
5/31/94, respectively.
The Russell 1000 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. Index returns assume reinvestment of dividends and, unlike the
fund's returns, do not reflect any fees or expenses.
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of 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
Choosing a share class -- Special features sections of this prospectus.
Kemper Technology Fund 29
<PAGE>
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load)
Imposed on Purchases (as % of
offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
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: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.55% 0.55% 0.55%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 0.37% 0.55% 0.51%
----- ----- -----
Total Annual Fund Operating Expenses 0.92% 1.85% 1.81%
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown. The example does not reflect sales
charges (loads) on reinvested dividends and other distributions. If these sales
charges were included, your costs would be higher.
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $663 $588 $284
3 Years $851 $882 $569
5 Years $1,055 $1,201 $980
10 Years $1,641 $1,701 $2,127
30 Kemper Technology Fund
<PAGE>
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $663 $188 $184
3 Years $851 $582 $569
5 Years $1,055 $1,001 $980
10 Years $1,641 $1,701 $2,127
Principal strategies and investments
The fund invests principally in the common stock of companies in the technology
sector. Technology companies include those whose processes, products or
services, in the judgment of the investment manager, are or may be expected to
significantly benefit from scientific developments and the application of
technical advances in industry, manufacturing and commerce. This investment
policy permits the investment manager to seek stocks having superior growth
potential in virtually any industry in which they may be found. Examples of the
types of industries the fund may invest in are:
o aerospace;
o electronics;
o genetic engineering;
o geology;
o information sciences (including computers and computer software);
o medicine (including pharmacology, biotechnology and biophysics); and
o oceanography.
A stock is typically sold when, in the opinion of the portfolio manager, (i) the
stock has reached its fair market value and its appreciation potential is
limited, or (ii) a company's fundamentals have deteriorated.
Although the fund does not presently intend to do so, it may invest up to 25% of
its total assets in foreign securities.
Because the fund may engage in active and frequent trading of portfolio
securities, the fund may have higher transaction costs which would affect the
the fund's performance over time. In addition, shareholders may incur taxes on
any realized capital gains.
For temporary defensive purposes, the fund may invest up to 100% of its assets
in short-term high-grade debt securities, cash and cash equivalents. Because
this defensive policy differs from the fund's investment objective, the fund may
not achieve its goals during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques that may impact fund performance,
including options, futures and other strategic transactions.
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.
Kemper Technology Fund 31
<PAGE>
Additional risks
Small company risk. While small company stocks have historically outperformed
large company stocks, they also have been subject to greater investment risk.
The risks generally associated with small companies include more limited product
lines, markets and financial resources, lack of management depth or experience,
dependency on key personnel and vulnerability to adverse market and economic
developments. Accordingly, the prices of small company stocks tend to be more
volatile than prices of large company stocks. Further, the prices of small
company stocks are often adversely affected by limited trading volumes and the
lack of publicly available information.
Also, because small companies normally have fewer shares outstanding and these
shares generally trade less frequently than large companies, it may be more
difficult for the fund to buy and sell significant amounts of small company
shares without having an unfavorable impact on the shares' stock market price.
Foreign Investing. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
32 Kemper Technology Fund
<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. Except as otherwise
indicated, the fund's investment objective and policies may be changed without a
vote of shareholders.
The fund's investments will normally consist of domestic equity and fixed income
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 the fund's portfolio management team as to general market and
economic conditions, trends in yields and interest rates and changes in fiscal
or monetary policies. In pursuit of capital appreciation, the investment manager
seeks growth-oriented, quality stocks of companies of any size that it believes
are attractively priced and have strong fundamentals. The fund also emphasizes
current income in seeking its objective. Fixed income investments may be of any
rating, and may include lower-rated high yield/high risk securities.
Because the fund invests in both stocks and bonds, it may be a good choice for
investors seeking diversification in a single fund. The fund may be an
appropriate choice for more conservative equity investors. The balanced approach
of the fund may also appeal to investors who are interested in pursuing income
and capital appreciation.
Principal risks
The fund's principal risks are associated with investing in the stock market,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio and inflation risk. You will find a discussion of these risks
under "Growth Stock Investing" at the front of this prospectus.
Management Style. To the extent that the fund invests in both stocks and bonds
to seek 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.
Interest Rates. Interest rate risk is the risk that the value of a fund's
investments will go down when interest rates rise. Normally the value of a
fund's investments varies inversely with changes in interest rates so that in
periods of rising interest rates, the value of a fund's portfolio declines.
Maturity. Generally, longer-term securities are more susceptible to changes in
value as a result of interest-rate changes than are shorter-term securities.
Credit Risk. Credit risk refers to the risk that an issuer of a bond may default
with respect to the payment of principal and interest. The lower a bond is
rated, the more it is considered to be a speculative or risky investment.
Prepayment Risk. Prepayment risk is commonly associated with pooled debt
securities, such as mortgage-backed securities and asset-backed securities, but
may affect other debt securities as well. When the underlying debt obligations
Kemper Total Return Fund 33
<PAGE>
are prepaid ahead of schedule, the return on the security will be lower than
expected. Prepayment rates usually increase when interest rates are falling.
High Yield, Fixed Income Securities. Investments in high yield securities (often
referred to as "junk bonds") are more likely to be affected by negative
developments relating to 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.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year, and
comparing this information to a broad measure of market performance. Of course,
past performance is not necessarily an indication of future performance.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
Total returns for years ended December 31
[The information below was represented by a bar graph in the printed materials.]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
19.83% 4.11% 40.16% 2.49% 11.59% -9.18% 25.80% 16.25% 19.14% 15.91%
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 17.08% (the first quarter of 1991), and the fund's lowest
return for a calendar quarter was ?9.82% (the third quarter of 1990).
34 Kemper Total Return Fund
<PAGE>
Average Annual Total Returns
For periods ended Russell 1000
December 31, 1998 Class A Class B Class C Growth Index
----------------- ------- ------- ------- ------------
One Year 9.21% 11.68% 14.79% 38.71%
Five Years 11.57% -- -- 25.70%
Ten Years 13.20% -- -- 20.57%
Since Class Inception** 12.00% 14.39% 14.77% *
- -----------
* Index returns for the life of each class: 29.05% (5/31/94) for Class B and
C shares. The Index was not in existence on the Class A shares' inception
date.
** Inception dates for Class A, B and C shares are 3/2/64, 5/31/94 and
5/31/94, respectively.
The Russell 1000 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. Index returns assume reinvestment of dividends and, unlike the
fund's returns, do not reflect any fees or expenses.
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of 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
Choosing a share class -- Special features sections of this prospectus.
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load)
Imposed on Purchases (as % of
offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
(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.
Kemper Total Return Fund 35
<PAGE>
Annual fund operating expenses: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.53% 0.53% 0.53%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 0.48% 0.73% 0.62%
----- ----- -----
Total Annual Fund Operating Expenses 1.01% 2.01% 1.90%
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown. The example does not reflect sales
charges (loads) on reinvested dividends and other distributions. If these sales
charges were included, your costs would be higher.
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $672 $604 $293
3 Years $878 $931 $597
5 Years $1,101 $1,283 $1,026
10 Years $1,740 $1,841 $2,222
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $672 $204 $193
3 Years $878 $631 $597
5 Years $1,101 $1,083 $1,026
10 Years $1,740 $1,841 $2,222
Principal strategies and investments
The fund follows a highly flexible program of investing in common stocks and
bonds in pursuit of its goal for total return.
The equity securities that the fund invests in are those that the investment
manager believes are reasonably priced relative their earnings growth potential.
To select stocks, the investment manager evaluates a variety of factors
including historic and projected earnings growth, balance sheets and stock
prices. The investment manager expects to follow a disciplined buy and sell
strategy, in which proprietary research gathered from meetings with, among
others, senior management of companies in which the fund invests, government
experts and industry leaders plays an important role.
36 Kemper Total Return Fund
<PAGE>
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 fixed income securities.
The fund may invest up to 25% of its total assets in foreign securities.
For temporary defensive purposes, the fund may invest up to 100% of its assets
in short-term high-grade debt securities, cash and cash equivalents. Because
this defensive policy differs from the fund's investment objective, the fund may
not achieve its goals during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques that may impact fund performance,
including options, futures and other strategic transactions.
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.
Additional risks
High Yield Securities. High yield, fixed income securities (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, to be
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 these 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. In addition, 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
Kemper Total Return Fund 37
<PAGE>
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.
Foreign Investing. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
38 Kemper Total Return Fund
<PAGE>
KEMPER VALUE+GROWTH FUND
Investment objective and principal strategies
Kemper Value+Growth Fund seeks growth of capital through a portfolio of growth
and value stocks. A secondary objective of the fund is the reduction of risk
over a full market cycle compared to a portfolio of only growth stocks or only
value stocks. Except as otherwise indicated, the fund's investment objective and
policies may be changed without a vote of shareholders.
The fund invests primarily in a diversified portfolio of U.S. common stocks. The
investment manager combines value and growth stocks using sophisticated
quantitative modeling. The fund may invest in the stocks of companies of any
size, but focuses on the 1500 U.S. companies with the largest market
capitalization. Typically companies in which the fund invests will have a market
capitalization in excess of $1 billion.
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 low P/E ratios and dividend yields
higher than the average of the companies represented in the Standard & Poor's
500 Stock Index.
The fund may be appropriate for investors seeking to conveniently combine value
stocks and growth stocks in a single fund.
Principal risks
The fund's principal risks are associated with investing in the stock market,
equity and growth investing, the investment manager's skill in managing the
fund's portfolio and inflation risk. You will find a discussion of these risks
under "Growth Stock Investing" at the front of this prospectus.
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.
Past performance
The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year, and
comparing this information to a broad measure of market performance. Of course,
past performance is not necessarily an indication of future performance.
The information provided in the chart is for Class A shares, and does not
reflect sales charges, which reduce return.
Kemper Value+Growth Fund 39
<PAGE>
Total returns for years ended December 31
[The information below was represented by a bar graph in the printed materials.]
1996 1997 1998
---- ---- ----
25.56% 24.52% 18.88%
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 20.66% (the fourth quarter of 1998), and the fund's lowest
return for a calendar quarter was ?12.62% (the third quarter of 1998).
Average Annual Total Returns
For periods ended Russell 1000
December 31, 1998 Class A Class B Class C Index
----------------- ------- ------- ------- -----
One Year 12.04% 14.88% 17.80% 27.02%
Five Years -- -- -- --
Ten Years -- -- -- --
Since Class Inception** 21.40% 22.26% 22.66% *
- -----------
* Index returns for the life of each class: 28.11% (10/31/95) for Class A, B
and C shares.
** Inception date for Class A, B and C shares is 10/16/95.
The Russell 1000 Index is an unmanaged capitalization-weighted price only index
comprised of the largest capitalized U.S. companies whose common stocks are
traded in the United States.
Index returns assume reinvestment of dividends and, unlike the fund's returns,
do not reflect any fees or expenses.
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of 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
Choosing a share class -- Special features sections of this prospectus.
40 Kemper Value+Growth Fund
<PAGE>
Shareholder fees: Fees paid directly from your investment.
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load)
Imposed on Purchases (as % of
offering price) 5.75% None None
Maximum Deferred Sales Charge
(Load) (as % of redemption proceeds) None(1) 4% 1%
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends/Distributions None None None
Redemption Fee (as % of amount
redeemed, if applicable) None None None
Exchange Fee None None None
- -----------
(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: Expenses that are deducted from fund assets.
Class A Class B Class C
------- ------- -------
Management Fee 0.72% 0.72% 0.72%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 0.70% 0.80% 0.69%
----- ----- -----
Total Annual Fund Operating Expenses 1.42% 2.27% 2.16%
Example
This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
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 returns vary from year to year, and
may be higher or lower than those shown. The example does not reflect sales
charges (loads) on reinvested dividends and other distributions. If these sales
charges were included, your costs would be higher.
Fees and expenses if you sold shares after:
Class A Class B Class C
------- ------- -------
1 Year $711 $630 $319
3 Years $999 $1,009 $676
5 Years $1,307 $1,415 $1,159
10 Years $2,179 $2,195 $2,493
Kemper Value+Growth Fund 41
<PAGE>
Fees and expenses if you did not sell your shares:
Class A Class B Class C
------- ------- -------
1 Year $711 $230 $219
3 Years $999 $709 $676
5 Years $1,307 $1,215 $1,159
10 Years $2,179 $2,195 $2,493
Principal strategies and investments
Historically, the performance of growth and value stocks has tended to be
counter-cyclical, that is, 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 the fund's portfolio management team believes present greater return
opportunities at the time.
The investment manager's Quantitative Research Department will use proprietary
modeling techniques to determine the allocation between growth and value stocks
in the fund's portfolio.
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. The investment manager expects
that changes in the allocation would be gradual. There is no assurance that the
allocation process will improve investment results.
To select individual securities, the investment manager uses additional
quantitative models. Growth stocks and value stocks are evaluated according to
style-specific models. By using multiple models, the investment manager seeks to
create a portfolio where value and growth stocks are clearly delineated.
In managing the growth portion of the portfolio, the investment manager's
proprietary quantitative models evaluate a variety of momentum factors. These
include historical earnings growth, projected earnings growth, return on equity,
debt to capital and other balance sheet data.
In managing the value portion of the portfolio, the investment manager's
proprietary quantitative models evaluate a variety of valuation factors. These
include price-to-earnings ratios, price-to-book ratios, price-to-cash flow,
dividend growth rates, earnings estimates and growth rates, return on equity and
other balance sheet data.
Although the fund does not presently intend to do so, it may invest up to 25% of
its total assets in foreign securities.
For temporary defensive purposes, the fund may invest up to 100% of its assets
in short-term high-grade debt securities, cash and cash equivalents. Because
this defensive policy differs from the fund's investment objective, the fund may
not achieve its goals during a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques that may impact fund performance,
including options, futures and other strategic transactions.
42 Kemper Value+Growth Fund
<PAGE>
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.
Additional risk
Foreign Investing. Investing in foreign securities, and to a greater extent
emerging markets, involves risks in addition to those associated with investing
in securities in the U.S. To the extent that investments are denominated in
foreign currencies, adverse changes in the values of foreign currencies may have
a significant negative effect on any returns from these investments. Investing
in foreign securities exposes the fund to an increased risk of political and
economic instability.
Other risks of investing in foreign securities include: limited information,
higher brokerage costs, different accounting standards and thinner trading
markets as compared to U.S. markets.
Kemper Value+Growth Fund 43
<PAGE>
INVESTMENT MANAGER
The fund retains 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 fund's 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, 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 of the funds below pays Scudder Kemper Investments, Inc. a graduated
monthly investment management fee. Fees paid for each fund's most recently
completed fiscal year are shown below:
As a % of average
daily net assets
----------------
Kemper Blue Chip Fund 0.56%
Kemper Classic Growth Fund* 0.70%
Kemper Growth Fund 0.54%
Kemper Technology Fund 0.55%
Kemper Total Return Fund 0.53%
Kemper Value+Growth Fund 0.72%
- -----------
* For Kemper Classic Growth Fund, the investment manager has agreed to waive
0.25% of its management fee until December 31, 1999.
The Kemper Aggressive Growth Fund and Kemper Small Capitalization Equity Fund
pay Scudder Kemper Investments, Inc. an annual investment management fee
(payable monthly) at the annual rate of 0.65% of the average daily net assets of
each Fund. This Base Fee may be adjusted upward or downward on the basis of the
investment performance of the Class A shares of each Fund relative to the
performance of the Standard & Poor's 500 Composite Stock Price Index over a
twelve-month period
The investment management fee for the Kemper Aggressive Growth Fund may range
from 0.45% to 0.85% of the average daily net assets of the fund. The investment
management fee for the Kemper Small Capitalization Equity Fund may range from
0.35% to 0.95% of the average daily net asset of the fund.
Investment management fees paid by Kemper Aggressive Growth Fund and Kemper
Small Capitalization Equity Fund to Scudder Kemper Investments, Inc. for the
most recently completed fiscal year are shown below:
As a % of average daily net assets
----------------------------------
Kemper Aggressive Growth Fund 0.38%
Kemper Small Capitalization Equity Fund 0.36%
44 Investment Manager
<PAGE>
PORTFOLIO MANAGEMENT
The following investment professionals are associated with the funds as
indicated:
Kemper Aggressive Growth Fund
PORTFOLIO MANAGEMENT
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 Manager began his investment career in
1982. Prior to joining Scudder
Kemper he was a Senior Portfolio
Manager for an unaffiliated
investment company.
David H. Burshtan 1998 Joined Scudder Kemper in 1995. He
Portfolio Manager began his investment career in
1988. Prior to joining Scudder
Kemper he was a Senior
International Securities Analyst
responsible for emerging markets
at a trust company.
- --------------------------------------------------------------------------------
Kemper Blue Chip Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Tracy McCormick 1994 Joined Scudder Kemper in 1994.
Lead Portfolio Manager She began her investment career
in 1980. Prior to joining Scudder
Kemper she was Senior Vice
President and a Portfolio Manager
at an unaffiliated investment
management company.
Steven H. Reynolds 1998 Joined Scudder Kemper in 1995. He
Portfolio Manager began his investment career in
1968. Prior to joining Scudder
Kemper he was Senior Vice
President and a Portfolio Manager
at an unaffiliated investment
management company.
Gary A. Langbaum 1998 Joined Scudder Kemper in 1988. He
Portfolio Manager began his investment career in
1970. Prior to joining Scudder
Kemper he was a Senior Research
Analyst and Associate Director of
Research at a banking trust
company.
Maureen P. Lentz 1998 Joined Scudder Kemper in 1994.
Portfolio Manager She began her investment career
in 1988. Prior to joining Scudder
Kemper she worked as a systems
and operations analyst for an
unaffiliated insurance company.
- --------------------------------------------------------------------------------
Investment Manager 45
<PAGE>
Kemper Classic Growth Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
William F. Gadsden 1996 Joined Scudder Kemper in 1983. He
Co-Lead Portfolio began his investment career in
Manager 1983. Prior to joining Scudder
Kemper he worked for an
international custodian bank.
Bruce F. Beaty 1996 Joined Scudder Kemper in 1991. He
Co-Lead Portfolio began his investment career in
Manager 1982. Prior to joining Scudder
Kemper he worked for an
unaffiliated insurance company.
- --------------------------------------------------------------------------------
Kemper Growth Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Steven H. Reynolds 1998 Joined Scudder Kemper in 1995. He
Lead Portfolio Manager began his investment career in
1968. Prior to joining Scudder
Kemper he was Senior Vice
President and a Portfolio Manager
at an unaffiliated investment
management company.
Tracy McCormick 1994 Joined Scudder Kemper in 1994.
Portfolio Manager She began her investment career
in 1980. Prior to joining Scudder
Kemper she was Senior Vice
President and a Portfolio Manager
at an unaffiliated investment
management company.
Gary A. Langbaum 1998 Joined Scudder Kemper in 1988. He
Portfolio Manager began his investment career in
1970. Prior to joining Scudder
Kemper he was a Senior Research
Analyst and Associate Director of
Reserach at a banking trust
company.
Maureen P. Lentz 1998 Joined Scudder Kemper in 1994.
Portfolio Manager She began her investment career
in 1988. Prior to joining Scudder
Kemper she worked as a systems
and operations analyst for an
unaffiliated insurance company.
- --------------------------------------------------------------------------------
46 Investment Manager
<PAGE>
Kemper Small Capitalization Equity Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Kurt R. Stalzer 1997 Joined Scudder Kemper in 1997. He
Lead Portfolio Manager began his investment career in
1982. Prior to joining Scudder
Kemper he was a Senior Portfolio
Manager for an unaffiliated
investment company.
David H. Burshtan 1998 Joined Scudder Kemper in 1995. He
Portfolio Manager began his investment career in
1988. Prior to joining Scudder
Kemper he was a Senior
International Securities Analyst
responsible for emerging markets
at a trust company.
- --------------------------------------------------------------------------------
Kemper Technology Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
James B. Burkhart 1998 Joined Scudder Kemper in 1998. He
Lead Portfolio Manager began his investment career in
1970. Prior to joining Scudder
Kemper he was an analyst and
Portfolio Manager for a trust
company.
Tracy McCormick 1998 Joined Scudder Kemper in 1994.
Portfolio Manager She began her investment career
in 1980. Prior to joining Scudder
Kemper she was Senior Vice
President and a Portfolio Manager
at an unaffiliated investment
management company.
- --------------------------------------------------------------------------------
Kemper Total Return Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Gary A. Langbaum 1995 Joined Scudder Kemper in 1988. He
Lead Portfolio Manager began his investment career in
1970. Prior to joining Scudder
Kemper he was a Senior Research
Analyst and Associate Director of
Reserach at a banking trust
company.
Tracy McCormick 1998 Joined Scudder Kemper in 1994.
Portfolio Manager She began her investment career
in 1980. Prior to joining Scudder
Kemper she was Senior Vice
President and a Portfolio Manager
at an unaffiliated investment
management company.
Stephen A. Wohler 1998 Joined Scudder Kemper in 1979.
Portfolio Manager Since then he has served as
portfolio manager for other
affiliated mutual funds and has
over 20 years of investment
experience.
- --------------------------------------------------------------------------------
Investment Manager 47
<PAGE>
Kemper Value+Growth Fund
Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Philip S. Fortuna 1998 Joined Scudder Kemper in 1986.
Lead Portfolio Manager Since then he has served as
portfolio manager for other
affiliated mutual funds and has
over 15 years of investment
experience.
Karla D. Grant 1998 Joined Scudder Kemper in 1997.
Portfolio Manager She began her investment career
in 1990. Prior to joining Scudder
Kemper she served as Vice
President for several independent
asset management firms.
Shahram Tajbakhsh 1998 Joined Scudder Kemper in 1996. He
Portfolio Manager began his investment career in
1984. Prior to joining Scudder
Kemper he was a Lead Project
Manager at an international
financial news provider.
Robert D. Tymoczko 1998 Joined Scudder Kemper in 1997. He
Portfolio Manager began his investment career in
1996. Prior to joining Scudder
Kemper he worked as an economic
consultant specializing in
quantitative research and
econometric consulting.
- --------------------------------------------------------------------------------
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, such as problems with calculating net asset value and difficulties
in implementing a fund's purchase and redemption procedures. 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 issuers whose securities are held by a fund or on
global markets or economies generally.
Euro conversion
The introduction of a new European currency, the Euro, may result in
uncertainties for European securities and the operation of each fund. The Euro
was introduced on January 1, 1999, by eleven European countries that are members
of the European Economic and Monetary Union (EMU). The introduction of the Euro
will require the redenomination of European debt and
48 Investment Manager
<PAGE>
equity securities over a period of time, which may result in various accounting
differences and/or tax treatments. Additional questions are raised by the fact
that certain other European community members, including the United Kingdom, did
not officially implement the Euro on January 1, 1999.
The investment manager is actively working to address Euro-related issues and
understands that other key service providers are taking similar steps. At this
time, however, no one knows precisely what the degree of impact will be. To the
extent that the market impact or effect on a fund's holdings is negative, it
could hurt the fund's performance.
Investment Manager 49
<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 Kemper Service Company,
the Shareholder Service Agent. Be aware that financial services firms may
receive different compensation depending upon which class of shares they sell.
Rule 12b-1 plan
Each fund has adopted plans 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 other services provided to
shareholders of 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
50 About Your Investment
<PAGE>
cost more than other types of sales charges. Long-term shareholders may pay more
than the economic equivalent of the maximum initial sales charges permitted by
the National Association of Securities Dealers, although Kemper Distributors,
Inc. believes that it is unlikely, in the case of Class B Shares, because of the
automatic conversion feature of those Shares.
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.
Class A Shares -- Large Order NAV Purchase Privilege. Class A shares of a fund
may be purchased at net asset value by any purchaser provided that the amount
invested in such fund or other Kemper Funds 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 above (the "Large Order NAV
Purchase Privilege").
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
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
whether the 15-Day Hold Policy applies to a particular exchange, the value of
the shares to be exchanged shall be computed by aggregating the value of shares
being exchanged for all accounts under common control, direction or advice,
including without limitation accounts administered by a financial services firm
offering market timing, asset allocation or similar services.
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.
About Your Investment 51
<PAGE>
BUYING SHARES
You may purchase shares of a fund by contacting the securities dealer or other
financial services firm from whom you received this prospectus.
CLASS A SHARES
Public Offering Price. Including Sales Charge
Sales Charge
------------
As a % of As a % of Net
Amount of Purchase Offering Price Amount Invested*
------------------ -------------- ----------------
Less than $50,000 5.75% 6.10%
$50,000 but less than $100,000 4.50 4.71%
$100,000 but less than $250,000 3.50 3.63%
$250,000 but less than $500,000 2.60 2.67%
$500,000 but less than $1 million 2.00 2.04%
$1 million and over 0.00** 0.00**
- -----------
* Rounded to the nearest one hundredth percent
** 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, any trust, pension, profit-sharing or other benefit plan
for only such persons
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 any trust, pension,
profit-sharing or other benefit plan for only such persons
o officers, directors, and employees of service agents of the funds
52 About Your Investment
<PAGE>
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
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, 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, acting solely as
agent for their clients, that adhere to certain standards established by
Kemper Distributors, including a requirement that such shares be purchased
for the benefit of their clients participating in an investment advisory
program or agency commission program under which such clients pay a fee to
the investment advisor or other firm for portfolio management or agency
brokerage services.
Contingent Deferred Sales Charge
A contingent deferred sales charge may be imposed upon redemption of Class A
shares purchased under the Large Order NAV Purchase Privilege as follows: 1% if
they are redeemed within one year of purchase and 0.50% if redeemed during the
second year following purchase. The charge will not be imposed upon redemption
of reinvested dividends or share appreciation. The charge is applied to the
value of the shares redeemed, excluding amounts not subject to the charge. The
contingent deferred sales charge will be waived in the event of:
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
About Your Investment 53
<PAGE>
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 or its affiliates
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.
Rule 12b-1 Fee
None
Exchange Privilege
Class A shares may be exchanged for each other at their 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.
CLASS B SHARES
Public Offering Price
Net asset value per share without any sales charge at the time of purchase.
Contingent Deferred Sales Charge
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. 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%
54 About Your Investment
<PAGE>
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
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
Kemper Service Company, 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.
Rule 12b-1 Fee
0.75%
Conversion Feature
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. 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 Privilege
Class B shares of a fund and Class B shares of most Kemper Funds may be
exchanged for each other at their relative net asset values without a contingent
deferred sales charge.
About Your Investment 55
<PAGE>
CLASS C SHARES
Public Offering Price
Net asset value per share without any sales charge at the time of purchase.
Contingent Deferred Sales Charge
A contingent deferred sales charge of 1% may be imposed upon redemption of Class
C shares redeemed within one year of 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.
Rule 12b-1 Fee
0.75%
Conversion Feature
None
Exchange Privilege
Class C shares of a fund and Class C shares of most Kemper 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.
56 About Your Investment
<PAGE>
SELLING AND EXCHANGING SHARES
General
Contact your securities dealer or other financial services firm to arrange for
share redemptions or exchanges.
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.
An exchange of shares entails the sale of fund shares and subsequent purchase of
shares of another Kemper Fund.
The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in
December, 1996 will be eligible for the second year's charge if redeemed on or
after December 1, 1997. In the event no specific order is requested when
redeeming shares subject to a contingent deferred sales charge, the redemption
will be made first from shares representing reinvested dividends and then from
the earliest purchase of shares. KDI receives any contingent deferred sales
charge directly.
Share certificates
When certificates for shares have been issued, they must be mailed to or
deposited with Kemper Service Company, 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.
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. The reinvestment privilege can be used only once as to any specific shares
and reinvestment must be effected within six months of the redemption.
About Your Investment 57
<PAGE>
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, Small Cap,
Technology and Value+Growth Funds; semi-annually for Kemper Blue Chip Fund; and
quarterly for Kemper 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 Kemper 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 Kemper Service Company, 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, upon written request to
Kemper Service Company, 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.
Distributions are generally taxable, whether received in cash or reinvested.
Taxes
Dividends representing net investment income and net short-term capital gains,
if any, 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.
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 you.
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.
58 About Your Investment
<PAGE>
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.
Each fund sends you detailed tax information about the amount and type of its
distributions by January 31 of the following year.
Each fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to you if you fail to provide the fund with
your current taxpayer identification number or to make required certifications,
or if you have been notified by the IRS that you are subject to backup
withholding. Any such withheld amounts may be credited against your U.S. federal
income tax liability.
You 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.
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,
normally 4:00 p.m. eastern time, on each day the New York Stock Exchange is open
for trading. Market prices are used to determine the value of the funds' assets.
If market prices are not readily available for a security or if a security's
price is not considered to be market indicative, that security may be valued by
another method that the Board or its delegate believes accurately reflects fair
value. In those circumstances where a security's price is not considered to be
market indicative, the security's valuation may differ from an available market
quotation.
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, less all liabilities, by the number of shares
of that class outstanding. The per share net asset value of the Class B and
Class C shares of a fund will generally be lower than that of the Class A shares
of a fund because of the higher annual expenses borne by the Class B and Class C
shares.
To the extent that a fund invests in foreign securities, these securities may be
listed on foreign exchanges that trade on days when the fund does not price its
shares. As a result, the net asset value per share of a fund may change at a
time when shareholders are not able to purchase or redeem their shares.
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 New York Stock
Exchange 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
About Your Investment 59
<PAGE>
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.
Payment for shares you sell will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request.
If you have share certificates, these must accompany your order in proper form
for transfer. When you place an order to sell shares for which the fund may not
yet have received good payment (i.e., purchases by check, EXPRESS-Transfer or
Bank Direct Deposit), the fund may delay transmittal of the proceeds until it
has determined that collected funds have been received for the purchase of such
shares. This may be up to 10 days from receipt by a fund of the purchase amount.
The redemption of shares within certain time periods may be subject to
contingent deferred sales charges, as noted above.
Signature guarantees
A signature guarantee is required unless you sell $50,000 or less worth of
shares (prior to the imposition of any contingent deferred sales charge) and the
proceeds are payable to the shareholder of record at the address of record. You
can obtain a guarantee 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.
60 About Your Investment
<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 Kemper Service
Company, 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' distributor,
Kemper Distributors), 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 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.
About Your Investment 61
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the funds' or certain
classes of a fund's financial performance for the periods reflected below.
Certain information reflects financial results for a single fund share. The
total return figures show what an investor in a fund (or certain classes of a
fund) would have earned (or lost) assuming reinvestment of all dividends and
distributions. This information, for all funds except Classic Growth Fund, has
been audited by Ernst & Young LLP. With respect to Classic Growth Fund, this
information has been audited by PricewaterhouseCoopers LLP. The reports of each
of the auditors, along with the funds' financial statements, are included in the
funds' annual report, which are available upon request by calling the Kemper
Funds at 1-800-621-1048.
Kemper Aggressive Growth Fund
December
Year ended 31, 1996 to
September September
30, 30,
CLASS A 1998 1997
- --------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $12.60 9.50
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.02) (.02)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (1.05) 3.12
- --------------------------------------------------------------------------------
Total from investment operations (1.07) 3.10
- --------------------------------------------------------------------------------
Less distribution from net realized gain .55 --
- --------------------------------------------------------------------------------
Net asset value, end of period $10.98 12.60
- --------------------------------------------------------------------------------
Total return (not annualized) (8.67)% 32.63
- --------------------------------------------------------------------------------
Ratios to average net assets (annualized)
Expenses absorbed by the Fund 1.25% 1.49
- --------------------------------------------------------------------------------
Net investment loss (.42)% (.35)
- --------------------------------------------------------------------------------
Other ratios to average net assets (annualized)
Expenses 1.46% --
- --------------------------------------------------------------------------------
Net investment loss (.63)% --
- --------------------------------------------------------------------------------
62 Financial Highlights
<PAGE>
December
Year ended 31, 1996 to
September September
30, 30,
CLASS B 1998 1997
- -------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $12.52 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.04) (.08)
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (1.10) 3.10
- -------------------------------------------------------------------------------
Total from investment operations (1.14) 3.02
- -------------------------------------------------------------------------------
Less distribution from net realized gain .55 --
- -------------------------------------------------------------------------------
Net asset value, end of period $10.83 12.52
- -------------------------------------------------------------------------------
Total return (not annualized) (9.30)% 31.79
- -------------------------------------------------------------------------------
Ratios to average net assets (annualized)
Expenses absorbed by the Fund 2.12% 2.41
- -------------------------------------------------------------------------------
Net investment loss (1.29)% (1.27)
- -------------------------------------------------------------------------------
Other ratios to average net assets (annualized)
Expenses 2.81% --
- -------------------------------------------------------------------------------
Net investment loss (1.98)% --
- -------------------------------------------------------------------------------
December
Year ended 31, 1996 to
September September
30, 30,
CLASS C 1998 1997
- --------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $12.53 9.50
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.04) (.07)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (1.10) 3.10
- --------------------------------------------------------------------------------
Total from investment operations (1.14) 3.03
- --------------------------------------------------------------------------------
Less distribution from net realized gain .55 --
- --------------------------------------------------------------------------------
Net asset value, end of period $10.84 12.53
- --------------------------------------------------------------------------------
Total return (not annualized) (9.29)% 31.89
- --------------------------------------------------------------------------------
Ratios to average net assets (annualized)
Expenses absorbed by the Fund 2.10% 2.19
- --------------------------------------------------------------------------------
Net investment loss (1.27)% (1.05)
- --------------------------------------------------------------------------------
Other ratios to average net assets (annualized)
Expenses 2.76% --
- --------------------------------------------------------------------------------
Net investment loss (1.93)% --
- --------------------------------------------------------------------------------
December
Year ended 31, 1996 to
September September
30, 30,
1998 1997
- -------------------------------------------------------------------------------
Supplemental data for all classes
Net assets at end of period (in thousands) $37,332 11,609
- -------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 190% 364
- -------------------------------------------------------------------------------
Notes: Total return does not reflect the effect of any sales charges. Scudder
Kemper agreed to temporarily waive certain operating expenses of the Fund during
the year ended September 30, 1998. The Other Ratios to Average Net Assets are
computed without this waiver.
Financial Highlights 63
<PAGE>
Kemper Blue Chip Fund
<TABLE>
<CAPTION>
Year ended October 31,
CLASS A 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of year $17.68 17.14 14.87 12.33 13.88
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .11 .18 .22 .19 .19
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 1.17 3.70 3.45 2.57 (.71)
- -----------------------------------------------------------------------------------
Total from investment
operations 1.28 3.88 3.67 2.76 (.52)
- -----------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .16 .21 .20 .20 .19
- -----------------------------------------------------------------------------------
Distribution from net
realized gain 2.19 3.13 1.20 .02 .84
- -----------------------------------------------------------------------------------
Total dividends 2.35 3.34 1.40 .22 1.03
- -----------------------------------------------------------------------------------
Net asset value, end of year $16.61 17.68 17.14 14.87 12.33
- -----------------------------------------------------------------------------------
Total return 7.80% 26.78 26.72 22.74 (3.82)
- -----------------------------------------------------------------------------------
Ratios to average net assets
Expenses 1.29% 1.19 1.26 1.30 1.48
- -----------------------------------------------------------------------------------
Net investment income .62% 1.07 1.40 1.47 1.50
</TABLE>
<TABLE>
<CAPTION>
May 31
to
October
Year ended October 31, 31,
CLASS B 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $17.61 17.09 14.82 12.29 12.30
- ----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (.03) .04 .10 .09 .06
- ----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 1.17 3.67 3.45 2.56 (.01)
- ----------------------------------------------------------------------------------
Total from investment
operations 1.14 3.71 3.55 2.65 .05
- ----------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .01 .06 .08 .10 .06
- ----------------------------------------------------------------------------------
Distribution from net
realized gain 2.19 3.13 1.20 .02 --
- ----------------------------------------------------------------------------------
Total dividends 2.20 3.19 1.28 .12 .06
- ----------------------------------------------------------------------------------
Net asset value, end of
period $16.55 17.61 17.09 14.82 12.29
- ----------------------------------------------------------------------------------
Total return (not
annualized) 6.96% 25.62 25.82 21.76 .42
- ----------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 2.10% 2.06 2.08 2.06 2.43
- ----------------------------------------------------------------------------------
Net investment income (.19)% .20 .58 .71 .33
- ----------------------------------------------------------------------------------
</TABLE>
64 Financial Highlights
<PAGE>
<TABLE>
<CAPTION>
May 31 to
Year ended October 31, October 31,
CLASS C 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $17.69 17.15 14.88 12.32 12.30
- ---------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (.01) .03 .10 .07 .09
- ---------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 1.18 3.71 3.45 2.62 (.01)
- ---------------------------------------------------------------------------------------
Total from investment
operations 1.17 3.74 3.55 2.69 .08
- ---------------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .02 .07 .08 .11 .06
- ---------------------------------------------------------------------------------------
Distribution from net
realized gain 2.19 3.13 1.20 .02 --
- ---------------------------------------------------------------------------------------
Total dividends 2.21 3.20 1.28 .13 .06
- ---------------------------------------------------------------------------------------
Net asset value, end of period $16.65 17.69 17.15 14.88 12.32
- ---------------------------------------------------------------------------------------
Total return (not
annualized) 7.08% 25.71 25.75 22.04 .67
- ---------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 2.03% 2.00 2.05 2.01 2.33
- ---------------------------------------------------------------------------------------
Net investment income
(loss) (.12)% .26 .61 .76 .43
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended October 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Supplemental data for all classes
Net assets at end of year
(in thousands) $581,770 446,891 256,172 168,266 153,172
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 157% 183 166 117 131
- ----------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges.
Financial Highlights 65
<PAGE>
Kemper Classic Growth Fund
For the period April 16, 1998
(commencement of sale of
Class A, B and C shares)
to August 31, 1998
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Net asset value, beginning of period $20.30 $20.30 $20.30
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .01 (.05) (.05)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transactions (3.69) (3.68) (3.68)
- --------------------------------------------------------------------------------
Total from investment operations (3.68) (3.73) (3.73)
- --------------------------------------------------------------------------------
Net asset value, end of period $16.62 $16.57 $16.57
- --------------------------------------------------------------------------------
Total return (%) (b) (c) (18.13)** (18.37)** (18.37)**
- --------------------------------------------------------------------------------
Ratios and supplemental data
Net assets, end of period ($ millions) 7.2 5.9 .9
- --------------------------------------------------------------------------------
Ratio of operating expenses, net, to
average daily net assets (%) 1.24* 2.12* 2.09*
- --------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) 1.74* 2.52* 3.00*
- --------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average daily net assets (%) .10* (.79)* (.73)*
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) 48.5 48.5 48.5
- --------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
66 Financial Highlights
<PAGE>
Kemper Growth Fund
<TABLE>
<CAPTION>
Year ended September 30,
CLASS A 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of year $15.47 17.21 16.07 12.93 15.33
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (.01) -- .12 .05 .01
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) (1.65) 2.61 2.74 3.27 (1.41)
- -----------------------------------------------------------------------------------
Total from investment
operations (1.66) 2.61 2.86 3.32 (1.40)
- -----------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income -- -- .04 -- --
- -----------------------------------------------------------------------------------
Distribution from net
realized gain 2.09 4.35 1.68 .18 1.00
- -----------------------------------------------------------------------------------
Total dividends 2.09 4.35 1.72 .18 1.00
- -----------------------------------------------------------------------------------
Net asset value, end of year $11.72 15.47 17.21 16.07 12.93
- -----------------------------------------------------------------------------------
Total return (11.78)% 19.97 19.62 26.07 (9.39)
- -----------------------------------------------------------------------------------
Ratios to average net assets
Expenses 1.04% 1.06 1.07 1.17 1.09
- -----------------------------------------------------------------------------------
Net investment income (loss) (.09)% .07 .65 .43 .24
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
May 31
to
Sept.
Year ended September 30, 30,
CLASS B 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $14.83 16.82 15.85 12.88 13.10
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.16) (.16) (.09) (.08) (.03)
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) (1.55) 2.52 2.74 3.23 (.19)
- -----------------------------------------------------------------------------------
Total from investment
operations (1.71) 2.36 2.65 3.15 (.22)
- -----------------------------------------------------------------------------------
Less distribution from net
realized gain 2.09 4.35 1.68 .18 --
- -----------------------------------------------------------------------------------
Net asset value, end of
period $11.03 14.83 16.82 15.85 12.88
- -----------------------------------------------------------------------------------
Total return (not
annualized) (12.73)% 18.68 18.47 24.83 (1.68)
- -----------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 2.14% 2.13 2.05 2.17 2.11
- -----------------------------------------------------------------------------------
Net investment loss (1.19)% (1.00) (.33) (.57) (.76)
- -----------------------------------------------------------------------------------
</TABLE>
Financial Highlights 67
<PAGE>
<TABLE>
<CAPTION>
May 31
to
Sept.
Year ended September 30, 30,
CLASS C 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $14.91 16.87 15.87 12.88 13.09
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.14) (.13) (.06) (.07) (.02)
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) (1.55) 2.52 2.74 3.24 (.19)
- -----------------------------------------------------------------------------------
Total from investment
operations (1.69) 2.39 2.68 3.17 (.21)
- -----------------------------------------------------------------------------------
Less distribution from net
realized gain 2.09 4.35 1.68 .18 --
- -----------------------------------------------------------------------------------
Net asset value, end of
period $11.13 14.91 16.87 15.87 12.88
- -----------------------------------------------------------------------------------
Total return (not
annualized) (12.50)% 18.87 18.65 24.99 (1.60)
- -----------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 1.98% 1.99 1.95 2.03 2.09
- -----------------------------------------------------------------------------------
Net investment loss (1.03)% (.86) (.23) (.43) (.67)
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended September 30,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Supplemental data for all classes
Net assets at end of year (in
thousands) $2,209,521 2,827,565 2,738,303 2,503,301 2,255,977
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate 122% 201 150 67 115
</TABLE>
Notes: Total return does not reflect the effect of any sales charges. Per share
data for year ended September 30, 1998 were determined based on average shares
outstanding.
68 Financial Highlights
<PAGE>
Kemper Small Capitalization Equity Fund
<TABLE>
<CAPTION>
Year ended September 30,
CLASS A 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of year $7.98 7.01 7.14 5.81 6.45
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.03) (.01) (.02) (.01) (.01)
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) (1.84) 1.55 .94 1.68 (.27)
- -----------------------------------------------------------------------------------
Total from investment
operations (1.87) 1.54 .92 1.67 (.28)
- -----------------------------------------------------------------------------------
Less distribution from net
realized gain .81 .57 1.05 .34 .36
- -----------------------------------------------------------------------------------
Net asset value, end of
year $5.30 7.98 7.01 7.14 5.81
- -----------------------------------------------------------------------------------
Total return (25.13)% 24.29 16.33 30.88 (4.31)
- -----------------------------------------------------------------------------------
Ratios to average net assets
Expenses .90% .90 1.08 1.14 1.34
- -----------------------------------------------------------------------------------
Net investment loss (.38)% (.20) (.26) (.18) (.76)
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
May 31,
to Sept.
Year ended September 30, 30,
CLASS B 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $7.64 6.81 7.03 5.78 5.65
- -------------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.11) (.10) (.09) (.07) (.02)
- -------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) (1.74) 1.50 .92 1.66 .15
- -------------------------------------------------------------------------------------
Total from investment
operations (1.85) 1.40 .83 1.59 .13
- -------------------------------------------------------------------------------------
Less distribution from net
realized gain .81 .57 1.05 .34 --
- -------------------------------------------------------------------------------------
Net asset value, end of
period $4.98 7.64 6.81 7.03 5.78
- -------------------------------------------------------------------------------------
Total return (not
annualized) (26.06)% 22.83 15.13 29.59 2.30
- -------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 2.14% 2.14 2.15 2.17 2.29
- -------------------------------------------------------------------------------------
Net investment loss (1.62)% (1.44) (1.33) (1.21) (1.38)
- -------------------------------------------------------------------------------------
</TABLE>
Financial Highlights 69
<PAGE>
<TABLE>
<CAPTION>
May 31,
to Sept.
Year ended September 30, 30,
CLASS C 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $7.63 6.80 7.02 5.77 5.65
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.14) (.09) (.09) (.07) (.03)
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) (1.68) 1.49 .92 1.66 .15
- -----------------------------------------------------------------------------------
Total from investment
operations (1.82) 1.40 .83 1.59 .12
- -----------------------------------------------------------------------------------
Less distribution from net
realized gain .81 .57 1.05 .34 --
- -----------------------------------------------------------------------------------
Net asset value, end of
period $5.00 7.63 6.80 7.02 5.77
- -----------------------------------------------------------------------------------
Total return (not
annualized) (25.65)% 22.87 15.16 29.65 2.12
- -----------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 2.06% 1.95 2.15 2.10 2.10
- -----------------------------------------------------------------------------------
Net investment loss (1.54)% (1.25) (1.33) (1.14) (1.21)
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended September 30,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Supplemental data for all classes
Net assets at end of year (in
thousands) $718,349 1,095,478 934,075 839,905 631,607
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 86% 102 85 102 58
- ------------------------------------------------------------------------------------------------
</TABLE>
Notes: Total return does not reflect the effect of any sales charges. Per share
data for the year ended September 30, 1996 were determined based on average
shares outstanding.
70 Financial Highlights
<PAGE>
Kemper Technology Fund
<TABLE>
<CAPTION>
Year ended October 31,
CLASS A 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of year $13.13 13.16 14.63 11.50 10.68
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.04) (.06) (.08) (.03) --
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain .82 2.14 .74 4.66 1.49
- -----------------------------------------------------------------------------------
Total from investment
operations .78 2.08 .66 4.63 1.49
- -----------------------------------------------------------------------------------
Less distribution from net
realized gain 2.14 2.11 2.13 1.50 .67
- -----------------------------------------------------------------------------------
Net asset value, end of
year $11.77 13.13 13.16 14.63 11.50
- -----------------------------------------------------------------------------------
Total return 8.21% 17.11 7.83 47.30 14.95
- -----------------------------------------------------------------------------------
Ratios to average net assets
Expenses .92% .89 .89 .88 .89
- -----------------------------------------------------------------------------------
Net investment income (loss) .37% (.42) (.62) (.23) .05
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
May 31
to
October
Year ended October 31, 31,
CLASS B 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $12.54 12.77 14.39 11.45 9.99
- -------------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.14) (.18) (.19) (.15) (.05)
- -------------------------------------------------------------------------------------
Net realized and unrealized
gain .77 2.06 .70 4.59 1.51
- -------------------------------------------------------------------------------------
Total from investment
operations .63 1.88 .51 4.44 1.46
- -------------------------------------------------------------------------------------
Less distribution from net
realized gain 2.14 2.11 2.13 1.50 --
- -------------------------------------------------------------------------------------
Net asset value, end of
period $11.03 12.54 12.77 14.39 11.45
- -------------------------------------------------------------------------------------
Total return (not annualized) 7.24% 15.91 6.76 45.65 14.61
- -------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 1.85% 1.85 1.87 1.82 1.99
- -------------------------------------------------------------------------------------
Net investment loss (1.30)% (1.38) (1.60) (1.17) (1.08)
- -------------------------------------------------------------------------------------
</TABLE>
Financial Highlights 71
<PAGE>
<TABLE>
<CAPTION>
May 31
to
October
Year ended October 31, 31,
CLASS C 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $12.64 12.85 14.45 11.45 9.99
- -------------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (.14) (.17) (.18) (.15) (.05)
- -------------------------------------------------------------------------------------
Net realized and unrealized
gain .81 2.07 .71 4.65 1.51
- -------------------------------------------------------------------------------------
Total from investment
operations .67 1.90 .53 4.50 1.46
- -------------------------------------------------------------------------------------
Less distribution from net
realized gain 2.14 2.11 2.13 1.50 --
- -------------------------------------------------------------------------------------
Net asset value, end of
period $11.17 12.64 12.85 14.45 11.45
- -------------------------------------------------------------------------------------
Total return (not annualized) 7.57% 15.98 6.88 46.23 14.61
- -------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 1.81% 1.82 1.82 1.76 1.83
- -------------------------------------------------------------------------------------
Net investment loss (1.26)% (1.35) (1.55) (1.11) (.92)
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended October 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Supplemental data for all classes
Net assets at end of year
(in thousands) $1,247,991 1,209,723 1,062,813 1,017,955 713,654
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate 146% 192 121 105 81
- ----------------------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges. Per share
data for 1995 through 1998 were determined based on average shares outstanding.
72 Financial Highlights
<PAGE>
Kemper Total Return Fund
<TABLE>
<CAPTION>
Year ended October 31,
CLASS A 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of year $11.34 11.28 10.60 9.10 11.23
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .29 .31 .28 .29 .19
- -----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) .77 1.57 1.24 1.46 (1.01)
- -----------------------------------------------------------------------------------
Total from investment
operations 1.06 1.88 1.52 1.75 (.82)
- -----------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .31 .33 .34 .25 .23
- -----------------------------------------------------------------------------------
Distribution from net
realized gain 1.55 1.49 .50 -- 1.08
- -----------------------------------------------------------------------------------
Total dividends 1.86 1.82 .84 .25 1.31
- -----------------------------------------------------------------------------------
Net asset value, end of
year $10.54 11.34 11.28 10.60 9.10
- -----------------------------------------------------------------------------------
Total return 10.47% 18.95 15.34 19.46 (7.92)
- -----------------------------------------------------------------------------------
Ratios to average net assets
Expenses 1.01% 1.01 1.05 1.12 1.13
- -----------------------------------------------------------------------------------
Net investment income 2.75% 2.92 2.76 3.00 2.34
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
May 31
to
October
Year ended October 31, 31,
CLASS B 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $11.33 11.27 10.59 9.09 9.24
- -------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .19 .22 .19 .20 .06
- -------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) .75 1.55 1.23 1.46 (.16)
- -------------------------------------------------------------------------------------
Total from investment
operations .94 1.77 1.42 1.66 (.10)
- -------------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .20 .22 .24 .16 .05
- -------------------------------------------------------------------------------------
Distribution from net
realized gain 1.55 1.49 .50 -- --
- -------------------------------------------------------------------------------------
Total dividends 1.75 1.71 .74 .16 .05
- -------------------------------------------------------------------------------------
Net asset value, end of
period $10.52 11.33 11.27 10.59 9.09
- -------------------------------------------------------------------------------------
Total return (not
annualized) 9.30% 17.86 14.28 18.42 (1.06)
- -------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 2.01% 1.95 1.99 2.05 2.03
- -------------------------------------------------------------------------------------
Net investment income 1.75% 1.98 1.82 2.07 1.57
- -------------------------------------------------------------------------------------
</TABLE>
Financial Highlights 73
<PAGE>
<TABLE>
<CAPTION>
May 31 to
Year ended October 31, October 31,
CLASS C 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning
of period $11.34 11.28 10.61 9.09 9.24
- ---------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .20 .22 .20 .21 .06
- ---------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) .77 1.56 1.22 1.48 (.16)
- ---------------------------------------------------------------------------------------
Total from investment
operations .97 1.78 1.42 1.69 (.10)
- ---------------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .22 .23 .25 .17 .05
- ---------------------------------------------------------------------------------------
Distribution from net
realized gain 1.55 1.49 .50 -- --
- ---------------------------------------------------------------------------------------
Total dividends 1.77 1.72 .75 .17 .05
- ---------------------------------------------------------------------------------------
Net asset value, end of
period $10.54 11.34 11.28 10.61 9.09
- ---------------------------------------------------------------------------------------
Total return (not annualized) 9.50% 17.92 14.31 18.76 (1.05)
- ---------------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
Expenses 1.90% 1.90 1.89 1.86 2.00
- ---------------------------------------------------------------------------------------
Net investment income 1.86% 2.03 1.92 2.26 1.60
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended October 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Supplemental data for all classes
Net assets at end of year
(in thousands) $3,321,254 3,241,383 3,020,798 2,926,542 2,864,322
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 80% 122 85 142 121
- ------------------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges.
74 Financial Highlights
<PAGE>
Kemper Value+Growth Fund
<TABLE>
<CAPTION>
October
16 to
November
Year ended November 30, 30,
CLASS A 1998 1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $14.62 12.95 10.02 9.50
- --------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .01 .02 .05 .02
- --------------------------------------------------------------------------------------
Net realized and unrealized gain 1.69 2.48 2.88 .50
- --------------------------------------------------------------------------------------
Total from investment operations 1.70 2.50 2.93 .52
- --------------------------------------------------------------------------------------
Less distribution from net realized
gain .50 .83 -- --
- --------------------------------------------------------------------------------------
Net asset value, end of period $15.82 14.62 12.95 10.02
- --------------------------------------------------------------------------------------
Total return (not annualized) 12.06% 20.83 29.24 5.47
- --------------------------------------------------------------------------------------
Ratios to average net assets
(annualized) (a)
Expenses 1.42% 1.41 1.47 1.35
- --------------------------------------------------------------------------------------
Net investment income .22% .35 .43 2.25
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
October
16 to
November
Year ended November 30, 30,
CLASS B 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $14.37 12.83 10.02 9.50
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.07) (.07) (.04) .02
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.60 2.44 2.85 .50
- -------------------------------------------------------------------------------------------
Total from investment operations 1.53 2.37 2.81 .52
- -------------------------------------------------------------------------------------------
Less distribution from net realized
gain .50 .83 -- --
- -------------------------------------------------------------------------------------------
Net asset value, end of period $15.40 14.37 12.83 10.02
- -------------------------------------------------------------------------------------------
Total return (not annualized) 11.06% 19.96 28.04 5.47
- -------------------------------------------------------------------------------------------
Ratios to average net assets (annualized) (a)
Expenses 2.27% 2.27 2.27 2.10
- -------------------------------------------------------------------------------------------
Net investment income (loss) (.63)% (.51) (.37) 1.50
- -------------------------------------------------------------------------------------------
</TABLE>
Financial Highlights 75
<PAGE>
<TABLE>
<CAPTION>
October
16 to
November
Year ended November 30, 30,
CLASS C 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $14.37 12.84 10.01 9.50
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.04) (.05) (.04) .01
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.57 2.41 2.87 .50
- ------------------------------------------------------------------------------------------
Total from investment operations 1.53 2.36 2.83 .51
- ------------------------------------------------------------------------------------------
Less distribution from net realized gain .50 .83 -- --
- ------------------------------------------------------------------------------------------
Net asset value, end of period $15.40 14.37 12.84 10.01
- ------------------------------------------------------------------------------------------
Total return (not annualized) 11.06% 19.86 28.27 5.37
- ------------------------------------------------------------------------------------------
Ratios to average net assets (annualized)(a)
Expenses 2.16% 2.15 2.22 2.07
- ------------------------------------------------------------------------------------------
Net investment income (loss) (.52)% (.39) (.32) 1.53
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
October
16 to
November
Year ended November 30, 30,
1998 1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Supplemental data for all classes
Net assets at end of period
(in thousands) $144,791 97,741 39,092 5,851
- ----------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 92% 56 82 --
</TABLE>
Note: Total return does not reflect the effect of any sales charges.
(a) Scudder Kemper Investments, Inc. agreed to temporarily waive certain
operating expenses of the fund during the fiscal years ended November 30,
1997 and 1996. Absent this waiver, the ratios of expenses to average net
assets would have increased and the ratios of net investment income to
average net assets would have decreased by the following amounts: for the
year ended November 30, 1997, 0.05% for Class B and 0.01% for Class C; for
the year ended November 30, 1996, 0.12% for Class A, 0.17% for Class B and
0.13% for Class C.
76 Financial Highlights
<PAGE>
Additional information about the funds may be found in the Statement of
Additional Information, the Shareholder Services Guide and in shareholder
reports. Shareholder inquiries may be made by calling Kemper at the toll-free
telephone number listed below. The Statement of Additional Information contains
more information on fund investments and operations. The Shareholder Services
Guide contains more 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 Call Kemper at: 1-800-621-1048
- --------------------------------------------------------------------------------
By Mail Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
or
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(a duplication fee is charged)
- --------------------------------------------------------------------------------
In Person Public Reference Room
Securities and Exchange Commission
Washington, D.C.
(Call 1-800-SEC-0330
for more information.)
- --------------------------------------------------------------------------------
By Internet http://www.sec.gov
http://www.kemper.com
- --------------------------------------------------------------------------------
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 811-07855
Kemper Blue Chip Fund 811-5357
Kemper Classic Growth Fund 811-43
Kemper Growth Fund 811-1365
Kemper Small Capitalization Equity Fund 811-1702
Kemper Technology Fund 811-0547
Kemper Total Return Fund 811-1236
Kemper Value+Growth Fund 811-7331
- --------------------
[LOGO] PRINTED WITH [RECYCLE LOGO] Printed on recycled paper
SOYINK
- --------------------
<PAGE>
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 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.........................................10
PORTFOLIO TRANSACTIONS.....................................................19
INVESTMENT MANAGER AND UNDERWRITER.........................................20
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES..............................29
DIVIDENDS AND TAXES........................................................41
PERFORMANCE................................................................47
OFFICERS AND BOARD MEMBERS.................................................66
SHAREHOLDER RIGHTS.........................................................72
APPENDIX--RATINGS OF FIXED INCOME INVESTMENTS..............................74
The financial statements appearing in each Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference. The Annual Reports for each
of the Funds accompanies this document.
KEF-13 2/99
printed on recycled paper
<PAGE>
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions which cannot
be changed without approval of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, (the "1940 Act") 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, Small Cap Fund,
Technology Fund, Total Return Fund and Value+Growth Fund have elected to be
classified as diversified open-end investment funds.
Each Fund may not, as a fundamental policy:
1. Make loans except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time.
2. Borrow money, except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from
time to time.
3. Concentrate its investments in a particular industry, as that term is used in
the 1940 Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
4. Purchase physical commodities or contracts relating to physical commodities.
5. 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. Issue senior securities except as permitted under the 1940 Act, as amended,
and as interpreted or modified by regulatory authority having jurisdiction,
from time to time.
7. 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.
Each Fund has adopted the following non-fundamental restrictions, which may be
changed by the Board without shareholder approval.
The Aggressive Growth Fund may not, as a non-fundamental policy:
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
2
<PAGE>
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 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 non-fundamental policy,
3
<PAGE>
The Fund did not borrow money as permitted by its fundamental investment
restriction number in the latest fiscal year and it has no present intention of
borrowing during the current year:
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.
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,
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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 its fundamental investment restriction
number in the latest fiscal year and neither Fund has a present intention of
borrowing during the current year:
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.
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
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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 its fundamental nvestment restriction number in
the latest fiscal year and it has no present intention of borrowing during the
current year:
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.
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,
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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 its fundamental investment
restriction number in the latest fiscal year and has no present intention of
borrowing during the current year:
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,
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<PAGE>
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 is fundamental investment restriction number in
the latest fiscal year and it has no present intention of borrowing during the
current year:
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. 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.
8
<PAGE>
9
<PAGE>
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 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.
SPECIAL RISK FACTORS
Non-Diversified. 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
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<PAGE>
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."
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.
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<PAGE>
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 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
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(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.
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
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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.
Options on Securities. The Aggressive Growth 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 and
Technology Funds may write "covered" put options provided that, as long as the
Fund is obligated as a writer of a put option, the Fund will own an option to
sell the underlying securities subject to the option, having an exercise price
equal to or greater than the exercise price of the "covered" option, or it will
deposit and maintain in a segregated account eligible securities having a value
equal to or greater than the exercise price of the option. A call option gives
the purchaser the right to buy, and the writer the obligation to sell, the
underlying security at the exercise price during or at the end of the option
period. A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying security at the exercise price during or at
the end of the option period. The premium received for writing an option will
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to such market price, the price
volatility of the underlying security, the option period, supply and demand and
interest rates. The Funds may write (for the 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
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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.
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.
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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 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 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 Growthand
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 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 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
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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 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
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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. 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.
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.
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.
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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 Adviser.
The primary objective of the Adviser 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
Adviser seeks to evaluate the overall reasonableness of brokerage commissions
paid (to the extent applicable) through the familiarity of the Distributor with
commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
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 Adviser 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 Adviser'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 and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The AdvisorAdviser 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 Adviser 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 Adviser will place
orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker-dealer and a subsidiary of the Adviser; 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 Adviser, it is the opinion of
the AdvisorAdviser that such information only supplements the Adviser's own
research effort since the information must still be analyzed, weighed and
reviewed by the Adviser's staff. Such information may be useful to the
AdvisorAdviser in providing services to clients other than a Fund, and not all
such information is used by the Adviser in connection with a Fund. Conversely,
such information provided to the Adviser by broker/dealers through whom other
clients of the Adviser effect securities transactions may be useful to the
Adviser in providing services to a Fund.
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Each Fund's Board members 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.
Brokerage Commissions
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.
Allocated to Firms
Based on Research
Fund Fiscal 1998 in Fiscal 1998 Fiscal 1997 Fiscal 1996
- ---- ----------- -------------- ----------- -----------
Aggressive $ 27,000* $ N.A.
Blue Chip $ 2,664,000 $1,661,000
Growth $11,676,000 $9,535,000
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
* For the period December 31, 1996 to September 30, 1997.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper" or "the
Adviser"), 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 Adviser is owned by its officers and employees. Pursuant to investment
management agreements, Scudder Kemper acts as each Fund's investment
advisorAdviser, 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 SEC, 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.
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Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by
Scudder Kemper. The investment management agreements provide that Scudder Kemper
shall act as each Fund's investment Adviser, manage its investments and provide
it with various services and facilities.
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 Adviser, with the balance
owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in 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.
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,
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
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
21
<PAGE>
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 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+ 98,000(5) $ 37,000(1) --
Blue Chip 3,104,000 $ 2,018,000 1,198,000
Growth 14,891,000 $14,576,000 13,994,000
Small Cap 3,519,000(6) $ 3,193,000(3) 4,418,000(4)
Technology 6,842,000 $ 6,532,000 5,582,000
Total Return 18,088,000 $17,084,000 15,825,000
Value+Growth 906,000 $ 474,000 131,000*
22
<PAGE>
+ 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 $9,000 from $107,000 base fee.
(6) Fee was decreased $2,791,000 from $6,310,000 base fee.
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
1940 Act. The agreement may not be amended for a class to increase the fee to be
paid by a Fund with respect to such class without approval by a majority of the
outstanding voting securities of such class of the Fund and all material
amendments must in any event be approved by the Board of Trustees in the manner
described above with respect to the continuation of the agreement. The
provisions concerning the continuation, amendment and termination of the
distribution agreement are on a Fund by Fund basis and for each Fund on a class
by class basis.
Class A Shares. 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.
Commissions Commissions Commissions Paid
Retained by Underwriter Paid to Kemper
Fund Fiscal Year Underwriter to All Firms Affiliated Firms
- ---- ----------- ----------- ------------ ----------------
Aggressive 1998 $ 32,000 323,000 5,000
1997+ $ 7,000 111,000 5,000
1996 N.A. N.A. N.A.
Blue Chip 1998 $183,000 1,286,000 6,000
1997 $124,000 1,101,000 7,000
1996 $ 72,000 424,000 11,000
23
<PAGE>
Growth 1998 $326,000 1,998,000 5,000
1997 $296,000 1,523,000 9,000
1996 $327,000 2,075,000 57,000
Small Cap 1998 $154,000 875,000 0
1997 $104,000 705,000 0
1996 $130,000 849,000 16,000
Technology 1998 $163,000 824,000 7,000
1997 $181,000 853,000 7,000
1996 $198,000 869,000 37,000
Total Return 1998 $233,000 2,219,000 6,000
1997 $191,000 1,591,000 0
1996 $225,000 1,697,000 79,000
Value+Growth 1998 $ 61,000 462,000 0
1997 $ 40,000 538,000 0
1996 $ 33,000 238,000 15,000
+ 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 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.
24
<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
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 Fiscal and Prospectus and Sales Operating Interest
B Shares Year Literature Printing Expenses Expenses Expenses
- -------- ---- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Aggressive 1998
1997+ 12,000 1,000 3,000 1,000 4,000
1996
Blue Chip 1998
1997 189,000 13,000 530,000 97,000 238,000
1996 117,000 10,000 232,000 76,000 85,000
Growth 1998
1997 563,000 39,000 1,424,000 199,000 48,000
1996 1,020,000 88,000 2,049,000 284,000 188,000
277,000
Small Cap 1998
1997 222,000 15,000 564,000 97,000 426,000
1996 384,000 34,000 781,000 125,000 380,000
Technology 1998
1997 162,000 11,000 442,000 77,000 295,000
1996 309,000 28,000 572,000 121,000 191,000
54,000
Total Return 1998
1997 517,000 36,000 1,391,000 193,000 44,000
1996 1,100,000 100,000 2,139,000 344,000 438,000
809,000
Value+Growth 1998
1997 65,000 5,000 184,000 30,000 104,000
1996 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.
25
<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
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 Fiscal and Prospectus and Sales Operating Interest
C Shares Year Literature Printing Expenses Expenses Expenses
- -------- ---- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
Aggressive 1997+ 7,000 1,000 20,000 0 1,000
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 26,000 2,000 52,000 18,000 12,000
1996 14,000 1,000 28,000 1,000 5,000
1995 3,000 1,000 13,000 8,000 2,000
1998
Growth 1997 44,000 3,000 110,000 8,000 36,000
1996 48,000 4,000 89,000 8,000 18,000
1995 12,000 2,000 70,000 15,000 7,000
1998
Small Cap 1997 21,000 1,000 53,000 9,000 21,000
1996 30,000 3,000 60,000 3,000 11,000
1995 6,000 1,000 36,000 14,000 4,000
1998
Technology 1997 24,000 2,000 66,000 2,000 19,000
1996 34,000 3,000 67,000 2,000 8,000
1995 4,000 1,000 19,000 10,000 2,000
1998
Total Return 1997 35,000 2,000 94,000 2,000 36,000
1996 49,000 4,000 97,000 5,000 20,000
1995 13,000 2,000 72,000 15,000 9,000
1998
Value+Growth 1997 7,000 1,000 20,000 2,000 7,000
1996 13,000 1,000 23,000 8,000 3,000
1995** 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) Amounts shown after expense waiver.
26
<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* 28,000 6,000 28,000 1,000
Blue Chip 1,198,000 134,000 293,000 6,000
Growth 5,791,000 148,000 1,180,000 3,000
Small Cap 1,938,000 106,000 438,000 4,000
Technology 884,000 108,000 273,000 2,000
Total Return 7,774,000 167,000 1,259,000 5,000
Value+Growth 345,000 9,000 86,000 3,000
</TABLE>
*For the period December 31, 1996 to September 30, 1997.
(a) Amounts shown are after expense waiver.
If a Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of a Fund to make payments to KDI pursuant to the Plan will cease
and the Fund will not be required to make any payments past the termination
date. Thus, there is no legal obligation for the Fund to pay any expenses
incurred by KDI in excess of its fees under a Plan, if for any reason the Plan
is terminated in accordance with its terms. Future fees under a Plan may or may
not be sufficient to reimburse KDI for its expenses incurred.
ADMINISTRATIVE SERVICES. 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 for the last three fiscal years.
[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>
$1998* 2,000 1,000 0 80,000 0
Aggressive $1997+ 7,000 4,000 2,000 24,000 0
$1996 N.A. N.A. N.A. N.A. N.A.
$1998 879,000 394,000 44,000 1,311,000 5,000
Blue Chip $1997 598,000 220,000 16,000 886,000 0
$1996 415,000 78,000 4,000 512,000 15,000
</TABLE>
27
<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>
$1998 4,274,000 1,829,000 47,000 6,179,000 37,000
Growth $1997 4,000,000 2,093,000 36,000 6,149,000 41,000
$1996 3,929,000 2,016,000 19,000 5,983,000 138,000
$1998 1,407,000 614,000 33,000 2,071,000 5,000
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
$1998 1,763,000 284,000 32,000 2,114,000 5,000
Technology $1997 1,682,000 228,000 17,000 1,955,000 0
$1996 1,460,000 138,000 7,000 1,607,000 15,000
$1998 5,353,000 2,504,000 56,000 7,976,000 17,000
Total Return $1997 4,683,000 2,813,000 36,000 7,603,000 22,000
$1996 4,252,000 2,772,000 20,000 7,049,000 194,000
$1998 152,000 130,000 10,000 299,000 0
Value+Growth $1997* 71,000 73,000 4,000 169,000 0
$1996 22,000 25,000 2,000 57,000 2,000
</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.
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.
Fund Fees IFTC Paid to KSvC
- ---- ----------------------
Aggressive $ 209,000
Blue Chip $1,790,000
Growth $7,105,000
Small Cap $3,107,000
Technology $1,454,000
Total Return $7,277,000
Value+Growth $ 501,000
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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 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.
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<PAGE>
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
------------------ -------------- ------------ -----
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 0.00** 0.00** ***
* 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 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
30
<PAGE>
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 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 Adviser or other firm for portfolio
management and other services. Such shares are sold for investment purposes and
on the condition that they will not be resold except through redemption or
repurchase by the Funds. The Funds may also issue Class A shares at net asset
value in connection with the
31
<PAGE>
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 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
32
<PAGE>
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 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.
33
<PAGE>
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 SEC 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 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
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<PAGE>
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 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
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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:
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%
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<PAGE>
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 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
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<PAGE>
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
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.
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<PAGE>
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. 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
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<PAGE>
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 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.
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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, 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 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.
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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 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
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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.
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.
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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.
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
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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.
An individual may make a deductible IRA contribution for any taxable year only
if (i) the individual is not an active participant in an employer's retirement
plan, or (ii) the individual has an adjusted gross income below a certain level
($50,000 for married individuals filing a joint return, with a phase-out of the
deduction for adjusted gross income between $50,000 and $60,000; $30,000 for a
single individual, with a phase-out for adjusted gross income between $30,000
and $40,000). An individual is not considered an active participant in an
employer's retirement plan if the individual's spouse is an active participant
in such a plan. However, in the case of a joint return, the amount of the
deductible contribution by the individual who is not an active participant (but
whose spouse is) is phased out for adjusted gross income between $150,000 and
$160,000. 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
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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.
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.
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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.
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.
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Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the SEC. The average annual total
return for 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 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.
48
<PAGE>
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.
49
<PAGE>
AGGRESSIVE GROWTH FUND -- SEPTEMBER 30, 1998
Fund Fund
AVERAGE ANNUAL TOTAL Fund Class Class B Class C
RETURN TABLE A Shares Shares Shares
- ------------ -------- ------ ------
Life of Class(+) 7.87 9.14 10.79
One Year -13.93 -11.90 -9.29
(+) Since December 31, 1996 for Class A, B and C shares.
50
<PAGE>
BLUE CHIP FUND -- OCTOBER 31, 1998
Fund Fund Fund
AVERAGE ANNUAL TOTAL Class A Class B Class C
RETURN TABLE Shares Shares Shares
- ------------ ------ ------ ------
Life of Class(+) 12.24 17.59 18.01
Ten Years 14.05 N/A N/A
Five Years 14.01 N/A N/A
One Year 1.59 4.14 7.08
(+) Since November 23, 1987 for Class A shares. Since May 31, 1994 for Class B
and Class C shares.
51
<PAGE>
GROWTH FUND -- SEPTEMBER 30, 1998
Fund
AVERAGE ANNUAL TOTAL Fund Class Class B Fund Class
RETURN TABLE A Shares Shares C Shares
- ------------ -------- ------ --------
Life of Class(+) 12.04 9.62 10.10
Ten Years 12.47 N/A N/A
Five Years 6.38 N/A N/A
One Year -16.84 -14.97 -12.50
(+) Since April 4, 1966 for Class A shares. Since May 31, 1994 for Class B and
Class C shares.
52
<PAGE>
53
<PAGE>
SMALL CAP FUND -- SEPTEMBER 30, 1998
AVERAGE ANNUAL TOTAL Fund Class Fund Class Fund Class C
RETURN TABLE A Shares B Shares Shares
- ------------ -------- -------- ------
Life of Class(+) 11.52 7.50 7.94
Ten Years 11.86 N/A N/A
Five Years 5.04 N/A N/A
One Year -29.46 -28.02 -25.65
(+) Since February 20, 1969 for Class A shares. Since May 31, 1994 for Class B
and Class C shares.
NA -- Not Available.
54
<PAGE>
TECHNOLOGY FUND -- OCTOBER 31, 1998
AVERAGE ANNUAL TOTAL Fund Class A Fund Class B Fund Class C
RETURN TABLE Shares Shares Shares
- ------------ ------ ------ ------
Life of Class(+) 13.06 19.46 19.95
Ten Years 15.88 N/A N/A
Five Years 16.88 N/A N/A
One Year 2.00 4.61 7.57
(+) Since September 7, 1948 for Class A shares. Since May 31, 1994 for Class B
and Class C shares.
NA--Not Available.
55
<PAGE>
TOTAL RETURN FUND -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
Dow Jones
ANNUAL TOTAL RETURN Fund Class A Fund Class Fund Class Industrial Standard & Consumer
TABLE Shares B Shares C Shares Average (3) Poor's 500 (4) Price Index (5)
- ----- ------ -------- -------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Life of Class(+) 11.78 12.82 13.62
Ten Years 12.31 N/A N/A
Five Years 9.45 N/A N/A
One Year 4.14 6.52 9.50
<CAPTION>
Lehman Bros
ANNUAL TOTAL RETURN Russell 1000(R) Lipper Balanced Gov't/Corp.
TABLE Growth Index (6) Fund (11) Index (12)
- ----- ---------------- --------- ----------
<S> <C> <C> <C>
Life of Class(+)
Ten Years
Five Years
One Year
</TABLE>
(+) Since March 2, 1964 for Class A shares. Since May 31, 1994 for Class B and
Class C shares.
56
<PAGE>
VALUE+GROWTH FUND -- NOVEMBER 30, 1998
<TABLE>
<CAPTION>
Dow Jones
ANNUAL TOTAL Fund Class Fund Class Fund Class Industrial Standard & Consumer Price Russell 1000(R)
RETURN TABLE A Shares B Shares C Shares Average (3) Poor's 500 (4) Index (5) Growth Index (6)
- ------------ -------- -------- -------- ----------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Class(+) 19.37 20.23 20.66
Three Years 20.23 19.01 19.52
One Year 20.66 8.06 5.63
</TABLE>
(+) Since October 16, 1995 for Class A, B and C shares.
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75%. The Initial Investment for Class B and Class C
shares was not adjusted. Amounts were adjusted for Class B shares for the
contingent deferred sales charge that may be imposed at the end of the
period based upon the schedule for shares sold currently, see "Redemption
or Repurchase of Shares" in the prospectus. No adjustments were made to
Class C shares. Amounts were adjusted for Class C shares for the
contingent deferred sales charge that may be imposed for periods less than
one year.
(2) Includes short-term capital gain dividends, if any.
57
<PAGE>
Investors may want to compare the performance of a Fund to certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of deposits prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution.
Information regarding bank products may be based upon, among other things, the
BANK RATE MONITOR National IndexTM for certificates of deposit, which is an
unmanaged index and is based on stated rates and the annual effective yields of
certificates of deposit in the ten largest banking markets in the United States,
or the CDA Investment Technologies, Inc. Certificate of Deposit Index, which is
an unmanaged index based on the average monthly yields of certificates of
deposit.
Investors also may want to compare the performance of a Fund to that of U.S.
Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on the average monthly yield of
treasury bills maturing in six months. Due to their short maturities, Treasury
bills generally experience very low market value volatility.
Investors may want to compare the performance of a Fund, such as the Total
Return Fund, to the performance of a hypothetical portfolio weighted 60% in the
Standard & Poor's 500 Stock Index (an unmanaged index generally representative
of the U.S. stock market) and 40% in the Lehman Brothers Government/Corporate
Bond Index (an unmanaged index generally representative of intermediate and
long-term government and investment grade corporate debt securities). See the
footnotes above for a more complete description of these indexes. The Total
Return Fund may invest in both equity and fixed income securities. The
percentage of assets invested in each type of security will vary from time to
time in the discretion of the Fund's investment manager and will not necessarily
approximate the 60%/40% weighting of this hypothetical index.
Investors may want to compare the performance of a Fund to that of money market
funds. Money market funds seek to maintain a stable net asset value and yield
fluctuates. Information regarding the performance of money market funds may be
based upon, among other things, IBC/Donoghue's Money Fund 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.
58
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59
<PAGE>
60
<PAGE>
61
<PAGE>
62
<PAGE>
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
63
<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 9/30/98) #117 of 238 funds
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 10/31/98) #80 of 146 funds
Five Year (Period ended 10/31/98) #213 of 296 funds
One Year (Period ended 10/31/98) #476 of 726 funds
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
------------
Twenty Years (Period ended 9/30/98) #57 of 98 funds
Fifteen Years (Period ended 9/30/98) #88 of 113 funds
Ten Years (Period ended 9/30/98) #130 of 187 funds
Five Years (Period ended 9/30/98) #332 of 359 funds
One Year (Period ended 9/30/98) #757 of 954 funds
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.
64
<PAGE>
SMALL CAP FUND
Lipper Mutual Fund
Performance Analysis
Small Cap Company
Growth Funds
------------
Twenty Years (Period ended 9/30/98) #4 of 14 funds
Fifteen Years (Period ended 9/30/98) #10 of 22 funds
Ten Years (Period ended 9/30/98) #36 of 62 funds
Five Years (Period ended 9/30/98) #146 of 180 funds
One Year (Period ended 9/30/98) #426 of 576 funds
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
----------------
Twenty Years (Period ended 10/31/98) 2 of 3 funds
Fifteen Years (Period ended 10/31/98) #4 of 7 funds
Ten Years (Period ended 10/31/98) #11 of 12 funds
Five Years (Period ended 10/31/98) #11 of 19 funds
One Year (Period ended 10/31/98) #38 of 69 funds
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
--------------
Twenty Years (Period ended 10/31/98) #6 of 28 funds
Fifteen Years (Period ended 10/31/98) #20 of 29 funds
Ten Years (Period ended 10/31/98) #16 of 56 funds
Five Years (Period ended 10/31/98) #121 of 151 funds
One Year (Period ended 10/31/98) #151 of 395 funds
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
---------------
Three Year (Period ended 11/30/98) #218 of 459 funds
One Year (Period ended 11/30/98) #402 of 744 funds
65
<PAGE>
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 BOARD MEMBERS
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 Adviser.
All Funds:
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Adviser.
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.
THOMAS W. LITTAUER (4/26/55), Trustee, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; 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.
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, Adviser.
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.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, AdvisorAdviser; 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,
Adviser.
66
<PAGE>
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, dviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS, (2/21/63) Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; 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, Adviser; 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, Adviser and KDI.Aggressive Growth Fund &
Small Cap Fund.
STEVEN H. REYNOLDS (9/11/43), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Scudder Kemper.
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.
Value+Growth Fund:
PHILIP S. FORTUNA (11/30/57), Vice President*, 101 California Street, Suite
4100, San Francisco, California; Vice President, Scudder Kemper.
Total Return Fund:
GARY A. LANGBAUM (12/16/48), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Executive Vice President, Scudder Kemper.
*Interested persons of the Fund as defined in the 1940 Act.
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.
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<PAGE>
Aggregate Compensation From Fund
<TABLE>
<CAPTION>
Total
Compensation
From Fund and
Kemper Fund
Complex
Total Value+ Paid
Name of Trustee Aggressive Blue Chip Growth Small Cap Tech Return Growth Trustees**
- --------------- ---------- --------- ------ --------- ---- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Belin* $300 2,500 5,000 3,500 3,900 5,500 1,300 87,600
Lewis A. Burnham $400 3,000 5,900 4,200 4,400 6,200 1,600 126,100
Donald L. Dunaway* $400 3,100 6,400 4,500 4,700 6,700 1,800 135,000
Robert B. Hoffman $400 2,700 5,600 4,000 4,200 5,900 1,500 116,100
Donald R. Jones $400 3,000 6,100 4,300 4,500 6,400 1,600 129,600
Shirley D. Peterson $300 2,500 5,200 5,700 3,900 5,500 1,400 108,800
William P. Sommers $300 2,500 5,200 5,700 3,900 5,500 1,400 108,800
</TABLE>
* 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 $$300, $18,600, $73,700, $47,800,
$64,100, $86400, and $2,800 for Mr. Belin and $0, $12,600, $36,400,
$22,400, 00, $39,400 and $1,800 for Mr. Dunaway for the Aggressive, Blue
Chip, Growth, Small Cap, Technology, Total Return and Value+Growth Funds,
respectively.
** Includes compensation for service on the boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as a trustee of 26 Kemper
funds with 46 fund portfolios.
As of December 31, 1998, 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 charts below.
Kemper Aggressive Growth Fund
Name and Address Class Percentage
- ---------------- ----- ----------
National Financial Svcs Corp.,
200 Liberty Street
New York, NY 10281 A 7.37
Donaldson Lufkin Jenrette
Securities Corp. Inc.
PO Box 2052
Jersey City, NJ 07303 A 5.26
National Financial Svcs Corp.,
200 Liberty Street
New York, NY 10281 B 9.65
Donaldson Lufkin Jenrette
Securities Corp. Inc.
PO Box 2052
Jersey City, NJ 07303 B 8.33
National Financial Svcs Corp.,
200 Liberty Street
New York, NY 10281 C 10.38
68
<PAGE>
Kemper Classic Growth Fund
Name and Address Class Percentage
- ---------------- ----- ----------
Lincoln Trust Company TTEE
PO Box 5831
Denver, Co 80217 B 11.53
Lincoln Trust Company TTEE
PO Box 5831
Denver, Co 80217 C 6.06
Kemper Blue Chip Fund
Name and Address Class Percentage
- ---------------- ----- ----------
National Financial Svcs Corp.,
200 Liberty Street
New York, NY 10281 B 5.01
Donaldson Lufkin Jenrette
Securities Corp. Inc.
PO Box 2052
Jersey City, NJ 07303 B 6.60
Prudential Securities, Inc.
One New York Plaza
New York, NY 10004-1901 C 5.67
Kemper Small Capitalization Equity
Name and Address Class Percentage
- ---------------- ----- ----------
Everen Securities, Inc.
111 E Kilbourn Ave
Milwaukee, WI 53202 B 5.24
J.C. Bradford & Co.
330 Commerce St.,
Nashville, TN 37201 C 9.61
Kemper Technology Fund
Name and Address Class Percentage
- ---------------- ----- ----------
Everen Securities, Inc.
111 E Kilbourn Ave
Milwaukee, WI 53202 B 5.40
J.C. Bradford & Co.
330 Commerce St.,
Nashville, TN 37201 C 8.15
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<PAGE>
Kemper Value Plus Growth Fund
Name and Address Class Percentage
- ---------------- ----- ----------
National Financial Svcs Corp.,
200 Liberty Street
New York, NY 10281 B 5.45
Everen Securities, Inc.
111 E Kilbourn Ave
Milwaukee, WI 53202 B 5.63
National Financial Svcs Corp.,
200 Liberty Street
New York, NY 10281 C 10.01
70
<PAGE>
* Record and beneficial owner.
** Record owner only.
71
<PAGE>
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 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 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
72
<PAGE>
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 1940 Act); (c) any termination of the Fund or a
class to the extent and as provided in the Declaration of Trust; (d) any
amendment of the Declaration of Trust (other than amendments changing the name
of the Fund, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Fund, or any registration of the Fund with the SEC 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.
73
<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.
74
<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) Text of Share Certificate.
(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) 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)(3) 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.
(Incorporated by reference to Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-1A which was filed on December
3, 1998.)
(e)(1) Underwriting and Distribution Services Agreement between the Registrant, on
behalf of Kemper Value Plus Growth Fund, and Kemper Distributors, Inc. dated
September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-1A which was filed on December
3, 1998.)
(f) Inapplicable.
Part C - Page 2
<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. Filed herein.
(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.
(Incorporated by reference to Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-1A which was filed on December
3, 1998.)
(m)(2) Rule 12b-1 Plan between Kemper Value Plus Growth Fund (Class C Shares) and
Kemper Distributors, Inc. dated August 1, 1998.
(Incorporated by reference to Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-1A which was filed on December
3, 1998.)
Part C - Page 3
<PAGE>
(n) Financial Data Schedule. Filed herein.
(o) Rule 18f-3 Plan.
(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
---- ------------------------------------
Part C - Page 4
<PAGE>
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc.##
Chairman, Zurich-American Insurance Company o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc.##
CEO/Branch Offices, Zurich Life Insurance Company##
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.*
Part C - Page 5
<PAGE>
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
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
</TABLE>
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None.
Thomas W. Littauer Director, Chief Executive Officer Trustee and 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
Part C - Page 6
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Paula Gaccione Vice President None.
Michael E. Harrington Vice President None.
Robert A. Rudell Vice President None.
William M. Thomas Vice President None.
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 7
<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 25th day of
January, 1999.
By /s/Mark S. Casady
------------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on January 25, 1999 on behalf of
the following persons in the capacities indicated.
SIGNATURE TITLE
- --------- -----
/s/ Daniel Pierce
- --------------------------------------
Daniel Pierce* Chairman and 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/Thomas W. Littauer
- --------------------------------------
Thomas W. Littauer Trustee
/s/ Shirley D. Peterson
- --------------------------------------
Shirley D. Peterson* Trustee
/s/ William P. Sommers
- --------------------------------------
William P. Sommers* Trustee
/s/John R. Hebble
- --------------------------------------
John R. Hebble Treasurer
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. 5
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 6
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(j)
Exhibit 23(n)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated January 19, 1999 in the Registration Statement (Form
N-1A) of Kemper Value Plus Growth Fund and its incorporation by reference in the
related Prospectus and Statement of Additional Information of Kemper Equity
Funds/Growth Style, filed with the Securities and Exchange Commission in this
Post-Effective Amendment No. 5 to the Registration Statement under the
Securities Act of 1933 (File No. 33-61433) and in this Amendment No. 6 to the
Registration Statement under the Investment Company Act of 1940 (File No.
811-7331).
ERNST & YOUNG LLP
Chicago, Illinois
January 29, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000946751
<NAME> KEMPER VALUE PLUS GROWTH FUND
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 121,638
<INVESTMENTS-AT-VALUE> 144,138
<RECEIVABLES> 424
<ASSETS-OTHER> 1,902
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 146,464
<PAYABLE-FOR-SECURITIES> 171
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,502
<TOTAL-LIABILITIES> 1,673
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,212
<SHARES-COMMON-STOCK> 4,849
<SHARES-COMMON-PRIOR> 3,560
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,079
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,500
<NET-ASSETS> 144,791
<DIVIDEND-INCOME> 1,825
<INTEREST-INCOME> 244
<OTHER-INCOME> 0
<EXPENSES-NET> (2,282)
<NET-INVESTMENT-INCOME> (213)
<REALIZED-GAINS-CURRENT> 2,115
<APPREC-INCREASE-CURRENT> 10,221
<NET-CHANGE-FROM-OPS> 12,123
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,830)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,480
<NUMBER-OF-SHARES-REDEEMED> (1,317)
<SHARES-REINVESTED> 126
<NET-CHANGE-IN-ASSETS> 47,050
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> 3,434
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 906
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,282
<AVERAGE-NET-ASSETS> 124,775
<PER-SHARE-NAV-BEGIN> 14.62
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 1.69
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.82
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000946751
<NAME> KEMPER VALUE PLUS GROWTH FUND
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 121,638
<INVESTMENTS-AT-VALUE> 144,138
<RECEIVABLES> 424
<ASSETS-OTHER> 1,902
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 146,464
<PAYABLE-FOR-SECURITIES> 171
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,502
<TOTAL-LIABILITIES> 1,673
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,212
<SHARES-COMMON-STOCK> 4,044
<SHARES-COMMON-PRIOR> 2,984
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,079
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,500
<NET-ASSETS> 144,791
<DIVIDEND-INCOME> 1,825
<INTEREST-INCOME> 244
<OTHER-INCOME> 0
<EXPENSES-NET> (2,282)
<NET-INVESTMENT-INCOME> (213)
<REALIZED-GAINS-CURRENT> 2,115
<APPREC-INCREASE-CURRENT> 10,221
<NET-CHANGE-FROM-OPS> 12,123
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,520)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,752
<NUMBER-OF-SHARES-REDEEMED> (797)
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> 47,050
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> 3,434
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 906
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,282
<AVERAGE-NET-ASSETS> 124,775
<PER-SHARE-NAV-BEGIN> 14.37
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 1.60
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.40
<EXPENSE-RATIO> 2.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000946751
<NAME> KEMPER VALUE PLUS GROWTH FUND
<SERIES>
<NUMBER> 003
<NAME> CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 121,638
<INVESTMENTS-AT-VALUE> 144,138
<RECEIVABLES> 424
<ASSETS-OTHER> 1,902
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 146,464
<PAYABLE-FOR-SECURITIES> 171
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,502
<TOTAL-LIABILITIES> 1,673
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,212
<SHARES-COMMON-STOCK> 377
<SHARES-COMMON-PRIOR> 194
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,079
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,500
<NET-ASSETS> 144,791
<DIVIDEND-INCOME> 1,825
<INTEREST-INCOME> 244
<OTHER-INCOME> 0
<EXPENSES-NET> (2,282)
<NET-INVESTMENT-INCOME> (213)
<REALIZED-GAINS-CURRENT> 2,115
<APPREC-INCREASE-CURRENT> 10,221
<NET-CHANGE-FROM-OPS> 12,123
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (105)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 262
<NUMBER-OF-SHARES-REDEEMED> (86)
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 47,050
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> 3,434
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 906
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,282
<AVERAGE-NET-ASSETS> 124,775
<PER-SHARE-NAV-BEGIN> 14.37
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 1.57
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.40
<EXPENSE-RATIO> 2.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
