<PAGE> 1
AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON JANUARY 30, 1996.
1933 ACT REGISTRATION NO. 2-10668
1940 ACT REGISTRATION NO. 811-0547
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
<TABLE>
<CAPTION>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 64 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 64 /X/
</TABLE>
(Check appropriate box or boxes)
------------------
KEMPER TECHNOLOGY FUND
(Exact name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C>
120 South LaSalle Street, Chicago, Illinois 60603
(Address of Principal Executive Office) (Zip Code)
</TABLE>
Registrant's Telephone Number, including Area Code: (312) 781-1121
<TABLE>
<S> <C>
Philip J. Collora, Vice President and Secretary With a copy to:
Kemper Technology Fund
120 South LaSalle Street Charles F. Custer
Chicago, Illinois 60603 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
</TABLE>
Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Rule 24f-2 Notice for Registrant's fiscal year ended October 31,
1995 was filed on or about December 26, 1995.
It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on February 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
KEMPER TECHNOLOGY FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
------------ ----------------------
<S> <C> <C>
1. Cover Page.............................. Cover Page
2. Synopsis................................ Summary; Summary of Expenses; Supplement to
Prospectus
3. Condensed Financial Information......... Financial Highlights; Performance; Supplement
to Prospectus
4. General Description of Registrant....... Summary; Investment Objectives, Policies and
Risk Factors; Capital Structure
5. Management of the Fund.................. Summary; Investment Manager and Underwriter
5A. Management's Discussion of Fund
Performance............................. Performance
6. Capital Stock and Other Securities...... Summary; Dividends and Taxes; Purchase of
Shares; Capital Structure
7. Purchase of Securities Being Offered.... Summary; Investment Manager and Underwriter;
Net Asset Value; Purchase of Shares; Special
Features; Supplement to Prospectus
8. Redemption or Repurchase................ Summary; Redemption or Repurchase of Shares
9. Pending Legal Proceedings............... Inapplicable
</TABLE>
<PAGE> 3
KEMPER EQUITY FUNDS
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 1, 1996
CLASS I SHARES
KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER QUANTITATIVE EQUITY FUND*
KEMPER SMALL CAPITALIZATION EQUITY FUND
KEMPER TECHNOLOGY FUND
KEMPER TOTAL RETURN FUND
KEMPER VALUE+GROWTH FUND
*THE KEMPER QUANTITATIVE EQUITY FUND WILL NOT
COMMENCE OPERATIONS UNTIL FEBRUARY 15, 1996.
Kemper Blue Chip Fund (the "Blue Chip Fund"), Kemper Growth Fund (the "Growth
Fund"), Kemper Quantitative Equity Fund (the "Quantitative Fund"), Kemper Small
Capitalization Equity Fund (the "Small Cap Fund"), Kemper Technology Fund (the
"Technology Fund"), Kemper Total Return Fund (the "Total Return Fund") and
Kemper Value+Growth Fund (the "Value+Growth" Fund) (collectively, the "Funds")
currently offer four classes of shares to provide investors with different
purchasing options. These are Class A, Class B and Class C shares, which are
described in the prospectus, and Class I shares, which are described in the
prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors; (a) tax-exempt retirement plans of Kemper Financial Services, Inc.
("KFS") and its affiliates; and (b) the following investment advisory clients of
KFS and its investment advisory affiliates (including Zurich Investment
Management, Inc.) and Dreman Value Advisors, Inc. that invest at least $1
million in a Fund; (1) unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and self-directed retirement
plans); (2) unaffiliated banks and insurance companies purchasing for their own
accounts; and (3) endowment funds of unaffiliated non-profit organizations.
Class I shares currently are available for purchase only from Kemper
Distributors, Inc., principal underwriter for the Funds. Share certificates are
not available for Class I shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge schedules and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services fee
charged to Class I shares. As a result of the relatively lower expenses for
Class I shares, the level of income dividends per share (as a percentage of net
asset value) and, therefore, the overall investment return, will be higher for
Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL FUNDS) CLASS I
- ----------------------------------------------------------------------------------------- -------
<S> <C>
Maximum Sales Charge on Purchases
(as a percentage of offering price).................................................... None
Maximum Sales Charge on Reinvested Dividends............................................. None
Redemption Fees.......................................................................... None
Exchange Fee............................................................................. None
Deferred Sales Charge (as a percentage of redemption proceeds)........................... None
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET
ASSETS, AND AFTER BLUE SMALL TOTAL VALUE+
MANAGEMENT FEE REDUCTION FOR CHIP GROWTH QUANTITATIVE CAP TECHNOLOGY RETURN GROWTH
VALUE+GROWTH FUND) FUND FUND FUND FUND FUND FUND FUND(1)
---- ------ ------------ ----- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees....................... .58% .54% .58% .73% .56% .54% .60%
12b-1 Fees............................ None None None None None None None
Other Expenses(2)..................... .08% .05% .15% .06% .09% .07% .15%
---- ---- ---- ---- ---- ---- ----
Total Operating Expenses.............. .66% .59% .73% .79% .65% .61% .75%
==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE FUND 1 YEAR 3 YEARS
- ------------------------------------------------------------------ ------------- ------ -------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, Blue Chip $7 $21
assuming
(1) 5% annual return and (2) redemption at the end of each time Growth $6 $19
period:
Quantitative $7 $23
Small Cap $8 $25
Technology $7 $21
Total Return $6 $20
Value+Growth $8 $24
</TABLE>
- ---------------
(1) After management fee and expense reimbursement reduction for Value+Growth
Fund for the current fiscal year.
(2) Other Expenses have been estimated for the current fiscal year.
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in Class I shares of a Fund will
bear directly or indirectly.
The base management fee for the Small Cap Fund is .65% and is subject to a
maximum upward or downward performance adjustment of .30 of 1%. The table
reflects the management fee for the prior short fiscal period after such
adjustment. Due to the short fiscal period for Class I shares (as reflected in
the Financial Highlights table below), the effective management fee was
different from that incurred by the Class A, B and C shares. The Quantitative
Fund will not commence operations until February 15, 1996 and the Value+Growth
Fund commenced operations on October 16, 1995; thus expenses are shown for only
the one and three year periods. KFS has agreed to temporarily reduce its
management fee and reimburse or pay certain operating expenses for the
Value+Growth Fund during its current fiscal year as described in the prospectus.
Without this waiver "Management Fees" would be .72% and "Total Operating
Expenses" would be .87%. See "Investment Manager and Underwriter" in the
prospectus.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE> 5
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH SMALL CAP TECHNOLOGY TOTAL RETURN
FUND FUND FUND FUND
JULY 3, JULY 3, JULY 3, JULY 3,
1995 TO 1995 TO 1995 TO 1995 TO
SEPT. 30, SEPT. 30, OCT. 31, OCT. 31,
1995 1995 1995 1995
----------- --------- ---------- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.80 6.27 12.72 10.07
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .03 -- (.02) .10
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.26 .88 1.94 .52
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.29 .88 1.92 .62
- ------------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income -- -- -- .08
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.09 7.15 14.64 10.61
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED)(%) 8.72 14.04 15.09 6.21
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(%):
Expenses .59 .79 .65 .61
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .92 (.14) (.33) 2.97
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
No financial information is presented for Class I shares of the Blue Chip Fund
or the Value+Growth Fund since no Class I shares had been issued as of such
Funds' fiscal year end. The Quantitative Fund will not commence operations until
February 15, 1996.
SPECIAL FEATURES
Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Kemper Money Market Fund--Money Market Portfolio if the shareholders of Class
I shares have purchased shares because they are participants in tax-exempt
retirement plans of KFS and its affiliates and (ii) Class I shares of any other
"Kemper Mutual Fund" listed under "Special Features--Class A Shares--Combined
Purchases" in the prospectus. Conversely, shareholders of Kemper Money
Funds--Kemper Money Market Fund who have purchased shares because they are
participants in tax-exempt retirement plans of KFS and its affiliates may
exchange their shares for Class I shares of "Kemper Mutual Funds" to the extent
that they are available through their plan. Exchanges will be made at the shares
relative net asset values. Exchanges are subject to the limitations set forth in
the prospectus under "Special Features--Exchange Privilege--General."
February 1, 1996
KEF - 1 (2/96)
3
<PAGE> 6
<TABLE>
<S> <C>
TABLE OF CONTENTS
- -----------------------------------------------
Summary 1
- -----------------------------------------------
Summary of Expenses 2
- -----------------------------------------------
Financial Highlights 5
- -----------------------------------------------
Investment Objectives, Policies and Risk
Factors 11
- -----------------------------------------------
Investment Manager and Underwriter 24
- -----------------------------------------------
Dividends and Taxes 28
- -----------------------------------------------
Net Asset Value 29
- -----------------------------------------------
Purchase of Shares 30
- -----------------------------------------------
Redemption or Repurchase of Shares 35
- -----------------------------------------------
Special Features 39
- -----------------------------------------------
Performance 42
- -----------------------------------------------
Capital Structure 43
- -----------------------------------------------
</TABLE>
This combined prospectus of the Kemper Equity Funds contains information about
each of the Funds that you should know before investing and should be retained
for future reference. A Statement of Additional Information dated February 1,
1996, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. It is available upon request without charge
from the Funds at the address or telephone number on this cover or the firm from
which this prospectus was obtained. Kemper Value+Growth Fund is also known as
Kemper Value Plus Growth Fund.
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN A
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LOGO
KEMPER
EQUITY
FUNDS
PROSPECTUS FEBRUARY 1, 1996
KEMPER EQUITY FUNDS
120 South LaSalle Street, Chicago, Illinois 60603
1-800-621-1048
This prospectus describes a choice of seven equity and balanced mutual funds
managed by Kemper Financial Services, Inc.
KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER QUANTITATIVE EQUITY FUND*
KEMPER SMALL CAPITALIZATION EQUITY FUND
KEMPER TECHNOLOGY FUND
KEMPER TOTAL RETURN FUND
KEMPER VALUE+GROWTH FUND
*THE KEMPER QUANTITATIVE EQUITY FUND WILL NOT COMMENCE OPERATIONS UNTIL FEBRUARY
15, 1996.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 7
KEMPER EQUITY FUNDS
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVES. The seven open-end, diversified management investment
companies (the "Funds") covered in this combined prospectus are as follows:
KEMPER BLUE CHIP FUND (the "Blue Chip Fund") seeks growth of capital and of
income.
KEMPER GROWTH FUND (the "Growth Fund") seeks growth of capital through
professional management and diversification of investment securities having
potential for capital appreciation.
KEMPER QUANTITATIVE EQUITY FUND (the "Quantitative Fund") seeks growth of
capital and reduction of risk through professional management of a diversified
portfolio of equity securities.
KEMPER SMALL CAPITALIZATION EQUITY FUND (the "Small Cap Fund") seeks maximum
appreciation of investors' capital.
KEMPER TECHNOLOGY FUND (the "Technology Fund") seeks growth of capital.
KEMPER TOTAL RETURN FUND (the "Total Return Fund") seeks to obtain the highest
total return, a combination of income and capital appreciation, consistent with
reasonable risk.
KEMPER VALUE+GROWTH FUND (the "Value+Growth Fund") seeks growth of capital
through professional management of a portfolio of growth and value stocks.
The Funds may purchase put and call options, engage in financial futures
transactions, invest in foreign securities, engage in related foreign currency
transactions and lend portfolio securities. The Technology and Quantitative
Funds may also write (sell) put and call options. The Funds may invest up to 25%
of total assets in foreign securities. See "Investment Objectives, Policies and
Risk Factors."
RISK FACTORS. There is no assurance that the investment objective of any Fund
will be achieved and investment in each Fund includes risks that vary in kind
and degree depending upon the investment policies of that Fund. The returns and
net asset value of each Fund will fluctuate. Investment by the Small Cap Fund
primarily in smaller companies and the emphasis of the Technology Fund on
smaller emerging growth technology companies involve greater risk than
investment in larger, more established companies. Foreign investments by the
Funds involve risk and opportunity considerations not typically associated with
investing in U.S. companies. The U.S. Dollar value of a foreign security tends
to decrease when the value of the U.S. Dollar rises against the foreign currency
in which the security is denominated and tends to increase when the value of the
U.S. Dollar falls against such currency. Thus, the U.S. Dollar value of foreign
securities in a Fund's portfolio, and the Fund's net asset value, may change in
response to changes in currency exchange rates even though the value of the
foreign securities in local currency terms may not have changed. While a Fund's
investments in foreign securities will principally be in developed countries,
the Fund may invest a portion of its assets in developing or "emerging" markets,
which involve exposure to economic structures that are generally less diverse
and mature than in the United States, and to political systems that may be less
stable. A portion of the assets of the Total Return Fund may be invested in
lower rated or unrated high yield bonds which entail greater risk of loss of
principal and interest than higher rated fixed income securities. There are
special risks associated with options, financial futures and foreign currency
transactions and other derivatives and there is no assurance that use of those
investment techniques will be successful. See "Investment Objectives, Policies
and Risk Factors."
PURCHASES AND REDEMPTIONS. Each Fund provides investors with the option of
purchasing shares in the following ways:
Class A Shares..............
Offered at net asset value plus a maximum sales
charge of 5.75% of the offering price. Reduced sales
charges apply to purchases of $50,000 or more. The
redemption within one year of Class A shares
purchased at net asset value under the Large Order
NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge.
1
<PAGE> 8
Class B Shares............ Offered at net asset value, subject to a Rule 12b-1
distribution fee and a contingent deferred sales
charge that declines from 4% to zero on certain
redemptions made within six years of purchase. Class
B shares automatically convert into Class A shares
(which have lower ongoing expenses) six years after
purchase.
Class C Shares............ Offered at net asset value without an initial or
contingent deferred sales charge, but subject to a
Rule 12b-1 distribution fee. Class C shares do not
convert into another class.
Each class of shares represents interests in the same portfolio of investments
of a Fund. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value, which may be
more or less than original cost, subject, in the case of Class A shares
purchased under the Large Order NAV Purchase Privilege and for Class B shares,
to any applicable contingent deferred sales charge. See "Purchase of Shares" and
"Redemption or Repurchase of Shares."
INVESTMENT MANAGER AND UNDERWRITER. Kemper Financial Services, Inc. ("KFS")
serves as investment manager for each Fund. KFS is paid an investment management
fee by each Fund based upon average daily net assets of that Fund at an
effective annual rate that differs for each Fund. Dreman Value Advisors, Inc.
("DVA"), a wholly owned subsidiary of KFS, is the sub-advisor for the
Value+Growth Fund and is paid a fee of .25% of average daily net assets of that
Fund by KFS. Kemper Distributors, Inc. ("KDI"), a wholly owned subsidiary of
KFS, is principal underwriter and administrator for each Fund. For Class B
shares and Class C shares, KDI receives a Rule 12b-1 distribution fee of .75% of
average daily net assets. KDI also receives the amount of any contingent
deferred sales charges paid on the redemption of shares. Administrative services
are provided to shareholders under administrative services agreements with KDI.
Each Fund pays an administrative services fee at the annual rate of up to .25%
of average daily net assets of each class of the Fund, which KDI pays to
financial services firms. See "Investment Manager and Underwriter."
DIVIDENDS. Each Fund normally distributes dividends of net investment income as
follows: annually for the Growth, Quantitative, Small Cap, Technology and
Value+Growth Funds; semi-annually for the Blue Chip Fund; and quarterly for the
Total Return Fund. Each Fund distributes any net realized short-term and
long-term capital gains at least annually. Income and capital gain dividends of
a Fund are automatically reinvested in additional shares of that Fund, without a
sales charge, unless the shareholder makes a different election. See "Dividends
and Taxes."
GENERAL. In the opinion of the staff of the Securities and Exchange Commission,
the use of this combined prospectus may make each Fund liable for any
misstatement or omission in this prospectus regardless of the particular Fund to
which it pertains.
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL
FUNDS)(1) CLASS A CLASS B CLASS C
------- ------------------------ -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases (as a percentage of
offering price)...................................... 5.75%(2) None None
Maximum Sales Charge on Reinvested Dividends........... None None None
Redemption Fees........................................ None None None
Exchange Fee........................................... None None None
Deferred Sales Charge (as a percentage of redemption
proceeds)............................................ None(3) 4% during the first None
year, 3% during the
second and third years,
2% during the fourth and
fifth years and 1% in
the sixth year
</TABLE>
- -------------------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details.
(2) Reduced sales charges apply to purchases of $50,000 or more. See "Purchase
of Shares -- Initial Sales Charge Alternative -- Class A Shares."
(3) The redemption within one year of shares purchased at net asset value under
the Large Order NAV Purchase Privilege may be subject to a 1% contingent
deferred sales charge. See "Purchase of Shares -- Initial Sales Charge
Alternative -- Class A Shares."
2
<PAGE> 9
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets, and after management fee reduction for
Value+Growth Fund)
<TABLE>
<CAPTION>
TOTAL VALUE+
BLUE CHIP GROWTH QUANTITATIVE SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND FUND(6)
--------- ------ ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Management Fees............... .58% .54% .58% .48% .56% .54% .60%
12b-1 Fees.................... None None None None None None None
Other Expenses(7)............. .72% .63% .90% .66% .32% .58% .90%
--------- ------ ------------ --------- ---------- ------- -------
Total Operating Expenses...... 1.30% 1.17% 1.48% 1.14% .88% 1.12% 1.50%
======= ====== ========= ======== ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
TOTAL VALUE+
BLUE CHIP GROWTH QUANTITATIVE SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND FUND(6)
--------- ------ ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Management Fees............... .58% .54% .58% .48% .56% .54% .60%
12b-1 Fees(4)................. .75% .75% .75% .75% .75% .75% .75%
Other Expenses(7)............. .73% .88% .93% .94% .51% .76% .93%
--------- ------ ------------ --------- ---------- ------- -------
Total Operating Expenses...... 2.06% 2.17% 2.26% 2.17% 1.82% 2.05% 2.28%
======= ====== ========= ======== ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
TOTAL VALUE+
BLUE CHIP GROWTH QUANTITATIVE SMALL CAP TECHNOLOGY RETURN GROWTH
FUND FUND FUND FUND FUND FUND FUND(6)
--------- ------ ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Management Fees............... .58% .54% .58% .48% .56% .54% .60%
12b-1 Fees(5)................. .75% .75% .75% .75% .75% .75% .75%
Other Expenses(7)............. .68% .74% .90% .87% .45% .57% .90%
--------- ------ ------------ --------- ---------- ------- -------
Total Operating Expenses...... 2.01% 2.03% 2.23% 2.10% 1.76% 1.86% 2.25%
======= ====== ========= ======== ======== ====== ======
</TABLE>
- -------------------------
(4) Long-term shareholders may pay more than the economic equivalent of the
maximum initial sales charges permitted by the National Association of
Securities Dealers, although KDI believes that is unlikely because of the
automatic conversion feature described under "Purchase of Shares -- Deferred
Sales Charge Alternative -- Class B Shares."
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.
(6) After management fee reduction and expense reimbursement for Value+Growth
Fund for the current fiscal year.
(7) Other Expenses have been estimated for the Quantitative Fund and
Value+Growth Fund for the current fiscal year.
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
You would pay the following expenses on a Blue Chip $ 70 $ 96 $ 125 $205
$1,000 investment, assuming (1) 5% annual Growth $ 69 $ 93 $ 118 $191
return and (2) redemption at the end of Quantitative $ 72 $ 102 -- --
each time period: Small Cap $ 68 $ 92 $ 117 $188
Technology $ 66 $ 84 $ 103 $160
Total Return $ 68 $ 91 $ 116 $186
Value+Growth $ 72 $ 102 -- --
</TABLE>
3
<PAGE> 10
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
------------- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
CLASS B SHARES(8)
You would pay the following expenses on Blue Chip $ 51 $ 85 $ 121 $ 239
a $1,000 investment, assuming (1) 5% Growth $ 52 $ 88 $ 126 $ 250
annual return and (2) redemption at the Quantitative $ 53 $ 91 -- --
end of each time period: Small Cap $ 52 $ 88 $ 126 $ 250
Technology $ 48 $ 77 $ 109 $ 214
Total Return $ 51 $ 84 $ 120 $ 238
Value+Growth $ 53 $ 91 -- --
You would pay the following expenses on Blue Chip $ 21 $ 65 $ 111 $ 239
the same investment, assuming no Growth $ 22 $ 68 $ 116 $ 250
redemption: Quantitative $ 23 $ 71 -- --
Small Cap $ 22 $ 68 $ 116 $ 250
Technology $ 18 $ 57 $ 99 $ 214
Total Return $ 21 $ 64 $ 110 $ 238
Value+Growth $ 23 $ 71 -- --
CLASS C SHARES
You would pay the following expenses on Blue Chip $ 20 $ 63 $ 108 $ 234
a $1,000 investment, assuming (1) 5% Growth $ 21 $ 64 $ 109 $ 236
annual return and (2) redemption at the Quantitative $ 23 $ 70 -- --
end of each time period: Small Cap $ 21 $ 66 $ 113 $ 243
Technology $ 18 $ 55 $ 95 $ 207
Total Return $ 19 $ 58 $ 101 $ 218
Value+Growth $ 23 $ 70 -- --
</TABLE>
- -------------------------
(8) Assumes conversion to Class A shares six years after purchase and was
calculated based upon the assumption that the shareholder was an owner of
the shares on the first day of the first year and the contingent deferred
sales charge was applied as follows: 1 year (3%), 3 years (2%), 5 years (1%)
and 10 years (0%). See "Redemption or Repurchase of Shares -- Contingent
Deferred Sales Charge -- Class B Shares" for more information regarding the
calculation of the contingent deferred sales charge.
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information.
The base management fee for the Small Cap Fund is .65% and is subject to a
maximum upward or downward performance adjustment of .30%. The table reflects
the base management fee for the prior fiscal year after such adjustment.
The Value+Growth Fund commenced operations on October 16, 1995, thus expenses
are shown for only the one and three year periods. KFS has agreed to temporarily
reduce its management fee and reimburse or pay certain operating expenses to the
extent necessary to limit the Fund's "Total Operating Expenses" to the levels
indicated in the tables above. Without such waiver and reimbursement,
"Management Fees" would be .72% and "Total Operating Expenses" for Class A, B
and C shares would be 1.62%, 2.40% and 2.37%, respectively.
The Quantitative Fund will commence operations on February 15, 1996, thus
expenses are shown for only the one and three year periods.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE> 11
FINANCIAL HIGHLIGHTS
The tables below show financial information for each Fund except the
Quantitative Fund expressed in terms of one share outstanding throughout the
period. The information in the tables for each Fund is covered by the report of
the Fund's independent auditors. The report for each Fund is contained in its
Registration Statement and is available from that Fund. The financial statements
contained in each Fund's 1995 Annual Report to Shareholders are incorporated
herein by reference and may be obtained by writing or calling that Fund.
BLUE CHIP FUND
<TABLE>
<CAPTION>
NOV. 23, 1987
YEAR ENDED OCTOBER 31, TO OCT. 31,
1995 1994 1993 1992 1991 1990 1989 1988
------------------------------------------------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.33 13.88 12.72 13.24 9.65 10.07 8.41 9.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .19 .19 .18 .18 .11 .13 .18 .35
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.57 (.71) 1.13 .41 3.63 (.45) 1.78 (.80)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.76 (.52) 1.31 .59 3.74 (.32) 1.96 (.45)
- --------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .20 .19 .15 .14 .15 .10 .30 .14
- --------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .02 .84 -- .97 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends .22 1.03 .15 1.11 .15 .10 .30 .14
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.87 12.33 13.88 12.72 13.24 9.65 10.07 8.41
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (%) 22.74 (3.82) 10.35 4.76 39.19 (3.23) 24.08 (4.99)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (%):
Expenses 1.30 1.48 1.25 1.46 1.66 1.91 2.08 1.83
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.47 1.50 1.28 1.63 .88 1.28 1.99 4.47
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
----------- -----------
MAY 31, MAY 31,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.29 12.30 12.32 12.30
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .09 .06 .07 .09
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.56 (.01) 2.62 (.01)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.65 .05 2.69 .08
- -----------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .10 .06 .11 .06
- -----------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .02 -- .02 --
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends .12 .06 .13 .06
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.82 12.29 14.88 12.32
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (%) 21.76 .42 22.04 .67
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (%):
Expenses 2.06 2.43 2.01 2.33
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income .71 .33 .76 .43
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NOV. 23, 1987
YEAR ENDED OCTOBER 31, TO OCT. 31,
1995 1994 1993 1992 1991 1990 1989 1988
----------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands) $168,266 153,172 196,327 182,553 61,146 32,172 26,164 20,421
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 117 131 222 178 162 93 89 326
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 12
GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $12.93 15.33 13.09 13.14 9.00 9.79 7.61 13.73 13.07 12.29
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .01 .01 .03 .06 .18 .17 .23 .20 .24
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 3.27 (1.41) 2.29 .71 4.57 (.79) 2.24 (2.83) 4.13 2.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.32 (1.40) 2.30 .74 4.63 (.61) 2.41 (2.60) 4.33 2.52
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .03 .05 .11 .18 .23 .21 .10 .30
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .18 1.00 .03 .74 .38 -- -- 3.31 3.57 1.44
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .18 1.00 .06 .79 .49 .18 .23 3.52 3.67 1.74
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $16.07 12.93 15.33 13.09 13.14 9.00 9.79 7.61 13.73 13.07
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 26.07 (9.39) 17.60 5.55 54.13 (6.37) 32.60 (15.15) 44.69 23.37
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.17 1.09 1.00 1.03 1.04 .89 .83 .82 .80 .78
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .43 .24 .06 .32 .59 1.84 2.11 3.38 1.67 1.96
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------- -----------------------------
MAY 31, MAY 31,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.88 13.10 12.88 13.09
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.08) (.03) (.07) (.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 3.23 (.19) 3.24 (.19)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.15 (.22) 3.17 (.21)
- ------------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain .18 -- .18 --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.85 12.88 15.87 12.88
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (%) 24.83 (1.68) 24.99 (1.60)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (%):
Expenses 2.17 2.11 2.03 2.09
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.57) (.76) (.43) (.67)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of
year (in thousands) $2,503,301 2,255,977 1,826,961 1,419,292 613,245 307,555 335,998 285,485 376,045 275,060
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate (%) 67 115 139 83 143 194 160 61 247 181
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 13
SMALL CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992(A) 1991 1990 1989 1988 1987 1986
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 5.81 6.45 5.25 5.35 3.79 4.71 3.66 6.69 5.80 4.93
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.01) (.01) (.02) (.02 ) .02 .05 .10 .05 .09 .10
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.68 (.27) 1.71 .40 1.89 (.86) 1.00 (1.45) 1.82 1.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.67 (.28) 1.69 .38 1.91 (.81) 1.10 (1.40) 1.91 1.11
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- -- .01 .06 .11 .05 .13 -- .11
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .34 .36 .49 .47 .29 -- -- 1.50 1.02 .13
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .34 .36 .49 .48 .35 .11 .05 1.63 1.02 .24
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 7.14 5.81 6.45 5.25 5.35 3.79 4.71 3.66 6.69 5.80
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 30.88 (4.31) 34.11 7.02 55.16 (17.52) 30.58 (17.34) 39.40 23.71
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.14 1.34 1.03 1.28 1.25 .86 .64 .72 .53 .48
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.18) (.76) (.43) (.43 ) .27 1.22 2.55 1.42 1.62 1.83
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ ------------------------------
MAY 31, MAY 31,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 5.78 5.65 5.77 5.65
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.07) (.02) (.07) (.03)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.66 .15 1.66 .15
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.59 .13 1.59 .12
- ------------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain .34 -- .34 --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.03 5.78 7.02 5.77
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (%) 29.59 2.30 29.65 2.12
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (%):
Expenses 2.17 2.29 2.10 2.10
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.21) (1.38) (1.14) (1.21)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of year (in
thousands) $839,905 631,607 510,060 329,116 289,345 179,092 286,411 284,426 353,111 273,736
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 102 58 82 73 126 107 100 90 115 113
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 14
TECHNOLOGY FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1995 1994 1993(A) 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $11.50 10.68 9.95 12.42 9.37 10.19 9.39 11.76 13.82 11.45
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.03) -- (.01) .01 .13 .22 .26 .18 .19 .20
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.66 1.49 2.03 .04 3.35 (.45) 1.28 .07 .56 3.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.63 1.49 2.02 .05 3.48 (.23) 1.54 .25 .75 3.23
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- -- .03 .20 .29 .23 .12 .13 .21
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.50 .67 1.29 2.49 .23 .30 .51 2.50 2.68 .65
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends 1.50 .67 1.29 2.52 .43 .59 .74 2.62 2.81 .86
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $14.63 11.50 10.68 9.95 12.42 9.37 10.19 9.39 11.76 13.82
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 47.30 14.95 21.76 .32 38.58 (2.51) 18.19 3.84 6.32 29.79
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .88 .89 .81 .82 .81 .71 .69 .69 .63 .60
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.23) .05 (.06) .07 1.24 2.23 2.92 2.26 1.17 1.58
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------- ----------------------------
MAY 31, MAY 31,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.45 9.99 11.45 9.99
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.15) (.05) (.15) (.05)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 4.59 1.51 4.65 1.51
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.44 1.46 4.50 1.46
- -------------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain 1.50 -- 1.50 --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.39 11.45 14.45 11.45
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (%) 45.65 14.61 46.23 14.61
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (%):
Expenses 1.82 1.99 1.76 1.83
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.17) (1.08) (1.11) (.92)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) $1,017,955 713,654 612,604 559,279 606,295 472,992 532,760 513,800 566,241 598,722
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 81 95 95 81 25 39 11 41 37
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 15
TOTAL RETURN FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 9.10 11.23 10.07 10.07 7.78 8.34 7.34 7.24 8.78 7.28
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .29 .19 .30 .22 .36 .46 .37 .36 .27 .33
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 1.46 (1.01) 1.54 .37 2.42 (.64) 1.04 .23 (.55) 1.77
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.75 (.82) 1.84 .59 2.78 (.18) 1.41 .59 (.28) 2.10
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income .25 .23 .24 .29 .49 .38 .41 .29 .28 .21
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- 1.08 .44 .30 -- -- -- .20 .98 .39
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .25 1.31 .68 .59 .49 .38 .41 .49 1.26 .60
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.60 9.10 11.23 10.07 10.07 7.78 8.34 7.34 7.24 8.78
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 19.46 (7.92) 19.08 6.09 37.20 (2.31) 20.00 8.75 (4.18) 30.57
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.12 1.13 1.02 1.06 1.03 .87 .79 .78 .72 .72
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 3.00 2.34 2.94 2.23 3.96 5.87 4.76 5.10 3.05 4.02
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------- ----------------------------
MAY 31, MAY 31,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
--------------------------------------------------------------
CLASS B AND C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.09 9.24 9.09 9.24
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .20 .06 .21 .06
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.46 (.16) 1.48 (.16)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.66 (.10) 1.69 (.10)
- -------------------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .16 .05 .17 .05
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.59 9.09 10.61 9.09
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (%) 18.42 (1.06) 18.76 (1.05)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (%):
Expenses 2.05 2.03 1.86 2.00
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.07 1.57 2.26 1.60
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
ALL CLASSES
SUPPLEMENTAL DATA:
Net assets at end of year (in
thousands) $2,926,542 2,864,322 1,509,687 1,212,896 998,465 781,417 937,804 976,972 1,077,369 677,618
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 142 121 180 150 157 157 130 187 171 172
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 16
For the period from October 16, 1995 (initial public offering) to November 30,
1995.
VALUE+GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
-------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.50 9.50 9.50
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .02 .02 .01
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized gain .50 .50 .50
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .52 .52 .51
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.02 10.02 10.01
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (%) 5.47 5.47 5.37
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (%):
Expenses 1.35 2.10 2.07
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 2.25 1.50 1.53
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $5,851
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Per share data were determined based on average shares outstanding.
Total return does not reflect the effect of any sales charges. The Funds are
organized as separate Massachusetts business trusts. As discussed under
"Investment Manager and Underwriter," effective May 31, 1994, the investment
management fee for some Funds changed, resulting in a higher fee for the Growth
Fund, the Technology Fund and the Total Return Fund and a lower fee for the Blue
Chip Fund. The fee schedule for the Small Cap Fund is unchanged, except that the
performance adjustment is based upon the performance of the Fund's Class A
shares.
10
<PAGE> 17
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The following information sets forth each Fund's investment objective and
policies. Each Fund's returns and net asset value will fluctuate and there is no
assurance that any Fund will meet its objective.
BLUE CHIP FUND. The Blue Chip Fund seeks growth of capital and of income. In
seeking to achieve its objective, the Fund will invest primarily in common
stocks of well capitalized, established companies that the Fund's investment
manager believes to have the potential for growth of capital, earnings and
dividends. Under normal market conditions, the Fund will, as a fundamental
policy, invest at least 65%, and may invest up to 100%, of its total assets in
the common stocks of companies with a market capitalization of at least $1
billion at the time of investment.
In pursuing its objective, the Fund will emphasize investments in common stocks
of large, well known, high quality companies. Companies of this general type are
often referred to as "Blue Chip" companies. "Blue Chip" companies are generally
identified by their substantial capitalization, established history of earnings
and dividends, easy access to credit, good industry position and superior
management structure. "Blue Chip" companies are believed to generally exhibit
less investment risk and less price volatility than companies lacking these high
quality characteristics, such as smaller, less seasoned companies. In addition,
the large market of publicly held shares for such companies and the generally
high trading volume in those shares results in a relatively high degree of
liquidity for such investments. The characteristics of high quality and high
liquidity of "Blue Chip" investments should make the market for such stocks
attractive to investors both within and outside the United States. The Fund will
generally attempt to avoid speculative securities or those with significant
speculative characteristics.
Examples of "Blue Chip" companies currently eligible for investment by the Fund
include, but are not limited to, companies such as Pfizer Inc., Merck & Co.,
Inc., Hewlett-Packard Company, AT&T Company, General Reinsurance, J.P. Morgan &
Co., Union Pacific Corporation and PepsiCo. Inc. While the Fund's portfolio will
not be limited to the examples noted and need not contain any specific security,
companies of this general quality comprise a relatively small, select group. In
general, the Fund will seek to invest in those established, high quality
companies whose industries are experiencing favorable secular or cyclical
change. Thus, the Fund in seeking its objective will endeavor to select its
investments from among high quality companies operating in the more attractive
industries.
As indicated above, the Fund's investment portfolio will normally consist
primarily of common stocks. The Fund may invest to a more limited extent in
preferred stocks, debt securities and securities convertible into or
exchangeable for common stocks, including warrants and rights, when they are
believed to offer opportunities for growth of capital and of income. The Fund
may also purchase options, engage in financial futures transactions, purchase
foreign securities, engage in related foreign currency transactions and lend its
portfolio securities. See "Special Risk Factors--Foreign Securities" and
"Additional Investment Information" below. The Fund may engage in short sales
against-the-box, although it is the Fund's current intention that no more than
5% of its net assets will be at risk. When, as a result of market conditions
affecting "Blue Chip" companies, a defensive position is deemed advisable to
help preserve capital, the Fund may temporarily invest without limit in
high-grade debt securities, securities of the U.S. Government and its agencies,
and high quality money market instruments, including repurchase agreements, or
retain cash.
The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
There are risks inherent in the investment in any security, including shares of
the Fund. The investment manager attempts to reduce risk through diversification
of the Fund's portfolio and fundamental research; however, there is no guarantee
that such efforts will be successful. The investment manager believes that there
are
11
<PAGE> 18
opportunities for growth of capital and growth of dividends from investments in
"Blue Chip" companies over time. The Fund's shares are intended for long-term
investment.
GROWTH FUND. The Growth Fund seeks growth of capital through professional
management and diversification of investments in securities it believes to have
potential for capital appreciation. In seeking to obtain capital appreciation,
the Fund may trade in securities for the short-term. To this extent, the Fund
will be engaged in trading operations based on short-term market considerations
as distinct from long-term investment based upon fundamental valuation of
securities. However, the Fund will emphasize fundamental research in attempting
to identify under-valued situations that it hopes will appreciate over the
longer term. The Fund's investment policy may involve a somewhat greater risk
than is inherent in the ordinary investment security. Since any income received
from such securities will be entirely incidental, an investor should not
consider a purchase of Fund shares as equivalent to a complete investment
program.
In seeking to achieve its objective, it will be the Fund's policy to invest
primarily in securities that it believes offer the potential for increasing the
Fund's total asset value. While it is anticipated that most investments will be
in common stocks of companies with above-average growth prospects, investments
may also be made to a limited degree in other common stocks and in convertible
securities (including warrants), such as bonds and preferred stocks. The Fund
may also purchase options, engage in financial futures transactions, purchase
foreign securities, engage in related foreign currency transactions and lend its
portfolio securities. See "Special Risk Factors--Foreign Securities" and
"Additional Investment Information" below. There may also be times when a
significant portion of the Fund's assets may be held temporarily in cash or
defensive type securities, such as high-grade debt securities, securities of the
U.S. Government or its agencies and high quality money market instruments,
including repurchase agreements, depending upon the investment manager's
analysis of business and economic conditions and the outlook for security
prices.
Some of the factors the Fund's management will consider in making its
investments are patterns of increasing growth in sales and earnings, the
development of new or improved products or services, favorable outlooks for
growth in the industry, the probability of increased operating efficiencies,
emphasis on research and development, cyclical conditions, or other signs that a
company is expected to show greater than average capital appreciation and
earnings growth.
QUANTITATIVE FUND. The Quantitative Fund seeks growth of capital and reduction
of risk through professional management of a diversified portfolio of equity
securities. In seeking to achieve the Fund's objectives, the investment manager
will emphasize the use of fundamental research and advanced quantitative
technology. There is no assurance that the management strategy for the Fund will
be successful or that the Fund will achieve its objectives.
The investment manager uses a disciplined approach to stock selection and
fundamental research to help it identify quality "growth" companies, whose
stocks are selling at reasonable prices based upon their earnings potential and
whose earnings are growing faster than the market average. Those stocks that are
believed by the investment manager to have superior price appreciation potential
are considered as eligible for investment by the Fund. Thus, a list of eligible
investments is developed by the investment manager through a regimented review
process that applies the results of research generated by the investment
manager's analytical staff to well defined quantitative factors (e.g., return on
equity, earnings per share growth) and qualitative factors (e.g., industry
growth, market share). As described below, the Fund's portfolio is structured by
the investment manager from eligible investments by using advanced quantitative
technology with a view to reducing the degree by which the volatility of the
portfolio differs from the volatility of the market for growth stocks generally.
The investment manager believes that there are identifiable macro-economic
factors that are major contributors to the volatility of the stock market.
Examples of these factors include: economic growth, the direction of long-term
interest rates and the credit spread, which is the spread between Treasury and
corporate fixed income securities. In selecting among the growth stocks
identified as being eligible for inclusion in the Fund's portfolio,
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the investment manager applies advanced quantitative techniques to help
structure the portfolio so that normally it is neutrally weighted to these
macro-economic factors. These techniques involve the use of computer modeling to
help select a portfolio of securities believed to be attractive while
simultaneously maintaining a neutral macroeconomic posture. Neutral weighting
means that the exposure of the Fund's portfolio to the effect of these
macro-economic factors is, in the view of the investment manager, generally the
same as the exposure of the market for growth stocks as a whole. The purpose of
this process is to reduce the degree by which the volatility of the portfolio
differs from the volatility of the market for growth stocks and to increase the
importance of fundamental research and stock selection in the management
process.
Depending upon economic and market conditions, the investment manager may at
times under- or overweight the portfolio with respect to certain macro-economic
factors. In those circumstances, the return potential as well as the risk
profile of the Fund's portfolio may be increased relative to the market for
growth stocks generally. However, a primary goal of portfolio structuring for
the Fund is to reduce those risks and the investment manager would normally not
be expected to so weight the portfolio.
Under normal conditions, the Fund will invest at least 65%, and may invest up to
100%, of its total assets in equity securities. Equity securities include common
stocks, preferred stocks, securities convertible into or exchangeable for common
or preferred stocks, equity investments in partnerships, joint ventures and
other forms of non-corporate investment and warrants and rights exercisable for
equity securities. Normally, the Fund's primary investments will be common
stocks of large, well capitalized companies. The Fund currently does not intend
to invest more than 5% of its net assets in debt securities (including
convertible debt securities) during the current year (except for defensive
investments described below).
The Fund may also purchase and write options, engage in financial futures
transactions, purchase foreign securities and engage in related foreign currency
transactions and lend its portfolio securities. See "Special Risk
Factors--Foreign Securities" and "Additional Investment Information" below. From
time to time, all or a significant portion of the Fund's assets may be held
temporarily in cash or defensive type securities, such as high-grade debt
securities, securities of the U.S. Government or its agencies and high quality
money market instruments, including repurchase agreements.
The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
SMALL CAP FUND. The Small Cap Fund seeks maximum appreciation of investors'
capital. Current income will not be a significant factor. The Fund is designed
primarily for investors with substantial resources and the investment experience
to consider their shares as a long-term investment involving financial risk
commensurate with potential substantial gains.
The Fund seeks attractive areas for investment opportunity arising from such
factors as technological advances, new marketing methods, and changes in the
economy and population. Currently, the investment manager believes that such
investment opportunities may be found among the following: (a) companies engaged
in high technology fields such as electronics, medical technology, computer
software and specialty retailing; (b) companies having a significantly improved
earnings outlook as the result of a changed economic environment, acquisitions,
mergers, new management, changed corporate strategy or product innovation; (c)
companies supplying new or rapidly growing services to consumers and businesses
in such fields as automation, data processing, communications, marketing and
finance; and (d) companies having innovative concepts or ideas.
As a non-fundamental policy, at least 65% of the Fund's total assets normally
will be invested in the equity securities of smaller companies, i.e., those
having a market capitalization of $1 billion or less at the time of investment,
many of which would be in the early stages of their life cycle. The investment
manager currently believes that investment in such companies may offer greater
opportunities for growth of capital than larger,
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<PAGE> 20
more established companies, but also involves certain special risks. Smaller
companies often have limited product lines, markets, or financial resources, and
they may be dependent upon one or a few key people for management. The
securities of such companies generally are subject to more abrupt or erratic
market movements and may be less liquid than securities of larger, more
established companies or the market averages in general.
The Fund's investment portfolio will normally consist primarily of common stocks
and securities convertible into or exchangeable for common stocks, including
warrants and rights. The Fund may also invest to a limited degree in preferred
stocks and debt securities when they are believed by the investment manager to
offer opportunities for capital growth. The Fund may also purchase options,
engage in financial futures transactions, purchase foreign securities, engage in
related foreign currency transactions and lend its portfolio securities. See
"Special Risk Factors--Foreign Securities" and "Additional Investment
Information" below. When a defensive position is deemed advisable, it may,
without limit, invest in high-grade senior securities and securities of the U.S.
Government and its instrumentalities or retain cash or cash equivalents,
including repurchase agreements.
In the selection of investments, long-term capital appreciation will take
precedence over short range market fluctuations. The Fund does not intend to
engage actively in trading for short-term profits, although it may occasionally
make investments for short-term capital appreciation when such action is
believed to be desirable and consistent with sound investment procedure.
Generally, the Fund will make long-term rather than short-term investments.
Nevertheless, it may dispose of such investments at any time it may be deemed
advisable because of a subsequent change in the circumstances of a particular
company or industry or in general market or economic conditions. For example, a
security initially purchased for long-term growth potential may be sold at any
time when it is determined that future growth may not be at an acceptable rate
or that there is a risk of substantial decline in market price. The rate of
portfolio turnover is not a limiting factor when changes in investments are
deemed appropriate. In addition, market conditions, cash requirements for
redemption and repurchase of Fund shares or other factors could affect the
portfolio turnover rate.
Since many of the securities in the Fund's portfolio may be considered
speculative in nature by traditional investment standards, substantially greater
than average market volatility and investment risk may be involved. There can be
no assurance that the Fund's shareholders will be protected from the risk of
loss inherent in security ownership.
TECHNOLOGY FUND. The Technology Fund seeks growth of capital. In seeking to
achieve its objective, the Fund will invest primarily in securities of companies
which the investment manager expects to benefit from technological advances and
improvements ("technology companies") with an emphasis on the securities of
companies that the investment manager believes have potential for long-term
capital growth. Receipt of income from such securities will be entirely
incidental. Technology companies include those whose processes, products or
services, in the judgment of the investment manager, are or may be expected to
be significantly benefited by scientific developments and the application of
technical advances in industry, manufacturing and commerce resulting from
improving technology in such fields as, for example, aerospace, chemistry,
electronics, genetic engineering, geology, information sciences (including
computers and computer software), metallurgy, medicine (including pharmacology,
biotechnology and biophysics) and oceanography. This investment policy permits
the investment manager to seek stocks having superior growth potential in
virtually any industry in which they may be found. The above objective and
policies may not be changed without shareholder approval.
The investment manager currently believes that investments in smaller emerging
growth technology companies may offer greater opportunities for growth of
capital than investments in larger, more established technology companies.
However, such investments also involve certain special risks. Smaller companies
often have limited product lines, markets, or financial resources; and they may
be dependent upon one or a few persons for management. The securities of such
companies generally are subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. Thus, investment by the Fund in smaller emerging growth technology
companies may expose investors to greater than average financial and market
risk. There is no assurance that the Fund's objective will be achieved.
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<PAGE> 21
The Fund's investment portfolio will normally consist primarily of common stocks
and securities convertible into or exchangeable for common stocks, including
warrants and rights. The Fund may also invest to a limited degree in preferred
stocks and debt securities when they are believed to offer opportunities for
capital growth. The Fund may also purchase and write options, engage in
financial futures transactions, purchase foreign securities, engage in related
foreign currency transactions and lend its portfolio securities. See "Special
Risk Factors--Foreign Securities" and "Additional Investment Information" below.
When a defensive position is deemed advisable, the Fund may, without limit,
invest in high-grade senior securities and securities of the U.S. Government and
its instrumentalities or retain cash or cash equivalents, such as high quality
money market instruments, including repurchase agreements. The Fund's shares are
intended for long-term investment.
The Fund may invest up to 10% of its total assets in entities, such as limited
partnerships or trusts, that invest primarily in the securities of technology
companies. The investment manager believes that the flexibility to make limited
indirect investment in technology companies through entities such as limited
partnerships and trusts will provide the Fund with increased opportunities for
growth of capital. However, there is no assurance that such investments will be
profitable. Entities that invest in the securities of technology companies
normally have management fees and other costs that are in addition to those of
the Fund. Such fees and costs will reduce any returns directly attributable to
the underlying technology companies. The effect of these fees will be considered
by the investment manager in connection with any decision to invest in such
entities. Securities issued by these entities are normally privately placed,
restricted and illiquid.
The Fund purchases securities for long-term investment, but it is the investment
manager's belief that a sound investment program must be flexible in order to
meet changing conditions, and changes in holdings will be made whenever deemed
advisable.
TOTAL RETURN FUND. The Total Return Fund seeks the highest total return, a
combination of income and capital appreciation, consistent with reasonable risk.
The Fund will emphasize liberal current income in seeking its objective. The
Fund's investments will normally consist of domestic and foreign fixed income
and equity securities. Fixed income securities will include bonds and other debt
securities (such as U.S. and foreign Government securities and investment grade
and high yield corporate obligations) and preferred stocks, some of which may
have a call on common stocks through attached warrants or a conversion
privilege. The percentage of assets invested in specific categories of fixed
income and equity securities will vary from time to time depending upon the
judgment of management as to general market and economic conditions, trends in
yields and interest rates and changes in fiscal or monetary policies. The Fund
may also purchase options, engage in financial futures transactions, engage in
foreign currency transactions and lend its portfolio securities. See "Special
Risk Factors--Foreign Securities" and "Additional Investment Information" below.
As noted above, the Fund may invest in high yield fixed income securities which
are in the lower rating categories and those which are unrated. Thus, the Fund
could invest in some instruments considered by the rating services to have
predominantly speculative characteristics. Investments in lower rated or
non-rated securities, while generally providing greater income and opportunity
for gain than investments in higher rated securities, entail greater risk of
loss of income and principal. Currently, it is anticipated that the Fund would
invest less than 35% of its total assets in high yield bonds. For a discussion
of lower rated and non-rated securities and related risks, see "Special Risk
Factors--High Yield (High Risk) Bonds" below.
The Fund does not make investments for short-term profits, but it is not
restricted in policy with regard to portfolio turnover and will make changes in
its investment portfolio from time to time as business and economic conditions
and market prices may dictate and as its investment policy may require.
VALUE+GROWTH FUND. The Value+Growth Fund seeks growth of capital through
professional management of a portfolio of growth and value stocks. These stocks
include stocks of large established companies, as well as stocks of small
companies. A secondary objective is the reduction of risk over a full market
cycle compared to a portfolio of only growth stocks or only value stocks.
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<PAGE> 22
Growth stocks are stocks of companies whose earnings per share are expected by
the investment manager to grow faster than the market average. Growth stocks
tend to trade at higher price to earnings (P/E) ratios than the general market,
but the investment manager believes that the potential of such stocks for above
average earnings more than justifies their price. Value stocks are considered
"bargain stocks" because they are perceived as undervalued, i.e., attractively
priced in relation to their earnings potential (low P/E ratios). Value stocks
typically have dividend yields higher than the average of the companies
represented in the Standard & Poor's 500 Stock Index.
The allocation between growth and value stocks in the Fund's portfolio will be
made by the investment manager's Quantitative Research Department with the help
of a proprietary model that evaluates macro-economic factors such as the
strength of the economy, interest rates and special factors concerning growth
and value stocks. Historically, the performance of growth and value stocks has
tended to be counter-cyclical, i.e., when one was in favor, the other was out of
favor relative to the equity market in general. Through the allocation process,
the investment manager will seek to weight the portfolio more heavily in the
type of stocks that are believed to present greater return opportunities at the
time. The neutral allocation between growth and value stocks would be 50%/50%.
Although allocations in favor of growth or value normally would not be expected
to exceed 60%, the allocation to growth or value may be up to 75% at any time.
Allocation decisions are normally based upon long-term considerations and
changes would normally be expected to be gradual. There is no assurance that the
allocation process will improve investment results.
KFS manages the growth portion of the Fund. In managing the growth portion of
the portfolio, KFS emphasizes stock selection and fundamental research in
seeking to enhance long-term performance potential. KFS considers a number of
quantitative and qualitative factors in considering whether to invest in a stock
including high return on equity and earnings growth rate, low level of debt,
strong balance sheet, good management and industry leadership. DVA manages the
value portion of the Fund. DVA seeks stocks it believes to be undervalued. The
principal factor considered is P/E ratios. Typically stocks of both types will
have a market capitalization in excess of $1 billion. In selecting among stocks
with low P/E ratios, DVA considers other factors such as financial strength,
book to market value, earnings and dividend growth rates, return on equity and
earnings estimates.
Although it is anticipated that the Fund will invest primarily in common stocks
of domestic companies, the Fund may also purchase convertible securities, such
as bonds and preferred stocks (including warrants and rights). The Fund may also
purchase options, engage in financial futures transactions, purchase foreign
securities, engage in related foreign currency transactions and lend its
portfolio securities. See "Special Risk Factors-- Foreign Securities" and
"Additional Investment Information" below. From time to time, a significant
portion of the Fund's assets may be held temporarily in cash or defensive type
securities, such as high-grade debt securities, securities of the U.S.
Government or its agencies and high quality money market instruments, including
repurchase agreements.
The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
SPECIAL RISK FACTORS--FOREIGN SECURITIES. The Funds invest primarily in
securities that are publicly traded in the United States; but, they have
discretion to invest a portion of their assets in foreign securities that are
traded principally in securities markets outside the United States. The Funds
currently limit investment in foreign securities not publicly traded in the
United States to 25% of their total assets. The Funds may also invest without
limit in U.S. Dollar denominated American Depository Receipts ("ADRs"), which
are bought and sold in the United States and are not subject to the preceding
limitation. In connection with their foreign securities investments, the Funds
may, to a limited extent, engage in foreign currency exchange, options and
futures transactions as a hedge and not for speculation. Additional information
concerning foreign securities and related techniques is contained under
"Additional Investment Information" below and "Investment Policies and
Techniques" in the Statement of Additional Information.
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<PAGE> 23
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based on the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
EMERGING MARKETS. While each Fund's investments in foreign securities will be
principally in developed countries, a Fund may make investments in developing or
"emerging" countries, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. A developing or emerging market country can be
considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most Western European countries. Currently,
investing in many emerging markets may not be desirable or feasible because of
the lack of adequate custody arrangements for a Fund's assets, overly burdensome
repatriation and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or other reasons. As
opportunities to invest in securities in emerging markets develop, a Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past, markets of developing or emerging market countries have been more
volatile than the markets of developed countries; however, such markets often
have provided higher rates of return to investors. The investment manager
believes that these characteristics can be expected to continue in the future.
Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.
Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.
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In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of a Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to a Fund due to subsequent declines in value of the
portfolio security or, if a Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Certain emerging
markets may lack clearing facilities equivalent to those in developed countries.
Accordingly, settlements can pose additional risks in such markets and
ultimately can expose the Fund to the risk of losses resulting from a Fund's
inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for a Fund's portfolio securities in such
markets may not be readily available. A Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of a Fund. Emerging markets may require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
FIXED INCOME. Since most foreign fixed income securities are not rated, a Fund
(principally the Total Return Fund) will invest in foreign fixed income
securities based on the investment manager's analysis without relying on
published ratings. Since such investments will be based upon the investment
manager's analysis rather than upon published ratings, achievement of a Fund's
goals may depend more upon the abilities of the investment manager than would
otherwise be the case.
The value of the foreign fixed income securities held by a Fund, and thus the
net asset value of the Fund's shares, generally will fluctuate with (a) changes
in the perceived creditworthiness of the issuers of those securities, (b)
movements in interest rates, and (c) changes in the relative values of the
currencies in which a Fund's investments in fixed income securities are
denominated with respect to the U.S. Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of a Fund's investments
in foreign fixed income securities, and the extent to which a Fund hedges its
interest rate, credit and currency exchange rate risks. Many of the foreign
fixed income obligations in which a Fund will invest will have long maturities.
A longer average maturity generally is associated with a higher level of
volatility in the market value of such securities in response to changes in
market conditions.
Investments in sovereign debt, including Brady Bonds, involve special risks.
Brady Bonds are debt securities issued under a plan implemented to other debtor
nations to restructure their outstanding commercial bank indebtedness. Foreign
governmental issuers of debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or pay
interest when due. In the event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Political conditions, especially a sovereign entity's
willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and a Fund may be unable to
collect all or any part of its investment in a particular issue.
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Foreign investment in certain sovereign debt is restricted or controlled to
varying degrees, including requiring governmental approval for the repatriation
of income, capital or proceed of sales by foreign investors. These restrictions
or controls may at times limit or preclude foreign investment in certain
sovereign debt or increase the costs and expenses of a Fund. A significant
portion of the sovereign debt in which a Fund may invest is issued as part of
debt restructuring and such debt is to be considered speculative. There is a
history of defaults with respect to commercial bank loans by public and private
entities issuing Brady Bonds. All or a portion of the interest payments and/or
principal repayment with respect to Brady Bonds may be uncollateralized.
PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. A Fund's investments in the
securities of privatized enterprises include privately negotiated investments in
a government- or state-owned or controlled company or enterprise that has not
yet conducted an initial equity offering, investments in the initial offering of
equity securities of a state enterprise or former state enterprise and
investments in the securities of a state enterprise following its initial equity
offering.
In certain jurisdictions, the ability of foreign entities, such as a Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatization will be successful or that
governments will not re-nationalize enterprises that have been privatized.
In the case of the enterprises in which a Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization of management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as the enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which a Fund may invest
enjoy the protection of and receive preferential treatment from the respective
sovereigns that own or control them. After making an initial equity offering
these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
DEPOSITORY RECEIPTS. For many foreign securities, there are U.S. Dollar
denominated ADRs, which are bought and sold in the United States and are issued
by domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in the domestic bank or a correspondent bank. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers, such as changes in foreign currency exchange rates. However, by
investing in ADRs rather than directly in foreign issuers' stock, the Fund
avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs. The Funds may also
invest in European Depository Receipts ("EDRs"), which are receipts evidencing
an arrangement with a European bank similar to that for ADRs and are designed
for use in the European securities markets. EDRs are not necessarily denominated
in the currency of the underlying security.
SPECIAL RISK FACTORS--HIGH YIELD (HIGH RISK) BONDS. As stated above, the Total
Return Fund may invest a portion of its assets in fixed income securities that
are in the lower rating categories (below the fourth category) of recognized
rating agencies or are non-rated. These lower rated and non-rated fixed income
securities are considered, on balance, as predominantly speculative with respect
to capacity to pay interest and repay
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principal in accordance with the terms of the obligation and generally will
involve more credit risk than securities in the higher rating categories. Lower
rated and non-rated securities, which are commonly referred to as "junk bonds,"
have widely varying characteristics and quality. The market values of such
securities tend to reflect individual corporate developments to a greater extent
than do those of higher rated securities, which react primarily to fluctuations
in the general level of interest rates. Such lower rated securities also are
more sensitive to economic conditions than are higher rated securities. Adverse
publicity and investor perceptions regarding lower rated bonds, whether or not
based upon fundamental analysis, may depress the prices for such securities.
These and other factors adversely affecting the market value of high yield
securities will adversely affect the Fund's net asset value. Although some risk
is inherent in all securities ownership, holders of fixed income securities have
a claim on the assets of the issuer prior to the holders of common stock.
Therefore, an investment in fixed income securities generally entails less risk
than an investment in common stock of the same issuer. The Fund may have
difficulty disposing of certain high yield securities because they may have a
thin trading market. The lack of a liquid secondary market may have an adverse
effect on market price and the Fund's ability to dispose of particular issues
and may also make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing these assets. Additional information
concerning high yield securities appears under "Investment Policies and
Techniques--Other Considerations--High Yield (High Risk) Bonds" and
"Appendix--Ratings of Fixed Income Investments" in the Statement of Additional
Information.
ADDITIONAL INVESTMENT INFORMATION. The portfolio turnover rates for the Funds
(other than the Quantitative and Value+Growth Funds) are listed under "Financial
Highlights." It is anticipated that, under normal circumstances, the portfolio
turnover rate for the Quantitative and Value+Growth Funds will not exceed 100%.
Certain Funds may experience high turnover rates (over 100%). Higher portfolio
turnover involves correspondingly greater brokerage commissions or other
transaction costs. Higher portfolio turnover may result in the realization of
greater net short-term capital gains. In order to continue to qualify as a
regulated investment company for federal income tax purposes, less than 30% of
the annual gross income of a Fund must be derived from the sale or other
disposition of securities and certain other investments held by a Fund for less
than three months. See "Dividends and Taxes" in the Statement of Additional
Information.
The Blue Chip Fund may not borrow money except as a temporary measure for
extraordinary or emergency purposes and not for leverage purposes, and then only
in an amount up to one-third of the value of its total assets in order to meet
redemption requests without immediately selling any portfolio securities or
other assets. If, for any reason, the current value of the Fund's total assets
falls below an amount equal to three times the amount of its indebtedness from
money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes. The Fund may pledge up to 15% of its total assets
to secure any such borrowings. The Growth, Quantitative, Small Cap, Technology,
Total Return and Value+Growth Funds each may not borrow money except for
temporary or emergency purposes (but not for the purchase of investments) and
then only in an amount not to exceed 5% of its net assets. These Funds may not
pledge their assets in an amount exceeding the amount of the borrowings secured
by such pledge.
A Fund will not purchase illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 15% of the
Fund's net assets, valued at the time of the transaction, would be invested in
such securities. If a Fund holds a material percentage of its assets in illiquid
securities, there may be a question concerning the ability of the Fund to make
payment within seven days of the date its shares are tendered for redemption.
SEC guidelines provide that the usual limit on aggregate holdings by an open-end
investment company of illiquid assets is 15% of its net assets. See "Investment
Policies and Techniques--Over-the-Counter Options" in the Statement of
Additional Information for a description of the extent to which over-the-counter
traded options are in effect considered as illiquid for purposes of the limit on
illiquid securities for the Funds. Each Fund may invest in securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933. This rule
permits otherwise restricted securities to be sold to certain institutional
buyers, such as the Portfolios. Such securities may be illiquid and subject to
the Fund's limitation on illiquid securities. A "Rule 144A" security may be
treated as liquid, however, if so determined pursuant to procedures adopted by
20
<PAGE> 27
the Board of Trustees. Investing in Rule 144A securities could have the effect
of increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become uninterested for a time in purchasing Rule 144A
securities.
Each Fund has adopted certain fundamental investment restrictions, which are
presented in the Statement of Additional Information and which, together with
the investment objective and policies of a Fund (other than policies that are
not fundamental), cannot be changed without approval by holders of a majority of
its outstanding voting shares. As defined in the Investment Company Act of 1940,
this means the lesser of the vote of (a) 67% of the shares of a Fund present at
a meeting where more than 50% of the outstanding shares are present in person or
by proxy; or (b) more than 50% of the outstanding shares of a Fund. Policies of
the Blue Chip, Quantitative and Value+Growth Funds that are neither designated
as fundamental nor incorporated into any of the fundamental investment
restrictions referred to above are not fundamental and may be changed by the
Board of Trustees of the Fund without shareholder approval.
OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. The Funds may each deal in options
on securities, securities indexes and foreign currencies, which options may be
listed for trading on a national securities exchange or traded over-the-counter.
The Quantitative and Technology Funds may write (sell) covered call and secured
put options on up to 25% of net assets and each Fund may purchase put and call
options provided that no more than 5% of its net assets may be invested in
premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during or at the end of the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security or
other asset at the exercise price during or at the end of the option period. The
writer of a covered call owns securities or other assets that are acceptable for
escrow and the writer of a secured put invests an amount not less than the
exercise price in eligible securities or other assets to the extent that it is
obligated as a writer. If a call written by a Fund is exercised, the Fund
foregoes any possible profit from an increase in the market price of the
underlying security or other asset over the exercise price plus the premium
received. In writing puts, there is a risk that a Fund may be required to take
delivery of the underlying security or other asset at a disadvantageous price.
Over-the-counter traded options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer as a result of the insolvency of such dealer or otherwise, in which event
a Fund may experience material losses. However, in writing options (for the
Quantitative and Technology Funds) the premium is paid in advance by the dealer.
OTC options are available for a greater variety of securities or other assets,
and a wider range of expiration dates and exercise prices, than for exchange
traded options.
Each Fund may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or the cash value of a securities index during a specified future
period at a specified price. A Fund will "cover" futures contracts sold by the
Fund and maintain in a segregated account certain liquid assets in connection
with futures contracts purchased by the Fund as described under "Investment
Policies and Techniques" in the Statement of Additional Information. In
connection with their foreign securities investments, the Funds may also engage
in foreign currency financial futures transactions. A Fund will not enter into
any futures contracts or options on futures contracts if the aggregate of the
contract value of the outstanding futures contracts of the Fund and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
the total assets of the Fund.
The Funds may engage in financial futures transactions and may use index options
as an attempt to hedge against market risks. For example, when the near-term
market view is bearish but the portfolio composition is judged satisfactory for
the longer term, exposure to temporary declines in the market may be reduced by
entering into futures contracts to sell securities or the cash value of a
securities index. Conversely, where the near-term view is bullish, but the Fund
is believed to be well positioned for the longer term with a high cash
21
<PAGE> 28
position, the Fund can hedge against market increases by entering into futures
contracts to buy securities or the cash value of a securities index. In either
case, the use of futures contracts would tend to reduce portfolio turnover and
facilitate the Fund's pursuit of its investment objective.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. If participants
in the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures market could result. Price
distortions also could result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators,
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager still may not result in a successful hedging
transaction. If any of these events should occur, a Fund could lose money on the
financial futures contracts and also on the value of its portfolio assets. The
costs incurred in connection with futures transactions could reduce a Fund's
return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by a Fund
may expire worthless, in which case a Fund would lose the premium paid therefor.
A Fund may engage in futures transactions only on commodities exchanges or
boards of trade. A Fund will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities which the Fund owns or intends to purchase.
FOREIGN CURRENCY TRANSACTIONS. The Funds may invest a portion of their assets in
securities denominated in foreign currencies. The Funds may engage in foreign
currency transactions in connection with their investments in foreign securities
but will not speculate in foreign currency exchange.
The value of the foreign securities investments of a Fund measured in U.S.
Dollars (including ADRs) may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the Fund
may incur costs in connection with conversions between various currencies. A
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers.
When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Fund is able to protect itself against a
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S. Dollar and such foreign currency.
However, this tends to limit potential gains that might result from a positive
change in such currency relationships. A Fund may also hedge its foreign
currency exchange rate risk by engaging in currency financial futures and
options transactions.
22
<PAGE> 29
When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. The forecasting of short-term currency market movement is extremely
difficult and whether such a short-term hedging strategy will be successful is
highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for a Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
A Fund will not speculate in foreign currency exchange. A Fund will not enter
into such forward contracts or maintain a net exposure in such contracts where
the Fund would be obligated to deliver an amount of foreign currency in excess
of the value of the Fund's securities or other assets denominated in that
currency. The Funds do not intend to enter into such forward contracts if they
would have more than 15% of the value of their total assets committed to forward
contracts for the purchase of a foreign currency. A Fund segregates cash or
liquid high-grade securities in an amount not less than the value of the Fund's
total assets committed to forward foreign currency exchange contracts entered
into for the purchase of a foreign currency. If the value of the securities
segregated declines, additional cash or securities are added so that the
segregated amount is not less than the amount of the Fund's commitments with
respect to such contracts. A Fund generally does not enter into a forward
contract with a term longer than one year.
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.
SPECIAL RISK FACTORS--OPTIONS, FUTURES, FOREIGN CURRENCIES AND OTHER
DERIVATIVES. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures, foreign currency and other derivative transactions. See "Investment
Policies and Techniques" in the Statement of Additional Information. The
principal risks are: (a) possible imperfect correlation between movements in the
prices of options, currencies, futures contracts or other derivatives and
movements in the prices of the securities or currencies hedged, used for cover
or that the derivative intended to replicate; (b) lack of assurance that a
liquid secondary market will exist for any particular option, futures, foreign
currency or other derivatives contract at any particular time; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; (d) losses on futures contracts resulting from market movements not
anticipated by the investment manager; (e) the possible need to defer closing
out certain options, futures or other derivatives contracts in order to continue
to qualify for beneficial tax treatment afforded "regulated investment
companies" under the Internal Revenue Code; and (f) the possible non-performance
of the counter-party to the derivative contract.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Funds may lend securities (principally to broker-dealers)
without limit where such loans are callable at any time and are continuously
secured by segregated collateral (cash or U.S. Government securities) equal to
no less than the
23
<PAGE> 30
market value, determined daily, of the securities loaned. The Funds will receive
amounts equal to dividends or interest on the securities loaned. The Funds will
also earn income for having made the loan. Any cash collateral pursuant to these
loans will be invested in short-term money market instruments. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities fail financially.
However, the loans would be made only to firms deemed by the investment manager
to be of good standing, and when the investment manager believes the potential
earnings justify the attendant risk. Management will limit such lending to not
more than one-third of the value of a Fund's total assets.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. (to be named Zurich Kemper
Investments, Inc. on or about March 1, 1996) ("KFS"), 120 South LaSalle Street,
Chicago, Illinois 60603, is the investment manager of each Fund and provides
each Fund with continuous professional investment supervision. Dreman Value
Advisors, Inc. ("DVA") is the sub-adviser for the Value+Growth Fund. See
"Value+Growth Fund" below for information about DVA. KFS is one of the largest
investment managers in the country and has been engaged in the management of
investment funds for more than forty-five years. KFS and its affiliates provide
investment advice and manage investment portfolios for the Kemper Funds, the
affiliated insurance companies, and other corporate, pension, profit-sharing and
individual accounts representing approximately $63 billion under management. KFS
acts as investment manager for 28 open-end and seven closed-end investment
companies, with 68 separate investment portfolios, representing more than 3
million shareholder accounts. KFS is an indirect subsidiary of Zurich Insurance
Company, an internationally recognized company providing services in life and
non-life insurance, reinsurance and asset management.
Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreements provide that KFS shall act as each Fund's
investment adviser, manage its investments and provide it with various services
and facilities. KFS will from time to time use the services of Zurich Investment
Management Limited, 1 Fleet Place, London EC4M 7RQ, a wholly-owned subsidiary of
KFS, with respect to foreign securities investments of the Funds including
analysis, research, execution and trading services.
Tracy McCormick Chester has been the portfolio manager of the Blue Chip Fund
since September, 1994 when she joined KFS. She is a vice president of the Blue
Chip Fund and senior vice president of KFS. Prior to coming to KFS, she was a
senior vice president and portfolio manager of an investment management company;
and prior thereto, she managed private accounts. She received a B.A. and an
M.B.A. in Finance from Michigan State University, East Lansing, Michigan.
Steven H. Reynolds and the KFS Equity Investment Committee have managed the
Growth Fund since September, 1995. Mr. Reynolds joined KFS in September, 1995 as
an executive vice president and chief investment officer -- equities.
Immediately prior to joining KFS, he was a senior vice president and equity
portfolio manager of an investment manager; and prior thereto, he was a senior
vice president, managing director and head of active equities at a national
bank. Mr. Reynolds received a bachelor's degree from Johns Hopkins University,
Baltimore, Maryland, and an M.B.A. in finance from the University of Virginia,
Charlottesville, Virginia.
Frank D. Korth and Richard A. Goers are the portfolio co-managers of the
Technology Fund. Mr. Korth has served as portfolio co-manager since January,
1994. Mr. Korth joined KFS in March, 1990 and is currently a senior vice
president of KFS and a vice president of the Fund. Prior to coming to KFS, Mr.
Korth was president and portfolio manager of a mutual fund investing primarily
in equity securities. He received a B.A. in Math from Mankato State University,
Mankato, Minnesota and an M.B.A. in Finance from Bernard Baruch College, New
York, New York. Mr. Korth is a Chartered Financial Analyst. Mr. Goers has served
as a portfolio co-manager since 1991. Mr. Goers joined KFS in January, 1971 and
is currently a senior vice president of KFS and a vice president of the Fund.
Mr. Goers received a B.S. in Industrial (Business) Administration from Iowa
State University, Ames, Iowa and an M.B.A. in Finance from Northwestern
University, Chicago, Illinois. Mr. Goers is a Chartered Financial Analyst.
24
<PAGE> 31
Gary A. Langbaum has been the portfolio manager of the Total Return Fund since
February, 1995 and the portfolio manager of the Small Cap Fund since January,
1996. He is assisted by investment personnel who specialize in certain areas.
Mr. Langbaum joined KFS in 1988 and is an executive vice president of KFS. He
received a B.A. in Finance from the University of Maryland, College Park,
Maryland.
Daniel J. Bukowski will become the portfolio manager of the Quantitative Fund
upon commencement of operations on February 15, 1996 and has been a portfolio
co-manager of the Value+Growth Fund since October, 1995. Mr. Bukowski joined KFS
in 1989 and is a senior vice president and Director of Quantitative Research of
KFS and a vice president of the Quantitative Fund and the Value+Growth Fund. Mr.
Bukowski received a B.A. in Statistics and an M.B.A. in Finance from the
University of Chicago, Chicago, Illinois. Mr. Reynolds is a portfolio co-manager
of the Value+Growth Fund primarily responsible for management of the growth
portion since the Fund's inception in 1995. David N. Dreman is also a portfolio
co-manager of the Value+Growth Fund. See "Value+Growth Fund" below for more
information on management of that Fund and Mr. Dreman.
KFS has an Equity Investment Committee that determines overall investment
strategy for equity portfolios managed by KFS. The Equity Investment Committee
is currently comprised of the following members: Daniel J. Bukowski, Tracy
McCormick Chester, James H. Coxon, Richard A. Goers, Frank D. Korth, Gary A.
Langbaum, Maura J. Murrhy, James R. Neel, Thomas M. Regner, Steven H. Reynolds
and Stephen B. Timbers. The portfolio managers work together as a team with the
Equity Investment Committee and various equity analysts and equity traders to
manage each Fund's investments. Equity analysts--through research, analysis and
evaluation--work to develop investment ideas appropriate for the Fund. These
ideas are studied and debated by the Equity Investment Committee and, if
approved, are added to a list of eligible investments. The portfolio managers
use the list of eligible investments to help them structure the Fund's portfolio
in a manner consistent with the Fund's objective. The KFS International Equity
Investments area, directed by Dennis H. Ferro, and the KFS International Fixed
Income Investments area, directed by Gordon K. Johns, provide research and
analysis regarding foreign investments to the portfolio managers. After
investment decisions are made, equity traders execute the portfolio manager's
instructions through various broker-dealer firms.
The Funds (other than the Small Cap Fund) pay KFS investment management fees,
payable monthly, at the annual rates shown below. Before May 31, 1994, each Fund
(other than the Small Cap Fund, Quantitative Fund and Value+Growth Fund) paid
KFS an investment management fee under different schedules that are described in
the Statement of Additional Information. The Small Cap Fund pays a base annual
management fee, payable monthly, at the rate of .65% of the average daily net
assets of the Fund. This base fee is subject to upward or downward adjustment
between .35% and .95% on the basis of the investment performance of the Class A
shares of the Fund compared with the performance of the Standard & Poor's 500
Stock Index as described in the Statement of Additional Information.
<TABLE>
<CAPTION>
BLUE CHIP,
GROWTH,
QUANTITATIVE,
TECHNOLOGY
AND TOTAL VALUE+
AVERAGE DAILY NET ASSETS RETURN FUNDS GROWTH FUND
- ------------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
$0 - $250 million........................................................ .58% .72%
$250 million - $1 billion................................................ .55 .69
$1 billion - $2.5 billion................................................ .53 .66
$2.5 billion - $5 billion................................................ .51 .64
$5 billion - $7.5 billion................................................ .48 .60
$7.5 billion - $10 billion............................................... .46 .58
$10 billion - $12.5 billion.............................................. .44 .56
Over $12.5 billion....................................................... .42 .54
</TABLE>
25
<PAGE> 32
KFS has agreed to temporarily reduce its investment management fee and reimburse
or pay operating expenses of the Value+Growth Fund to the extent necessary to
limit the Fund's operating expenses to the levels described under "Summary of
Expenses." For this purpose "operating expenses" do not include taxes, interest,
extraordinary expenses, brokerage commissions or transaction costs. KFS can
terminate this arrangement at any time upon notice to the Fund.
VALUE+GROWTH FUND. As mentioned above, DVA is the sub-adviser for the
Value+Growth Fund. Under the terms of the Sub-Advisory Agreement, DVA will
manage the value portion of the Fund and will provide such other investment
advice, research and assistance as KFS may, from time to time, reasonably
request. DVA, which was formed in October, 1994, has served as investment
manager for Kemper-Dreman Fund, Inc. ("KDF") and certain institutional accounts
since August, 1995 when it acquired substantially all the assets of Dreman Value
Management, L.P., the former adviser for KDF. DVA is a wholly-owned subsidiary
of KFS and is located at 10 Exchange Place, Suite 2050, Jersey City, New Jersey
07302. KFS pays DVA for its services a sub-advisory fee, payable monthly at the
annual rate of .25% of average daily net assets of the Fund. David N. Dreman has
been a portfolio co-manager of the Fund and primarily responsible for management
of the value portion of the Value+Growth Fund since its inception in 1995. Mr.
Dreman is the Chairman and a Director of DVA and a vice president of the Fund.
Mr. Dreman is a pioneer of the philosophy of contrarian investing (buying what
is out of favor) and a leading proponent of the low P/E investment style. He is
a columnist for Forbes and the author of several books on the value style of
investing. Mr. Dreman received a Bachelor of Finance in Commerce from the
University of Manitoba, Winnipeg, Manitoba, Canada.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with each Fund, Kemper Distributors, Inc.
("KDI"), 120 South LaSalle Street, Chicago, Illinois, 60603, an affiliate of
KFS, is the principal underwriter and distributor of each Fund's shares and acts
as agent of each Fund in the sale of its shares. KDI bears all its expenses of
providing services pursuant to the distribution agreement, including the payment
of any commissions. KDI provides for the preparation of advertising or sales
literature and bears the cost of printing and mailing prospectuses to persons
other than shareholders. KDI bears the cost of qualifying and maintaining the
qualification of Fund shares for sale under the securities laws of the various
states and each Fund bears the expense of registering its shares with the
Securities and Exchange Commission. KDI may enter into related selling group
agreements with various broker-dealers, including affiliates of KDI, that
provide distribution services to investors. KDI also may provide some of the
distribution services. Before February 1, 1995, KFS was the principal
underwriter and distributor.
Class A Shares. KDI receives no compensation from the Funds as principal
underwriter for Class A shares and pays all expenses of distribution of each
Fund's Class A shares under the distribution agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of each Fund's shares.
Class B Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of each Fund attributable to Class B shares. This fee is
accrued daily as an expense of Class B shares. KDI also receives any contingent
deferred sales charges. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Class B Shares." KDI currently compensates firms for
sales of Class B shares at a commission rate of 3.75%.
Class C Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of each Fund attributable to Class C shares. This fee is
accrued daily as an expense of Class C shares. KDI currently pays firms for
sales of Class C shares a distribution fee, payable quarterly, at an annual rate
of .75% of net assets attributable to Class C shares maintained and serviced by
the firm. A firm becomes eligible for the distribution fee based upon assets in
accounts in the month of purchase and the fee continues until terminated by KDI
or a Fund.
Rule 12b-1 Plan. Since each distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that
26
<PAGE> 33
agreement is approved and reviewed separately for the Class B shares and the
Class C shares in accordance with Rule 12b-1 under the Investment Company Act of
1940, which regulates the manner in which an investment company may, directly or
indirectly, bear the expenses of distributing its shares. The table below shows
amounts paid in connection with each Fund's Rule 12b-1 Plan during its 1995
fiscal year (except the Quantitative Fund which will commence operations
February 15, 1996).
<TABLE>
<CAPTION>
DISTRIBUTION FEES
DISTRIBUTION EXPENSES PAID CONTINGENT DEFERRED
INCURRED BY BY FUND TO SALES CHARGES PAID
UNDERWRITER UNDERWRITER TO UNDERWRITER
--------------------- -------------------- -------------------
FUND CLASS B CLASS C CLASS B CLASS C CLASS B
- -------------------------------------- ---------- ------- --------- ------- -------------------
<S> <C> <C> <C> <C> <C>
Blue Chip............................. $ 332,000 32,000 59,000 5,000 29,000
Growth................................ $6,065,000 128,000 5,249,000 23,000 2,368,000
Small Cap............................. $2,408,000 74,000 1,341,000 13,000 518,000
Technology............................ $1,069,006 40,000 168,000 5,000 56,000
Total Return.......................... $7,592,000 136,000 8,303,000 26,000 3,318,000
Value+Growth*......................... $ 90,000 3,000 1,000 0 0
</TABLE>
- ---------------
* For the period October 16, 1995 to November 30, 1995.
If a Rule 12b-1 Plan is terminated in accordance with its terms, the obligation
of a Fund to make payments to KDI pursuant to the Plan will cease and the Fund
will not be required to make any payments past the termination date. Thus, there
is no legal obligation for the Fund to pay any expenses incurred by KDI in
excess of its fees under a Plan, if for any reason the Plan is terminated in
accordance with its terms. Future fees under a Plan may or may not be sufficient
to reimburse KDI (or KFS as predecessor to KDI) for its expenses incurred.
ADMINISTRATIVE SERVICES. KDI also provides information and administrative
services for shareholders of each Fund pursuant to administrative services
agreements ("administrative agreements"). KDI may enter into related
arrangements with various financial services firms, such as broker-dealer firms
or banks ("firms"), that provide services and facilities for their customers or
clients who are shareholders of the Funds. Such administrative services and
assistance may include, but are not limited to, establishing and maintaining
shareholder accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding each Fund and its special
features, and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. KDI bears all its expenses
of providing services pursuant to the administrative agreement, including the
payment of any service fees. For services under the administrative agreements,
each Fund pays KDI a fee, payable monthly, at the annual rate of up to .25% of
average daily net assets of each class of such Fund. KDI then pays each firm a
service fee at an annual rate of up to .25% of net assets of each class of those
accounts that it maintains and services for each Fund. Firms to which service
fees may be paid include broker-dealers affiliated with KDI. A firm becomes
eligible for the service fee based on assets in the accounts in the month
following the month of purchase (in the month of purchase for Class C Shares)
and the fee continues until terminated by KDI or a Fund. The fees are calculated
monthly and paid quarterly. KDI may advance to financial services firms the
first year service fee related to Class B shares sold by such firms at a rate of
up to .25% of the purchase price of such shares. As compensation therefor, KDI
may retain the administrative services fee paid by a Fund with respect to such
shares for the first year after purchase. Financial services firms will become
eligible for future service fees with respect to such shares commencing in the
thirteenth month following the month of purchase.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreements not paid to firms to compensate
itself for administrative functions performed for each Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on a Fund's records and it is intended
that KDI will pay all the administrative services fee that it receives from each
Fund to firms in the form of service fees. The effective administrative services
fee rate
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<PAGE> 34
to be charged against all assets of each Fund while this procedure is in effect
will depend upon the proportion of Fund assets that is in accounts for which
there is a firm of record.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of each Fund maintained in the United States. The Chase Manhattan Bank, N.A.,
Chase MetroTech Center, Brooklyn, New York 11245, as custodian, has custody of
all securities and cash of each Fund held outside the United States. IFTC also
is the Funds' transfer agent and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company, an affiliate of KFS, serves as
"Shareholder Service Agent" of the Funds and, as such, performs all of IFTC's
duties as transfer agent and dividend-paying agent. For a description of
transfer agent and shareholder service agent fees, see "Investment Manager and
Underwriter" in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS. KFS places all orders for purchases and sales of a
Fund's securities (except that DVA places all orders for the value portion of
the Value+Growth Fund). Subject to seeking best execution of orders, KFS or DVA
may consider sales of shares of a Fund and other funds managed by KFS and DVA as
a factor in selecting broker-dealers. See "Portfolio Transactions" in the
Statement of Additional Information.
DIVIDENDS AND TAXES
DIVIDENDS. Each Fund normally distributes dividends of net investment income as
follows: annually for the Growth, Quantitative, Small Cap, Technology and
Value+Growth Funds; semi-annually for the Blue Chip Fund; and quarterly for the
Total Return Fund. Each Fund distributes any net realized short-term and
long-term capital gains at least annually. The quarterly distribution to
shareholders of the Total Return Fund may include short-term capital gains.
Dividends paid by a Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
Fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset
value; or
(2) To receive income and capital gain dividends in cash.
Any dividends of a Fund that are reinvested normally will be reinvested in
shares of the same class of that same Fund. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have dividends of a Fund
invested in shares of the same class of another Kemper Fund at the net asset
value of such class of such other fund. See "Special Features--Class A
Shares--Combined Purchases" for a list of such other Kemper Funds. To use this
privilege of investing dividends of a Fund in shares of another Kemper Fund,
shareholders must maintain a minimum account value of $1,000 in the Fund
distributing the dividends and a minimum account value of $1,000 in the Kemper
Fund in which dividends are reinvested. The Funds will reinvest dividend checks
(and future dividends) in shares of that same Fund and class if checks are
returned as undeliverable.
TAXES. Each Fund intends to continue to qualify (or for the Quantitative Fund,
that intends to qualify) as a regulated investment company under Subchapter M of
the Internal Revenue Code (the "Code") and, if so qualified, will not be liable
for federal income taxes to the extent its earnings are distributed. Dividends
derived
28
<PAGE> 35
from net investment income and net short-term capital gains are taxable to
shareholders as ordinary income and long-term capital gain dividends are taxable
to shareholders as long-term capital gain regardless of how long the shares have
been held and whether received in cash or shares. Long-term capital gain
dividends received by individual shareholders are taxed at a maximum rate of
28%. Dividends declared in October, November or December to shareholders of
record as of a date in one of those months and paid during the following January
are treated as paid on December 31 of the calendar year declared. A portion of
the dividends paid by the Funds may qualify for the dividends received deduction
available to corporate shareholders.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a
return of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing gains
realized on sales of securities, such dividends would be a return of investment
though taxable as stated above.
Each Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over". The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
(IRAs) or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends 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.
NET ASSET VALUE
The net asset value per share of a Fund is determined separately for each class
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The per share net asset value of the
Class B and Class C shares of a Fund will generally be lower than that of the
Class A shares of the Fund because of the higher expenses borne by Class B and
Class C shares. Portfolio securities that are primarily traded on a domestic
securities exchange or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed or, if there is no recent sale price available, at the last current
bid quotation. Portfolio securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges where primarily traded. A security
that is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by the Board
of Trustees or its delegates. Securities not so traded or listed are valued at
the last current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or asked
priced is used. Exchange traded fixed income options are valued at the last sale
price unless there is no sale price, in which event current prices provided by
market makers are used. Over-the-counter traded options are valued based upon
current prices provided by market makers. Financial futures and options thereon
are valued at the settlement price established each day by the board of trade or
exchange on which they are traded. Other securities and assets are valued at
fair value as determined in good faith by the Board of Trustees. Because of the
need to obtain prices as of the close of trading on various exchanges throughout
the world, the calculation of net asset value of a Fund
29
<PAGE> 36
investing in foreign securities does not necessarily take place
contemporaneously with the determination of the prices of a Fund's foreign
securities, which may be made prior to the determination of net asset value. For
purposes of determining the Fund's net asset value of a Fund investing in
foreign securities, all assets and liabilities initially expressed in foreign
currency values will be converted into U.S. Dollar values at the mean between
the bid and offered quotations of such currencies against U.S. Dollars as last
quoted by a recognized dealer. If an event were to occur, after the value of a
security was so established but before the net asset value per share was
determined, which was likely to materially change the net asset value, then that
security would be valued using fair value considerations by the Board of
Trustees or its delegates. On each day the New York Stock Exchange (the
"Exchange") is open for trading, the net asset value is determined as of the
earlier of 3:00 p.m. Chicago time or the close of the Exchange.
PURCHASE OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial or a contingent deferred sales charge
but are subject to higher ongoing expenses than Class A shares and do not
convert into another class. When placing purchase orders, investors must specify
whether the order is for Class A, Class B or Class C shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
--------------------------------- ------------------------ ---------------------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of None Initial sales charge waived or
5.75% of the public offering reduced for certain purchases
price
Class B Maximum contingent deferred sales 0.75% Shares convert to Class A shares
charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class C None 0.75% No conversion feature
</TABLE>
The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).
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<PAGE> 37
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------
ALLOWED
TO
DEALERS
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF NET OF
OFFERING ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE* PRICE
------ ------ ------
<S> <C> <C> <C>
Less than $50,000..................................... 5.75 % 6.10 % 5.20 %
$50,000 but less than $100,000........................ 4.50 4.71 4.00
$100,000 but less than $250,000....................... 3.50 3.63 3.00
$250,000 but less than $500,000....................... 2.60 2.67 2.25
$500,000 but less than $1 million..................... 2.00 2.04 1.75
$1 million and over................................... .00 ** .00 ** ***
</TABLE>
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
*** Commission is payable by KDI as discussed below.
Each Fund receives the entire net asset value of all its Class A shares sold.
KDI, the Funds' principal underwriter, retains the sales charge on sales of
Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth in the above table. Upon notice to all dealers with whom it
has sales agreements, KDI may reallow up to the full applicable sales charge, as
shown in the above table, during periods and for transactions specified in such
notice and such reallowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is reallowed, such
dealers may be deemed to be underwriters as that term is defined in the
Securities Act of 1933.
Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which KFS or DVA does not serve as investment manager
("non-Kemper fund") provided that: (a) the investor has previously paid either
an initial sales charge in connection with the purchase of the non-Kemper fund
shares redeemed or a contingent deferred sales charge in connection with the
redemption of the non-Kemper fund shares, and (b) the purchase of Fund shares is
made within 90 days after the date of such redemption. To make such a purchase
at net asset value, the investor or the investor's dealer must, at the time of
purchase, submit a request that the purchase be processed at net asset value
pursuant to this privilege. Effective March 1, 1996, KDI may in its discretion
compensate firms for sales of Class A shares under this privilege at a
commission rate of .50% of the amount of Class A shares purchased.
Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such Fund or other Kemper Mutual
Funds listed under "Special Features--Class A Shares--Combined Purchases" totals
at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 provided
in either case that such plan has not less than 200 eligible employees (the
"Large Order NAV Purchase Privilege"). Redemption within one year of shares
purchased under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Large Order NAV Purchase Privilege."
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of a Fund to
employer sponsored employee benefit plans using the subaccount recordkeeping
system made available through the Shareholder Service Agent at net asset value
in accordance with the
31
<PAGE> 38
Large Order NAV Purchase Privilege up to the following amounts: 1.00% of the net
asset value of shares sold on amounts up to $5 million in any calendar year,
.50% on the next $5 million and .25% on amounts over $10 million in such
calendar year. KDI may in its discretion compensate investment dealers or other
financial services firms in connection with the sale of Class A shares of each
Fund to other purchasers at net asset value in accordance with the Large Order
NAV Purchase Privilege up to the following amounts: 1.00% of the net asset value
of shares sold on amounts up to $3 million, .50% on the next $2 million and .25%
on amounts over $5 million. For purposes of determining the appropriate
commission percentage to be applied to a particular sale under the foregoing
schedules, KDI will consider the cumulative amount invested by the purchaser in
a Fund and other Kemper Mutual Funds listed under "Special Features--Class A
Shares--Combined Purchases," including purchases pursuant to the "Combined
Purchases," "Letter of Intent" and "Cumulative Discount" features referred to
above. The privilege of purchasing Class A shares of a Fund at net asset value
under the Large Order NAV Purchase Privilege is not available if another net
asset value purchase privilege is also applicable.
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 .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 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-Dreman Fund, Inc. ("KDF") on September 8, 1995, and have
continuously owned shares of KDF (or a Kemper Fund acquired by exchange of KDF
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 Everen Securities,
Inc. In addition, unitholders of unit investment trusts sponsored by Everen
Securities, 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 which have such programs. Class A shares of a Fund may be sold at net
asset value through certain investment advisers registered under the Investment
Advisers Act of 1940 and other financial services firms that adhere to certain
standards established by KDI, including a
32
<PAGE> 39
requirement that such shares be sold for the benefit of their clients
participating in a "wrap account" or similar program under which such clients
pay a fee to the investment adviser or other firm. Such shares are sold for
investment purposes and on the condition that they will not be resold except
through redemption or repurchase by the Funds. The Funds may also issue Class A
shares at net asset value in connection with the acquisition of the assets of or
merger or consolidation with another investment company, or to shareholders in
connection with the investment or reinvestment of income and capital gain
dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of a Fund will automatically convert to Class A shares of the
same Fund six years after issuance on the basis of the relative net asset value
per share. Class B shareholders of the 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 or contingent deferred
sales charge is imposed. Since Class C shares are sold without an initial sales
charge, the full amount of the investor's purchase payment will be invested in
Class C shares for his or her account. KDI pays firms for sales of Class C
shares a distribution fee, payable quarterly, at an annual rate of .75% of net
assets attributable to Class C shares maintained and serviced by the firm. KDI
is compensated by each Fund for services as distributor and principal
underwriter for Class C shares. See "Investment Manager and Underwriter."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six
33
<PAGE> 40
years might consider Class B shares. Investors who prefer not to pay an initial
sales charge but who plan to redeem their shares within six years might consider
Class C shares. Orders for Class B shares or Class C shares for $500,000 or more
will be declined. Orders for Class B shares or Class C shares by employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent will be invested instead in
Class A shares at net asset value where the combined subaccount value in a Fund
or other Kemper Mutual Funds listed under "Special Features -- Class A Shares --
Combined Purchases" is in excess of $5 million including purchases pursuant to
the "Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features." For more information about the three sales
arrangements, consult your financial representative or the Shareholder Service
Agent. Financial services firms may receive different compensation depending
upon which class of shares they sell.
GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Fund for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers, as
described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to a
Fund.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of the Funds. Non cash compensation includes luxury merchandise and trips to
luxury resorts. In some instances, such discounts, commissions or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Funds, or other funds underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other
financial services firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of its business day will be
confirmed at a price based on the net asset value effective on that day. The
Funds reserve the right to determine the net asset value more frequently than
once a day if deemed desirable. Dealers and other financial services firms are
obligated to transmit orders promptly. Collection may take significantly longer
for a check drawn on a foreign bank than for a check drawn on a domestic bank.
Therefore, if an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected before shares will be purchased. See "Purchase and
Redemption of Shares" in the Statement of Additional Information.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Funds' shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Funds' shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts 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
34
<PAGE> 41
cash dividends. Such firms, including affiliates of KDI, may receive
compensation from the Funds through the Shareholder Service Agent for these
services. This prospectus should be read in connection with such firms' material
regarding their fees and services.
The Funds reserve the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, each
Fund may temporarily suspend the offering of any class of its shares to new
investors. During the period of such suspension, persons who are already
shareholders of such class of such Fund normally are permitted to continue to
purchase additional shares of such class and to have dividends reinvested.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require a Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Funds' transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When a Fund is asked to redeem shares for which it may not have yet received
good payment, it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 15 days from receipt by a Fund of the purchase
amount. The redemption within one year of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge (see "Purchase of Shares") and the redemption
of Class B shares may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge--Class B Shares" below).
Because of the high cost of maintaining small accounts, the Funds reserve the
right to redeem an account (and, in the case of Class B shares, impose any
applicable contingent deferred sales charge) that falls below the minimum
investment level, currently $1,000, as a result of redemptions. Currently,
Individual Retirement Accounts and employee benefit plan accounts are not
subject to this procedure. A shareholder will be notified in writing and will be
allowed 60 days to make additional purchases to bring the account value up to
the minimum investment level before a Fund redeems the shareholder's account.
The investment required to reach that level may be made at net asset value
(without any initial sales charge in the case of Class A shares).
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent
35
<PAGE> 42
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 in the case of Class B
shares) are $50,000 or less and the proceeds are payable to the shareholder of
record at the address of record, normally a telephone request or a written
request by any one account holder without a signature guarantee is sufficient
for redemptions by individual or joint account holders, and trust, executor and
guardian account holders (excluding custodial accounts for gifts and transfers
to minors), provided the trustee, executor or guardian is named in the account
registration. Other institutional account holders and 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 15 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. The Funds reserve the right to terminate or modify
this privilege at any time.
REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which each Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the Fund next determined after receipt of a
request by KDI. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of KDI's business day will be confirmed at
the net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of the Fund
effective on that day and normally the proceeds will be sent to the designated
account the following business day. Delivery of the proceeds of a wire
redemption of $250,000 or more may be delayed by the Fund for up to seven days
if KFS deems it appropriate under then current market conditions. Once
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048 or in writing, subject to 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
36
<PAGE> 43
(including any contingent deferred sales charge). To change the designated
account to receive wire redemption proceeds, send a written request to the
Shareholder Service Agent with signatures guaranteed as described above or
contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed by wire transfer until such shares have been owned for at least 15
days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
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 of 1% may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege if they
are redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived in the event of: (a)
redemptions by a participant-directed qualified retirement plan described in
Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457; (b) redemptions by employer
sponsored employee benefit plans using the subaccount record keeping system made
available through 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); and (e)
redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed excluding amounts not subject to the charge.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES
YEAR OF REDEMPTION AFTER PURCHASE CHARGE
------------------------------------------------------------------------ ----------
<S> <C>
First................................................................... 4%
Second.................................................................. 3%
Third................................................................... 3%
Fourth.................................................................. 2%
Fifth................................................................... 2%
Sixth................................................................... 1%
</TABLE>
Class B shareholders who originally acquired their shares as Initial Shares of
Kemper Portfolios, formerly known as Kemper Investment Portfolios, hold them
subject to the same CDSC schedule that applied when those shares were purchased,
as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
YEAR OF ----------------------------------------------------------------------------------------
REDEMPTION SHARES PURCHASED ON OR AFTER
AFTER SHARES PURCHASED ON OR AFTER FEBRUARY 1, 1991 AND BEFORE SHARES PURCHASED BEFORE
PURCHASE MARCH 1, 1993 MARCH 1, 1993 FEBRUARY 1, 1991
------------------------ ----------------------------- ----------------------------- ------------------------
<S> <C> <C> <C>
First................... 4% 3% 5%
Second.................. 3% 3% 4%
Third................... 3% 2% 3%
Fourth.................. 2% 2% 2%
Fifth................... 2% 1% 2%
Sixth................... 1% 1% 1%
</TABLE>
37
<PAGE> 44
The following example will illustrate the operation of the contingent deferred
sales charge. Assume that an investor makes a single purchase of $10,000 of a
Fund's Class B shares and that 16 months later the value of the shares has grown
by $1,000 through reinvested dividends and by an additional $1,000 in
appreciation to a total of $12,000. If the investor were then to redeem the
entire $12,000 in share value, the contingent deferred sales charge would be
payable only with respect to $10,000 because neither the $1,000 of reinvested
dividends nor the $1,000 of share appreciation is subject to the charge. The
charge would be at the rate of 3% ($300) because it was in the second year after
the purchase was made.
The rate of the contingent deferred sales charge under the schedule above is
determined by the length of the period of ownership. Investments are tracked on
a monthly basis. The period of ownership for this purpose begins the first day
of the month in which the order for the investment is received. For example, an
investment made in December, 1996 will be eligible for the 3% charge if redeemed
on or after December 1, 1997. In the event no specific order is requested, the
redemption will be made first from Class B shares representing reinvested
dividends and then from the earliest purchase of Class B shares. KDI receives
any contingent deferred sales charge directly.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to satisfy required minimum distributions after age 70 1/2 from an
IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by 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.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of a Fund
or any other Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of the Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
a Fund or of the other listed Kemper Mutual Funds. A shareholder of a Fund or
other Kemper Mutual Fund who redeems Class A shares purchased under the Large
Order NAV Purchase Privilege (see "Purchase of Shares") or Class B 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
or Class B shares, as the case may be, of a Fund or of other Kemper Mutual
Funds. The amount of any contingent deferred sales charge also will be
reinvested. These reinvested shares will retain their original cost and purchase
date for purposes of the contingent deferred sales charge. Also, a holder of
Class B shares who has redeemed shares may reinvest up to the full amount
redeemed, less any applicable contingent deferred sales charge that may have
been imposed upon the redemption of such shares, at net asset value in Class A
shares of a Fund or of the other Kemper Mutual Funds listed under "Special
Features--Class A Shares--Combined Purchases." Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Funds
available for sale in the shareholder's state of residence as listed under
"Special Features--Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of shares of a
Fund, the
38
<PAGE> 45
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 Fund, Kemper U.S. Government Securities Fund, Kemper
International Fund, Kemper State Tax-Free Income Series, Kemper Adjustable Rate
U.S. Government Fund, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper
Target Equity Fund (series are subject to a limited offering period), Kemper
Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund, Kemper U.S.
Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper Value+Growth
Fund, Kemper-Dreman Fund, Inc., Kemper Quantitative Equity Fund and Kemper
Horizon Fund ("Kemper Mutual Funds"). Except as noted below, there is no
combined purchase credit for direct purchases of shares of Kemper Money Funds,
Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account
Trust, Tax-Exempt New York Money Market Fund or Investors Cash Trust ("Money
Market Funds"), which are not considered "Kemper Mutual Funds" for purposes
hereof. For purposes of the Combined Purchases feature described above as well
as for the Letter of Intent and Cumulative Discount features described below,
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent may include: (a)
Money Market Funds as "Kemper Mutual Funds", (b) all classes of shares of any
Kemper Mutual Fund and (c) the value of any other plan investment, such as
guaranteed investment contracts and employer stock, maintained on such
subaccount record keeping system.
CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Mutual Funds listed above made by any
purchaser within a 24-month period under a written Letter of Intent ("Letter")
provided by KDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than actually
paid, the appropriate number of escrowed shares are redeemed and the proceeds
used toward satisfaction of the obligation to pay the increased sales charge.
The Letter for an employer sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Mutual Funds held of record as of the initial purchase date under
the Letter as an "accumulation credit" toward the completion of the Letter, but
no price adjustment will be made on such shares. Only investments in Class A
shares are included in this privilege.
CLASS A SHARES--CUMULATIVE DISCOUNT. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the above mentioned Kemper Mutual Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already owned
by the investor.
CLASS A SHARES--AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales
39
<PAGE> 46
charge is applicable to a purchase. Upon such notification, the investor will
receive the lowest applicable sales charge. Quantity discounts described above
may be modified or terminated at any time.
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds and the Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the Offering Period for such
series as described in the applicable prospectus. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with KDI.
Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of another Kemper Mutual Fund or a Money
Market Fund under the exchange privilege described above without paying any
contingent deferred sales charge at the time of exchange. If the Class A shares
received on exchange are redeemed thereafter, a contingent deferred sales charge
may be imposed in accordance with the foregoing requirements provided that the
shares redeemed will retain their original cost and purchase date for purposes
of the contingent deferred sales charge.
Class B Shares. Class B shares of a Fund and Class B shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class B
shares may be exchanged without a contingent deferred sales charge being imposed
at the time of exchange. For purposes of the contingent deferred sales charge
that may be imposed upon the redemption of the shares received on exchange,
amounts exchanged retain their original cost and purchase date.
Class C Shares. Class C shares of a Fund and Class C shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values.
General. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be exchanged until they have been owned for at least 15 days. In
addition, shares of a Kemper Mutual Fund (except Kemper Cash Reserves Fund)
acquired by exchange from another Kemper Mutual Fund, or from a Money Market
Fund, may not be exchanged thereafter until they have been owned for 15 days.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, dealers or other
firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis 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 Kemper Mutual Funds, Attention: Exchange Department, P.O. Box 419557,
Kansas City, Missouri 64141-6557, or by telephone if the shareholder has given
authorization. Once the authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-621-1048, subject to the limitations
on liability under "Redemption or Repurchase of Shares--General." Any share
certificates must be deposited prior to any exchange of such shares. During
periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the telephone exchange privilege. The
exchange privilege is not a right and may be suspended, terminated or modified
at any time. Exchanges may only be made for funds that are available for sale in
the shareholder's state of residence.
40
<PAGE> 47
Currently, Tax-Exempt California Money Market Fund is available for sale only in
California and Tax-Exempt New York Money Market Fund is available for sale only
in New York, Connecticut, New Jersey and Pennsylvania. Except as otherwise
permitted by applicable regulations, 60 days' prior written notice of any
termination or material change will be provided.
SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of any class of the
shares of a Kemper Mutual Fund or Money Market Fund may authorize the automatic
exchange of a specified amount ($100 minimum) of such shares for shares of the
same class of another such Kemper Fund. If selected, exchanges will be made
automatically until the privilege is terminated by the shareholder or the Kemper
Fund. Exchanges are subject to the terms and conditions described above under
"Exchange Privilege," including the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange. This privilege may not be used for the
exchange of shares held in certificated form.
EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $2,500) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in a Fund. Shareholders can also redeem shares (minimum $500 and maximum $2,500)
from their Fund account and transfer the proceeds to their bank, savings and
loan, or credit union checking account. By enrolling in EXPRESS-Transfer, the
shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to transfer the specified amounts between the
shareholder's Fund account and the predesignated bank, savings and loan or
credit union account, subject to the limitations on liability under "Redemption
or Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a
shareholder can initiate a transaction by calling Kemper Shareholder Services
toll free at 1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m.
Chicago time. Shareholders may terminate this privilege by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").
BANK DIRECT DEPOSIT. A shareholder may purchase additional shares of a Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, monthly investments are made automatically from the shareholder's account
at a bank, savings and loan or credit union into the shareholder's Fund account.
By enrolling in Bank Direct Deposit, the shareholder authorizes the Fund and its
agents to either draw checks or initiate Automated Clearing House debits against
the designated account at a bank or other financial institution. This privilege
may be selected by completing the appropriate section on the Account Application
or by contacting the Shareholder Service Agent for appropriate forms. A
shareholder may terminate his or her Plan by sending written notice to Kemper
Service Company, P.O. Box 419415, Kansas City, Missouri 64141-6415. Termination
by a shareholder will become effective within thirty days after the Shareholder
Service Agent has received the request. A Fund may immediately terminate a
shareholder's Plan in the event that any item is unpaid by the shareholder's
financial institution. The Funds may terminate or modify this privilege at any
time.
PAYROLL DIRECT DEPOSIT AND GOVERNMENT DIRECT DEPOSIT. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) A Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. The minimum periodic
payment is $100. The maximum annual rate at which Class B shares
41
<PAGE> 48
may be redeemed under a systematic withdrawal plan is 10% of the net asset value
of the account. Shares are redeemed so that the payee will receive payment
approximately the first of the month. Any income and capital gain dividends will
be automatically reinvested at net asset value. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested and fluctuations in the net asset value
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, a Fund will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.
KDI will waive the contingent deferred sales charge on redemptions of Class B
shares made pursuant to a systematic withdrawal plan. The right is reserved to
amend the systematic withdrawal plan on 30 days' notice. The plan may be
terminated at any time by the investor or the Funds.
TAX-SHELTERED RETIREMENT PLANS. KFS provides retirement plan services and
documents and KDI can establish investor accounts in any of the following types
of retirement plans:
- - Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.
- - 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from KDI upon request. The brochures for plans trusteed by
IFTC describe the current fees payable to IFTC for its services as trustee.
Investors should consult with their own tax advisers before establishing a
retirement plan.
PERFORMANCE
The Funds may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return." Performance
information will be computed separately for Class A, Class B and Class C shares.
Each of these figures is based upon historical results and is not representative
of the future performance of any class of the Funds.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Russell 1000(R)
Index, the Russell 1000(R) Growth Index, the Wilshire Large Company Growth
Index, the Wilshire 750 Mid Cap Company Growth Index, the Standard &
Poor's/Barra Value Index, Standard & Poor's/Barra Growth Index and the Russell
1000(R) Value Index. The performance of a Fund such as the Total Return Fund may
also be compared to the combined performance of two indexes, such as a 60%/40%
42
<PAGE> 49
combination of the Standard & Poor's 500 Stock Index and the Lehman Brothers
Government/Corporate Bond Index or for the Value+Growth Fund to a 50%/50%
combination of the Russell 1000(R) Growth Index and the Russell 1000(R) Value
Index. The performance of a Fund may also be compared to the performance of
other mutual funds or mutual fund indexes with similar objectives and policies
as reported by independent mutual fund reporting services such as Lipper
Analytical Services, Inc. ("Lipper"). Lipper performance calculations are based
upon changes in net asset value with all dividends reinvested and do not include
the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National 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.
A Fund may depict the historical performance of the securities in which the Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. A Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund. The relative performance of growth stocks versus
value stocks may also be discussed.
Each Fund's Class A shares are sold at net asset value plus a maximum sales
charge of 5.75% of the offering price. While the maximum sales charge is
normally reflected in the Fund's Class A performance figures, certain total
return calculations may not include such charge and those results would be
reduced if it were included. Class B shares and Class C shares are sold at net
asset value. Redemptions of Class B shares within the first six years after
purchase may be subject to a contingent deferred sales charge that ranges from
4% during the first year to 0% after six years. Average annual total return
figures do, and total return figures may, include the effect of the contingent
deferred sales charge for the Class B shares that may be imposed at the end of
the period in question. Performance figures for the Class B shares not including
the effect of the applicable contingent deferred sales charge would be reduced
if it were included.
Each Fund's returns and net asset value will fluctuate. Shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares may be subject to a
contingent deferred sales charge as described above. Additional information
concerning each Fund's performance appears in the Statement of Additional
Information. Additional information about each Fund's performance also appears
in its Annual Report to Shareholders, which is available without charge from the
Fund.
CAPITAL STRUCTURE
The Funds are open-end management investment companies, organized as separate
business trusts under the laws of Massachusetts. The Blue Chip Fund was
organized as a business trust under the laws of Massachusetts on May 28, 1987.
The Growth Fund was organized as a business trust under the laws of
Massachusetts on October 24, 1985 and, effective January 31, 1986, that Fund
pursuant to a reorganization succeeded to the assets and liabilities of Kemper
Growth Fund, Inc., a Maryland corporation organized in 1965. The Small Cap Fund
was organized as a 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
43
<PAGE> 50
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 Quantitative Fund was organized as a business
trust under the laws of Massachusetts on June 12, 1995. The investment manager
invested the "seed money" as the sole shareholder of the Quantitative Fund
before the public offering of its shares and, therefore, controlled that Fund as
of January 26, 1996.
Each Fund may issue an unlimited number of shares of beneficial interest in one
or more series or "Portfolios," all having no par value, which may be divided by
the Board of Trustees into classes of shares. Currently, each Fund offers four
classes of shares. These are Class A, Class B and Class C shares, as well as
Class I shares, which are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of KFS and its affiliates; and (b)
the following investment advisory clients of KFS and its investment advisory
affiliates that invest at least $1 million in a Fund: (1) unaffiliated benefit
plans, such as qualified retirement plans (other than individual retirement
accounts and self-directed retirement plans); (2) unaffiliated banks and
insurance companies purchasing for their own accounts; and (3) endowment funds
of unaffiliated non-profit organizations. The Board of Trustees of a Fund may
authorize the issuance of additional classes and additional Portfolios if deemed
desirable, each with its own investment objectives, policies and restrictions.
Since the Funds may offer multiple Portfolios, each is known as a "series
company." Shares of a Fund have equal noncumulative voting rights except that
Class B and Class C shares have separate and exclusive voting rights with
respect to each Fund's Rule 12b-1 Plan. Shares of each class also have equal
rights with respect to dividends, assets and liquidation of such Fund subject to
any preferences (such as resulting from different Rule 12b-1 distribution fees),
rights or privileges of any classes of shares of the Fund. Shares of each Fund
are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Funds are not
required to hold annual shareholder meetings and do not intend to do so.
However, they will hold special meetings as required or deemed desirable for
such purposes as electing trustees, changing fundamental policies or approving
an investment management agreement. Subject to the Agreement and Declaration of
Trust of each Fund, shareholders may remove trustees. If shares of more than one
Portfolio for any Fund are outstanding, shareholders will vote by Portfolio and
not in the aggregate or by class except when voting in the aggregate is
required, under the Investment Company Act of 1940, such as for the election of
trustees or when voting by class is appropriate.
44
<PAGE> 51
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
KEF-1 2/96 (LOGO)printed on recycled paper
KEMPER
EQUITY
FUNDS
FEBRUARY 1, 1996
KEMPER BLUE CHIP FUND
KEMPER GROWTH FUND
KEMPER QUANTITATIVE EQUITY FUND
KEMPER SMALL CAPITALIZATION EQUITY FUND
KEMPER TECHNOLOGY FUND
KEMPER TOTAL RETURN FUND
KEMPER VALUE+GROWTH FUND
LOGO
KEMPER
<PAGE> 52
KEMPER TECHNOLOGY FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
----------------------------------------- ---------------------------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies
and Techniques
14. Management of the Fund................... Investment Manager and Underwriter;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Underwriter;
Officers and Trustees
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions
18. Capital Stock and Other Securities....... Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends and Taxes
21. Underwriters............................. Investment Manager and Underwriter
22. Calculation of Performance Data.......... Performance
23. Financial Statements..................... Financial Statements
</TABLE>
<PAGE> 53
KEMPER EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
KEMPER BLUE CHIP FUND ("BLUE CHIP FUND")
KEMPER GROWTH FUND ("GROWTH FUND")
KEMPER QUANTITATIVE EQUITY FUND ("QUANTITATIVE FUND")*
KEMPER SMALL CAPITALIZATION EQUITY FUND ("SMALL CAP FUND")
KEMPER TECHNOLOGY FUND ("TECHNOLOGY FUND")
KEMPER TOTAL RETURN FUND ("TOTAL RETURN FUND")
KEMPER VALUE PLUS GROWTH FUND ("VALUE+GROWTH FUND")
*THE KEMPER QUANTITATIVE EQUITY FUND WILL NOT
COMMENCE OPERATIONS UNTIL FEBRUARY 15, 1996
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the combined
Statement of Additional Information for each of the funds (the "Funds") listed
above. It should be read in conjunction with the combined prospectus of the
Funds dated February 1, 1996. The prospectus may be obtained without charge from
the Funds.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Restrictions................................................. B-1
Investment Policies and Techniques...................................... B-9
Portfolio Transactions.................................................. B-15
Investment Manager and Underwriter...................................... B-16
Purchase and Redemption of Shares....................................... B-23
Dividends and Taxes..................................................... B-24
Performance............................................................. B-25
Officers and Trustees................................................... B-39
Shareholder Rights...................................................... B-44
Quantitative Fund -- Report of Independent Auditors (January 4, 1996)... B-45
Quantitative Fund -- Statement of Net Assets (January 4, 1996).......... B-46
Appendix -- Ratings of Fixed Income Investments......................... B-47
</TABLE>
The financial statements appearing in each Fund's 1995 Annual Report to
Shareholders are incorporated herein by reference. The Annual Report for the
Fund for which this Statement of Additional Information is requested accompanies
this document. (The foregoing is not applicable to the Quantitative Fund, which
will commence operations on February 15, 1996.)
KEF-13 2/96 (LOGO) printed on recycled paper
<PAGE> 54
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions which,
together with the investment objective and fundamental policies of such Fund,
cannot be changed without approval of a majority of its outstanding voting
shares. As defined in the Investment Company Act of 1940, this means the lesser
of the vote of (a) 67% of the shares of the Fund present at a meeting where more
than 50% of the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund.
THE BLUE CHIP FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result,
more than 5% of the total value of the Fund's assets would be invested in
securities of that issuer.
(2) Purchase more than 10% of any class of voting securities of any issuer.
(3) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objective and policies.
(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction number
(4) above. (The collateral arrangements with respect to options, financial
futures and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions.
(7) Make short sales of securities or maintain a short position for the account
of the Fund unless at all times when a short position is open it owns an equal
amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 10% of the Fund's total assets is held as collateral for such
sales at any one time.
(8) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(9) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
the Fund's total assets would be invested in any one industry.
(10) Invest in commodities or commodity futures contracts, although it may buy
or sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate (including real estate limited
partnership interests), although it may invest in securities which are secured
by real estate and securities of issuers which invest or deal in real estate.
B-1
<PAGE> 55
(11) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(12) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Blue Chip
Fund may not:
(i) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(ii) Invest for the purpose of exercising control or management of another
issuer.
(iii) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers which
invest in or sponsor such programs.
(iv) Purchase securities of other open-end investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
(v) Invest more than 5% of the Fund's total assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) which with their predecessors have a record of less than
three years continuous operation and equity securities of issuers which are not
readily marketable.
(vi) Invest more than 15% of its net assets in illiquid securities.
(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchange. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(viii) Invest in oil, gas, and other mineral leases.
(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies which invest in real estate).
(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.
(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.
THE GROWTH FUND AND THE VALUE+GROWTH FUND, EACH MAY NOT, AS A FUNDAMENTAL
POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer.
B-2
<PAGE> 56
(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
(6) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(7) Invest 25% or more of its total assets in any one industry. Water,
communications, electric and gas utilities shall each be considered a separate
industry.
(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Growth
Fund did not borrow money as permitted by investment restriction number 4 in the
latest fiscal year and neither Fund has a present intention of borrowing during
the current year. The Fund has adopted the following non-fundamental
restrictions, which may be changed by the Board of Trustees without shareholder
approval. The Growth Fund and the Value+Growth Fund, each may not:
(i) Invest more than 5% of the Fund's total assets in securities of issuers
which with their predecessors have a record of less than three years continuous
operation and equity securities of issuers which are not readily marketable.
(ii) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(iii) Invest for the purpose of exercising control or management of another
issuer.
(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
B-3
<PAGE> 57
(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets.
(vi) Invest more than 15% of its net assets in illiquid securities.
(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(viii) Invest in oil, gas, and other mineral leases.
(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable securities in real estate investment trusts and
readily marketable securities of companies which invest in real estate).
(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.
(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.
THE SMALL CAP FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
(6) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(7) Invest 25% or more of its total assets in any one industry. Water,
communications, electric and gas utilities shall each be considered a separate
industry.
B-4
<PAGE> 58
(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Small Cap
Fund may not:
(i) Invest more than 5% of the Fund's total assets in securities of issuers
which with their predecessors have a record of less than three years continuous
operation and equity securities of issuers which are not readily marketable.
(ii) Purchase or retain the securities of any issuer if any of the officers or
trustees of the Fund or its investment adviser owns beneficially more than 1/2
of 1% of the securities of such issuer and together own more than 5% of the
securities of such issuer.
(iii) Invest for the purpose of exercising control or management of another
issuer.
(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets.
(vi) Invest more than 15% of its net assets in illiquid securities.
(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(viii) Invest in oil, gas, and other mineral leases.
(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies which invest in real estate).
(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.
(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.
B-5
<PAGE> 59
THE QUANTITATIVE FUND AND THE TECHNOLOGY FUND, EACH MAY NOT, AS A FUNDAMENTAL
POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
(6) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may it purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts.
(7) Invest 25% or more of its total assets in any one industry. Water,
communications, electric and gas utilities shall each be considered a separate
industry.
(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Technology Fund did not borrow money as permitted by investment restriction
number 4 in the latest fiscal year and neither Fund has a present intention of
borrowing during the current year. The Quantitative Fund and the Technology Fund
adopted the following non-fundamental restrictions, which may be changed by the
Board of Trustees without shareholder approval. These Funds may not:
(i) Invest more than 5% of the Fund's total assets in securities of issuers
which with their predecessors have a record of less than three years continuous
operation and equity securities of issuers which are not readily marketable.
(ii) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
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(iii) Invest for the purpose of exercising control or management of another
issuer.
(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, 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.
(vi) Invest more than 15% of its net assets in illiquid securities.
(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(viii) Invest in oil, gas, and other mineral leases.
(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies which invest in real estate).
(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.
(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts. (The Quantitative Fund currently does not intend to invest
more than 5% of its net assets in securities of real estate investment trusts.)
THE TOTAL RETURN FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowings secured thereby.
(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
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(6) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
(7) Invest 25% or more of its total assets in any one industry. Water,
communications, electric and gas utilities shall each be considered a separate
industry.
(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number 4 in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval. The Total
Return Fund may not:
(i) Invest more than 5% of the Fund's total assets in securities of issuers
which with their predecessors have a record of less than three years continuous
operation and in equity securities which are not readily marketable.
(ii) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(iii) Invest for the purpose of exercising control or management of another
issuer.
(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, reorganization or acquisition of assets.
(vi) Invest more than 15% of its net assets in illiquid securities.
(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(viii) Invest in oil, gas, and other mineral leases.
(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies which invest in real estate).
(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in
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restricted securities and securities of issuers which with their predecessors
have a record of less than three years continuous operation will not exceed 15%
of total assets.
(xi) Invest more than 10% of its total assets in securities of real estate
investment funds.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. Each Fund may engage in options transactions and may engage in
financial futures transactions in accordance with its respective investment
objectives and policies. The Blue Chip, Growth, Small Cap, Total Return and
Value+Growth Funds each may invest in put and call options but may not write
(sell) options. The Quantitative and Technology Funds may write (sell) covered
call options and secured put options and may purchase put and call options. Each
such Fund intends to engage in such transactions if it appears to the investment
manager to be advantageous for the Fund to do so in order to pursue its
investment objective and also to hedge against the effects of market risks but
not for speculative purposes. The use of futures and options, and possible
benefits and attendant risks, are discussed below along with information
concerning other investment policies and techniques.
OPTIONS ON SECURITIES. The Quantitative and Technology Funds may write (sell)
"covered" call options on securities as long as the Fund owns the underlying
securities subject to the option or an option to purchase the same underlying
securities, having an exercise price equal to or less than the exercise price of
the "covered" option, or will establish and maintain for the term of the option
a segregated account consisting of cash, U.S. Government securities or other
liquid high-grade debt obligations ("eligible securities") having a value at
least equal to the fluctuating market value of the optioned securities. The
Quantitative and Technology Funds may write "covered" put options provided that,
as long as the Fund is obligated as a writer of a put option, the Fund will own
an option to sell the underlying securities subject to the option, having an
exercise price equal to or greater than the exercise price of the "covered"
option, or it will deposit and maintain in a segregated account eligible
securities having a value equal to or greater than the exercise price of the
option. A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security at the exercise price during or at
the end of the option period. A put option gives the purchaser the right to
sell, and the writer the obligation to buy, the underlying security at the
exercise price during or at the end of the option period. The premium received
for writing an option will reflect, among other things, the current market price
of the underlying security, the relationship of the exercise price to such
market price, the price volatility of the underlying security, the option
period, supply and demand and interest rates. The Funds may write (for the
Quantitative and Technology Funds) or purchase spread options, which are options
for which the exercise price may be a fixed dollar spread or yield spread
between the security underlying the option and another security that is used as
a bench mark. The exercise price of an option may be below, equal to or above
the current market value of the underlying security at the time the option is
written. The buyer of a put who also owns the related security is protected by
ownership of a put option against any decline in that security's price below the
exercise price less the amount paid for the option. The ability to purchase put
options allows a Fund to protect capital gains in an appreciated security it
owns, without being required to actually sell that security. At times a Fund
would like to establish a position in a security upon which call options are
available. By purchasing a call option, a Fund is able to fix the cost of
acquiring the security, this being the cost of the call plus the exercise price
of the option. This procedure also provides some protection from an unexpected
downturn in the market, because a Fund is only at risk for the amount of the
premium paid for the call option which it can, if it chooses, permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium
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received. If the covered call option writer has to sell the underlying security
because of the exercise of a call option, it realizes a gain or loss from the
sale of the underlying security, with the proceeds being increased by the amount
of the premium.
If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium, plus the interest income on the eligible securities that
have been segregated. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However,
this would be offset in whole or in part by gain from the premium received and
any interest income earned on the eligible securities that have been segregated.
OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objectives, Policies and Risk Factors"), the Funds may deal in over-the-counter
traded options ("OTC options"). OTC options differ from exchange traded options
in several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event a Fund may
experience material losses. However, in writing options the premium is paid in
advance by the dealer. OTC options are available for a greater variety of
securities, and a wider range of expiration dates and exercise prices, than are
exchange traded options. Since there is no exchange, pricing is normally done by
reference to information from market makers, which information is carefully
monitored by the investment manager and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Fund writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Funds understand the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Funds have adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Funds' portfolios. A brief description of
such procedures is set forth below.
A Fund will only engage in OTC options transactions with dealers that have been
specifically approved by the investment manager pursuant to procedures adopted
by the Fund's Board of Trustees. The investment manager believes that the
approved dealers should be able to enter into closing transactions if necessary
and, therefore, present minimal credit risks to a Fund. The investment manager
will monitor the credit-worthiness of the approved dealers on an ongoing basis.
A Fund currently will not engage in OTC options transactions if the amount
invested by the Fund in OTC options, plus (for the Quantitative and Technology
Funds) a "liquidity charge" related to OTC options written by the Fund, plus the
amount invested by the Fund in illiquid securities, would exceed 15% of the
Fund's net assets. The "liquidity charge" referred to above is computed as
described below.
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The Quantitative and Technology Funds anticipate entering into agreements with
dealers to which the Fund sells OTC options. Under these agreements either Fund
would have the absolute right to repurchase the OTC options from the dealer at
any time at a price no greater than a price established under the agreements
(the "Repurchase Price"). The "liquidity charge" referred to above for a
specific OTC option transaction will be the Repurchase Price related to the OTC
option less the intrinsic value of the OTC option. The intrinsic value of an OTC
call option for such purposes will be the amount by which the current market
value of the underlying security exceeds the exercise price. In the case of an
OTC put option, intrinsic value will be the amount by which the exercise price
exceeds the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow either Fund to repurchase a specific OTC
option written by the Fund, the "liquidity charge" will be the current market
value of the assets serving as "cover" for such OTC option.
OPTIONS ON SECURITIES INDICES. The Blue Chip, Growth, Small Cap, Total Return
and Value+Growth Funds may purchase, and the Quantitative and Technology Funds
may purchase and write, call and put options on securities indices in an attempt
to hedge against market conditions affecting the value of securities that the
Fund owns or intends to purchase, and not for speculation. Through the writing
or purchase of index options, a Fund can achieve many of the same objectives as
through the use of options on individual securities. Options on securities
indices are similar to options on a security except that, rather than the right
to take or make delivery of a security at a specified price, an option on a
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 Quantitative or Technology Fund writes an option on a securities index,
it will segregate, and mark-to-market, eligible securities equal in value to
100% of the exercise price in the case of a put, or the contract value in the
case of a call. In addition, where a Fund writes a call option on a securities
index at a time when the contract value exceeds the exercise price, the Fund
will segregate and mark-to-market, until the option expires or is closed out,
cash or cash equivalents equal in value to such excess.
A Fund may also purchase and sell options on other appropriate indices, as
available, such as foreign currency indices. Options on futures contracts and
index options involve risks similar to those risks relating to transactions in
financial futures contracts described below. Also, an option purchased by a Fund
may expire worthless, in which case the Fund would lose the premium paid
therefor.
FINANCIAL FUTURES CONTRACTS. The Funds may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or an amount of foreign currency or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might affect adversely the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.
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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.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when purchasing a futures contract, writing a put option or entering
into a forward currency exchange purchase, a Fund will maintain in a segregated
account cash, U.S. Government securities or liquid high-grade debt obligations
equal to the value of such contracts. A Fund will use cover in connection with
selling a futures contract.
A Fund will not engage in transactions in financial futures contracts or options
thereon for speculation, but only in an attempt to hedge against changes in
interest rates or market conditions affecting the value of securities which the
Fund holds or intends to purchase.
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FOREIGN CURRENCY OPTIONS. The Funds may engage in foreign currency options
transactions. A foreign currency option provides the option buyer with the right
to buy or sell a stated amount of foreign currency at the exercise price at a
specified date or during the option period. A call option gives its owner the
right, but not the obligation, to buy the currency, while a put option gives its
owner the right, but not the obligation, to sell the currency. The option seller
(writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Fund against an adverse movement in the
value of a foreign currency, it does not limit the gain which might result from
a favorable movement in the value of such currency. For example, if a Fund were
holding securities denominated in an appreciating foreign currency and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, it would not have to exercise its put. Similarly, if the Fund had
entered into a contract to purchase a security denominated in a foreign currency
and had purchased a foreign currency call to hedge against a rise in value of
the currency but instead the currency had depreciated in value between the date
of purchase and the settlement date, the Fund would not have to exercise its
call but could acquire in the spot market the amount of foreign currency needed
for settlement.
FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of their financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), the Funds may use foreign currency futures contracts
and options on such futures contracts. Through the purchase or sale of such
contracts, a Fund may be able to achieve many of the same objectives as through
forward foreign currency exchange contracts more effectively and possibly at a
lower cost.
Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days ("term") from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. The investment manager believes that it
is important to have the flexibility to enter into such forward contracts when
it determines that to do so is in the best interests of a Fund. A Fund will not
speculate in foreign currency exchange.
If a Fund retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Fund will incur a gain or a
loss (as described below) to the extent that there has been movement in forward
contract prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between a Fund's entering into a
forward contract for the sale of foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. 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.
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A Fund will not enter into forward contracts or maintain a net exposure in such
contracts when the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets
denominated in that currency. A Fund segregates cash or liquid high-grade
securities in an amount not less than the value of the Fund's total assets
committed to forward foreign currency exchange contracts entered into for the
purchase of a foreign currency. If the value of the securities segregated
declines, additional cash or securities is added so that the segregated amount
is not less than the amount of the Fund's commitments with respect to such
contracts. A Fund generally does not enter into a forward contract with a term
longer than one year.
REPURCHASE AGREEMENTS. A Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. No Fund currently intends to invest more than 5% of
its net assets in repurchase agreements during the current year.
SHORT SALES AGAINST-THE-BOX. The Blue Chip Fund may make short sales
against-the-box for the purpose of deferring realization of gain or loss for
federal income tax purposes. A short sale "against-the-box" is a short sale in
which the Fund owns at least an equal amount of the securities sold short or
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and at least equal in amount to,
the securities sold short. The Fund may engage in such short sales only to the
extent that not more than 10% of the Fund's total assets (determined at the time
of the short sale) is held as collateral for such sales. The Fund does not
currently intend, however, to engage in such short sales to the extent that more
than 5% of its net assets will be held as collateral therefor during the current
year.
OTHER CONSIDERATIONS--HIGH YIELD (HIGH RISK) BONDS. As reflected in the
prospectus, the Total Return Fund may invest a portion of its assets in fixed
income securities that are in the lower rating categories of recognized rating
agencies or are non-rated. These lower rated or non-rated fixed income
securities are considered, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation and generally will involve more credit risk than securities in
the higher rating categories.
The market values of such securities tend to reflect individual corporate
developments to a greater extent than do those of higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower rated securities also tend to be more sensitive to economic conditions
than are higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, regarding lower rated bonds may
depress the prices for such securities. These and other factors adversely
affecting the market value of high yield securities will adversely affect the
Fund's net asset value. Although some risk is inherent in all securities
ownership, holders of fixed income securities have a claim on the assets of the
issuer prior to the holders of common stock. 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
B-14
<PAGE> 68
specific projected business forecasts, or the unavailability of additional
financing. The risk of loss from default by the issuer is significantly greater
for the holders of high yielding securities because such securities are
generally unsecured and are often subordinated to other creditors of the issuer.
Zero coupon securities and pay-in-kind bonds involve additional special
considerations. Zero coupon securities are debt obligations that do not entitle
the holder to any periodic payments of interest prior to maturity or a specified
cash payment date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from their face
amount or par value. The market prices of zero coupon securities are generally
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a greater
degree than do securities paying interest currently with similar maturities and
credit quality. Zero coupon, pay-in-kind or deferred interest bonds carry
additional risk in that unlike bonds that pay interest throughout the period to
maturity, the Fund will realize no cash until the cash payment date unless a
portion of such securities is sold and, if the issuer defaults, the Fund may
obtain no return at all on its investment.
Additional information concerning high yield securities appears under
"Appendix--Ratings of Fixed Income Investments."
PORTFOLIO TRANSACTIONS
KFS is the investment manager for the Kemper Funds and KFS and its affiliates
also furnish investment management services to other clients including Kemper
Corporation and the Kemper insurance companies. KFS is the sole shareholder of
Zurich Investment Management, Inc. and Zurich Investment Management, Limited.
These three entities share some common research and trading facilities. DVA is
the investment manager for Kemper-Dreman Fund, Inc. and the sub-adviser for the
Value+Growth Fund. At times investment decisions may be made to purchase or sell
the same investment securities for a Fund and for one or more of the other
clients managed by KFS or DVA. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security through the
same trading facility, the transactions are allocated as to amount and price in
a manner considered equitable to each.
National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options a Fund
will be able to write on a particular security.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or futures contracts available to a Fund. On the
other hand, the ability of a Fund to participate in volume transactions may
produce better executions for a Fund in some cases. The Board of Trustees of
each Fund believes that the benefits of KFS's and DVA's organization outweigh
any limitations that may arise from simultaneous transactions or position
limitations.
KFS and DVA, in effecting purchases and sales of portfolio securities for the
account of a Fund, will implement each Fund's policy of seeking best execution
of orders, which includes best net prices, except to the extent that KFS and DVA
may be permitted to pay higher brokerage commissions for research services as
described below. Consistent with this policy, orders for portfolio transactions
are placed with broker-dealer firms giving consideration to the quality,
quantity and nature of each firm's professional services, which include
execution, clearance procedures, wire service quotations and statistical and
other research information provided to a Fund and KFS or DVA. Any research
benefits derived are available for all clients, including clients of affiliated
companies. Since it is only supplementary to KFS's and DVA's own research
efforts and must be analyzed and reviewed by KFS' and DVA's staff, the receipt
of research information is not expected to materially reduce expenses. In
selecting among firms believed to meet the criteria for handling a particular
transaction, KFS and DVA may give consideration to those firms that have sold or
are selling shares of the Funds and of other funds
B-15
<PAGE> 69
managed by KFS and DVA, as well as to those firms that provide market,
statistical and other research information to a Fund and KFS and DVA, although
neither KFS nor DVA is authorized to pay higher commissions or, in the case of
principal trades, higher prices to firms that provide such services, except as
described below.
KFS and DVA may in certain instances be permitted to pay higher brokerage
commissions (not including principal trades) solely for receipt of market,
statistical and other research services. Subject to Section 28(e) of the
Securities Exchange Act of 1934 and procedures that may be adopted by the Board
of Trustees of each Fund, a Fund could pay a firm that provides research
services to KFS or DVA commissions for effecting a securities transaction for
the Fund in excess of the amount other firms would have charged for the
transaction if KFS or DVA determines in good faith that the greater commission
is reasonable in relation to the value of the research services provided by the
executing firm viewed in terms either of a particular transaction or KFS's or
DVA's overall responsibilities to the Fund or other clients. Not all of such
research services may be useful or of value in advising a particular Fund.
Research benefits will be available for all clients of KFS and its subsidiaries.
The investment management fee paid by a Fund to KFS is not reduced because KFS
or DVA receives these research services.
The table below shows total brokerage commissions paid by each Fund for the last
three fiscal years and for the most recent fiscal year, the percentage thereof
that was allocated to firms based upon research information provided or sales of
Kemper Fund shares (except for the Quantitative Fund, which will commence
operations on February 15, 1996.
<TABLE>
<CAPTION>
ALLOCATED TO FIRMS
BASED ON
RESEARCH/SALES OF
KEMPER FUND SHARES
FUND FISCAL 1995 IN FISCAL 1995 FISCAL 1994 FISCAL 1993
- ------------------------------------------ ----------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Blue Chip................................. $ 506,000 90% $ 565,000 $ 1,128,000
Growth.................................... $ 6,470,000 81% $ 7,110,000 $ 8,100,000
Small Cap................................. $ 5,975,000 63% $ 2,782,000 $ 2,740,000
Technology................................ $ 3,504,000 75% $ 1,644,000 $ 3,279,000
Total Return.............................. $ 8,309,000 68% $ 7,705,000 $ 6,884,000
Value+Growth*............................. $ 6,000 17% N.A. N.A.
</TABLE>
- ---------------
* For the period October 16, 1995 to November 30, 1995.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. (to be named Zurich Kemper
Investments, Inc. on or about March 1, 1996) ("KFS"), 120 South LaSalle Street,
Chicago, Illinois 60603, is each Fund's investment manager. KFS is owned by KFS
Holding Corp. KFS Holding Corp. is a more than 90% owned subsidiary of Zurich
Holding Company of America, Inc., which is a wholly-owned subsidiary of Zurich
Insurance Company, an internationally recognized company providing services in
life and non-life insurance, reinsurance and asset management. Pursuant to
investment management agreements, KFS acts as each Fund's investment adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical, bookkeeping and administrative
services, and permits any of its officers or employees to serve without
compensation as trustees or officers of a Fund if elected to such positions.
Each investment management agreement provides that each Fund pays the charges
and expenses of its operations, including the fees and expenses of the trustees
(except those who are officers or employees of KFS), independent auditors,
counsel, custodian and transfer agent and the cost of share certificates,
reports and notices to shareholders, brokerage commissions or transaction costs,
costs of calculating net asset value, taxes and
B-16
<PAGE> 70
membership dues. Each Fund bears the expenses of registration of its shares with
the Securities and Exchange Commission, while Kemper Distributors, Inc. ("KDI"),
as principal underwriter, pays the cost of qualifying and maintaining the
qualification of each Fund's shares for sale under the securities laws of the
various states. KFS has agreed to reimburse each Fund to the extent required by
applicable state expense limitations should all operating expenses of each Fund,
including the investment management fees of KFS but excluding taxes, interest,
distribution fees, extraordinary expenses, brokerage commissions or transaction
costs and any other properly excludable expenses, exceed the applicable state
expense limitations. The Funds believe that the most restrictive state expense
limitation currently in effect would require that such operating expenses not
exceed 2.5% of the first $30 million of average daily net assets, 2% of the next
$70 million and 1.5% of average daily net assets over $100 million. Under such
state expense limitation, custodian costs attributable to foreign securities
that are in excess of similar domestic custodian costs are excluded from
operating expenses.
The investment management agreements provide that KFS shall not be liable for
any error of judgment or of law, or for any loss suffered by a Fund in
connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
KFS in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under each agreement.
Each Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually (a) by a majority
of the trustees who are not parties to such agreement or interested persons of
any such party except in their capacity as trustees of the Fund and (b) by the
shareholders or the Board of Trustees of the Fund. The agreements for the
Quantitative and Value+Growth Funds have initial terms ending March 1, 1997.
Each Fund's investment management agreement may be terminated at any time upon
60 days notice by either party, or by a majority vote of the outstanding shares
of the Fund, and will terminate automatically upon assignment. If additional
Fund's become subject to an investment management agreement, the provisions
concerning continuation, amendment and termination shall be on a Fund by Fund
basis. Additional Funds may be subject to a different agreement.
The current investment management fee rates paid by the Funds are in the
prospectus, see "Investment Manager and Underwriter." The investment management
fees paid by each Fund for its last three fiscal years are shown in the table
below (except for the Quantitative Fund, which will not commence operations
until February 15, 1996).
<TABLE>
<CAPTION>
FUND FISCAL 1995 FISCAL 1994 FISCAL 1993
- ------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Blue Chip............................................. $ 903,000 1,072,000 1,298,000
Growth................................................ $12,349,000 9,634,000 8,320,000
Small Cap............................................. $ 3,273,000+ 3,746,000++ 2,290,000+++
Technology............................................ $ 4,542,000 3,296,000 3,074,000
Total Return.......................................... $15,147,000 10,997,000 6,837,000
Value+Growth*......................................... $ 1,000 N.A. N.A.
</TABLE>
- ---------------
* For the period October 16, 1995 to November 30, 1995.
+ Fee was decreased $766,000 from $4,039,000 base fee.
++ Fee was increased $499,000 from $3,247,000 base fee.
+++ Fee was decreased $102,000 from $2,392,000 base fee.
The Small Cap Fund pays a base annual investment management fee, payable
monthly, at the rate of .65 of 1% of the average daily net assets of the Fund.
This base fee is subject to upward or downward adjustment on the basis of the
investment performance of the Class A shares of the Fund as compared with the
performance of the Standard & Poor's 500 Stock Index (the "Index"). The Small
Cap Fund will pay an additional monthly fee at an annual rate of .05% of such
average daily net assets for each percentage point (fractions to be prorated) by
which the performance of the Class A shares of the Fund exceeds that of the
Index for the immediately
B-17
<PAGE> 71
preceding twelve months; provided that such additional monthly fee shall not
exceed 1/12 of .30% of the average daily net assets. Conversely, the
compensation payable by the Small Cap Fund will be reduced by an annual rate of
.05% of such average daily net assets for each percentage point (fractions to be
prorated) by which the performance of the Class A shares of the Fund falls below
that of the Index, provided that such reduction in the monthly fee shall not
exceed 1/12 of .30% of the average net assets. The total fee on an annual basis
can range from .35% to .95% of average daily net assets. The Small Cap Fund's
investment performance during any twelve month period is measured by the
percentage difference between (a) the opening net asset value of one Class A
share of the Fund and (b) the sum of the closing net asset value of one Class A
share of the Fund plus the value of any income and capital gain dividends on
such share during the period treated as if reinvested in Class A shares of the
Fund at the time of distribution. The performance of the Index is measured by
the percentage change in the Index between the beginning and the end of the
twelve month period with cash distributions on the securities which comprise the
Index being treated as reinvested in the Index at the end of each month
following the payment of the dividend. Each monthly calculation of the incentive
portion of the fee may be illustrated as follows: if over the preceding twelve
month period the Small Cap Fund's adjusted net asset value applicable to one
Class A share went from $10.00 to $11.00 (10% appreciation), and the Index,
after adjustment, went from 100 to 104 (or only 4%), the entire incentive
compensation would have been earned by KFS. On the other hand, if the Index rose
from 100 to 110 (10%), no incentive fee would have been payable. A rise in the
Index from 100 to 116 (16%) would have resulted in the minimum monthly fee of
1/12 of .35%. Since the computation is not cumulative from year to year, an
additional management fee may be payable with respect to a particular year,
although the Small Cap Fund's performance over some longer period of time may be
less favorable than that of the Index. Conversely, a lower management fee may be
payable in a year in which the performance of the Fund's Class A shares' is less
favorable than that of the Index, although the performance of the Fund's Class A
shares over a longer period of time might be better than that of the Index.
Prior to May 31, 1994, the Blue Chip Fund paid KFS an investment management fee,
payable monthly, at the annual rate of .65% of average daily net assets of the
Fund. Prior to May 31, 1994, the Growth Fund and the Total Return Fund each paid
KFS an investment management fee, payable monthly, at the annual rate of .65% of
the first $200 million of average daily net assets, .55% of the next $300
million of average daily net assets and .45% of average daily net assets over
$500 million. Prior to May 31, 1994, the Technology Fund paid KFS an investment
management fee, payable monthly, at the annual rate of .60% of the first $200
million of average daily net assets, .50% of the next $300 million of average
daily net assets and .401% of average daily net assets over $500 million.
VALUE+GROWTH FUND SUB-ADVISER. Dreman Value Advisors, Inc. ("DVA"), 10 Exchange
Place, Jersey City, New Jersey 07302, is the sub-adviser for the value portion
of the Value+Growth Fund. DVA is a wholly owned subsidiary of KFS. DVA will act
as sub-adviser pursuant to the terms of a Sub-Advisory Agreement between it and
KFS.
Under the terms of the Sub-Advisory Agreement, DVA will manage the value portion
of the Value+Growth Fund's portfolio and will provide such investment advice,
research and assistance as KFS may, from time to time, reasonably request. DVA
may, under the terms of the Sub-Advisory Agreement, render similar services to
others including other investment companies. For its services, DVA will receive
from KFS a monthly fee at the annual rate of .25% of the Fund's average daily
net assets. DVA permits any of its officers or employees to serve without
compensation as trustees or officers of the Value+Growth Fund if elected to such
positions.
The Sub-Advisory Agreement provides that DVA will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
DVA in the performance of its duties or from reckless disregard by DVA of its
obligations and duties under the Sub-Advisory Agreement.
B-18
<PAGE> 72
The Sub-Advisory Agreement has an initial term ending March 1, 1997 and
continues by its terms from year to year if such continuance is specifically
approved at least annually (a) by a majority of the trustees who are not parties
to such agreement or interested persons of any such party except in their
capacity as trustees of the Fund, and (b) by the shareholders or the Board of
Trustees of the Fund. The Sub-Advisory Agreement may be terminated at any time
upon 60 days' notice by KFS, DVA or by the Board of Trustees of the Fund or by
majority vote of the outstanding shares of the Fund, and will terminate
automatically upon assignment or upon termination of the Fund's investment
management agreement.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), a wholly owned subsidiary of KFS, is the principal underwriter and
distributor for the shares of each Fund and acts as agent of each Fund in the
continuous offering of its shares. KDI bears all its expenses of providing
services pursuant to the distribution agreements, including the payment of any
commissions. Each Fund pays the cost for the prospectus and shareholder reports
to be set in type and printed for existing shareholders, and KDI, as principal
underwriter, pays for the printing and distribution of copies thereof used in
connection with the offering of shares to prospective investors. KDI also pays
for supplementary sales literature and advertising costs. Before February 1,
1995, KFS was the principal underwriter and distributor.
Each distribution agreement continues in effect from year to year so long as
such continuance is approved for each class at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to a
class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
Investment Company Act of 1940. The agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.
B-19
<PAGE> 73
CLASS A SHARES. The following information concerns the underwriting commissions
paid in connection with the distribution of each Fund's Class A shares for the
fiscal years noted (except for the Quantitative Fund, which will not commence
operations until February 15, 1996.
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS PAID TO KEMPER
COMMISSIONS RETAINED UNDERWRITER AFFILIATED
FUND FISCAL YEAR BY UNDERWRITER PAID TO ALL FIRMS FIRMS
- ----------------------------- ----------- -------------------- ----------------- --------------
<S> <C> <C> <C> <C>
Blue Chip.................... 1995 $ 33,000 225,000 29,000
1994 $ 64,000 398,000 68,000
1993 $ 130,000 1,022,000 214,000
Growth....................... 1995 $ 266,000 2,130,000 326,000
1994 $ 489,000 3,861,000 591,000
1993 $1,404,000 12,057,000 1,622,000
Small Cap.................... 1995 $ 105,000 798,000 133,000
1994 $ 182,000 1,264,000 243,000
1993 $ 224,000 4,669,000 1,148,000
Technology................... 1995 $ 116,000 840,000 218,000
1994 $ 43,000 218,000 38,000
1993 $ 65,000 250,000 37,000
Total Return................. 1995 $ 206,000 1,642,000 218,000
1994 $ 523,000 4,036,000 693,000
1993 $ 620,000 5,144,000 746,000
Value+Growth*................ 1995 $ 0 48,000 3,000
1994 $ N.A. N.A. N.A.
1993 $ N.A. N.A. N.A.
</TABLE>
- ---------------
* For the period October 16, 1995 to November 30, 1995.
CLASS B SHARES AND CLASS C SHARES. Since the distribution agreement provides for
fees charged to Class B and Class C shares that are used by KDI to pay for
distribution services (see the prospectus under "Investment Manager and
Underwriter"), the agreement (the "Plan") is approved and renewed separately for
the Class B and Class C shares in accordance with Rule 12b-1 under the
Investment Company Act of 1940, which regulates the manner in which an
investment company may, directly or indirectly, bear expenses of distributing
its shares. Expenses of the Funds and of KDI (and KFS as its predecessor until
February 1, 1995), in connection with the Rule 12b-1 Plans for the Class B and
Class C Shares are set forth below (except for the Quantitative Fund, which will
not commence operations until February 15, 1996). A portion of the marketing,
sales and operating expenses shown below could be considered overhead expense.
<TABLE>
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID
BY UNDERWRITER
DISTRIBUTION CONTINGENT TOTAL ----------------------------------
FEES PAID DEFERRED COMMISSIONS COMMISSIONS ADVERTISING MARKETING
FUND CLASS B FISCAL BY FUND TO SALES CHARGES PAID BY UNDERWRITER PAID BY UNDERWRITER AND PROSPECTUS AND SALES
SHARES YEAR UNDERWRITER TO UNDERWRITER TO FIRMS TO AFFILIATED FIRMS LITERATURE PRINTING EXPENSES
- --------------- ------ ----------- -------------- ------------------- ------------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Blue Chip...... 1995 $ 59,000 29,000 183,000 25,000 18,000 6,000 77,000
Growth......... 1995 $ 5,249,000 2,368,000 3,296,000 335,000 322,000 59,000 1,872,000
Small Cap...... 1995 $ 1,341,000 518,000 1,188,000 142,000 117,000 22,000 666,000
Technology..... 1995 $ 168,000 56,000 654,000 151,000 53,000 14,000 239,000
Total Return... 1995 $ 8,303,000 3,318,000 3,751,000 371,000 416,000 62,000 2,277,000
Value+
Growth*...... 1995 $ 1,000 0 75,000 2,000 2,000 0 9,000
<CAPTION>
MISC.
FUND CLASS B OPERATING INTEREST
SHARES EXPENSES EXPENSES
- --------------- --------- --------
<S> <C> <C>
Blue Chip...... 26,000 22,000
Growth......... 239,000 277,000
Small Cap...... 98,000 317,000
Technology..... 55,000 54,000
Total Return... 277,000 809,000
Value+
Growth*...... 3,000 1,000
</TABLE>
- ---------------
* For the period October 16, 1995 to November 30, 1995.
B-20
<PAGE> 74
<TABLE>
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY
TOTAL DISTRIBUTION UNDERWRITER
DISTRIBUTION DISTRIBUTION FEES PAID --------------------------------------
FEES PAID FEES PAID BY UNDERWRITER ADVERTISING MARKETING
FUND CLASS C BY FUND BY UNDERWRITER TO AFFILIATED AND PROSPECTUS AND SALES
SHARES FISCAL YEAR TO UNDERWRITER TO FIRMS FIRMS LITERATURE PRINTING EXPENSES
- ------------------ ----------- -------------- -------------- -------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Blue Chip......... 1995 $ 5,000 5,000 0 3,000 1,000 13,000
Growth............ 1995 $ 23,000 22,000 6,000 12,000 2,000 70,000
Small Cap......... 1995 $ 13,000 13,000 4,000 6,000 1,000 36,000
Technology........ 1995 $ 5,000 4,000 1,000 4,000 1,000 19,000
Total Return...... 1995 $ 26,000 25,000 5,000 13,000 2,000 72,000
Value+Growth...... 1995 $ 0 0 0 1,000 0 1,000
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY
UNDERWRITER
--------------------------------------
MISC.
FUND CLASS C OPERATING INTEREST
SHARES EXPENSES EXPENSES
- ------------------ --------- --------
<S> <C> <C>
Blue Chip......... 8,000 2,000
Growth............ 15,000 7,000
Small Cap......... 14,000 4,000
Technology........ 10,000 2,000
Total Return...... 15,000 9,000
Value+Growth...... 1,000 0
</TABLE>
ADMINISTRATIVE SERVICES. Administrative services are provided to each Fund under
an administrative services agreement ("administrative agreement") with KDI. KDI
bears all its expenses of providing services pursuant to the administrative
agreement between KDI and each Fund, including the payment of service fees. Each
Fund pays KDI an administrative services fee, payable monthly, at an annual rate
of up to .25% of average daily net assets of Class A, B and C shares of each
Fund. Before February 1, 1995, KFS was the administrator.
KDI has entered into related arrangements with various financial services firms,
such as broker-dealers or banks ("firms"), that provide services and facilities
for their customers or clients who are shareholders of a Fund. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other services as may be agreed upon from
time to time and permitted by applicable statute, rule or regulation. KDI pays
each firm a service fee, payable quarterly, at an annual rate of up to .25% of
the net assets in Fund accounts that it maintains and services attributable to
Class A, Class B and Class C shares, respectively, in each case commencing with
the month after investment (month of investment for Class C shares); provided,
however, KDI may advance the first year service fee as described in the
prospectus under "Investment Manager and Underwriter." Firms to which service
fees may be paid include broker-dealers affiliated with KDI.
B-21
<PAGE> 75
The following information concerns the administrative services fee paid by each
Fund (except for the Quantitative Fund, which will not commence operations until
February 15, 1996.
<TABLE>
<CAPTION>
ADMINISTRATIVE SERVICE FEES
PAID BY FUND SERVICE FEES SERVICE FEES
---------------------------------- PAID BY ADMINISTRATOR PAID BY ADMINISTRATOR
FUND FISCAL YEAR CLASS A CLASS B CLASS C TO FIRMS TO AFFILIATED FIRMS
- ------------------- ----------- ---------- --------- ------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Blue Chip.......... 1995 $ 361,000 19,000 2,000 386,000 69,000
1994* $ 407,000 2,000 -- 413,000 92,000
1993 $ 476,000 N.A. N.A. 476,000 129,000
Growth............. 1995 $3,633,000 1,721,000 8,000 5,301,000 693,000
1994* $3,628,000 553,000 1,000 4,347,000 618,000
1993 $3,740,000 N.A. N.A. 3,740,000 627,000
Small Cap.......... 1995 $1,141,000 442,000 4,000 1,579,000 334,000
1994* $1,066,000 124,000 -- 1,212,000 321,000
1993 $ 935,000 N.A. N.A. 935,000 292,000
Technology......... 1995 $1,187,000 56,000 2,000 1,269,000 116,000
1994* $ 873,000 1,000 -- 885,000 83,000
1993 $ 820,000 N.A. N.A. 820,000 81,000
Total Return....... 1995 $4,047,000 2,710,000 9,000 6,685,000 1,010,000
1994* $3,635,000 1,212,000 1,000 5,063,000 959,000
1993 $3,159,000 N.A. N.A. 3,159,000 869,000
Value+Growth**..... 1995 $ 0 0 0 5,000 0
1994 $ N.A. N.A. N.A. N.A. N.A.
1993 $ N.A. N.A. N.A. N.A. N.A.
</TABLE>
- ---------------
* Class B and Class C shares were first offered on May 31, 1994.
** For the period October 16, 1995 to November 30, 1995.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fee that it receives
from a Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of a Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record. The Board of Trustees of a Fund,
in its discretion, may approve basing the fee to KDI on all Fund assets in the
future.
Certain trustees or officers of a Fund are also directors or officers of KFS or
KDI as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as
custodian and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of each Fund maintained in the United States. The Chase Manhattan Bank, N.A.,
Chase MetroTech Center, Brooklyn, New York 11245, as custodian, has custody of
all securities and cash of each Fund held outside of the United States. They
attend to the collection of principal and income, and payment for and collection
of proceeds of securities bought and sold by each Fund. IFTC is also each Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of KFS, serves as
"Shareholder Service Agent." IFTC receives 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
B-22
<PAGE> 76
1995 fiscal year (except Quantitative Fund), the shareholder service fees IFTC
remitted to KSvC. As noted previously, the Quantitative Fund will not commence
operations until February 15, 1996.
<TABLE>
<CAPTION>
FEES IFTC
FUND PAID TO KSVC
------------
<S> <C>
Blue Chip........................................................................... $ 557,000
Growth.............................................................................. $ 7,474,000
Small Cap........................................................................... $ 2,512,000
Technology.......................................................................... $ 724,000
Total Return........................................................................ $ 7,970,000
Value+Growth*....................................................................... $ 0
</TABLE>
- ---------------
* For the period October 16, 1995 to November 30, 1995.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Funds' independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Funds' annual financial statements, review certain
regulatory reports and the Funds' federal income tax returns, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
PURCHASE AND REDEMPTION OF SHARES
As described in the Funds' prospectus, shares of a Fund are sold at their public
offering price, which is the net asset value per share of the Fund next
determined after an order is received in proper form plus, with respect to Class
A shares, an initial sales charge. The minimum initial investment is $1,000 and
the minimum subsequent investment is $100 but such minimum amounts may be
changed at any time. See the prospectus for certain exceptions to these
minimums. An order for the purchase of shares that is accompanied by a check
drawn on a foreign bank (other than a check drawn on a Canadian bank in U.S.
Dollars) will not be considered in proper form and will not be processed unless
and until the Fund determines that it has received payment of the proceeds of
the check. The time required for such a determination will vary and cannot be
determined in advance.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by the Fund at the applicable net asset value
per share of such Fund as described in the Funds' prospectus. The redemption
within one year of Class A shares purchased at net asset value under the Large
Order NAV Purchase Privilege described in the prospectus may be subject to a 1%
contingent deferred sales charge (see "Purchase of Shares" in the prospectus).
Redemption of Class B shares may be subject to a contingent deferred sales
charge. When a Fund is asked to redeem shares for which it may not yet have
received good payment, it may delay the mailing of a redemption check until it
has determined that collected funds have been received for the purchase of such
shares, which will be up to 15 days.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B shares by certain classes of persons or through certain
types of transactions as described in the prospectus is provided because of
anticipated economies in sales and sales related efforts.
A Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
a Fund's shareholders.
B-23
<PAGE> 77
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. Each Fund normally distributes dividends of net investment income as
follows: annually for the Growth, Quantitative, Small Cap, Technology and
Value+Growth Funds; semi-annually for the Blue Chip Fund; and quarterly for the
Total Return Fund. Each Fund distributes any net realized short-term and
long-term capital gains at least annually. The quarterly distribution to
shareholders of the Total Return Fund may include short-term capital gains.
A Fund may at any time vary its foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and long-
term capital gains as the Board of Trustees of the Fund determines appropriate
under the then current circumstances. In particular, and without limiting the
foregoing, a Fund may make additional distributions of net investment income or
capital gain net income in order to satisfy the minimum distribution
requirements contained in the Internal Revenue Code (the "Code"). Dividends will
be reinvested in shares of the Fund paying such dividends unless shareholders
indicate in writing that they wish to receive them in cash or in shares of other
Kemper Funds as described in the prospectus.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
TAXES. Each Fund intends to continue to qualify (or, for the Quantitative Fund,
intends to qualify) as a regulated investment company under Subchapter M of the
Code and, if so qualified, will not be liable for federal income taxes to the
extent its earnings are distributed. One of the Subchapter M requirements to be
satisfied is that less than 30% of a Fund's gross income during its fiscal year
must be derived from gains (not reduced by losses) from the sale or other
disposition of securities and certain other investments held for less than three
months. A Fund may be limited in its options, futures and foreign currency
transactions in order to prevent recognition of such gains.
A Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Fund's securities.
The mark-to-market rules of the Code may require a Fund to recognize unrealized
gains and losses on certain options and futures held by the Fund at the end of
the fiscal year. Under these provisions, 60% of any capital gain net income or
loss recognized will generally be treated as long-term and 40% as short-term.
However, although certain forward contracts and futures contracts on foreign
currency are marked-to-market, the gain or loss is generally ordinary under
Section 988 of the Code. In addition, the straddle rules of the Code would
require deferral of certain losses realized on positions of a straddle to the
extent that the Fund had unrealized gains in offsetting positions at year end.
Gains and losses attributable to fluctuations in the value of foreign currencies
will be characterized generally as ordinary gain or loss under Section 988 of
the Code. For example, if a Fund sold a foreign bond and part of the
B-24
<PAGE> 78
gain or loss on the sale was attributable to an increase or decrease in the
value of a foreign currency, then the currency gain or loss may be treated as
ordinary income or loss. If such transactions result in greater net ordinary
income, the dividends paid by the Fund will be increased; if the result of such
transactions is lower net ordinary income, a portion of dividends paid could be
classified as a return of capital.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of a Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 of the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. Each Fund intends to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax.
A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of a Fund or other Kemper Mutual Fund listed in the
prospectus under "Special Features--Class A Shares--Combined Purchases" (other
than shares of Kemper Cash Reserves Fund not acquired by exchange from another
Kemper Mutual Fund) may reinvest the amount redeemed at net asset value at the
time of the reinvestment in shares of any Fund or in shares of a Kemper Mutual
Fund within six months of the redemption as described in the prospectus under
"Redemption or Repurchase of Shares-- Reinvestment Privilege." If a shareholder
realized a loss on the redemption or exchange of a Fund's shares and reinvests
in shares of the same Fund 30 days before or after the redemption or exchange,
the transactions may be subject to the wash sale rules resulting in a
postponement of the recognition of such loss for federal income tax purposes. An
exchange of a Fund's shares for shares of another fund is treated as a
redemption and reinvestment for federal income tax purposes upon which gain or
loss may be recognized.
A Fund's investment income derived from foreign securities may be subject to
foreign income taxes withheld at the source. Because the amount of a Fund's
investments in various countries will change from time to time, it is not
possible to determine the effective rate of such taxes in advance.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, each Fund's historical performance or return for
a class of shares may be shown in the form of "average annual total return" and
"total return" figures. These various measures of performance are described
below. Performance information will be computed separately for each class.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value in the case of Class B shares includes the effect of the applicable
contingent deferred sales charge that may be imposed at the end of the period.
The redeemable value is then divided by the initial investment, and this
quotient is taken to the Nth root (N representing the number of years in the
period) and 1 is subtracted from the
B-25
<PAGE> 79
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 shares may or may not include the effect
of the applicable contingent deferred sales charge that may be imposed at the
end of the period. The calculation assumes that all income and capital gains
dividends paid by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B shares would be
reduced if such charge were included. Total return figures for Class A shares
for various periods are set forth in the tables below.
A Fund's performance figures are based upon historical results and are not
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. Returns and net asset value will fluctuate.
Factors affecting each Fund's performance include general market conditions,
operating expenses and investment management. Any additional fees charged by a
dealer or other financial services firm would reduce the returns described in
this section. Shares of each Fund are redeemable at the then current net asset
value, which may be more or less than original cost.
The figures below show performance information for various periods. Comparative
information for certain indices is also included. Please note the differences
and similarities between the investments which a Fund may purchase and the
investments measured by the applicable indices. The net asset values and returns
of each class of shares of the Funds will also fluctuate. No adjustment has been
made for taxes payable on dividends. The periods indicated were ones of
fluctuating securities prices and interest rates. As indicated previously, the
Quantitative Fund will not commence operations until February 15, 1996.
B-26
<PAGE> 80
BLUE CHIP FUND -- OCTOBER 31, 1995
<TABLE>
<CAPTION>
Initial Income Ending Percentage
TOTAL $10,000 Capital Gain Dividends Ending Percentage Value Increase Dow Jones
RETURN Investment Dividends Reinvested Value Increase (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (adjusted)(1) (adjusted)(1) (1) (1) Average(3)
- -------------------- ---------- ------------ ---------- ------------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 15,570 $1,334 $3,516 $20,420 104.2% $ 21,668 116.7% 237.5%
Five Years 14,521 1,169 2,211 17,901 79.0 18,996 90.0 125.6
One Year 11,368 19 183 11,570 15.7 12,274 22.7 24.9
Year to Date 11,764 0 60 11,824 18.2 12,549 25.5 26.4
CLASS B SHARES
Life of Fund(++) $ 12,049 $ 20 $ 158 $11,927 19.3% $ 12,227 22.3% 31.7%
One Year 12,059 20 97 11,876 18.8 12,176 21.8 24.9
Year to Date 12,443 0 23 12,066 20.7 12,466 24.7 26.4
CLASS C SHARES
Life of Fund(++) $ 12,098 $ 20 $ 168 $ NA NA% $ 12,286 22.9% 31.7%
One Year 12,078 20 106 NA NA 12,204 22.0 24.9
Year to Date 12,462 0 26 NA NA 12,488 24.9 26.4
<CAPTION>
Russell Lipper U.S.
TOTAL Standard Consumer 1000(R) Growth Treasury
RETURN & Poor's Price Growth and Income Bill
TABLE 500(4) Index(5) Index(6) Fund(7) Index(8)
- -------------------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 224.5% 33.2% 238.5% 189.2% 56.0%
Five Years 121.3 15.1 127.2 115.0 25.5
One Year 26.4 2.8 29.2 20.0 5.9
Year to Date 29.0 2.7 31.3 23.7 2.7
Life of Fund(++) 32.7% 4.2% 38.3% 23.8% 8.3%
One Year 26.4 2.8 29.2 20.0 5.9
Year to Date 29.0 2.7 31.3 23.7 2.7
Life of Fund(++) 32.7% 4.2% 38.3% 23.8% 8.3%
One Year 26.4 2.8 29.2 20.0 5.9
Year to Date 29.0 2.7 31.3 23.7 2.7
</TABLE>
<TABLE>
<CAPTION>
Lipper
Russell Growth U.S.
AVERAGE ANNUAL Fund Fund Fund Dow Jones Standard Consumer 1000(R) and Treasury
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Income Bill
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(7) Index(8)
----------------- ------- ------- ------- --------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 9.4% NA% NA% 16.6% 16.0% 3.7% 16.7% 14.4% 5.8%
Life of Fund(++) NA 13.2 15.6 21.4 22.0 2.9 25.7 16.3 5.8
Five Years 12.4 NA NA 17.7 17.2 2.9 17.8 16.6 4.7
One Year 15.7 18.8 22.0 24.9 26.4 2.8 29.2 20.0 5.9
</TABLE>
- ---------------
(+) Since November 23, 1987 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
B-27
<PAGE> 81
GROWTH FUND -- SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending Percentage
TOTAL $10,000 Gain Dividends Value Increase Value Increase Dow Jones
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (1) (1) (1) (1) Average(3)
- ----------------- ---------- ---------- ---------- ---------- ---------- ------------ ------------ ---------
CLASS A SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) $ 30,037 $ 194,881 $ 92,487 $ 317,405 3,074.1% $336,927 3,269.3% 1,695.1%
Fifteen Years 12,287 36,937 16,852 66,076 560.8 70,095 601.0 835.9
Ten Years 12,323 18,148 8,265 38,736 287.4 41,000 311.0 402.6
Five Years 16,828 2,803 965 20,596 106.0 21,854 118.5 126.2
One Year 11,713 168 0 11,881 18.8 12,607 26.1 27.9
Year to Date 11,948 0 0 11,948 19.5 12,674 26.7 27.3
CLASS B SHARES
Life of Fund(++) $ 12,099 $ 175 $ 0 $ 11,974 19.7% $ 12,274 22.7% 32.7%
One Year 12,306 177 0 12,183 21.8 12,483 24.8 27.9
Year to Date 12,569 0 0 12,169 21.7 12,569 25.7 27.3
CLASS C SHARES
Life of Fund(++) $ 12,124 $ 175 $ 0 $ NA NA% $ 12,299 23.0% 32.7%
One Year 12,321 178 0 NA NA 12,499 25.0 27.9
Year to Date 12,585 0 0 NA NA 12,585 25.9 27.3
<CAPTION>
Russell U.S.
TOTAL Standard Consumer 1000(R) Lipper Treasury
RETURN & Poor's Price Growth Growth Bill
TABLE 500(4) Index(5) Index(6) Fund(9) Index(8)
- ----------------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 1,926.7 % 377.3% NA% 1,787.7% 627.5%
Fifteen Years 714.2 82.4 583.5 567.4 194.1
Ten Years 340.2 41.5 348.7 295.7 76.4
Five Years 120.9 15.5 128.0 127.0 25.5
One Year 29.6 2.5 32.2 28.0 5.9
Year to Date 29.7 2.3 31.2 29.5 2.7
Life of Fund(++) 33.4 % 3.9% 38.2% 29.7% 8.3%
One Year 29.6 2.5 32.2 28.0 5.9
Year to Date 29.7 2.3 31.2 29.5 2.7
Life of Fund(++) 33.4 % 3.9% 38.2% 29.7% 8.3%
One Year 29.6 2.5 32.2 28.0 5.9
Year to Date 29.7 2.3 31.2 29.5 2.7
</TABLE>
<TABLE>
<CAPTION>
Dow Russell
AVERAGE ANNUAL Fund Fund Fund Jones Standard Consumer 1000(R) Lipper
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Growth
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(9)
---------------- ------- ------- ------- ---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 12.4% NA% NA% 10.3% 10.7% 5.4% NA% 10.5%
Life of
Fund(++) NA 14.4 16.7 23.5 24.0 2.9 27.4 21.6
Fifteen Years 13.4 NA NA 16.1 15.0 4.1 13.7 13.5
Ten Years 14.5 NA NA 17.5 16.0 3.5 16.2 14.8
Five Years 15.6 NA NA 17.7 17.2 2.9 17.9 17.8
One Year 18.8 21.8 25.0 27.9 29.6 2.5 32.2 28.0
<CAPTION>
U.S.
AVERAGE ANNUAL Treasury
TOTAL RETURN Bill
TABLE Index(8)
---------------- --------
<S> <C>
Life of Fund(+) 7.0%
Life of
Fund(++) 6.1
Fifteen Years 7.5
Ten Years 5.8
Five Years 4.7
One Year 5.9
</TABLE>
- ---------------
(+) Since April 4, 1966 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
B-28
<PAGE> 82
SMALL CAP FUND -- SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase Dow Jones
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (1) (1) (1) (1) Average(3)
- ---------------------------- ------------ ---------- ---------- ---------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 33,679 $149,628 $ 50,129 $233,436 2,234.4% $247,442 2,374.4% 1,561.9%
Fifteen Years 17,850 43,600 12,425 73,875 638.8 78,423 684.2 835.9
Ten Years 13,653 21,621 5,072 40,346 303.5 42,818 328.2 402.6
Five Years 17,762 7,486 1,045 26,293 162.9 27,888 178.9 126.2
One Year 11,590 754 0 12,344 23.4 13,088 30.9 27.9
Year to Date 12,417 0 0 12,417 24.2 13,173 31.7 27.3
CLASS B SHARES
Life of Fund(++) $ 12,443 $ 815 $ 0 $ 12,958 29.6% $ 13,258 32.6% 32.7%
One Year 12,162 797 0 12,659 26.6 12,959 29.6 27.9
Year to Date 13,067 0 0 12,667 26.7 13,067 30.7 27.3
CLASS C SHARES
Life of Fund(++) $ 12,424 $ 816 $ 0 $ NA NA% $ 13,240 32.4% 32.7%
One Year 12,166 799 0 NA NA 12,965 29.7 27.9
Year to Date 13,073 0 0 NA NA 13,073 30.7 27.3
<CAPTION>
Russell
TOTAL Standard Consumer Wilshire 1000(R)
RETURN & Poor's Price Mid Cap Growth
TABLE 500(4) Index(5) Growth(10) Index(6)
- ------------------ -------- -------- ---------- --------
<S> <C> <C> <C> <C>
Life of Fund(+) 1,586.0 % 327.9% NA% NA%
Fifteen Years 714.2 82.4 699.1 583.5
Ten Years 340.2 41.5 304.2 348.7
Five Years 120.9 15.5 184.6 128.0
One Year 29.6 2.5 34.6 32.2
Year to Date 29.7 2.3 38.6 31.2
Life of Fund(++) 33.4 % 3.9% 40.0% 38.2%
One Year 29.6 2.5 34.6 32.2
Year to Date 29.7 2.3 38.6 31.2
Life of Fund(++) 33.4 % 3.9% 40.0% 38.2%
One Year 29.6 2.5 34.6 32.2
Year to Date 29.7 2.3 38.6 31.2
</TABLE>
<TABLE>
<CAPTION>
Dow Russell
AVERAGE ANNUAL Fund Fund Fund Jones Standard Consumer Wilshire 1000(R)
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Mid Cap Growth
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Growth(10) Index(6)
- ------------------------------ ------- ------- ---------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 12.6% NA% NA% 11.1% 11.2% 5.6% NA% NA%
Life of Fund(++) NA 21.3 23.3 23.5 24.0 2.9 26.8 27.4
Fifteen Years 14.3 NA NA 16.1 15.0 4.1 14.8 13.7
Ten Years 15.0 NA NA 17.5 16.0 3.5 14.9 16.2
Five Years 21.3 NA NA 17.7 17.2 2.9 22.8 17.9
One Year 23.4 26.6 29.7 27.9 29.6 2.5 31.6 32.2
</TABLE>
- ---------------
(+) Since February 20, 1969 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
B-29
<PAGE> 83
TECHNOLOGY FUND -- OCTOBER 31, 1995
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1) (1)
- ----------------- ---------- ------------ ---------- ---------- ---------- ------------ ------------
CLASS A SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) $ 61,730 $ 2,864,501 $ 517,422 $3,443,653 34,336.5% $ 3,651,657 36,416.6%
Twenty-five Years 21,610 170,905 28,095 220,610 2,106.1 234,095 2,241.0
Fifteen Years 10,302 49,566 6,109 65,977 559.8 70,021 600.2
Ten Years 12,042 29,749 2,810 44,601 346.0 47,327 373.3
Five Years 14,719 11,890 410 27,019 170.2 28,662 186.6
One Year 11,992 1,893 0 13,885 38.9 14,730 47.3
Year to Date 14,081 0 0 14,081 40.8 14,944 49.4
CLASS B SHARES
Life of Fund(++) $ 14,404 $ 2,289 $ 0 $ 16,393 63.9% $ 16,693 66.9%
One Year 12,568 1,997 0 14,265 42.7 14,565 45.7
Year to Date 14,805 0 0 14,405 44.1 14,805 48.1
CLASS C SHARES
Life of Fund(++) $ 14,464 $ 2,296 $ 0 $ NA NA% $ 16,760 67.6%
One Year 12,620 2,003 0 NA NA 14,623 46.2
Year to Date 14,851 0 0 NA NA 14,851 48.5
<CAPTION>
Russell
TOTAL Dow Jones Standard Consumer 1000(R)
RETURN Industrial & Poor's Price Growth
TABLE Average(3) 500(4) Index(5) Index(6)
- ----------------- ---------- -------- -------- --------
CLASS A SHARES
<S> <C> <C> <C> <C>
Life of Fund(+) 20,647.5% 24,835.4% 527.3% NA%
Twenty-five Years 1,741.9 1,758.9 290.1 NA
Fifteen Years 837.3 697.4 81.2 561.6
Ten Years 382.5 320.2 41.4 330.4
Five Years 125.6 121.3 15.1 127.2
One Year 24.9 26.4 2.8 29.2
Year to Date 26.4 29.0 2.7 31.3
CLASS B SHARES
Life of Fund(++) 31.7% 32.7% 4.2% 38.3%
One Year 24.9 26.4 2.8 29.2
Year to Date 26.4 29.0 2.7 31.3
CLASS C SHARES
Life of Fund(++) 31.7% 32.7% 4.2% 38.3%
One Year 24.9 26.4 2.8 29.2
Year to Date 26.4 29.0 2.7 31.3
</TABLE>
<TABLE>
<CAPTION>
Russell
AVERAGE ANNUAL Fund Fund Fund Dow Jones Standard Consumer 1000(R)
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6)
- ----------------- ------- ------- ------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 13.2% NA% NA% 12.0% 12.4% 4.0% NA%
Life of Fund(++) NA 41.6 43.9 21.4 22.0 2.9 25.7
Twenty-five Years 13.2 NA NA 12.4 12.4 5.6 NA
Fifteen Years 13.4 NA NA 16.1 14.8 4.0 13.4
Ten Years 16.1 NA NA 17.0 15.4 3.5 15.7
Five Years 22.0 NA NA 17.7 17.2 2.9 17.8
One Year 38.9 42.7 46.2 24.9 26.4 2.8 29.2
</TABLE>
- ---------------
(+) Since September 7, 1948 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
B-30
<PAGE> 84
TOTAL RETURN FUND -- OCTOBER 31, 1995
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending Percentage Dow
TOTAL $10,000 Gain Dividends Value Increase Value Increase Jones
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (1) (1) (1) (1) Average(3)
- --------------------- -------- --------- --------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 25,119 $ 110,176 $ 178,506 $ 313,801 3,038.0% $ 333,142 3,231.4% 2,122.4%
Twenty-five Years 25,238 69,342 111,389 205,969 1,959.7 218,452 2,084.5 1,741.9
Fifteen Years 14,930 15,259 22,901 53,090 430.9 56,343 463.4 837.3
Ten Years 13,730 6,308 8,632 28,670 186.7 30,403 204.0 382.5
Five Years 12,848 2,384 2,746 17,978 79.8 19,064 90.6 125.6
One Year 10,973 0 281 11,254 12.5 11,946 19.5 24.9
Year to Date 11,325 0 211 11,536 15.4 12,242 22.4 26.4
CLASS B SHARES
Life of Fund(++) $ 11,461 $ 0 $ 256 $ 11,417 14.2% $ 11,717 17.2% 31.7%
One Year 11,650 0 192 11,542 15.4 11,842 18.4 24.9
Year to Date 12,007 0 142 11,749 17.5 12,149 21.5 26.4
CLASS C SHARES
Life of Fund(++) $ 11,483 $ 0 $ 268 $ NA NA% $ 11,751 17.5% 31.7%
One Year 11,673 0 203 NA NA 11,876 18.8 24.9
Year to Date 12,029 0 153 NA NA 12,182 21.8 26.4
<CAPTION>
Standard Russell
TOTAL & Consumer 1000(R) Lipper Lehman Bros.
RETURN Poor's Price Growth Balanced Gov't/Corp.
TABLE 500(4) Index(5) Index(6) Fund(11) Index(12)
- --------------------- ------- ----- ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 2,376.1% 397.4% NA% NA% NA%
Twenty-five Years 1,758.9 290.1 NA 1,333.0 NA
Fifteen Years 697.4 81.2 561.6 565.3 436.9
Ten Years 320.2 41.4 330.4 217.5 160.6
Five Years 121.3 15.1 127.2 87.8 62.8
One Year 26.4 2.8 29.2 17.4 16.6
Year to Date 29.0 2.7 31.3 19.3 16.1
Life of Fund(++) 32.7% 4.2% 38.3% 19.0% 16.8%
One Year 26.4 2.8 29.2 17.4 16.6
Year to Date 29.0 2.7 31.3 19.3 16.1
Life of Fund(++) 32.7% 4.2% 38.3% 19.0 16.8%
One Year 26.4 2.8 29.2 17.4 16.6
Year to Date 29.0 2.7 31.3 19.3 16.1
</TABLE>
<TABLE>
<CAPTION>
AVERAGE Russell
ANNUAL Fund Fund Fund Dow Jones Standard Consumer 1000(R) Lipper
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Balanced
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(11)
- ------------------ ------- ------- ------- --------- -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 11.5% NA% NA% 10.3% 10.7% 5.2% NA% NA%
Life of Fund(++) NA 9.8 12.0 21.4 22.0 2.9 25.7 13.1
Twenty-five Years 12.9 NA NA 12.4 12.4 5.6 NA 11.2
Fifteen Years 11.8 NA NA 16.1 14.8 4.0 13.4 13.5
Ten Years 11.1 NA NA 17.0 15.4 3.5 15.7 12.3
Five Years 12.5 NA NA 17.7 17.2 2.9 17.8 13.4
One Year 12.5 15.4 18.8 24.9 26.4 2.8 29.2 17.4
<CAPTION>
AVERAGE
ANNUAL Lehman Bros.
TOTAL RETURN Gov't/Corp.
TABLE Index(12)
- ------------------ ------------
<S> <C>
Life of Fund(+) NA%
Life of Fund(++) 11.6
Twenty-five Years NA
Fifteen Years 11.9
Ten Years 10.1
Five Years 10.2
One Year 16.6
</TABLE>
- ---------------
(+) Since March 2, 1964 for Class A shares.
(++) Since May 31, 1994 for Class B and Class C shares.
NA--Not Available.
B-31
<PAGE> 85
VALUE+GROWTH FUND -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
Initial Capital Income Ending Percentage Ending Percentage
TOTAL $10,000 Gain Dividends Value Increase Value Increase Dow Jones
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (1) (1) (1) (1) Average(3)
- ----------------- ---------- ---------- ---------- ---------- ---------- ------------ ------------ ---------
CLASS A SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) $ 9,940 $0 $0 $ 9,940 (.6)% $ 10,547 5.5% 6.0%
CLASS B SHARES
Life of Fund(+) $ 10,547 $0 $0 $ 10,147 1.5% $ 10,547 5.5% 6.0%
CLASS C SHARES
Life of Fund(+) $ 10,537 $0 $0 $ NA NA% $ 10,537 5.4% 6.0%
<CAPTION>
Russell U.S.
TOTAL Standard Consumer 1000(R) Lipper Treasury
RETURN & Poor's Price Growth Growth Bill
TABLE 500(4) Index(5) Index(6) Fund(9) Index(8)
- ----------------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Life of Fund(+) 3.4% 0.3% 3.9% 3.0% 0.0%
Life of Fund(+) 3.4% 0.3% 3.9% 3.0% 0.0%
Life of Fund(+) 3.4% 0.3% 3.9% 3.0% 0.0%
</TABLE>
<TABLE>
<CAPTION>
Dow Russell U.S.
AVERAGE ANNUAL Fund Fund Fund Jones Standard Consumer 1000(R) Lipper Treasury
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price Growth Growth Bill
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Index(6) Fund(9) Index(8)
- ---------------- ------- ------- ------- ---------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) --% --% --% 56.1% 31.1% 2.0% NA% NA% 0.0%
</TABLE>
- ---------------
(+) Since October 16, 1995 for Class A, B and C shares. Average annual total
return not shown for Class A, B and C shares.
NA--Not Available.
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were adjusted
for the maximum initial sales charge at the beginning of the period, which is
5.75%. The Initial Investment for Class B and Class C shares was not adjusted.
Amounts were adjusted for Class B shares for the contingent deferred sales
charge that may be imposed at the end of the period based upon the schedule for
shares sold currently, see "Redemption or Repurchase of Shares" in the
prospectus. No adjustments were made to Class C shares since they do not have an
initial or contingent deferred sales charge.
(2) Includes short-term capital gain dividends, if any.
(3) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange. Assumes
reinvestment of dividends. Source is Towers Data Systems.
(4) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange. Assumes
reinvestment of dividends. Source is Towers Data Systems.
(5) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(6) The Russell 1000(R) Growth Index is an unmanaged index comprised of common
stocks of larger U.S. companies with greater than average growth orientation and
represents the universe of stocks from which "earnings/growth" money managers
typically select. Assumes reinvestment of dividends. Source is Lipper Analytical
Services, Inc.
(7) The Lipper Growth and Income Fund Index is a net asset value weighted index
of the performance of certain mutual funds tracked by Lipper Analytical
Services, Inc. The largest mutual funds within the Lipper "growth and income
investment" objective category are included in the index. Performance is based
on changes in net asset value with all dividends reinvested and with no
adjustment for sales charges.
(8) The U.S. Treasury Bill Index is an unmanaged index based on the average
monthly yield of Treasury Bills maturing in 6 months. Source is Towers Data
Systems.
(9) The Lipper Growth Fund Index is a net asset value weighted index of the
performance of certain mutual funds tracked by Lipper Analytical Services, Inc.
The largest mutual funds within the Lipper "growth investment" objective
category are included in the index. Performance is based on changes in net asset
value with all dividends reinvested and with no adjustment for sales changes.
(10) The Wilshire Mid Cap Growth Index is a market capitalization-weighted index
including domestic equity securities chosen from the Wilshire Mid-Cap 750 which
exhibit growth characteristics. Assumes reinvestment of dividends. Source is
Wilshire Associates Incorporated.
(11) The Lipper Balanced Fund Index is a net asset value weighted index of the
performance of certain mutual funds tracked by Lipper Analytical Services, Inc.,
New York, New York. The largest mutual funds within the Lipper "balanced
investment" objective category are included in the index. Performance is based
on changes in net asset value with all dividends reinvested and with no
adjustment for sales charges.
(12) The Lehman Brothers Government/Corporate Bond Index is on a total return
basis and is comprised of all publicly issued, non-convertible, domestic debt of
the U.S. Government or any agency thereof, quasi-federal corporation, or
corporate debt guaranteed by the U.S. Government and all publicly issued,
fixed-rate, non-convertible, domestic debt of the three major corporate
classifications: industrial, utility, and financial. Only notes and bonds with a
minimum outstanding principal amount of $1,000,000 and a minimum of one year to
maturity are included. Bonds included must have a rating of at least Baa by
Moody's Investors Service, Inc., BBB by Standard & Poor's Corporation or in the
case of bank bonds not rated by either Moody's or S&P, BBB by Fitch Investors
Service. This index is unmanaged. Source is Towers Data Systems.
B-32
<PAGE> 86
Investors may want to compare the performance of a Fund to certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of deposits prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution.
Information regarding bank products may be based upon, among other things, the
BANK RATE MONITOR National IndexTM for certificates of deposit, which is an
unmanaged index and is based on stated rates and the annual effective yields of
certificates of deposit in the ten largest banking markets in the United States,
or the CDA Investment Technologies, Inc. Certificate of Deposit Index, which is
an unmanaged index based on the average monthly yields of certificates of
deposit.
Investors also may want to compare the performance of a Fund to that of U.S.
Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on the average monthly yield of
treasury bills maturing in six months. Due to their short maturities, Treasury
bills generally experience very low market value volatility.
Investors may want to compare the performance of a Fund, such as the Total
Return Fund, to the performance of a hypothetical portfolio weighted 60% in the
Standard & Poor's 500 Stock Index (an unmanaged index generally representative
of the U.S. stock market) and 40% in the Lehman Brothers Government/Corporate
Bond Index (an unmanaged index generally representative of intermediate and
long-term government and investment grade corporate debt securities). See the
footnotes above for a more complete description of these indexes. The Total
Return Fund may invest in both equity and fixed income securities. The
percentage of assets invested in each type of security will vary from time to
time in the discretion of the Fund's investment manager and will not necessarily
approximate the 60%/40% weighting of this hypothetical index.
Investors may want to compare the performance of a Fund to that of money market
funds. Money market funds seek to maintain a stable net asset value and yield
fluctuates. Information regarding the performance of money market funds may be
based upon, among other things, IBC/Donoghue's Money Fund Averages(R) (All
Taxable). As reported by IBC/Donoghue's, all investment results represent total
return (annualized results for the period net of management fees and expenses)
and one year investment results are effective annual yields assuming
reinvestment of dividends.
B-33
<PAGE> 87
The following tables illustrate an assumed $10,000 investment in Class A shares
of each Fund (except the Quantitative Fund), which includes the current maximum
sales charge of 5.75%, with income and capital gain dividends reinvested in
additional shares. Each table covers the period from commencement of operations
of the Fund to December 31, 1995.
BLUE CHIP FUND (11/23/87)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL REINVESTED CAPITAL
ENDED DIVIDENDS GAIN DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1987 $ 0 $ 0 $ 9,519 $ 0 $ 0 $ 9,519
1988 339 0 8,545 342 0 8,887
1989 220 0 10,650 659 0 11,309
1990 134 0 10,776 806 0 11,582
1991 531 712 14,284 1,657 786 16,727
1992 185 0 13,949 1,810 768 16,527
1993 897 374 13,392 2,647 1,118 17,157
1994 269 27 12,472 2,733 1,068 16,273
1995 1,201 714 14,932 4,497 2,006 21,435
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
GROWTH FUND (4/4/66)
<TABLE>
<CAPTION>
CUMULATIVE VALUE OF SHARES ACQUIRED
DIVIDENDS ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1966 $ 0 $ 0 $ 8,920 $ 0 $ 0 $ 8,916
1967 75 954 13,165 77 984 14,220
1968 121 1,278 15,103 211 2,371 17,684
1969 242 836 12,897 410 2,862 16,168
1970 306 0 12,137 726 2,692 15,548
1971 313 652 13,794 1,143 3,757 18,692
1972 280 765 13,907 1,419 4,544 19,876
1973 322 0 11,089 1,471 3,622 16,174
1974 384 0 7,779 1,383 2,541 11,698
1975 368 0 10,809 2,295 3,530 16,626
1976 376 0 13,689 3,303 4,471 21,452
1977 383 0 13,757 3,715 4,495 21,963
1978 661 572 15,439 4,827 5,613 25,879
1979 852 3,998 18,775 6,772 10,900 36,439
1980 1,097 5,842 23,439 9,656 19,407 52,502
1981 1,053 2,201 19,253 8,955 18,257 46,465
1982 1,364 1,691 23,346 12,515 24,081 59,942
1983 4,257 5,471 25,476 17,849 31,659 74,984
1984 1,772 6,113 20,973 16,409 32,242 69,624
1985 2,313 8,923 22,822 20,376 45,166 88,364
1986 3,785 22,963 18,803 20,481 60,930 100,214
1987 12,643 22,692 13,065 26,916 65,975 105,956
1988 3,977 0 13,963 32,949 70,505 117,417
1989 2,844 0 17,907 45,201 90,420 153,528
1990 2,898 6,132 17,495 47,095 94,866 159,456
1991 7,496 5,963 27,552 82,490 156,017 266,059
1992 542 542 27,009 81,412 153,492 261,913
1993 1,631 16,494 25,552 78,674 161,958 266,184
1994 0 3,505 23,701 72,977 153,770 250,448
1995 8,987 24,887 27,981 95,333 206,954 330,268
- -----------------------------------------------------------------------------------------
</TABLE>
B-34
<PAGE> 88
- --------------------------------------------------------------------------------
SMALL CAP FUND (2/20/69)
<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1969 $ 94 $ 0 $ 9,179 $ 95 $ 0 $ 9,274
1970 172 0 8,924 275 0 9,199
1971 117 243 10,868 463 267 11,598
1972 121 634 10,925 583 890 12,398
1973 193 0 7,745 615 631 8,991
1974 197 0 4,953 585 403 5,941
1975 192 0 7,585 1,096 618 9,299
1976 162 0 9,915 1,605 808 12,328
1977 223 0 10,981 2,007 895 13,883
1978 358 1,527 11,548 2,469 2,471 16,488
1979 1,455 1,845 14,009 4,521 4,932 23,462
1980 1,770 1,232 18,670 7,745 7,771 34,186
1981 829 1,607 16,916 7,931 8,811 33,658
1982 657 1,201 20,472 10,389 12,108 42,969
1983 1,386 3,307 23,170 13,087 16,875 53,132
1984 1,082 0 20,934 12,916 15,247 49,097
1985 1,217 1,482 25,386 17,035 20,161 62,582
1986 581 11,279 24,104 16,782 30,928 71,814
1987 5,059 17,848 15,990 16,510 39,485 71,985
1988 1,062 0 16,982 18,656 41,931 77,569
1989 2,370 0 20,896 25,344 51,599 97,839
1990 1,325 6,405 18,019 23,288 51,425 92,732
1991 4,370 7,283 27,925 40,971 87,829 156,725
1992 0 12,972 25,613 37,580 93,726 156,919
1993 578 9,825 28,161 41,914 113,195 183,270
1994 0 10,437 25,566 38,053 113,583 177,202
1995 7,520 26,809 28,303 50,068 154,057 232,428
- ----------------------------------------------------------------------------------------
</TABLE>
B-35
<PAGE> 89
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
TECHNOLOGY FUND (9/7/48)
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1948 $ 0 $ 0 $ 10,127 $ 0 $ 0 $ 10,127
1949 305 112 10,907 354 125 11,386
1950 618 510 12,490 1,046 659 14,195
1951 722 569 13,608 1,870 1,312 16,790
1952 700 303 15,158 2,854 1,779 19,791
1953 812 595 14,325 3,494 2,292 20,111
1954 962 1,308 22,406 6,656 5,050 34,112
1955 1,129 1,681 24,367 8,426 7,310 40,103
1956 1,286 1,973 24,873 9,890 9,466 44,229
1957 1,362 2,109 20,485 9,344 9,912 39,741
1958 1,356 1,883 29,557 15,178 16,404 61,139
1959 1,430 2,771 34,283 19,144 22,002 75,429
1960 1,591 3,018 32,615 19,858 24,191 76,664
1961 1,498 3,620 37,426 24,332 31,506 93,264
1962 1,482 2,766 29,367 20,530 27,753 77,650
1963 1,686 3,388 32,152 24,207 33,809 90,168
1964 2,026 3,949 34,220 27,804 39,936 101,960
1965 2,279 5,209 41,983 36,626 54,459 133,068
1966 2,421 7,556 36,878 34,531 56,060 127,469
1967 2,347 16,506 43,123 42,726 83,106 168,955
1968 2,661 29,453 38,354 40,541 104,411 183,306
1969 4,067 15,134 30,970 36,388 98,699 166,057
1970 4,576 2,306 29,156 39,278 95,450 163,884
1971 4,307 7,228 31,519 46,839 111,044 189,402
1972 3,573 9,256 32,320 51,550 123,411 207,281
1973 4,092 0 26,202 45,665 100,050 171,917
1974 5,036 0 19,704 38,853 75,239 133,796
1975 5,503 0 26,160 57,435 99,889 183,484
1976 5,671 0 31,983 76,277 122,122 230,382
1977 6,134 3,081 30,127 78,198 118,387 226,712
1978 8,346 6,127 34,852 99,253 143,347 277,452
1979 8,825 14,677 42,911 132,292 192,861 368,064
1980 11,331 22,789 59,831 198,060 293,649 551,540
1981 12,949 29,973 46,878 166,926 259,055 472,859
1982 15,945 18,664 53,122 207,300 312,576 572,998
1983 22,078 88,219 53,165 228,712 402,902 684,779
1984 18,122 67,505 44,050 206,394 401,017 651,461
1985 11,304 43,186 51,561 253,748 516,719 822,028
1986 11,483 185,857 46,920 240,583 653,079 940,582
1987 28,099 200,645 38,481 222,331 744,271 1,005,083
1988 25,656 56,631 36,414 236,256 763,523 1,036,193
1989 35,011 36,281 42,828 314,484 935,927 1,293,237
1990 25,588 29,491 41,138 327,604 930,196 1,298,939
1991 18,709 328,427 47,131 395,051 1,432,891 1,875,073
1992 0 216,548 41,055 344,122 1,467,648 1,852,825
1993 0 127,584 42,953 360,038 1,666,453 2,069,449
1994 0 304,928 41,308 346,245 1,916,846 2,304,399
1995 164,768 336,598 49,199 591,597 2,649,098 3,289,894
- ------------------------------------------------------------------------------------------------
</TABLE>
B-36
<PAGE> 90
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND (3/2/64)
DIVIDENDS
ANNUAL CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1964 $ 286 $ 36 $ 9,775 $ 280 $ 35 $ 10,090
1965 485 75 10,249 788 113 11,150
1966 498 133 9,337 1,195 238 10,770
1967 528 533 10,367 1,854 821 13,042
1968 576 934 11,552 2,685 1,869 16,106
1969 705 186 9,608 2,880 1,734 14,222
1970 787 91 9,977 3,851 1,899 15,727
1971 798 308 10,806 4,991 2,382 18,179
1972 913 475 11,102 6,040 2,937 20,079
1973 1,095 0 9,502 6,202 2,514 18,218
1974 1,164 0 7,370 5,841 1,950 15,161
1975 1,251 0 9,324 8,721 2,467 20,512
1976 1,412 0 11,920 12,712 3,153 27,785
1977 1,580 689 11,517 13,873 3,777 29,167
1978 1,997 2,026 11,173 15,386 5,733 32,292
1979 2,493 3,239 12,547 19,958 9,982 42,487
1980 3,872 2,955 15,545 29,058 15,524 60,127
1981 2,893 2,272 14,278 29,458 16,532 60,268
1982 4,254 2,803 15,771 37,194 21,076 74,041
1983 8,825 3,719 16,256 47,149 25,542 88,947
1984 4,093 1,005 15,142 48,081 24,798 87,961
1985 5,472 2,977 17,891 62,603 32,510 113,004
1986 6,471 12,816 18,069 69,383 45,459 132,911
1987 5,213 3,478 16,564 67,975 45,219 129,758
1988 7,763 0 16,991 77,756 46,384 141,131
1989 7,619 0 19,432 96,645 53,047 169,124
1990 10,289 0 19,029 105,091 51,947 176,067
1991 8,001 6,055 24,999 146,974 74,795 246,768
1992 6,616 9,754 23,957 147,512 81,449 252,918
1993 10,120 22,863 23,578 155,228 103,420 282,226
1994 6,437 0 20,901 143,755 91,675 256,331
1995 12,811 11,545 24,265 179,922 118,210 322,467
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE+GROWTH FUND (10/16/95)
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 $ 0 $0 $ 10,030 $0 $0 $10,030
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Includes short-term capital gain dividends.
B-37
<PAGE> 91
The following tables compare the performance of the Class A shares of the Funds
over various periods with that of other mutual funds within the categories
described below according to data reported by Lipper Analytical Services, Inc.
("Lipper"), New York, New York, which is a mutual fund reporting service. Lipper
performance figures are based on changes in net asset value, with all income and
capital gain dividends reinvested. Such calculations do not include the effect
of any sales charges. Future performance cannot be guaranteed. Lipper publishes
performance analyses on a regular basis. Each category includes funds with a
variety of objectives, policies and market and credit risks that should be
considered in reviewing these rankings.
BLUE CHIP FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance
Analysis
------------------
Growth & Income
Funds
------------------
<S> <C>
Five Year (Period ended 12/31/95)............................................. 161 of 192
One Year (Period ended 12/31/95).............................................. 207 of 438
</TABLE>
The Lipper Growth & Income Funds category includes funds which combine a growth
of earnings orientation and an income requirement for level and/or rising
dividends.
GROWTH FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance
Analysis
------------------
Growth Funds
------------------
<S> <C>
Fifteen Years (Period ended 12/31/95)......................................... 56 of 109
Ten Years (Period ended 12/31/95)............................................. 50 of 153
Five Years (Period ended 12/31/95)............................................ 122 of 237
One Year (Period ended 12/31/95).............................................. 270 of 572
</TABLE>
The Lipper Growth Funds category includes funds which normally invest in
companies whose long-term earnings are expected to grow significantly faster
than the earnings of the stocks represented in the major unmanaged stock
indices.
SMALL CAP FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance
Analysis
------------------
Small Cap Company
Growth Funds
------------------
<S> <C>
Fifteen Years (Period ended 12/31/95)......................................... 3 of 12
Ten Years (Period ended 12/31/95)............................................. 16 of 37
Five Years (Period ended 12/31/95)............................................ 44 of 81
One Year (Period ended 12/31/95).............................................. 143 of 305
</TABLE>
The Lipper Mid Cap Company Growth Fund category includes funds which by
prospectus or portfolio practice limit their investments to companies on the
basis of the size of the company.
B-38
<PAGE> 92
TECHNOLOGY FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance
Analysis
------------------
Science &
Technology Funds
------------------
<S> <C>
Fifteen Years (Period ended 12/31/95)......................................... 2 of 3
Ten Years (Period ended 12/31/95)............................................. 8 of 13
Five Years (Period ended 12/31/95)............................................ 13 of 15
One Year (Period ended 12/31/95).............................................. 19 of 35
</TABLE>
The Lipper Science & Technology Funds category includes funds which invest 65%
of their equity portfolio in science and technology stocks.
TOTAL RETURN FUND
<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance
Analysis
------------------
Balanced Funds
------------------
<S> <C>
Fifteen Years (Period ended 12/31/95)......................................... 22 of 24
Ten Years (Period ended 12/31/95)............................................. 17 of 31
Five Years (Period ended 12/31/95)............................................ 33 of 61
One Year (Period ended 12/31/95).............................................. 98 of 220
</TABLE>
The Lipper Balanced Fund category includes funds whose primary objectives are to
conserve principal by maintaining at all times a balanced portfolio of both
stock and bonds. Typically, the stock/bond ratio ranges around 60% to 40%.
OFFICERS AND TRUSTEES
The officers and trustees of the Funds, their birthdates, their principal
occupations and their affiliations, if any, with KFS, the investment manager,
DVA, the sub-adviser, and KDI, the principal underwriter, are as follows (The
number following each person's title is the number of investment companies
managed by KFS and its affiliates for which he or she holds similar positions.):
ALL FUNDS:
DAVID W. BELIN (6/20/28), Trustee (23), 2000 Financial Center, 7th and Walnut,
Des Moines, Iowa; Member, Belin Harris Lamson McCormick, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33), Trustee (23), 16410 Avila Boulevard, Tampa, Florida;
Director, Management Consulting Services, McNulty & Company; formerly, Executive
Vice President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee (23), 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee (23), 800 North Lindbergh Boulevard, St.
Louis, Missouri; Senior Vice President and Chief Financial Officer, Monsanto
Company (chemical products); prior thereto, Vice President, FMC Corporation
(manufacturer of machinery and chemicals); prior thereto, Director, Executive
Vice President and Chief Financial Officer, Staley Continental, Inc. (food
products).
DONALD R. JONES (1/17/30), Trustee (23), 23 Flagship Lane, Hilton Head, South
Carolina; Retired; Director, Motorola, Inc. (manufacturer of electronic
equipment and components); formerly, Executive Vice President and Chief
Financial Officer, Motorola, Inc.
B-39
<PAGE> 93
SHIRLEY D. PETERSON (9/3/41), Trustee (23), 401 Rosemont Avenue, Frederick,
Maryland; President, Hood College; prior thereto, partner, Steptoe & Johnson
(attorneys); prior thereto, Commissioner, Internal Revenue Service; prior
thereto, Assistant Attorney General, U.S. Department of Justice.
WILLIAM P. SOMMERS (7/22/33), Trustee (23), 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); prior thereto, Executive Vice President, Iameter (medical
information and educational service provider), prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) (retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
STEPHEN B. TIMBERS (8/8/44), President and Trustee* (35), 120 South LaSalle
Street, Chicago, Illinois; President, Chief Executive Officer, Chief Investment
Officer and Director, KFS; Director, KDI, DVA and LTV Corporation.
JOHN E. NEAL (3/9/50), Vice President* (35), 120 South LaSalle Street, Chicago,
Illinois; Chief Operating Officer and Director, KFS; Director, DVA and KDI.
JOHN E. PETERS (11/4/47), Vice President* (35), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President, KFS; President and Director,
KDI; Director, DVA.
STEVEN H. REYNOLDS (9/11/43), Vice President* (12), 120 South LaSalle Street,
Chicago, Illinois; Executive Vice President and Chief Investment
Officer -- Equities, KFS.
CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary* (35), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to the Fund.
JEROME L. DUFFY (6/29/36), Treasurer* (35), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary* (35), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, KFS.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary* (27), 120 South LaSalle
Street, Chicago, Illinois; Vice President, KFS; Vice President and Director of
State Registrations, KDI.
BLUE CHIP FUND:
TRACY McCORMICK CHESTER (9/27/54), Vice President* (3), 120 South LaSalle
Street, Chicago, Illinois; Senior Vice President, KFS; formerly, Portfolio
Manager for Fiduciary Management; prior thereto, independent consultant managing
private accounts.
QUANTITATIVE FUND:
DANIEL J. BUKOWSKI (5/6/63), Vice President* (2), 120 South LaSalle Street,
Chicago, Illinois; Senior Vice President and Director of Quantitative Research,
KFS.
TECHNOLOGY FUND:
RICHARD A. GOERS (6/20/44), Vice President* (1), 120 South LaSalle Street,
Chicago, Illinois; Senior Vice President, KFS.
FRANK D. KORTH (7/11/45), Vice President* (1), 120 South LaSalle Street,
Chicago, Illinois; Senior Vice President, KFS.; formerly, President, Value Line
Fund.
B-40
<PAGE> 94
TOTAL RETURN FUND:
GARY A. LANGBAUM (12/16/48), Vice President* (2), 120 South LaSalle Street,
Chicago, Illinois; Executive Vice President, KFS.
VALUE+GROWTH FUND:
DANIEL J. BUKOWSKI (5/6/63), Vice President* (2), 120 South LaSalle Street,
Chicago, Illinois; Senior Vice President and Director of Quantitative Research,
KFS.
DAVID N. DREMAN (5/6/36), Vice President* (2), 10 Exchange Place, Suite 2050,
Jersey City, New Jersey, Chairman and Director, DVA.
* Interested persons of the Fund as defined in the Investment Company Act of
1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds, except that Mr. Custer's law firm
receives fees from the Funds as counsel to the Funds. The table below shows
amounts paid or accrued to those trustees who are not designated "interested
persons" during each Fund's 1995 fiscal year except that the information in the
last column is for calendar year 1995.
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM FUND RETIREMENT FROM FUND AND
------------------------------------------ BENEFITS KEMPER FUND
BLUE SMALL TOTAL ACCRUED AS PART OF COMPLEX
NAME OF TRUSTEE CHIP GROWTH CAP TECH RETURN FUND EXPENSES PAID TO TRUSTEES**
- ------------------------------------------- ------ ------ ------ ------ ------ ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
David W. Belin*............................ $2,300 $7,800 $4,600 $5,600 $9,100 $ 0 $149,700
Lewis A. Burnham........................... $2,100 $6,150 $3,500 $3,700 $6,900 $ 0 $111,000
Donald L. Dunaway*......................... $2,600 $7,700 $4,400 $5,400 $9,300 $ 0 $151,000
Robert B. Hoffman.......................... $2,000 $5,700 $3,200 $3,500 $6,400 $ 0 $105,500
Donald R. Jones............................ $2,100 $5,900 $3,400 $3,700 $6,800 $ 0 $110,700
Shirley D. Peterson***..................... $ 700 $1,700 $ 800 $1,200 $2,000 $ 0 $ 44,500
William P. Sommers......................... $1,900 $5,500 $3,100 $3,400 $6,200 $ 0 $100,700
</TABLE>
- ---------------
* Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Funds -- Kemper Money
Market Fund. Total deferred fees and interest accrued for the latest and
prior fiscal years are $9,500, $48,100, $30,600, $44,100 and $58,300 for Mr.
Belin and $10,600, $39,800, $23,300, $33,300 and $48,900 for Mr. Dunaway
from the Blue Chip, Growth, Small Cap, Tech and Total Return Funds,
respectively.
** Includes compensation for service as a trustee on twenty-three fund boards.
Also includes amounts for new funds estimated as if they had existed at the
beginning of the year, except for Quantitative and Value+Growth Funds since
no fee schedule has been established for those Funds.
*** Appointed a trustee on June 15, 1995.
B-41
<PAGE> 95
As of January 4, 1996, the officers and trustees of the Funds, as a group, owned
less than 1% of the then outstanding shares of each Fund and no person owned of
record 5% or more of the outstanding shares of any class of any Fund, except the
persons indicated in the chart below and KFS owned all the shares of
Quantitative Fund.
<TABLE>
<CAPTION>
NAME AND ADDRESS % OWNED FUND CLASS
- -------------------------------------------------------------------- ------- ------------ -----
<S> <C> <C> <C>
Forrest H. Scott.................................................... 9.06 Value+Growth A
5912 Trenton Franklin Rd.
Middleton, OH
John E. and Cheryl M. Neal.......................................... 5.76 Value+Growth A
309 Sterling Rd.
Kenilworth, IL
Everen Clearing Corp................................................ 5.75 Value+Growth A
111 E. Kilbourn Ave.
Milwaukee, WI
Harold K. and Charlotte C. Geyer.................................... 9.57 Value+Growth B
260 S. Chestnut
Platteville, WI
Alex. Brown and Sons Incorp......................................... 7.51 Value+Growth B
375 West Padonia Road
Baltimore, MD
Joseph J. and Marian G. Briscuso,................................... 21.88 Value+Growth C
707 Stevenson Ln.
Baltimore, MD
Jerome L. Greeley Jr.,.............................................. 21.45 Value+Growth C
6239 Fernway
Baltimore, MD
Shirley B. Schleunes................................................ 12.52 Value+Growth C
1005 Saxon Hill Dr.
Cockeysville, MD
Mary T. Shean....................................................... 9.66 Value+Growth C
112 4th Avenue
Haddon Heights, NJ
Alton P. and Mona W. Stephenson..................................... 9.20 Value+Growth C
P.O. Box 87
Pylesville, MD
Kemper Financial Services, Inc...................................... 5.47 Value+Growth C
120 S. LaSalle
Chicago, IL
Kenneth Mach........................................................ 8.41 Total Return C
908 N. Michigan Ave.
Chicago, IL
Kemper Financial Services, Inc...................................... 49.20 Total Return I
Profit Sharing Plan
120 S. LaSalle
Chicago, IL
Economy Employee Savings Plan....................................... 15.46 Total Return I
120 S. LaSalle
Chicago, IL
</TABLE>
B-42
<PAGE> 96
<TABLE>
<CAPTION>
NAME AND ADDRESS % OWNED FUND CLASS
- -------------------------------------------------------------------- ------- ------------ -----
<S> <C> <C> <C>
Kemper Service Company.............................................. 6.24 Total Return I
Profit Sharing Plan
811 Main Street
Kansas City, MO
Investors Fiduciary Trust Company-Trustee FBO
William J. Ralph.................................................... 8.46 Blue Chip C
14641 S. Lavergne
Midlothian, IL
Invest Financial Corp............................................... 99.00 Blue Chip I
120 S. LaSalle
Chicago, IL
Kemper Financial Services, Inc...................................... 52.99 Technology I
Profit Sharing Plan
120 S. LaSalle
Chicago IL
Kemper Service Company.............................................. 12.10 Technology I
Profit Sharing Plan
811 Main Street
Kansas City, MO
Economy Employee Savings Plan....................................... 12.98 Technology I
120 S. LaSalle
Chicago, IL
Kemper Group Plans.................................................. 5.79 Technology I
Profit Sharing Plan
120 S. LaSalle
Chicago, IL
Kemper Financial Services, Inc...................................... 60.42 Growth I
Profit Sharing Plan
120 S. LaSalle
Chicago, IL
Kemper Group Plans.................................................. 8.12 Growth I
Profit Sharing Plan
120 S. LaSalle
Chicago, IL
Kemper Service Company.............................................. 5.72 Growth I
Profit Sharing Plan
811 Main Street
Kansas City, MO
Kemper Financial Services, Inc...................................... 68.70 Small Cap I
Profit Sharing Plan
120 S. LaSalle
Chicago, IL
Kemper Group Plans.................................................. 8.88 Small Cap I
Profit Sharing Plan
120 S. LaSalle
Chicago, IL
</TABLE>
B-43
<PAGE> 97
SHAREHOLDER RIGHTS
The Funds generally are not required to hold meetings of their shareholders.
Under the Agreement and Declaration of Trust of each Fund ("Declaration of
Trust"), however, shareholder meetings will be held in connection with the
following matters: (a) the election or removal of trustees if a meeting is
called for such purpose; (b) the adoption of any contract for which shareholder
approval is required by the Investment Company Act of 1940 ("1940 Act"); (c) any
termination of the Fund or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund, supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision thereof); and (e) such additional matters as may be required by law,
the Declaration of Trust, the By-laws of the Fund, or any registration of the
Fund with the Securities and Exchange Commission or any state, or as the
trustees may consider necessary or desirable. The shareholders also would vote
upon changes in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) each Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of a Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, each
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
Each Fund's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of a Fund
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of a Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
Each Fund's Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Fund or any Portfolio or class by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of each Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of a Fund and each Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by KFS remote and not
material, since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.
B-44
<PAGE> 98
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder
Kemper Quantitative Equity Fund
We have audited the accompanying statement of net assets of Kemper Quantitative
Equity Fund as of January 4, 1996. This statement of net assets is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Kemper Quantitative Equity
Fund at January 4, 1996 in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Chicago, Illinois
January 4, 1996
B-45
<PAGE> 99
KEMPER QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS--JANUARY 4, 1996
<TABLE>
<S> <C>
ASSETS
Cash.................................................................................. $100,000
=========
NET ASSETS
Net assets, applicable to shares of beneficial interest (unlimited number of shares
authorized, no par value) outstanding as follows:
Class A--3,473.684
Class B--3,473.684
Class C--3,578.947.................................................................. $100,000
=========
THE PRICING OF SHARES
Net asset value and redemption price per share
Class A ($33,000 / 3,473.684 shares outstanding).................................... $ 9.50
Class B* ($33,000 / 3,473.684 shares outstanding)................................... $ 9.50
Class C ($34,000 / 3,578.947 shares outstanding).................................... $ 9.50
Maximum offering price per share
Class A (net asset value, plus 6.10% of net asset value or 5.75% of offering
price)........................................................................... $ 10.08
Class B (net asset value)........................................................... $ 9.50
Class C (net asset value)........................................................... $ 9.50
</TABLE>
- ---------------
* Subject to contingent deferred sales charge.
NOTES:
Kemper Quantitative Equity Fund (the "Trust"), was organized as a business trust
under the laws of The Commonwealth of Massachusetts on June 12, 1995. All Class
A, Class B and Class C shares of beneficial interest of the Trust were issued to
Kemper Financial Services, Inc. ("KFS"), the investment manager for such series,
on January 4, 1996. The Trust may establish multiple series; currently one
series has been established.
The costs of organization of the Fund will be paid by KFS.
B-46
<PAGE> 100
APPENDIX--RATINGS OF FIXED INCOME INVESTMENTS
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-47
<PAGE> 101
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
B-48
<PAGE> 102
Portfolio of Investments
KEMPER TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS AT OCTOBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Number of shares Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
ELECTRONIC
COMPONENTS - 21.6%
(b) Actel Corp. 166,346 $ 1,955
(b) Atmel Corporation 550,000 17,188
AVX Inc. 125,000 3,891
(b) Cirrus Logic Inc. 50,000 2,106
(b) C. P. Clare Corp. 100,000 2,587
(b) Cypress Semiconductor 200,000 7,050
(b) Information Storage Devices 75,000 1,631
(b) Integrated Device Technology Inc. 150,000 2,850
Intel Corporation 500,000 34,937
(b) Lattice Semiconductor Corp. 50,000 1,963
Linear Technology Corporation 500,000 21,875
(b) LSI Logic Corp. 400,000 18,850
(b) Maxim Integrated Products, Inc. 150,000 11,213
(b) MEMC Electronic Materials 10,000 320
(b) Microchip Technology Incorporated 150,000 5,953
Micron Technology 400,000 28,250
Molex Incorporated, "A" 312,500 9,609
(b) SGS-Thomson Microelectronics 100,000 4,525
Texas Instruments Inc. 425,000 29,006
Vishay Intertechnology 80,000 2,820
(b) VLSI Technology Inc., convertible, 8.25%, 2005 $2,500 2,362
(b) Xilinx, Inc. 200,000 9,200
=====================================================================
220,141
=====================================================================
SEMICONDUCTOR
PRODUCTION
EQUIPMENT - 8.2%
(b) Applied Materials Inc. 400,000 20,050
(b) Electroglas Inc. 100,000 7,025
(b) KLA Instruments Corp. 200,000 8,550
(b) Lam Research 100,000 6,088
Murata Manufacturing Co. 20,000 704
(b) Novellus Systems, Inc. 125,000 8,609
(b) Silicon Valley Group Inc. 190,000 6,151
(b) Tencor Instruments 175,000 7,459
(b) Teradyne Inc. 250,000 8,344
(b) Ultratech Stepper 210,000 8,400
Veeco Instruments 100,000 2,400
=====================================================================
83,780
=====================================================================
PERSONAL COMPUTING - 14.5% Adobe Systems Incorporated 54,600 3,112
(b) COMPAQ Computer 500,000 27,875
(b) Conner Peripherals Inc. 400,000 7,200
(b) Data Translation 60,000 960
Dell Computer Corp. 580,524 27,067
(b) Learning Co. 125,000 7,375
McAfee Associates, Inc. 100,000 5,825
(b) Microsoft Corporation 340,000 34,000
(b) Seagate Technology 300,000 13,425
(b) 7th Level, Inc. 250,000 3,688
(b) Smartflex Systems 40,000 585
(b) S3 Inc. 400,000 6,850
(b) Stormedia 100,000 4,600
(b) Symantec Corp. 200,000 4,862
=====================================================================
147,424
=====================================================================
</TABLE>
12
<PAGE> 103
Portfolio of Investments
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
Number of shares Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS - 19.6%
(b) ADC Telecommunications 125,000 $ 5,000
Allen Group 75,000 1,838
(b) America On-Line Inc. 30,000 2,400
(b) Ascend Communications Inc. 150,000 9,750
(b) Bay Networks Inc. 250,000 16,563
(b) Black Box Corp. 125,000 2,031
(b) Cisco Systems, Inc. 500,000 38,750
(b) Colonial Data Technologies Corp. 175,000 2,406
(b) DSC Communications 250,000 9,250
(b) FORE Systems Inc. 100,000 5,300
(b) LM Ericsson
"B" shares 130,000 2,759
ADRs 160,000 3,418
(b) Mobile Media Corp. 75,000 1,969
Motorola, Inc. 100,000 6,562
(b) NETCOM On-Line Communications
Services, Inc. 100,000 5,825
(b) Netscape Communications 70,000 6,160
Oy Nokia, AB
"A" shares 100,000 5,721
ADRs 20,000 1,115
(b) Paging Network, Inc. 180,000 4,140
(b) PSINet Inc. 100,000 1,775
Sirti SpA 126,730 772
(a) Socket Communications 134,756 472
(b) Spyglass Inc. 50,000 2,488
(b) Stratacom, Inc. 150,000 9,225
Telekom Malaysia 93,000 666
(b) Tellabs, Inc. 100,000 3,400
(b) 3Com Corp. 461,300 21,681
U.S. Robotics 210,000 19,425
(b) UUNET Technologies Inc. 100,000 6,075
Vodafone Group 507,832 2,095
=====================================================================
199,031
- -----------------------------------------------------------------------------------------------------------
SYSTEMS, SOFTWARE
AND SERVICES - 16.6%
(b) Alternative Resources Corp. 75,000 2,325
(b) Avid Technology Inc. 50,000 2,188
(b) Cadence Design Systems 180,000 5,805
(b) Checkfree Corp. 75,000 1,584
Computer Associates
International, Inc. 50,000 2,750
Cooper & Chyan Technology 50,000 706
(b) Epic Design Technology 75,000 3,450
First Data Corporation 318,943 21,090
General Motors Corporation, "E" 200,000 9,425
Getronics 53,791 2,563
HBO & Co. 50,000 3,537
Hewlett-Packard Company 500,000 46,313
(b) Informix Corp. 400,000 11,650
(b) Mentor Graphics Corp. 125,000 2,625
(b) Oracle Systems Corporation 200,000 8,725
(b) Parametric Technology Corporation 250,000 16,750
(b) PeopleSoft, Inc. 50,000 4,300
(b) PLATINUM technology Inc. 250,000 4,562
(b) Silicon Graphics, Inc. 400,000 13,300
(b) Transaction Systems Architects, "A" 75,000 1,950
(b) Wonderware Corp. 100,000 3,175
=====================================================================
168,773
</TABLE>
13
<PAGE> 104
Portfolio of Investments
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
Number of shares Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIFE SCIENCES - 14.6%
(b) Agouron Pharmaceuticals, Inc. 30,000 $ 780
(b) Alteon Inc. 150,000 1,406
(b) Amgen Inc. 450,000 21,600
(b) Angeion Corporation 250,000 2,281
Astra AB Fria, "A" 250,000 9,182
Athena Neurosciences Inc. 80,000 750
BioChem Pharma 25,000 956
(b) Boston Scientific Corp. 273,216 11,509
Cephalon Inc. 150,000 4,500
Genzyme Corp. 207,500 12,087
(b) Gilead Sciences Inc. 100,000 1,950
Guidant Corp. 58,663 1,877
(b) IDEXX Laboratories 210,000 8,558
(b) Isis Pharmaceuticals, Inc. 400,692 4,057
Lifecore Biomedical, Inc. 200,000 1,975
Ligand Pharmaceutical 100,000 787
Magainin Pharmaceuticals 100,000 813
Medtronic, Inc. 500,000 28,875
Neurogen Corp. 40,000 890
Pfizer, Inc. 300,000 17,212
(b) Pharmos Corporation 387,111 750
Schering-Plough Corporation 150,000 8,044
(b) St. Jude Medical, Inc. 50,000 2,663
(b) Thermedics Inc. 130,000 2,389
(b) ThermoTrex Corporation 40,000 1,435
(b) Vidamed Inc. 200,000 1,425
=====================================================================
148,751
=====================================================================
INDUSTRIAL TECHNOLOGY
AND MISCELLANEOUS -
4.1%
(a)(b) Advanced Technology Ventures II,
17.9% limited partnership interest -- 1,434
Ashland Coal, Inc. 35,000 831
(a)(b) Crosspoint Venture Partners 1993,
3.1% limited partnership interest -- 1,744
(a)(b) GEO Capital III, L.P.,
5.0% limited partnership interest -- 4,069
(b) ITI Technologies 50,000 1,263
Omron Corp. 67,000 1,570
(b) Solectron Corp. 200,000 8,050
(b) Thermo Electron Corporation 325,000 14,950
ThermoSpectra Corp. 65,000 1,056
(b) Zebra Technologies Corporation 120,000 7,140
=====================================================================
42,107
=====================================================================
TOTAL INVESTMENTS--99.2%
(Cost: $634,559) 1,010,007
=====================================================================
OTHER ASSETS, LESS LIABILITIES--.8% 7,948
=====================================================================
NET ASSETS--100% $1,017,955
=====================================================================
</TABLE>
See accompanying Notes to Portfolio of Investments.
14
<PAGE> 105
Portfolio of Investments
- -------------------------------------------------------------------------------
Notes to Portfolio of Investments
- -------------------------------------------------------------------------------
(a) The following securities may require registration under the Securities
Act of 1933 or an exemption therefrom in order to effect sale in the ordinary
course of business; they were valued at cost on the dates of acquisition. No
market quotations were available for unrestricted securities of the same class
on the dates of acquisition or on October 31, 1995, with the exception of
Socket Communications, which was valued at 70% of current market value. These
securities are valued at fair value as determined in good faith by the Board of
Trustees of the Fund. At October 31, 1995, the aggregate value of the Fund's
restricted securities was $7,719,000, which represented .76% of net assets.
<TABLE>
<CAPTION>
Date of Number
Security Description Acquisition of Shares Cost
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
17.9% limited
Advanced Technology Ventures II December 1994 partnership interest $ 1,899,604
April 1993
to 3.1% limited
Crosspoint Venture Partners 1993 October 1995 partnership interest $ 1,400,000
December 1993
to 5.0% limited
GEO Capital III, L.P. September 1995 partnership interest $ 1,484,080
May 1994
to
Socket Communications December 1994 134,756 shs. 4.62 per share
</TABLE>
(b) Non-income producing security.
Based on the cost of investments of $634,559,000 for federal income tax
purposes at October 31, 1995, the aggregate gross unrealized appreciation was
$381,732,000, the aggregate gross unrealized depreciation was $6,284,000 and
the net unrealized appreciation on investments was $375,448,000.
See accompanying Notes to Financial Statements.
Report of Independent Auditors
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TECHNOLOGY FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Technology Fund, as of
October 31, 1995, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the fiscal periods since 1991.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Kemper Technology Fund at October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the fiscal periods since 1991, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 28, 1995
15
<PAGE> 106
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $634,559) $1,010,007
- ----------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 1,604
- ----------------------------------------------------------------------------------------------------------
Investments sold 15,299
- ----------------------------------------------------------------------------------------------------------
Dividends and interest 82
- ----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,026,992
==========================================================================================================
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Cash overdraft 729
- ----------------------------------------------------------------------------------------------------------
Payable for:
Fund shares redeemed 686
- ----------------------------------------------------------------------------------------------------------
Investments purchased 6,720
- ----------------------------------------------------------------------------------------------------------
Management fee 460
- ----------------------------------------------------------------------------------------------------------
Distribution services fee 27
- ----------------------------------------------------------------------------------------------------------
Administrative services fee 126
- ----------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 180
- ----------------------------------------------------------------------------------------------------------
Other 109
- ----------------------------------------------------------------------------------------------------------
Total liabilities 9,037
- ----------------------------------------------------------------------------------------------------------
NET ASSETS $1,017,955
==========================================================================================================
- ----------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Paid-in capital $ 512,232
- ----------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 126,537
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and liabilities in foreign currencies 375,537
- ----------------------------------------------------------------------------------------------------------
Undistributed net investment income 3,649
- ----------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,017,955
==========================================================================================================
- ----------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- ----------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($957,565 / 65,450 shares outstanding) $14.63
- ----------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $15.52
- ----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($41,034 / 2,851 shares outstanding) $14.39
- ----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price per share
($1,577 / 109 shares outstanding) $14.45
- ----------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($17,779 / 1,214 shares outstanding) $14.64
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 107
Financial Statements
STATEMENT OF OPERATIONS
Year ended October 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------
Dividends $3,489
Interest 1,788
Total investment income 5,277
Expenses:
Management fee 4,542
Distribution services fee 173
Administrative services fee 1,245
Custodian and transfer agent fees and related expenses 1,059
Professional fees 81
Reports to shareholders 115
Trustees' fees and other 80
Total expenses 7,295
NET INVESTMENT LOSS (2,018)
============================================================================================================
- ------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments (including options purchased) 142,619
Net realized loss from options written (14,813)
Net realized gain 127,806
Change in net unrealized appreciation on investments and assets and
liabilities in foreign currencies 196,817
Net gain on investments 324,623
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $322,605
============================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------
Net investment income (loss) $(2,018) 309
Net realized gain 127,806 92,337
Change in net unrealized appreciation 196,817 (2,709)
Net increase in net assets resulting from operations 322,605 89,937
Net equalization credits 114 123
Distributions from net realized gain (92,581) (38,179)
Net increase from capital share transactions 74,163 49,169
TOTAL INCREASE IN NET ASSETS 304,301 101,050
============================================================================================================
- ------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Beginning of year 713,654 612,604
END OF YEAR (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME
OF $3,649 AND $5,095, RESPECTIVELY) $1,017,955 713,654
============================================================================================================
</TABLE>
17
<PAGE> 108
Notes to Financial Statements
1 DESCRIPTION OF THE FUND
Kemper Technology Fund is an open-end management investment company organized as
a business trust under the laws of Massachusetts. The Fund currently offers four
classes of shares. Class A shares are sold to investors subject to an initial
sales charge. Class B shares are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent deferred
sales charge payable upon certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance. Class C shares are sold
without an initial or a contingent deferred sales charge but are subject to
higher ongoing expenses than Class A shares and do not convert into another
class. Class I shares, which are sold to a limited group of investors, are not
subject to initial or contingent deferred sales charges and have lower ongoing
expenses than other classes. Each share represents an identical interest in the
investments of the Fund and has the same rights.
2 SIGNIFICANT
ACCOUNTING POLICIES
INVESTMENT VALUATION. Investments are stated at value. Portfolio securities that
are traded on a domestic securities exchange or securities listed on the NASDAQ
National Market are valued at the last sale price on the exchange or market
where primarily traded or listed or, if there is no recent sale, at the last
current bid quotation. Portfolio securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges where primarily traded. Securities
not so traded or listed are valued at the last current bid quotation if market
quotations are available. Fixed income securities are valued by using market
quotations, or independent pricing services that use prices provided by market
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Equity options are
valued at the last sale price unless the bid price is higher or the asked price
is lower, in which event such bid or asked price is used. Financial futures and
options thereon are valued at the settlement price established each day by the
board of trade or exchange on which they are traded. Forward foreign currency
contracts are valued at the forward rates prevailing on the day of valuation.
Other securities and assets are valued at fair value as determined in good faith
by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date, and interest income is
recorded on the accrual basis and includes amortization of money market
instrument premium and discount. Realized gains and losses from investment
transactions are reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and redeemed on a continuous basis
at net asset value (plus an initial sales charge on most sales of Class A
shares). Proceeds payable on redemption of Class B shares will be reduced by the
amount of any applicable contingent deferred sales charge. On each day the New
York Stock Exchange is open
18
<PAGE> 109
Notes to Financial Statements
for trading, the net asset value per share is determined as of the earlier of
3:00 p.m. Chicago time or the close of the Exchange. The net asset value per
share is determined separately for each class by dividing the Fund's net assets
attributable to that class by the number of shares of the class outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS. The Fund has complied with
the special provisions of the Internal Revenue Code available to investment
companies and therefore no federal income tax provision is required.
Differences in dividends per share are due to different class expenses.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from sales and cost of
redemptions of Fund shares is credited or charged to undistributed net
investment income so that income per share available for distribution is not
affected by sales or redemptions of shares.
3 TRANSACTIONS
WITH AFFILIATES
MANAGEMENT AGREEMENT. The Fund has a management agreement with Kemper Financial
Services, Inc. (KFS) and pays a management fee at an annual rate of .58% of the
first $250 million of average daily net assets declining gradually to .42%
of average daily net assets in excess of $12.5 billion. The Fund incurred a
management fee of $4,542,000 for the year ended October 31, 1995.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT. The Fund has an underwriting
and distribution services agreement with Kemper Distributors, Inc. (KDI).
Underwriting commissions paid in connection with the distribution of Class A
shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS ALLOWED BY KDI
RETAINED -------------------------------------
BY KDI TO ALL FIRMS TO AFFILIATES
------------ ------------ -------------
<S> <C> <C> <C>
Year ended October 31, 1995 $116,000 840,000 218,000
</TABLE>
For services under the distribution services agreement, the Fund pays KDI a fee
of .75% of average daily net assets of the Class B and Class C shares. Pursuant
to the agreement, KDI enters into related selling group agreements with
various firms at various rates for sales of Class B and Class C shares. In
addition, KDI receives any contingent deferred sales charges
19
<PAGE> 110
Notes to Financial Statements
(CDSC) from redemptions of Class B shares. Distribution fees and commissions
paid in connection with the sale of Class B and Class C shares and the CDSC
received in connection with the redemption of Class B shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION COMMISSIONS AND DISTRIBUTION
FEES AND FEES PAID BY KDI
CDSC RECEIVED ------------------------------------
BY KDI TO ALL FIRMS TO AFFILIATES
-------------- ------------ -------------
<S> <C> <C> <C>
Year ended October 31, 1995 $229,000 658,000 152,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an administrative services
agreement with KDI. For providing information and administrative services to
Class A, Class B and Class C shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net assets of each class. KDI in turn
has various agreements with financial services firms that provide these services
and pays these firms based on assets of Fund accounts the firms service.
Administrative services fees (ASF) paid are as follows:
<TABLE>
<CAPTION>
ASF ASF PAID BY KDI
PAID BY THE ------------------------------
FUND TO KDI TO ALL FIRMS TO AFFILIATES
----------- ------------ -------------
<S> <C> <C> <C>
Year ended October 31, 1995 $1,245,000 1,269,000 116,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a services agreement with the Fund's
transfer agent, Kemper Service Company (KSvC) is the shareholder service
agent of the Fund. For the year ended October 31, 1995, the transfer agent
remitted shareholder services fees to KSvC of $724,000.
OFFICERS AND TRUSTEES. Certain officers or trustees of the Fund are
also officers or directors of KFS. For the year ended October 31, 1995, the
Fund made no payments to its officers and incurred trustees' fees of $24,000 to
independent trustees.
4 INVESTMENT
TRANSACTIONS
For the year ended October 31, 1995, investment transactions (excluding
short-term instruments) are as follows (dollars in thousands):
<TABLE>
<S> <C>
Purchases $879,630
Proceeds from sales 876,222
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN: CONTRACTS PREMIUMS
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of year -- $ --
Option contracts written and terminated
by repurchase 800 6,901
Options outstanding at end of year -- --
</TABLE>
20
<PAGE> 111
Notes to Financial Statements
5 CAPITAL SHARE
TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
Year ended October 31,
1995 1994
--------------------- -------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
- -----------------------------------------------------------------------------------------------
Class A 8,774 $104,886 7,279 $ 75,132
Class B 4,556 54,618 496 5,352
Class C 123 1,490 16 150
Class I 1,586 20,709 -- --
- -----------------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS
- -----------------------------------------------------------------------------------------------
Class A 7,693 73,098 3,032 30,078
Class B 114 1,080 -- --
Class C 3 33 -- --
- -----------------------------------------------------------------------------------------------
SHARES REDEEMED
- -----------------------------------------------------------------------------------------------
Class A (12,664) (149,299) (8,355) (85,317)
Class B (2,221) (26,954) (45) (495)
Class C (28) (335) (5) (57)
Class I (372) (5,163) -- --
- -----------------------------------------------------------------------------------------------
CONVERSION OF SHARES
- -----------------------------------------------------------------------------------------------
Class A 46 574 2 20
Class B (47) (574) (2) (20)
- -----------------------------------------------------------------------------------------------
SHARES ISSUED IN ACQUISITION (A)
- -----------------------------------------------------------------------------------------------
Class A -- -- 2,294 24,326
===============================================================================================
NET INCREASE
FROM CAPITAL
SHARE TRANSACTIONS $74,163 $49,169
===============================================================================================
</TABLE>
(a) On August 26, 1994, the Fund acquired the assets of Kemper Environmental
Services Fund in a tax-free exchange.
6 FORWARD FOREIGN
CURRENCY CONTRACTS
In order to protect itself against a decline in the value of particular foreign
currencies against the U.S. Dollar, the Fund has entered into a forward contract
to deliver foreign currency in exchange for U.S. Dollars as described below. The
Fund bears the market risk that arises from changes in foreign exchange rates,
and accordingly, the unrealized gain on this contract is reflected in the
accompanying financial statements. The Fund also bears the credit risk if the
counterparty fails to perform under the contract. At October 31, 1995, the
Fund has the following forward foreign currency contract outstanding:
<TABLE>
<CAPTION>
Contract amount Unrealized gain
Foreign currency to be delivered in U.S. dollars Settlement at 10/31/95
(in thousands) (in thousands) date (in thousands)
-------------------------------- --------------- ---------- ----------------
<S> <C> <C> <C>
295,380 Japanese Yen $3,000 December 1995 $89
</TABLE>
21
<PAGE> 112
Financial Highlights
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 11.50 10.68 9.95 12.42 9.37
Income from investment operations:
Net investment income (loss) (.03) -- (.01) .01 .13
Net realized and unrealized gain 4.66 1.49 2.03 .04 3.35
Total from investment operations 4.63 1.49 2.02 .05 3.48
Less dividends:
Distribution from net investment income -- -- -- .03 .20
Distribution from net realized gain 1.50 .67 1.29 2.49 .23
Total dividends 1.50 .67 1.29 2.52 .43
Net asset value, end of year $ 14.63 11.50 10.68 9.95 12.42
=======================================================================================================================
TOTAL RETURN 47.30% 14.95 21.76 .32 38.58
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
=======================================================================================================================
Expenses .88% 89 .81 .82 .81
Net investment income (loss) (.23) .05 (.06) .07 1.24
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS I
----------------------- ----------------------- ------------
MAY 31, MAY 31, JULY 31,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO 1995 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.45 9.99 11.45 9.99 12.72
Income from investment operations:
Net investment loss (.15) (.05) (.15) (.05) (.02)
Net realized and unrealized gain 4.59 1.51 4.65 1.51 1.94
Total from investment operations 4.44 1.46 4.50 1.46 1.92
Less distribution from net realized gain 1.50 -- 1.50 -- --
Net asset value, end of period $ 14.39 11.45 14.45 11.45 14.64
=======================================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 45.65% 14.61 46.23 14.61 15.09
- -----------------------------------------------------------------------------------------------------------------------
ANNUALIZED RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Expenses 1.82% 1.99 1.76 1.83 .65
Net investment loss (1.17) (1.08) (1.11) (.92) (.33)
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL FUND DATA
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net assets at end of year (in thousands) $1,017,955 713,654 612,604 559,279 606,295
Portfolio turnover rate 105% 81 95 95 81
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Per
share data for 1995 was determined based on average shares outstanding.
22
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KEMPER TECHNOLOGY FUND
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(i) Financial statements included in Part A of the Registration
Statement: Financial Highlights.
(ii) Financial statements included in Part B of the Registration
Statement:
Statement of assets and liabilities--October 31, 1995.
Statement of operations for the year ended October 31, 1995.
Statement of changes in net assets for each of the two years in
the period ended October 31, 1995.
Portfolio of investments--October 31, 1995.
Notes to financial statements.
Schedules II, III, IV and V are omitted as the required information is
not present.
Schedule I has been omitted as the required information is presented in
the portfolio of investments at October 31, 1995.
(b) Exhibits
<TABLE>
<S> <C>
99.B.1. Amended and Restated Agreement and Declaration of Trust.
99.B.2. By-Laws.
99.B.3. Inapplicable.
99.B.4. (a) Text of Share Certificate.
99.B.4. (b) Written Instrument Establishing and Designating Separate Classes of
Shares.
99.B.5. Investment Management Agreement.
99.B.6. (a) Underwriting and Distribution Services Agreement.
99.B.6. (b) Form of Selling Group Agreement.
99.B.7. Inapplicable.
99.B.8. (a) Custody Agreement (Form 1).
99.B.8. (b) Foreign Custody Agreement (Form 2).
99.B.9. (a) Agency Agreement.
99.B.9. (b) Supplement to Agency Agreement.
99.B.9. (c) Administrative Services Agreement.
99.B.9. (d) Amendment to Administrative Services Agreement.
99.B.9. (e) Assignment and Assumption (ASA).
99.B.10. Inapplicable.
99.B.11. Report and Consent of Independent Auditors.
99.B.12. Inapplicable.
99.B.13. Inapplicable.
99.B.14.(a) Kemper Retirement Plan Prototype.
99.B.14.(b) Model Individual Retirement Account.
99.B.15. See 6(a) above (Class B and Class C shares).
99.B.16. Performance Calculations.
99.B.18. Multi-Distribution System Plan.
99.B.24. Powers of Attorney.
27 Financial Data Schedule.
99.485(B) Representation of Counsel (Rule 485).
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable.
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ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 4, 1996, there were holders of record of the sole series of
shares of Registrant as follows: 47,906 Class A; 12,309 Class B; 830 Class C and
4,835 Class I.
ITEM 27. INDEMNIFICATION
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the 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.
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ITEM 28(a) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information pertaining to business and other connections of the
Registrant's investment adviser is hereby incorporated by reference to the
section of the Prospectus captioned "Investment Manager and Underwriter," and to
the section of the Statement of Additional Information captioned "Investment
Manager and Underwriter."
Kemper Financial Services, Inc., investment adviser of the Registrant, is
investment adviser of:
Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Kemper Money Market Fund
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Quantitative Equity Fund
Kemper Horizon Fund
Kemper Europe Fund
Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund
Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund
and Kemper International Bond Fund.
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Item 28(b)(i) Business and Other Connections of Officers
and Directors of Kemper Financial Services Inc.,
the Investment Advisor
TIMBERS, STEPHEN B.
Director, President, Chief Executive Officer and Chief Investment Officer,
Kemper Financial Services, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Zurich Investment Management, Inc.
Director, Chairman, Kemper Service Company
Director, Dreman Value Advisors, Inc.
Director, President, Kemper International Management, Inc.
Trustee and President, Kemper Funds
Director, The LTV Corporation
Director, Investment Analysts Society of Chicago
NEAL, JOHN E.
Director, Chief Operating Officer, Kemper Financial Services, Inc.,
President, Kemper Funds Group
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Zurich Investment Management, Inc.
Director, Dreman Value Advisors, Inc.
Director, Camelot Financial Corporation
Director, Coast Broadcasting Company
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, Kemper Real Estate, Inc.
Director, President, Kemper/Cymrot, Inc.
Director, President, Kemper/Cymrot Management, Inc.
Director, President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Corporate Centre, Inc.
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Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Tourelle Corporation
Director, Two Corporate Centre, Inc.
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Centreville, Inc.
Director, President, KI Colorado Boulevard, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI LaFiesta Square, Inc.
Director, President, KI Lewinsville, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.
Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Lafayette BART, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, RespiteCare
Director, President, SMS Realty Corp.
Vice President, Kemper Funds
Director, Urban Shopping Centers, Inc.
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PETERS, JOHN E.
Director, Senior Executive Vice President, Kemper Financial
Services, Inc.
Director, Dreman Value Advisors, Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Zurich Investment Management, Inc.
Vice President, Kemper Funds
Director, Kemper Service Company
BEIMFORD, JR., JOSEPH P.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Municipal Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
CHAPMAN II, WILLIAM E.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
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COXON, JAMES H.
Executive Vice President, Kemper Financial Services, Inc.
Director, Vice President, Galaxy Offshore, Inc.
Executive Vice President, Kemper Asset Management Company
FERRO, DENNIS H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper International Fund
Director, Managing Director-Equities, Kemper Investment Management
Company Limited
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund
GREENAWALT, JAMES L.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
JOHNS, GORDON K.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Global Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper International Bond Fund
Vice President, Kemper International Management, Inc.
Managing Director, Kemper Investment
Management Company Limited
Vice President, Kemper Multi-Market Income Trust
Director, Thames Heritage Parade Limited
LANGBAUM, GARY A.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Total Return Fund
Vice President, Kemper Investors Fund
REYNOLDS, STEVEN H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper International Fund
Vice President, Kemper Blue Chip Fund
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Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Horizon Fund
Vice President, Kemper Investors Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund
SILIGMUELLER, DALE S.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Service Company
BUKOWSKI, DANIEL J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Value Plus Growth Fund
BUTLER, DAVID H.
Senior Vice President, Kemper Financial Services, Inc.
CERVONE, DAVID M.
Senior Vice President, Kemper Financial Services, Inc.
CESSINE, ROBERT S.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
CHESTER, TRACY McCORMICK
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Value Plus Growth Fund
CIARLELLI, ROBERT W.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Kemper Service Company
COLLECCHIA, FRANK E.
Senior Vice President, Kemper Financial Services, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company
Senior Investment Officer, Fidelity Life Association
Vice President, FKLA Loire Court, Inc.
Vice President, FLA First Nationwide, Inc.
Vice President, FLA Plate Building, Inc.
Vice President, Galaxy Offshore, Inc.
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Senior Investment Officer, Kemper Investors Life Insurance
Company
Vice President, KI Arnold Industrial, Inc.
Vice President, KI Canyon Park, Inc.
Vice President, KI Centreville, Inc.
Vice President, KI Colorado Boulevard, Inc.
Vice President, KI Dublin Boulevard, Inc.
Vice President, KI LaFiesta Square, Inc.
Vice President, KI Lewinsville, Inc.
Vice President, KI Monterey Research, Inc.
Vice President, KI Olive Street, Inc.
Vice President, KI Sutter Street, Inc.
Vice President, KI Thornton Boulevard, Inc.
Vice President, KR 77 Fitness Center, Inc.
Vice President, KR Avondale Redmond, Inc.
Vice President, KR Black Mountain, Inc.
Vice President, KR Brannan Resources, Inc.
Vice President, KR Clay Capital, Inc.
Vice President, KR Cranbury, Inc.
Vice President, KR Delta Wetlands, Inc.
Vice President, KR Gainesville, Inc.
Vice President, KR Halawa Associates, Inc.
Vice President, KR Hotels, Inc.
Vice President, KR Lafayette Apartments, Inc.
Vice President, KR Lafayette BART, Inc.
Vice President, KR Palm Plaza, Inc.
Vice President, KR Red Hill Associates, Inc.
Vice President, KR Seagate/Gateway North, Inc.
Vice President, KR Venture Way, Inc.
Vice President, KR Walnut Creek, Inc.
COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Kemper Financial
Services, Inc.
Vice President and Secretary, Kemper Funds
Assistant Secretary, Kemper International Management, Inc.
DIERENFELDT, DAVID F.
Senior Vice President, Associate General Counsel,
Assistant Secretary, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Secretary, Dreman Value Advisors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services
Insurance Agency, Inc.
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Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Zurich Investment Management, Inc.
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company
Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Service Company
DUDASIK, PATRICK H.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Chief Financial Officer and Treasurer,
Dreman Value Advisors, Inc.
Vice President and Treasurer, Zurich Investment Management, Inc.
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Treasurer and Chief Financial Officer, Kemper Service Company
Director and Treasurer, Kemper Investment Management Company
Limited
DUFFY, JEROME L.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Funds
GALLAGHER, MICHAEL L.
Senior Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
GLASSMAN, HARVEY
Senior Vice President, Kemper Financial Services, Inc.
GOERS, RICHARD A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
INNES, BRUCE D.
Senior Vice President, Kemper Financial Services, Inc.
Co-President, International Association of Corporate and
Professional Recruiters
KLEIN, GEORGE
Senior Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Zurich Investment Management, Inc.
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KORTH, FRANK D.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
McNAMARA, MICHAEL A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
MIER, CHRISTOPHER J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Municipal Income Trust
MURRIHY, MAURA J.
Senior Vice President, Kemper Financial Services, Inc.
NATHANSON, IRA
Senior Vice President, Kemper Financial Services, Inc.
RABIEGA, CRAIG F.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
RACHWALSKI, JR. FRANK J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Portfolios
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
REGNER, THOMAS M.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Horizon Fund
RESIS, JR., HARRY E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
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Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
SCHUMACHER, ROBERT T.
Senior Vice President, Kemper Financial Services, Inc.
SMITH, JR., EDWARD BYRON
Senior Vice President, Kemper Financial Services, Inc.
VINCENT, CHRISTOPHER T.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Zurich Investment Management, Inc.
BAZAN, KENNETH M.
First Vice President, Kemper Financial Services, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
BOEHM, JONATHAN J.
First Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
BURROW, DALE R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
BYRNES, ELIZABETH A.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust
CHIEN, CHRISTINE
First Vice President, Kemper Financial Services, Inc.
DeMAIO, CHRIS C.
First Vice President, Kemper Financial Services, Inc.
Vice President and Chief Accounting Officer, Kemper Service
Company
DEXTER, STEPHEN P.
First Vice President, Kemper Financial Services, Inc.
DOYLE, DANIEL J.
First Vice President, Kemper Financial Services, Inc.
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FENGER, JAMES E.
First Vice President, Kemper Financial Services, Inc.
HALE, DAVID D.
First Vice President, Kemper Financial Services, Inc.
HARRINGTON, MICHAEL E.
First Vice President, Kemper Financial Services, Inc.
HORTON, ROBERT J.
First Vice President, Kemper Financial Services, Inc.
JACOBS, PETER M.
First Vice President, Kemper Financial Services, Inc.
KEELEY, MICHELLE M.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios
KIEL, CAROL L.
First Vice President, Kemper Financial Services, Inc.
LAUGHLIN, ANN M.
First Vice President, Kemper Financial Services, Inc.
LENTZ, MAUREEN P.
First Vice President, Kemper Financial Services, Inc.
McCRINDLE-PETRARCA, SUSAN
First Vice President, Kemper Financial Services, Inc.
MINER, EDWARD
First Vice President, Kemper Financial Services, Inc.
MURRAY, SCOTT S.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
NORRIS, JOHNSTON A.
First Vice President, Kemper Financial Services, Inc.
PAYNE, III, ROBERT D.
First Vice President, Kemper Financial Services, Inc.
PANOZZO, ROBERTA L.
First Vice President, Kemper Financial Services, Inc.
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RADIS, STEVE A.
First Vice President, Kemper Financial Services, Inc.
RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant
Secretary, Kemper Financial Services, Inc.
Assistant Secretary, Kemper Distributors, Inc.
SILVIA, JOHN E.
First Vice President, Kemper Financial Services, Inc.
STUEBE, JOHN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
THOUIN, EDITH A.
First Vice President, Kemper Financial Services, Inc.
Director-European Equities, Kemper Investment Management Company Limited
Vice President, Kemper Europe Fund
TRUTTER, JONATHAN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
WETHERALD, ROBERT F.
First Vice President, Kemper Financial Services, Inc.
WILLSON, STEPHEN R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
WITTNEBEL, MARK E.
First Vice President, Kemper Financial Services, Inc.
BARRY, JOANN M.
Vice President, Kemper Financial Services, Inc.
BODEM, RICHARD A.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
BURSHTAN, DAVID H.
Vice President, Kemper Financial Services, Inc.
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CARNEY, ANNE T.
Vice President, Kemper Financial Services, Inc.
CARTER, PAUL J.
Vice President, Kemper Financial Services, Inc.
CHRISTIANSEN, HERBERT A.
Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
COHEN, JERRI I.
Vice President, Kemper Financial Services, Inc.
ESOLA, CHARLES J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
FRIHART, THORA A.
Vice President, Kemper Financial Services, Inc.
GERACI, AUGUST L.
Vice President, Kemper Financial Services, Inc.
GOLAN, JAMES S.
Vice President, Kemper Financial Services, Inc.
HUOT, LISA L.
Vice President, Kemper Financial Services, Inc.
KARWOWSKI, KENNETH F.
Vice President, Kemper Financial Services, Inc.
KNAPP, WILLIAM M.
Vice President, Kemper Financial Services, Inc.
KOCH, DEBORAH L.
Vice President, Kemper Financial Services, Inc.
KOURY, KATHRYN E.
Vice President, Kemper Financial Services, Inc.
KRANZ, KATHY J.
Vice President, Kemper Financial Services, Inc.
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KRUEGER, PAMELA D.
Vice President, Kemper Financial Services, Inc.
KYCE, JOYCE
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
LeFEBVRE, THOMAS J.
Vice President, Kemper Financial Services, Inc.
MANGIPUDI, V. RAO
Vice President, Kemper Financial Services, Inc.
McGOVERN, KAREN B.
Vice President, Kemper Financial Services, Inc.
MILLIGAN, BRIAN J.
Vice President, Kemper Financial Services, Inc.
Assistant Treasurer, Kemper Real Estate, Inc.
Assistant Treasurer, Kemper Cymrot, Inc.
Assistant Treasurer, Kemper Cymrot Management, Inc.
Assistant Treasurer, FKLA Loire Court, Inc.
Assistant Treasurer, FKLA Realty Corporation
Assistant Treasurer, FLA First Nationwide, Inc.
Assistant Treasurer, FLA Plate Building, Inc.
Assistant Treasurer, FLA Realty Corporation
Assistant Treasurer, Kemper Portfolio Corporation
Assistant Treasurer, KFC Portfolio Corporation
Assistant Treasurer, KILICO Realty Corporation
Assistant Treasurer, KI Arnold Industrial, Inc.
Assistant Treasurer, KI Canyon Park, Inc.
Assistant Treasurer, KI Centreville, Inc.
Assistant Treasurer, KI Colorado Boulevard, Inc.
Assistant Treasurer, KI Dublin Boulevard, Inc.
Assistant Treasurer, KI LaFiesta Square, Inc.
Assistant Treasurer, KI Lewinsville, Inc.
Assistant Treasurer, KI Monterey Research, Inc.
Assistant Treasurer, KI Olive Street, Inc.
Assistant Treasurer, KI Thornton Boulevard, Inc.
Assistant Treasurer, KI Sutter Street, Inc.
Assistant Treasurer, KR 77 Fitness Center, Inc.
Assistant Treasurer, KR Avondale Redmond, Inc.
Assistant Treasurer, KR Black Mountain Inc.
Assistant Treasurer, KR Brannon Resources, Inc.
Assistant Treasurer, KR Clay Capital, Inc.
Assistant Treasurer, KR Cranbury, Inc.
Assistant Treasurer, KR Delta Wetlands, Inc.
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Assistant Treasurer, KR Gainesville, Inc.
Assistant Treasurer, KR Hotels, Inc.
Assistant Treasurer, KR Lafayette Apartments, Inc.
Assistant Treasurer, KR Lafayette BART, Inc.
Assistant Treasurer, KR Palm Plaza, Inc.
Assistant Treasurer, KR Red Hill Associates, Inc.
Assistant Treasurer, KR Seagate/Gateway North, Inc.
Assistant Treasurer, KR Venture Way, Inc.
Assistant Treasurer, KR Walnut Creek, Inc.
MITCHELL, KATHERINE H.
Vice President, Kemper Financial Services, Inc.
MURPHY, THOMAS M.
Vice President, Kemper Financial Services, Inc.
NEVILLE, BRIAN P.
Vice President, Kemper Financial Services, Inc.
PANOZZO, ALBERT R.
Vice President, Kemper Financial Services, Inc.
PONTECORE, SUSAN E.
Vice President, Kemper Financial Services, Inc.
QUADRINI, LISA L.
Vice President, Kemper Financial Services, Inc.
ROKOSZ, PAUL A.
Vice President, Kemper Financial Services, Inc.
ROSE, KATIE M.
Vice President, Kemper Financial Services, Inc.
SHULTZ, KAREN D.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
SMITH, ROBERT G.
Vice President, Kemper Financial Services, Inc.
SOPHER, EDWARD O.
Vice President, Kemper Financial Services, Inc.
STROMM, LAWRENCE D.
Vice President, Kemper Financial Services, Inc.
C-17
<PAGE> 130
TEPPER, SHARYN A.
Vice President, Kemper Financial Services, Inc.
VANDEMERKT, RICHARD J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WATKINS, JAMES K.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WERTH, ELIZABETH C.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Distributors, Inc.
Assistant Secretary, Kemper Mutual Funds
Assistant Secretary, Kemper International Bond Fund
Assistant Secretary, Kemper Target Equity Fund
Assistant Secretary, Kemper-Dreman Fund, Inc.
Assistant Secretary, Kemper Horizon Fund
Assistant Secretary, Kemper Europe Fund
WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.
ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.
C-18
<PAGE> 131
ITEM 29. PRINCIPAL UNDERWRITER
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Mutual
Funds, Kemper Investors Fund, Kemper International Bond
Fund and Kemper-Dreman Fund, Inc.
(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 120 South LaSalle Street, Chicago, Illinois
60603.
<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- --------------------- -------------
<S> <C> <C>
John E. Peters Principal Director, President Vice President
William E. Chapman, II Director, Executive Vice President None
James L. Greenawalt Director, Executive Vice President None
John E. Neal Director Vice President
Stephen B. Timbers Director President, Trustee
Patrick H. Dudasik Financial Principal, Treasurer
and Chief Financial Officer None
Linda A. Bercher Senior Vice President None
Thomas V. Bruns Senior Vice President None
Terry Cunningham Senior Vice President None
Daniel T. O'Lear Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
David F. Dierenfeldt Vice President, Secretary None
Carlene D. Merold Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Diane E. Ratekin Assistant Secretary None
</TABLE>
(c) Not applicable.
C-19
<PAGE> 132
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, the offices of Registrant's investment adviser, Kemper
Financial Services, Inc., 120 South LaSalle Street, Chicago, Illinois 60603 or
at the offices of the custodian and transfer agent, Investors Fiduciary Trust
Company, 127 West 10th Street, Kansas City, Missouri 64105 or at the offices of
the shareholder service agent, Kemper Service Company, 811 Main Street, Kansas
City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-20
<PAGE> 133
S I G N A T U R E S
-------------------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Chicago and State of Illinois, on the 26th day of January, 1996.
KEMPER TECHNOLOGY FUND
By /s/ Stephen B. Timbers
---------------------------
Stephen B. Timbers, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below on January 26,
1996 on behalf of the following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Stephen B. Timbers President
------------------------------------- (Principal
Stephen B. Timbers Executive Officer)
and Trustee
/s/ David W. Belin* Trustee
-------------------------------------
/s/ Lewis A. Burnham* Trustee
-------------------------------------
/s/ Donald L. Dunaway* Trustee
-------------------------------------
/s/ Robert B. Hoffman* Trustee
-------------------------------------
/s/ Donald R. Jones* Trustee
-------------------------------------
/s/ Shirley D. Peterson* Trustee
-------------------------------------
/s/ William P. Sommers* Trustee
-------------------------------------
/s/ Jerome L. Duffy
------------------------------------- Treasurer
Jerome L. Duffy (Principal
Financial and
Accounting Officer)
*Philip J. Collora signs this document pursuant to powers of
attorney filed herewith.
/s/ Philip J. Collora
--------------------------------
Philip J. Collora
<PAGE> 134
KEMPER TECHNOLOGY FUND
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Exhibits
99.B.1. Amended and Restated Agreement and Declaration of Trust.
99.B.2. By-Laws.
99.B.3. Inapplicable.
99.B.4. (a) Text of Share Certificate.
99.B.4. (b) Written Instrument Establishing and Designating Separate Classes of
Shares.
99.B.5. Investment Management Agreement.
99.B.6. (a) Underwriting and Distribution Services Agreement.
99.B.6. (b) Form of Selling Group Agreement.
99.B.7. Inapplicable.
99.B.8. (a) Custody Agreement (Form 1).
99.B.8. (b) Foreign Custody Agreement (Form 2).
99.B.9. (a) Agency Agreement.
99.B.9. (b) Supplement to Agency Agreement.
99.B.9. (c) Administrative Services Agreement.
99.B.9. (d) Amendment to Administrative Services Agreement.
99.B.9. (e) Assignment and Assumption (ASA).
99.B.10. Inapplicable.
99.B.11. Report and Consent of Independent Auditors.
99.B.12. Inapplicable.
99.B.13. Inapplicable.
99.B.14.(a) Kemper Retirement Plan Prototype.
99.B.14.(b) Model Individual Retirement Account.
99.B.15. See 6(a) above (Class B and Class C shares).
99.B.16. Performance Calculations.
99.B.18. Multi-Distribution System Plan.
99.B.24. Powers of Attorney.
27 Financial Data Schedule.
99.485(B) Representation of Counsel (Rule 485).
</TABLE>
<PAGE> 1
EXHIBIT-99.B1
KEMPER TECHNOLOGY FUND
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
WHEREAS, Article IX, Section 4 of the Agreement and
Declaration of Trust of Kemper Technology Fund dated October 24,
1985, as amended, provides that the Agreement and Declaration of
Trust may be amended at any time by an instrument in writing
signed by a majority of the then Trustees when authorized so to
do by vote of Shareholders holding a majority of the Shares
entitled to vote; and
WHEREAS, the holders of a majority of the Shares entitled to
vote have authorized this Amendment and Restatement of said
Agreement and Declaration of Trust;
NOW, THEREFORE, said Agreement and Declaration of Trust is
amended and restated to read in its entirety as follows:
WITNESSETH
WHEREAS, this Trust has been formed for the purposes of
carrying on the business of a management investment company; and
WHEREAS, in furtherance of such purposes, the Trustees have
acquired and may hereafter acquire assets and properties, to hold
and manage as trustees of a Massachusetts voluntary association
with transferable shares in accordance with the provisions
hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets and properties which
they may from time to time acquire in any manner as Trustees
hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the
holders from time to time of shares in this Trust as hereinafter
set forth.
<PAGE> 2
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
NAME AND REGISTERED AGENT
-------------------------
SECTION 1. This Trust shall be known as Kemper Technology
Fund and the Trustees shall conduct the business of the Trust
under that name or any other name as they may from time to time
determine. The registered agent for the Trust in Massachusetts
shall be CT Corporation System whose address is 2 Oliver Street,
Boston, Massachusetts or such other person as the Trustees may
from time to time designate.
DEFINITIONS
-----------
SECTION 2. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts voluntary
association established by this Agreement and Declaration of
Trust, as amended from time to time, pursuant to Massachusetts
General Laws, Chapter 182;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV and then in
office;
(c) "Shares" mean the equal proportionate transferable
units of interest into which the beneficial interest in the Trust
shall be divided from time to time or, if more than one series or
class of shares is authorized under or pursuant to Article III,
the equal proportionate transferable units of interest into which
each such series or class shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of
1940 (and any successor statute) and the Rules and Regulations
thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter" and
"vote of a majority of the outstanding voting securities" shall
have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
-2-
<PAGE> 3
(h) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time;
(i) "Net asset value" shall have the meaning set forth in
Section 6 of Article VI hereof;
(j) The terms "series" or "series of Shares" refers to the
one or more separate investment portfolios of the Trust
authorized under or pursuant to Article III into which the assets
and liabilities of the Trust may be divided and the Shares of the
Trust representing the beneficial interest of Shareholders in
such respective portfolios; and
(k) The terms "class" or "class of Shares" refers to the
division of Shares representing any series into two or more
classes authorized under or pursuant to Article III.
ARTICLE II
----------
NATURE AND PURPOSE
------------------
The Trust is a voluntary association (commonly known as a
business trust) of the type referred to in Chapter 182 of the
General Laws of the Commonwealth of Massachusetts. The Trust is
not intended to be, shall not be deemed to be, and shall not be
treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or
Shareholders or any of them for any purpose be deemed to be, or
be treated in any way whatsoever as though they were, liable or
responsible hereunder as partners or joint venturers. The
purpose of the Trust is to engage in, operate and carry on the
business of an open-end management investment company and to do
any and all acts or things as are necessary, convenient,
appropriate, incidental or customary in connection therewith.
ARTICLE III
-----------
SHARES
------
DIVISION OF BENEFICIAL INTEREST
-------------------------------
SECTION 1. The Shares of the Trust shall be issued in one
or more series as the Trustees may, without Shareholder approval,
authorize from time to time. Each series shall be preferred over
all other series in respect of the assets allocated to that
-3-
<PAGE> 4
series as hereinafter provided. The beneficial interest in each
series shall at all times be divided into Shares (without par
value) of such series, each of which shall, except as provided in
the following sentence, represent an equal proportionate interest
in such series with each other Share of the same series, none
having priority or preference over another Share of the same
series. The Trustees may, without Shareholder approval, divide
the Shares of any series into two or more classes, Shares of each
such class having such preferences and special or relative rights
or privileges (including conversion rights, if any) as the
Trustees may determine. The number of Shares authorized shall be
unlimited, and the Shares so authorized may be represented in
part by fractional Shares. The Trustees may from time to time
divide or combine the shares of any series or class into a
greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class.
Without limiting the authority of the Trustees set forth in this
Section 1 to establish and designate any further series or class,
the Trustees hereby establish and designate one series of Shares
to be known as the "Initial Portfolio." The establishment and
designation of any series or class of Shares in addition to the
foregoing shall be effective upon the execution by a majority of
the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such series or class. As provided in Article IX,
Section 1 hereof, any series or class of Shares (whether or not
there shall then be Shares outstanding of said series or class)
may be terminated by the Trustees by written notice to the
Shareholders of such series or class or by the vote of the
Shareholders of such series or class entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter. In the event of any such termination, a majority of the
then Trustees shall execute an instrument setting forth the
termination of such series or class.
OWNERSHIP OF SHARES
-------------------
SECTION 2. The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer or similar
agent. No certificates certifying the ownership of Shares shall
be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer
of Shares and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent of the Trust,
as the case may be, shall be conclusive as to who are the
Shareholders of each series or class and as to the number of
Shares of each series or class held from time to time by each
Shareholder.
-4-
<PAGE> 5
INVESTMENT IN THE TRUST; ASSETS OF A SERIES
-------------------------------------------
SECTION 3. The Trustees may issue Shares of the Trust to
such persons and on such terms and, subject to any requirements
of law, for such consideration, which may consist of cash or
tangible or intangible property or a combination thereof, as they
may from time to time authorize.
All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall, irrevocably belong to
such series of Shares for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of
account of the Trust and are herein referred to as "assets of"
such series. Any allocation of the assets of a series among any
classes of Shares of such series shall be made in a manner
consistent with the preferences and special or relative rights or
privileges of such classes.
RIGHT TO REFUSE ORDERS
----------------------
SECTION 4. The Trust by action of its Trustees shall have
the right to refuse to accept any subscription for its Shares at
any time without any cause or reason therefore whatsoever.
Without limiting the foregoing, the Trust shall have the right
not to accept subscriptions under circumstances or in amounts as
the Trustees in their sole discretion consider to be
disadvantageous to existing Shareholders and the Trust may from
time to time set minimum and/or maximum amounts which may be
invested in Shares by a subscriber.
ORDER IN PROPER FORM
--------------------
SECTION 5. The criteria for determining what constitutes an
order in proper form and the time of receipt of such an order by
the Trust shall be prescribed by resolution of the Trustees.
WHEN SHARES BECOME OUTSTANDING
------------------------------
SECTION 6. Shares subscribed for and for which an order in
proper form has been received shall be deemed to be outstanding
as of the time of acceptance of the order therefor and the
determination of the net price thereof, which price shall be then
deemed to be an asset of the Trust.
-5-
<PAGE> 6
MERGER OR CONSOLIDATION
-----------------------
SECTION 7. In connection with the acquisition of all or
substantially all the assets or stock of another investment
company, investment trust, or of a company classified as a
personal holding company under Federal Income Tax laws, the
Trustees may issue or cause to be issued Shares of a series or
class and accept in payment therefor, in lieu of cash, such
assets at their market value, or such stock at the market value
of the assets held by such investment company or investment
trust, either with or without adjustment for contingent costs or
liabilities.
NO PREEMPTIVE RIGHTS, ETC.
--------------------------
SECTION 8. Shareholders shall have no preemptive or other
right to receive, purchase or subscribe for any additional Shares
or other securities issued by the Trust. The Shareholders shall
have no appraisal rights with respect to their Shares and, except
as otherwise determined by the Trustees in their sole discretion,
shall have no exchange or conversion rights with respect to their
Shares.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
-----------------------------------------------------
SECTION 9. Shares shall be deemed to be personal property
giving only the rights provided in this instrument. Every
Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of the
Declaration of Trust and to have become a party thereto. The
death of a Shareholder during the continuance of the Trust shall
not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees,
but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any
title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
-6-
<PAGE> 7
SHAREHOLDER INSPECTION RIGHTS
-----------------------------
SECTION 10. Any Shareholder or his agent may inspect and
copy during normal business hours any of the following documents
of the Trust: By-Laws, minutes of the proceedings of the
Shareholders and annual financial statements of the Trust,
including a balance sheet and financial statements of operations.
The foregoing rights of inspection of Shareholders of the Trust
are the exclusive and sole rights of the Shareholders with
respect thereto and no Shareholder of the Trust shall have, as a
Shareholder, the right to inspect or copy any of the books,
records or other documents of the Trust except as specifically
provided in this Section 10 of this Article III or except as
otherwise determined by the Trustees.
ARTICLE IV
----------
THE TRUSTEES
------------
NUMBER, DESIGNATION, ELECTION, TERM, ETC.
-----------------------------------------
SECTION 1.
----------
(a) INITIAL TRUSTEE. Robert J. Engling, the initial
Trustee, appointed other Trustees pursuant to subsection (c) of
this Section 1 and then resigned.
(b) NUMBER. The Trustees serving as such, whether named
above or hereafter becoming Trustees, may increase or decrease
the number of Trustees to a number other than the number
theretofore determined which number shall not be less than three
nor more than fifteen except during the period that the initial
Trustee named above is sole Trustee. No decrease in the number
of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 1.
(c) TERM AND ELECTION. Each Trustee, whether named above
or hereafter becoming a Trustee, shall serve as a Trustee until
the next meeting of Shareholders, if any, called for the purpose
of considering the election or re-election of such Trustee or of
a successor to such Trustee, and until the election and
qualification of his successor, if any, elected at such meeting,
or until such Trustee sooner dies, resigns, retires or is
removed. Upon the election and qualification of a new Trustee,
-7-
<PAGE> 8
the Trust estate shall vest in the new Trustee (together with the
continuing or other new Trustees) without any further act or
conveyance. Prior to any sale of Shares pursuant to any public
offering, the initial Trustee named above shall have the right to
appoint other persons as Trustees each to serve as Trustees as
aforesaid until the first meeting of Shareholders called for the
purpose of the election or re-election of such Trustee or of a
successor to such Trustee.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to the Chairman of the
Board, if any, the President or the Secretary of the Trust, and
such resignation or retirement shall take effect upon such
delivery or upon such later date as is specified in such
instrument.
(e) REMOVAL. Any Trustee may be removed for cause at any
time by written instrument, signed by at least a majority of the
number of Trustees prior to such removal, specifying the date
upon which such removal shall become effective. Any Trustee may
be removed with or without cause (i) by the vote of the
Shareholders entitled to vote more than fifty percent (50%) of
the votes entitled to be cast on the matter voting together
without regard to series or class at any meeting called for such
purpose, or (ii) by a written consent filed with the custodian of
the Trust's portfolio securities and executed by the Shareholders
entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter voting together without regard
to series or class.
Whenever ten or more Shareholders of record who have been
such for at least six months preceding the date of application,
and who hold in the aggregate Shares constituting at least one
percent of the outstanding Shares of the Trust, shall apply to
the Trustees in writing, stating that they wish to communicate
with other Shareholders with a view to obtaining signatures to a
request for a meeting to consider removal of a Trustee and
accompanied by a form of communication and request that they wish
to transmit, the Trustees shall within five business days after
receipt of such application inform such applicants as to the
approximate cost of mailing to the Shareholders of record the
proposed communication and form of request. Upon the written
request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing,
the Trustees shall, within reasonable promptness, mail such
material to all Shareholders of record at their addresses as
recorded on the books of the Trust. Notwithstanding the
foregoing, the Trustees may refuse to mail such material on the
basis and in accordance with the procedures set forth in the last
two paragraphs of Section 16(c) of the 1940 Act.
-8-
<PAGE> 9
(f) VACANCIES. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation the
death, resignation, retirement, removal or incapacity of any of
the Trustees, or resulting from an increase in the number of
Trustees by the other Trustees may (but so long as there are at
least three remaining Trustees, need not unless required by the
1940 Act) be filled either by a majority of the remaining
Trustees, even if less than a quorum, through the appointment in
writing of such other person as such remaining Trustees in their
discretion shall determine or, whenever deemed appropriate by the
remaining Trustees, by the election by the Shareholders, at a
meeting called for such purpose, of a person to fill such
vacancy. Upon the appointment or election and qualification of a
new Trustee as aforesaid, the Trust estate shall vest in the new
Trustee, together with the continuing Trustees, without any
further act or conveyance, except that any such appointment or
election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to be
effective at a later date shall become effective only at or after
the effective date of said retirement, resignation, or increase
in number of Trustees.
(g) MANDATORY ELECTION BY SHAREHOLDERS. Notwithstanding
the foregoing provisions of this Section 1, the Trustees shall
call a meeting of the Shareholders for the election of one or
more Trustees at such time or times as may be required in order
that the provisions of the 1940 Act may be complied with, and the
authority hereinabove provided for the Trustees to appoint any
successor Trustee or Trustees shall be restricted if such
appointment would result in failure of the Trust to comply with
any provision of the 1940 Act.
(h) EFFECT OF DEATH, RESIGNATION, ETC. The death,
resignation, retirement, removal or incapacity of the Trustees,
or any one of them, shall not operate to annul or terminate the
Trust or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration
of Trust.
(i) NO ACCOUNTING. Except under circumstances which would
justify his removal for cause, no person ceasing to be a Trustee
as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required
to make an accounting to the Shareholders or remaining Trustees
upon such cessation.
POWERS
------
SECTION 2. The Trustees, subject only to the specific
limitations contained in this Declaration of Trust or otherwise
imposed by the 1940 Act or other applicable law, shall have,
-9-
<PAGE> 10
without further or other authorization and free from any power or
control of the Shareholders, full, absolute and exclusive power,
control and authority over the Trust assets and the business and
affairs of the Trust to the same extent as if the Trustees were
the sole and absolute owners thereof in their own right and to do
all such acts and things as in their sole judgment and discretion
are necessary and incidental to, or desirable for the carrying
out of any of the purposes of the Trust or conducting the
business of the Trust. Any determination made in good faith by
the Trustees of the purposes of the Trust or the existence of any
power or authority hereunder shall be conclusive. In construing
the provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to the
Trustees. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with this Declaration of Trust
containing provisions relating to the business of the Trust, the
conduct of its affairs, its rights or powers and the rights or
powers of its Shareholders, Trustees, officers, employees and
other agents and may amend and repeal them to the extent that
such By-Laws do not reserve that right to the Shareholders; fill
vacancies in their number, including vacancies resulting from
increases in their number, unless a vote of the Trust's
Shareholders is required to fill such vacancies pursuant to the
1940 Act; elect and remove such officers and appoint and
terminate such agents as they consider appropriate; appoint from
their own number, and terminate, any one or more committees
consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session,
exercise some or all of the powers and authority of the Trustees
as the Trustees may determine; appoint an advisory board, the
members of which shall not be Trustees and need not be
Shareholders; employ one or more investment advisers or managers
as provided in Section 6 of this Article IV; employ one or more
custodians of the assets of the Trust and authorize such
custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of
securities; retain a transfer agent or a Shareholder services
agent, or both; provide for the distribution of Shares by the
Trust, through one or more principal underwriters or otherwise;
set record dates for the determination of Shareholders with
respect to various matters; and in general delegate such
authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of
the Trust or to any such custodian or underwriter.
In furtherance of and not in limitation of the foregoing,
the Trustees shall have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of, to lend or to pledge, to trade in or deal in
securities or interests of all kinds, however evidenced, or
-10-
<PAGE> 11
obligations of all kinds, however evidenced, or rights, warrants,
or contracts to acquire such securities, interests, or
obligations, of any private or public company, corporation,
association, general or limited partnership, trust or other
enterprise or organization, foreign or domestic, or issued or
guaranteed by any national or state government, foreign or
domestic, or their agencies, instrumentalities or subdivisions
(including but not limited to, bonds, debentures, bills, time
notes and all other evidences of indebtedness); negotiable or
non-negotiable instruments; any and all futures contracts;
government securities and money market instruments (including but
not limited to, bank certificates of deposit, finance paper,
commercial paper, bankers acceptances, and all kinds of
repurchase agreements);
(b) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of foreign currencies, and funds and exchanges, and make
deposits in banks, savings banks, trust companies, and savings
and loan associations, foreign or domestic;
(c) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop, and dispose of (by sale or
otherwise) any property, real or personal, and any interest
therein;
(d) To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the Trust;
(e) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property;
and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(f) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
(g) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust
or in the name of a custodian, subcustodian or other depositary
or a nominee or nominees or otherwise;
(h) Subject to the provisions of Article III, to allocate
assets, liabilities, income and expenses of the Trust to a
particular series of Shares or to apportion the same among two or
more series, provided that any liabilities or expenses incurred
by a particular series shall be payable solely out of the assets
of that series; and to the extent necessary or appropriate to
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<PAGE> 12
give effect to the preferences and special or relative rights or
privileges of any classes of Shares, to allocate assets,
liabilities, income and expenses of a series to a particular
class of Shares of that series or to apportion the same among two
or more classes of Shares of that series;
(i) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security or property of which is or was held in the
Trust; to consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer, and to pay calls
or subscriptions with respect to any security held in the Trust;
(j) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security
to, any such committee, depositary or trustee, and to delegate to
them such power and authority with relation to any security
(whether or not so deposited or transferred) as the Trustees
shall deem proper, and to agree to pay, and to pay, such portion
of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(k) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;
(l) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(m) To borrow funds;
(n) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;
and to mortgage and pledge the Trust property or any part thereof
to secure any of or all such obligations;
(o) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of
distribution and principal on its portfolio investments, and
insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such
office or position, or by reason of any action alleged to have
been taken or omitted by any such person as Shareholder, Trustee,
officer, employee, agent, investment adviser or manager,
principal underwriter, or independent contractor, including any
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<PAGE> 13
action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(p) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry
out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees of common law trusts. Except as otherwise provided
herein or from time to time in the By-Laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (if a quorum by present), within
or without Massachusetts, including any meeting held by means of
a conference telephone or other communications equipment by means
of which all persons participating in the meeting can communicate
with each other simultaneously and participation by such means
shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.
PAYMENT OF EXPENSES, ALLOCATION OF LIABILITIES
----------------------------------------------
SECTION 3. The Trustees are authorized to pay or to cause
to be paid out of the principal or income of the Trust, or partly
out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the
management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of
the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditor, counsel, custodian, transfer
agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
The assets of a particular series of Shares shall be charged
with the liabilities (including, in the discretion of the
Trustees or their delegate, accrued expenses and reserves)
incurred in respect of such series (but not with liabilities
incurred in respect of any other series) and such series shall
also be charged with its share of any other liabilities. Any
allocation of the liabilities of a series among classes of Shares
of that series shall be done in a manner consistent with the
preferences and special or relative rights or privileges of such
classes. The determination of the Trustees shall be final and
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<PAGE> 14
conclusive as to the amount of liabilities to be charged to one
or more particular series or class. The Trustees may delegate
from time to time the power to make such allocation to one or
more Trustees or to an agent of the Trust appointed for such
purpose. The liabilities with which a series is so charged are
herein referred to as the "liabilities of" such series.
SECTION 4. The Trustees shall have the power, as frequently
as they may determine, to cause each Shareholder to pay directly,
in advance or arrears, for charges for the Trust's custodian or
transfer or shareholder service or similar agent, an amount fixed
from time to time by the Trustees, by setting off such charges
due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of Shares in the
account of such Shareholder by that number of full and/or
fractional shares which represents the outstanding amount of such
charges due from such Shareholder.
OWNERSHIP OF ASSETS OF THE TRUST
--------------------------------
SECTION 5. Title to all of the assets of each series of the
Trust and of the Trust shall at all times be considered as vested
in the Trustees.
ADVISORY, MANAGEMENT AND DISTRIBUTION
-------------------------------------
SECTION 6. Subject to a favorable vote of a majority of the
outstanding voting securities of a series of the Trust, the
Trustees may on behalf of such series, at any time and from time
to time, contract for exclusive or nonexclusive advisory and/or
management services for such series with a corporation, trust,
association or other organization, every such contract to comply
with such requirements and restrictions as may be set forth in
the By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of such series shall be held
uninvested and to make changes in such series' investments. The
Trustees may also, at any time and from time to time, contract
with a corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with
such requirements and restrictions as may be set forth in the By-
Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
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<PAGE> 15
The fact that:
(a) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer, partner, trustee,
employee, manager, advisor, principal underwriter, or distributor
or agent of or for any corporation, trust, association, or other
organization, or of or for any parent or affiliate of any
organization, with which an advisory or management or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the
Trust, or that
(b) any corporation, trust, association or other
organization with which an advisory or management or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract may have been or may hereafter
be made also has an advisory or management contract, or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or
has other businesses or interests shall not affect the validity
of any such contract or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing the same or
create any liability or accountability to the Trust or its Share-
holders.
ARTICLE V
---------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
VOTING POWERS
-------------
SECTION 1. Subject to the voting provisions of one or more
classes of Shares, the Shareholders shall have power to vote
only: (a) for the election or removal of Trustees as provided in
Article IV, Section 1; (b) with respect to any investment advisor
or manager as provided in Article IV, Section 6; (c) with respect
to any termination or reorganization of the Trust or any series
or class thereof to the extent and as provided in Article IX,
Section 1; (d) with respect to any amendment of this Declaration
of Trust to the extent and as provided in Article IX, Section 4;
and (e) with respect to such additional matters relating to the
Trust as may be required by law, the 1940 Act, this Declaration
of Trust, the By-Laws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency) or
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<PAGE> 16
any state, or as the Trustees may consider necessary or
desirable.
Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote. Notwith-
standing any other provision of the Declaration of Trust, on any
matter submitted to a vote of Shareholders all Shares of the
Trust then entitled to vote shall, except to the extent otherwise
required or permitted by the preferences and special or relative
rights or privileges of any class of Shares, be voted by
individual series and not in the aggregate or by class, except
(a) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual series; and (b) when the Trustees
have determined that the matter affects only the interests of one
or more series or classes, then only Shareholders of such series
or class shall be entitled to vote thereon. There shall be no
cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy.
A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless
at or prior to the exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger.
Until Shares of any series or class are issued, the Trustees
may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be
taken by Shareholders of such series or class.
SHAREHOLDER MEETINGS
--------------------
SECTION 2. Meetings of Shareholders (including meetings
involving only one or more but less than all series or classes)
may be called and held from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Such
meetings shall be held at the principal office of the Trust as
set forth in the By-Laws of the Trust or at any such other place
within the United States as may be designated in the call
thereof, which call shall be made by the Trustees or the
President of the Trust. Meetings of Shareholders may be called
by the Trustees or such other person or persons as may be
specified in the By-Laws upon written application by Shareholders
holding at least twenty-five percent (25%) (or ten percent (10%))
if the purpose of the meeting is to determine if a Trustee is to
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<PAGE> 17
be removed from office) of the Shares then outstanding of all
series and classes entitled to vote at such meeting requesting a
meeting be called for a purpose requiring action by the
Shareholders as provided herein or in the By-Laws which purpose
shall be specified in any such written application.
Shareholders shall be entitled to at least seven days'
written notice of any meeting of the Shareholders.
QUORUM AND REQUIRED VOTE
------------------------
SECTION 3. The presence at a meeting of Shareholders in
person or by proxy of Shareholders entitled to vote at least
thirty percent (30%) of all votes entitled to be cast at the
meeting of each series or class entitled to vote as a series or
class shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or
of this Declaration of Trust permits or requires that the holders
of Shares shall vote in the aggregate and not as a series or
class, then the presence in person or by proxy of Shareholders
entitled to vote at least thirty percent (30%) of all votes
entitled to be cast at the meeting (without regard to series or
class) shall constitute a quorum. Any lesser number, however,
shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set
for the original meeting without the necessity of further notice.
Except when a larger vote is required by any provisions of
the 1940 Act, this Declaration of Trust or the By-Laws, a
majority of the Shares of each series or class voted on the
matter shall decide that matter insofar as that series or class
is concerned, provided that where any provision of law, this
Declaration of Trust or the By-Laws permits or requires that the
holders of Shares vote in the aggregate and not as a series or
class, then a majority of the Shares voted on any matter (without
regard to series or class) shall decide such matter and a
plurality shall elect a Trustee.
ACTION BY WRITTEN CONSENT
-------------------------
SECTION 4. Any action taken by Shareholders may be taken
without a meeting if Shareholders entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter of each series or class or, where any provision of law,
this Declaration of Trust or the By-Laws permits or requires that
the holders of Shares vote in the aggregate and not as a series
or class, if Shareholders entitled to vote more than fifty
percent (50%) of the votes entitled to be cast thereon (without
regard to series or class) (or in either case such larger vote as
shall be required by any provision of this Declaration of Trust
-17-
<PAGE> 18
or the By-Laws) consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
ADDITIONAL PROVISIONS
---------------------
SECTION 5. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
----------
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES,
-------------------------------------------
AND DETERMINATION OF NET ASSET VALUE
------------------------------------
DISTRIBUTIONS
-------------
SECTION 1. The Trustees may in their sole discretion from
time to time distribute to the Shareholders of any series such
income and gains, accrued or realized, as the Trustees may
determine, after providing for actual and accrued expenses and
liabilities of such series (including such reserves as the
Trustees may establish) determined in accordance with this
Declaration of Trust and good accounting practices. The Trustees
shall have full discretion to determine which items shall be
treated as income and which items as capital and their determina-
tion shall be binding upon the Shareholders. Distributions to
any series, if any be made, shall be in Shares of such series, in
cash or otherwise and on a date or dates determined by the
Trustees. At any time and from time to time in their discretion,
the Trustees may distribute to the Shareholders of any series as
of a record date or dates determined by the Trustees, in Shares
of such series, in cash or otherwise, all or part of any gains
realized on the sale or disposition of property of the series or
otherwise, or all or part of any other principal of the Trust
attributable to the series. Except to the extent otherwise
required or permitted by the preferences and special or relative
rights or privileges of any classes of Shares of that series,
each distribution pursuant to this Section 1 shall be made
ratably according to the number of Shares of the series held by
the several Shareholders on the applicable record date thereof,
provided that distributions from assets of a series may only be
made to the holders of the Shares of such series and provided
that no distributions need be made on Shares purchased pursuant
to orders received, or for which payment is made, after such time
or times as the Trustees may determine. Any distribution to the
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<PAGE> 19
Shareholders of a particular class of Shares shall be made to
such Shareholders prorata in proportion to the number of Shares
of such class held by each of them. Any distribution paid in
Shares will be paid at the net asset value thereof as determined
in accordance with this Declaration of Trust. The Trustees have
the power, in their discretion, to distribute for any year
amounts sufficient to enable the Trust to qualify as a "regulated
investment company" under the Internal Revenue Code as amended
(or any successor thereto) to avoid any liability for federal
income tax in respect of that year.
REDEMPTIONS AND REPURCHASES
---------------------------
SECTION 2. Any holder of Shares of the Trust may, by
presentation of a request in proper form, together with his
certificates, if any, for such Shares, in proper form for
transfer to the Trust or duly authorized agent of the Trust,
request redemption of his shares for the net asset value thereof
determined and computed in accordance with the provisions of this
Section 2 and the provisions of Section 6 of this Article VI.
Upon receipt by the Trust or its duly authorized agent, as
the case may be, of such a request for redemption of Shares in
proper form, such Shares shall be redeemed at the net asset value
per share of the particular series or class next determined after
such request is received or determined as of such other time
fixed by the Trustees as may be permitted or required by the 1940
Act. The criteria for determining what constitutes a request for
redemption in proper form and the time of receipt of such request
shall be fixed by the Trustees.
The obligation of the Trust to redeem its Shares as set
forth above in this Section 2 shall be subject to the condition
that such obligation may be suspended by the Trust by or under
authority of the Trustees during any period or periods when and
to the extent permissible under the 1940 Act. If there is such a
suspension, any Shareholder may withdraw any request for
redemption which has been received by the Trust during any such
period and the applicable net asset value with respect to which
would but for such suspension be calculated as of a time during
such period. Upon such withdrawal, the Trust shall return to the
Shareholder the certificates therefor, if any.
The Trust may also purchase, repurchase or redeem Shares in
accordance with such other methods, upon such other terms and
subject to such other conditions as the Trustee may from time to
time authorize at a price not exceeding the net asset value of
such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made. Shares redeemed or
repurchased by the Trust hereunder shall be canceled upon such
redemption or repurchase without further action by the Trust or
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<PAGE> 20
the Trustees and the number of issued and outstanding Shares of
the relevant series and class shall thereupon by reduced by such
amount.
PAYMENT FOR SHARES REDEEMED
---------------------------
SECTION 3. Payment of the redemption price for Shares
redeemed pursuant to this Article VI shall be made by the Trust
or its duly authorized agent after receipt by the Trust or its
duly authorized agent of a request for redemption in proper form
(together with any certificates for such Shares as provided in
Section 2 above) in accordance with procedures and subject to
conditions prescribed by the Trustees; provided, however, that
payment may be postponed during the period in which the
redemption of Shares is suspended under Section 2 above. Subject
to any generally applicable limitation imposed by the Trustees,
any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or
partly in kind, instead of in cash. Such payment in kind shall
be made by distributing securities or other property,
constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other
property then held by the series of Shares being redeemed,
purchased or repurchased (but not necessarily involving a portion
of each of the series' holdings) and taken at their value used in
determining the net asset value of the Shares in respect of which
payment is made.
REDEMPTIONS AT THE OPTION OF THE TRUST
--------------------------------------
SECTION 4. The Trust shall have the right at its option and
at any time and from time to time to redeem Shares of any
Shareholder at the net asset value thereof as determined in
accordance with Section 6 of this Article VI, if at such time
such Shareholder owns fewer shares of a series or class than, or
Shares of a series or class having an aggregate net asset value
of less than, an amount determined from time to time by the
Trustees. Any such redemption at the option of the Trust shall
be made in accordance with such other criteria and procedures for
determining the Shares to be redeemed, the redemption date and
the means of effecting such redemption as the Trustees may from
time to time authorize.
ADDITIONAL PROVISIONS RELATING TO DIVIDENDS, REDEMPTIONS AND
------------------------------------------------------------
REPURCHASES
-----------
SECTION 5. The completion of redemption, purchase or
repurchase of Shares shall constitute a full discharge of the
-20-
<PAGE> 21
Trust and the Trustees with respect to such Shares. No dividend
or distribution (including, without limitation, any distribution
paid upon termination of the Trust or of any series or class)
with respect to, nor any redemption or repurchase of, the Shares
of any series or class shall be effected by the Trust other than
from the assets of such series.
DETERMINATION OF NET ASSET VALUE
--------------------------------
SECTION 6. The term "net asset value" of each Share of a
series or class as of any particular time shall be the quotient
obtained by dividing the value, as at such time, of the net
assets of such series or class (i.e., the value of the assets of
such series or class less the liabilities of such series or
class, exclusive of liabilities represented by the Shares of such
series or class) by the total number of Shares of such series or
class outstanding at such time, all determined and computed in
accordance with the Trust's current prospectus.
The Trustees, or any officer, or officers or agent of the
Trust designated for the purpose by the Trustees shall determine
the net asset value of the Shares of each series or class, and
the Trustees shall fix the time or times as of which the net
asset value of the Shares of each series or class shall be
determined and shall fix the periods during which any such net
asset value shall be effective as to sales, redemptions and
repurchases of, and other transactions in, the Shares of such
series or class, except as such times and periods for any such
transaction may be fixed by other provisions of this Declaration
of Trust or by the By-Laws.
Determinations in accordance with this Section 6 made in
good faith shall be binding on all parties concerned.
HOW LONG SHARES ARE OUTSTANDING
-------------------------------
SECTION 7. Shares of the Trust surrendered to the Trust for
redemption by it pursuant to the provisions of Section 2 of this
Article VI shall be deemed to be outstanding until the redemption
price thereof is determined pursuant to this Article VI and,
thereupon and until paid, the redemption price thereof shall be
deemed to be a liability of the Trust. Shares of the Trust
purchased by the Trust in the open market shall be deemed to be
outstanding until confirmation of purchase thereof by the Trust
and, thereupon and until paid, the purchase price thereof shall
be deemed to be a liability of the Trust. Shares of the Trust
redeemed by the Trust pursuant to Section 4 of this Article VI
shall be deemed to be outstanding until said Shares are deemed to
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<PAGE> 22
be redeemed in accordance with procedures adopted by the Trustees
pursuant to said Section 4.
ARTICLE VII
-----------
COMPENSATION AND LIMITATION OF LIABILITY OF
-------------------------------------------
TRUSTEES AND SHAREHOLDERS
-------------------------
SECTION 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust if the rate thereof is
prescribed by such Trustees. Nothing herein shall in any way
prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and
payment for the same by the Trust, it being recognized that such
employment may result in such Trustee being considered an
Affiliated Person or an Interested Person.
LIMITATION OF LIABILITY
-----------------------
SECTION 2. The Trustees shall not be responsible or liable
in any event for any neglect or wrongdoing of any officer, agent,
employee, investment advisor or manager, principal underwriter or
custodian, nor shall any Trustee be responsible for the act or
omission of any other Trustee. Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate, Share
or undertaking and every other act or thing whatsoever executed
or done by or on behalf of the Trust or the Trustee or any of
them in connection with the Trust shall be conclusively deemed to
have been executed or done only in or with respect to their or
his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets
and property of the Trust or a particular series of Shares, and
may contain such further recital as he or they may deem
-22-
<PAGE> 23
appropriate, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
All persons extending credit to, contracting with or having
any claim against the Trust or a particular series of Shares
shall look only to the assets of the Trust or the assets of that
particular series of Shares, as the case may be, for payment
under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be
personally liable therefor.
TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
-------------------------------------------------------------
SECTION 3. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.
A Trustee shall be liable only for his own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this
Declaration of Trust and their duties as Trustees hereunder, and
shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. In
discharging their duties, the Trustees, when acting in good
faith, shall be entitled to rely upon the books of account of the
Trust and upon written reports made to the Trustees by any
officer appointed by them, any independent public accountant and
(with respect to the subject matter of the contract involved) any
officer, partner or responsible employee of any other party to
any contract entered into pursuant to Section 2 of Article IV.
The Trustees shall not be required to give any bond as such, nor
any surety if a bond is required.
LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES
------------------------------------------------
SECTION 4. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the
Trust or upon its order.
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<PAGE> 24
ARTICLE VIII
------------
INDEMNIFICATION
---------------
Subject to the exceptions and limitations contained in this
Article, every person who is, or has been, a Trustee or officer
of the Trust (including persons who serve at the request of the
Trust as directors, officers or trustees of another organization
in which the Trust has an interest as a shareholder, creditor or
otherwise) hereinafter referred to as a "Covered Person", shall
be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been such a Trustee,
director or officer and against amounts paid or incurred by him
in settlement thereof.
No indemnification shall be provided hereunder to a Covered
Person:
(a) against any liability to the Trust or its
Shareholders by reason of a final adjudication by the court or
other body before which the proceeding was brought that he
engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office;
(b) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interest of
the Trust; or
(c) in the event of a settlement or other disposition
not involving a final adjudication (as provided in paragraph (a)
or (b)) and resulting in a payment by a Covered Person, unless
there has been either a determination that such Covered Person
did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the
settlement or other disposition or a reasonable determination,
based on a review of readily available facts (as opposed to a
full trial-type inquiry) that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or
(ii) by written opinion of independent legal
counsel.
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<PAGE> 25
The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who
has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel other than Covered
Persons may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding subject to a claim for
indemnification under this Article shall be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification
under this Article, provided that either:
(a) such undertaking is secured by a surety bond or
some other appropriate security or the Trust shall be insured
against losses arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter) or independent legal
counsel in a written opinion shall determine, based upon a review
of the readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Article, a "Disinterested Trustee" is one
(a) who is not an "interested person" of the Trust, as defined in
the 1940 Act (including anyone who has been exempted from being
an "interested person" by any rule, regulation or order of the
Commission), and (b) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending.
As used in this Article, the words "claim", "action", "suit"
or "proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall
include without limitation, attorneys' fees, cost, judgments,
amounts paid in settlement, fines, penalties and other
liabilities.
In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or
other legal representatives or in the case of a corporation or
-25-
<PAGE> 26
other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability but only out of the
assets of the particular series of Shares of which he or she is
or was a Shareholder; provided, however, there shall be no
liability or obligation of the Trust arising hereunder to
reimburse any Shareholder for taxes paid by reason of such
Shareholder's ownership of Shares or for losses suffered by
reason of any changes in value of any Trust assets.
ARTICLE IX
----------
MISCELLANEOUS
-------------
DURATION, TERMINATION AND REORGANIZATION OF TRUST
-------------------------------------------------
SECTION 1. Unless terminated as provided herein, the Trust
shall continue without limitation of time. The Trust may be
terminated at any time by the Trustees by written notice to the
Shareholders without a vote of the Shareholders of the Trust or
by the vote of the Shareholders entitled to vote more than fifty
percent (50%) of the votes of each series or class entitled to be
cast on the matter. Any series or class of Shares may be
terminated at any time by the Trustees by written notice to the
Shareholders of such series or class without a vote of the
Shareholders of such series or class or by the vote of the
Shareholders of such series or class entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter.
Upon termination of the Trust or of any one or more series
or classes of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued
or anticipated, of the particular series or class as may be
determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees consider appropriate reduce to
the extent necessary the remaining assets of the particular
series to distributable form in cash or other securities, or any
combination thereof, and distribute the proceeds to the
Shareholders of the series or class involved, ratably according
the number of Shares of such series or class held by the several
Shareholders of such series or class on the date of termination.
Any such distributions with respect to any series which has one
or more classes of Shares outstanding shall be made ratably to
such classes in the same proportion as the number of Shares of
each class bears to the total number of Shares of the series,
except to the extent otherwise required or permitted by the
preferences and special or relative rights or privileges of any
classes of Shares of any such series.
-26-
<PAGE> 27
At any time by the affirmative vote of the Shareholders of
the affected series entitled to vote more than fifty percent
(50%) of the votes entitled to be cast on the matter, the
Trustees may sell, convey and transfer the assets of the Trust,
or the assets belonging to any one or more series, to another
trust, partnership, association or corporation organized under
the laws of any state of the United States, or to the Trust to be
held as assets belonging to another series of the Trust, in
exchange for cash, shares or other securities (including, in the
case of a transfer to another series of the Trust, Shares of such
other series) with such transfer being made subject to or with
the assumption by the transferee of, the liabilities belonging to
each series the assets of which are so distributed. Following
such transfer, the Trustees shall distribute such cash, shares or
other securities (giving due effect to the assets and liabilities
belonging to and any other differences among the various series
the assets belonging to which have so been transferred) among the
Shareholders of the series the assets belonging to which have
been so transferred; and if all the assets of the Trust have been
so distributed, the Trust shall be terminated.
FILING OF COPIES, REFERENCES, HEADINGS
--------------------------------------
SECTION 2. The original or a copy of this instrument and of
each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by any officer of the Trust as to whether or not any
such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein",
"hereof", and "hereunder", shall be deemed to refer to this
instrument as amended from time to time. Headings are placed
herein for convenience of reference only and shall not be taken
as a part hereof or control or affect the meaning, construction
or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an
original.
APPLICABLE LAW
--------------
SECTION 3. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to
-27-
<PAGE> 28
be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
AMENDMENTS
----------
SECTION 4. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then
Trustees when authorized so to do by vote of Shareholders holding
more than fifty percent (50%) of the Shares of each series
entitled to vote, except that an amendment which in the
determination of the Trustees shall affect the holders of one or
more series or classes of Shares but not the holders of all
outstanding series and classes shall be authorized by vote of the
Shareholders holding more than fifty percent (50%) of the Shares
entitled to vote of each series or class affected and no vote of
Shareholders of a series or class not affected shall be required.
Amendments having the purpose of changing the name of the Trust
or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision which is defective or
inconsistent with the 1940 Act or with the requirements of the
Internal Revenue Code and the regulations thereunder for the
Trust's obtaining the most favorable treatment thereunder
available to regulated investment companies shall not require
authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands and seals for themselves and their assigns, as of this 27th
day of May, 1994.
/s/ Charles M. Kierscht
---------------------------------
(SEAL) Charles M. Kierscht, Trustee
321 Princeton Road
Hinsdale, Illinois 60521
(signatures continue)
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<PAGE> 29
/s/ David W. Belin
---------------------------------
David W. Belin, Trustee
1705 Plaza Circle
Des Moines, Iowa 50322
/s/ Lewis A. Burnham
---------------------------------
Lewis A. Burnham, Trustee
16410 Avila Boulevard
Tampa, Florida 33613
/s/ Donald L. Dunaway
--------------------------------
Donald L. Dunaway, Trustee
235A North Elm Grove Road
Brookfield, Wisconsin 53005
/s/ Robert B. Hoffman
--------------------------------
Robert B. Hoffman, Trustee
1448 North Lake Shore Drive,
Apt. 7-8A
Chicago, IL 60610
/s/ Donald R. Jones
--------------------------------
Donald R. Jones, Trustee
1776 Beaver Pond Road
Inverness, Illinois 60067
--------------------------------
Charles M. Kierscht, Trustee
321 Princeton Road
Hinsdale, Illinois 60521
/s/ William P. Sommers
--------------------------------
William P. Sommers, Trustee
2181 Parkside Ave.
Hillsborough, California 94010
/s/ Stephen B. Timbers
--------------------------------
Stephen B. Timbers, Trustee
1448 North Lake Shore Drive,
Apt. 12-1/2C
Chicago, Illinois 60610
<PAGE> 30
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
Then personally appeared the afore-named David W. Belin,
Lewis A. Burnham, Donald L. Dunaway, Robert B. Hoffman, Donald R.
Jones, Charles M. Kierscht, William P. Sommers and Stephen B.
Timbers who acknowledged the foregoing instrument to be their
free act and deed, before me this 27th day of May, 1994.
/s/ Mary A. McCallister
--------------------------------
NOTARY PUBLIC
-30-
<PAGE> 1
EXHIBIT 99.B2
BY-LAWS OF
KEMPER TECHNOLOGY FUND
SECTION 1. AGREEMENT AND DECLARATION OF
----------------------------------------
TRUST AND PRINCIPAL OFFICE
--------------------------
1.1 Agreement and Declaration of Trust. These By-Laws shall be
subject to the Agreement and Declaration of Trust, as from time
to time in effect (the "Declaration of Trust"), of Kemper
Retirement Fund, the Massachusetts business trust established by
the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust; Resident Agent. The
principal office of the Trust shall be located in Chicago,
Illinois. Its resident agent in Massachusetts shall be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts or
such other person as the Trustees may from time to time select.
SECTION 2. SHAREHOLDERS
------------------------
2.1 Shareholder Meetings. Meetings of the shareholders may be
called at any time by the Trustees, by the President or, if the
Trustees and the President shall fail to call any meeting of
shareholders for a period of 30 days after written application of
one or more shareholders who hold at least 25% of all shares
issued and outstanding and entitled to vote at the meeting (or
10% if the purpose of the meeting is to determine if a Trustee
shall be removed from office), then such shareholders may call
such meeting. Each call of a meeting shall state the place,
date, hour and purposes of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall
be held at the principal office of the Trust, or, to the extent
permitted by the Declaration of Trust, at such other place within
the United States as shall be designated by the Trustees or the
President of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of
shareholders, stating the place, date and hour and the purposes
of the meeting, shall be given at least seven days before the
meeting to each shareholder entitled to vote thereat by leaving
such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the
Trust. Such notice shall be given by the Secretary or an
<PAGE> 2
Assistant Secretary or by an officer designated by the Trustees.
No notice of any meeting of shareholders need be given to a
shareholder if a written waiver of notice, executed before or
after the meeting by such shareholder or his attorney thereunto
duly authorized, is filed with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election
unless requested by a shareholder present or represented at the
meeting and entitled to vote in the election.
2.5 Proxies and Voting. Shareholders entitled to vote may vote
either in person or by proxy in writing dated not more than six
months before the meeting named therein, which proxies shall be
filed with the Secretary or other person responsible to record
the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of
such meeting. At all meetings of shareholders, unless the voting
is conducted by inspectors, all questions relating to the
qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman
of the meeting.
SECTION 3. TRUSTEES
--------------------
3.1 Committees and Advisory Board. The Trustees may appoint
from their number an executive committee and other committees.
Any such committee may be abolished and reconstituted at any time
and from time to time by the Trustees. Except as the Trustees
may otherwise determine, any such committee may make rules for
the conduct of its business. The Trustees may appoint an
advisory board to consist of not less than two nor more than five
members. The members of the advisory board shall be compensated
in such manner as the Trustees may determine and shall confer
with and advise the Trustees regarding the investments and other
affairs of the Trust. Each member of the advisory board shall
hold office until the first meeting of the Trustees following the
meeting of the shareholders, if any, next following his
appointment and until his successor is appointed and qualified,
or until he sooner dies, resigns, is removed, or becomes
disqualified, or until the advisory board is sooner abolished by
the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as
the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
-2-
<PAGE> 3
determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice
immediately after and at the same place as any meeting of the
shareholders.
3.3 Special Meetings. Special meetings of the Trustees may be
held at any time and at any place designated in the call of the
meeting, when called by the Chairman of the Board or by two or
more Trustees, sufficient notice thereof being given to each
Trustee by the Secretary or an Assistant Secretary or by the
officer or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send
notice by mail at least three days or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at
his or her usual or last known business or residence address or
to give notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need
not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with
the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting
nor a waiver of a notice need specify the purposes of the
meeting.
3.5 Quorum. At any meeting of the Trustees, one-third of the
Trustees then in office shall constitute a quorum; provided,
however, a quorum (unless the Board of Trustees consists of two
or fewer persons) shall not be less than two. Any meeting may be
adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting
may be held as adjourned without further notice.
SECTION 4. OFFICERS AND AGENTS
-------------------------------
4.1 Enumeration; Qualification. The officers of the Trust shall
be a President, a Treasurer, a Secretary and such other officers,
if any, as the Trustees from time to time may in their discretion
elect or appoint. The Trust may also have such agents, if any,
as the Trustees from time to time may in their discretion
appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same
person.
4.2 Powers. Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers
herein and in the Declaration of Trust set forth, such duties and
powers as are commonly incident to his or her office as if the
-3-
<PAGE> 4
Trust were organized as a Massachusetts business corporation and
such other duties and powers as the Trustees may from time to
time designate.
4.3 Election. The President, the Treasurer and the Secretary
shall be elected annually by the Trustees at their first meeting
in each calendar year or at such later meeting in such year as
the Trustees shall determine. Other officers or agents, if any,
may be elected or appointed by the Trustees at said meeting or at
any other time.
4.4 Tenure. The President, Treasurer and Secretary shall hold
office until the first meeting of Trustees in each calendar year
and until their respective successors are chosen and qualified,
or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each other officer shall hold office
and each agent shall retain his or her authority at the pleasure
of the Trustees.
4.5 Chairman of the Board. The Chairman of the Board of
Trustees, if one is so appointed, shall be chosen from among the
Trustees and may hold office only so long as he continues to be a
Trustee. The Chairman of the Board, if any is so appointed,
shall preside at all meetings of the shareholders and of the
Trustees at which he is present; and shall have such other duties
and powers as specified herein and as may be assigned to him by
the Trustee.
4.6 President and Vice Presidents. The President shall be the
chief executive officer of the Trust. The President shall,
subject to the control of the Trustees, have general charge and
supervision of the Trust and shall perform such other duties and
have such other powers as the Trustees shall prescribe from time
to time. Any Vice President shall at the request or in the
absence or disability of the President exercise the powers of the
President and perform such other duties and have such other
powers as shall be designated from time to time by the Trustees.
4.7 Treasurer and Controller. The Treasurer shall be the chief
financial officer of the Trust and, subject to any arrangement
made by the Trustees with a bank or trust company or other
organization as custodian or transfer or shareholder services
agent, shall be in charge of its valuable papers and shall have
such other duties and powers as may be designated from time to
time by the Trustees or by the President. If at any time there
shall be no Controller, the Treasurer shall also be the chief
accounting officer of the Trust and shall have the duties and
power prescribed herein for the Controller. Any Assistant
Treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
-4-
<PAGE> 5
The Controller, if any be elected, shall be the chief accounting
officer of the Trust and shall be in charge of its books of
account and accounting records. The Controller shall be
responsible for preparation of financial statements of the Trust
and shall have such other duties and powers as may be designated
from time to time by the Trustees or the President.
4.8 Secretary and Assistant Secretaries. The Secretary shall
record all proceedings of the shareholders and the Trustees in
books to be kept therefor, which books shall be kept at the
principal office of the Trust. In the absence of the Secretary
from any meeting of shareholders or Trustees, an Assistant
Secretary, or if there be none or if he or she is absent, a
temporary clerk chosen at the meeting shall record the
proceedings thereof in the aforesaid books.
SECTION 5. RESIGNATIONS AND REMOVALS
-------------------------------------
Any Trustee may resign his trust or retire as a Trustee in
accordance with procedures set forth in the Declaration of Trust.
Any officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of
the Board, the President or the Secretary or to a meeting of the
Trustees. The Trustees may remove any officer or advisory board
member elected or appointed by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the
extent expressly provided in a written agreement with the Trust,
no Trustee, officer, or advisory board member resigning, and no
officer or advisory board member removed, shall have any right to
any compensation for any period following his or her resignation
or removal, or any right to damages on account of such removal.
SECTION 6. VACANCIES
---------------------
A vacancy in the office of Trustee shall be filed in accordance
with the Declaration of Trust. Vacancies resulting from the
death, resignation, incapacity or removal of any officer may be
filled by the Trustees. Each successor of any such officer shall
hold office for the unexpired term, and in the case of the
President, the Treasurer and the Secretary, until his or her
successor is chosen and qualified, or in each case until he or
she sooner dies, resigns, is removed or becomes disqualified.
SECTION 7. SHARES OF BENEFICIAL INTEREST
-----------------------------------------
7.1 Share Certificates. No certificates certifying the
ownership of shares shall be issued except as the Trustees may
otherwise authorize. In the event that the Trustees authorize
-5-
<PAGE> 6
the issuance of share certificates, subject to the provisions of
Section 7.3, each shareholder shall be entitled to a certificate
stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President
and by the Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary. Such signatures may be facsimiles if the certificate
is signed by a transfer or shareholder services agent or by a
registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased
to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the
transfer or shareholder services agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the
record holders of such shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as
the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees
may at any time discontinue the issuance of share certificates
and may, by written notice to each shareholder, require the
surrender of share certificates to the Trust for cancellation.
Such surrender and cancellation shall not affect the ownership of
shares in the Trust.
SECTION 8. RECORD DATE
-----------------------
The Trustees may fix in advance a time, which shall not be more
than 90 days before the date of any meeting of shareholders or
the date for the payment of any dividend or making of any other
distribution to shareholders, as the record date for determining
the shareholders having the right to notice and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of
record on such record date shall have such right, notwithstanding
any transfer of shares on the books of the Trust after the record
date.
-6-
<PAGE> 7
SECTION 9. SEAL
----------------
The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced circular die with the word
"Massachusetts" together with the name of the Trust, cut or
engraved thereon; but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument, or
other paper executed and delivered by or on behalf of the Trust.
SECTION 10. EXECUTION OF PAPERS
--------------------------------
Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds,
leases, transfers, contracts, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the Trust shall
be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the President or by one of the
Vice Presidents or by the Treasurer or by whomsoever else shall
be designated for that purpose by the vote of the Trustees and
need not bear the seal of the Trust.
SECTION 11. FISCAL YEAR
------------------------
The fiscal year of the Trust shall end on such date in each year
as the Trustees shall from time to time determine.
SECTION 12. AMENDMENTS
-----------------------
These By-Laws may be amended or repealed, in whole or in part, by
a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such majority.
-7-
<PAGE> 1
EXHIBIT 99.B4(a)
TEXT OF SHARE CERTIFICATE
[Name]
is the owner of [number] shares
of beneficial interest in the above noted Fund (the "FUND"), of
the series and class, if any, specified, fully paid and
nonassessable, the said shares being issued and held subject to
the provisions of the Agreement and Declaration of Trust of the
Fund, and all amendments thereto, copies of which are on file
with the Secretary of The Commonwealth of Massachusetts. The
said owner by accepting this certificate agrees to and is bound
by all of the said provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by
attorney upon surrender of this certificate to the Fund properly
endorsed for transfer. This certificate is executed on behalf of
the Trustees of the Fund as Trustees and not individually and the
obligations hereof are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Fund or, if applicable, the
specified series of the Fund. The shares may be subject to a
contingent deferred sales charge. This certificate is not valid
unless countersigned by the Transfer Agent.
<PAGE> 1
EXHIBIT 99.B4(b)
KEMPER TECHNOLOGY FUND
WRITTEN INSTRUMENT ESTABLISHING
AND DESIGNATING SEPARATE CLASSES OF SHARES
------------------------------------------
The undersigned constitute all the Trustees of Kemper
Technology Fund (the "Fund"), a Massachusetts business trust
governed by an Amended and Restated Agreement and Declaration of
Trust dated May 27, 1994 (the "Amended Declaration of Trust").
This instrument is executed pursuant to Section 1 of Article III
of the Amended Declaration of Trust in order to establish and
designate separate classes of shares of any series of the Fund,
and it is based in part upon resolutions of the Board of Trustees
of the Fund adopted at a meeting on January 14, 1994.
WHEREAS, Under the Amended Declaration of Trust the Board of
Trustees has the authority, in its discretion and without
shareholder approval, to divide the shares of any series of the
Fund into separate classes of shares;
WHEREAS, This Board of Trustees has previously approved,
subject to various conditions, the division of the shares of each
series of the Fund into four classes of shares, to be named
"Class A Shares," "Class B Shares," "Class C Shares" and "Class I
Shares;"
WHEREAS, This Board of Trustees deems it desirable and in
the best interests of the Fund to divide the shares of each
series of the Fund, whether now existing or hereafter created
(the "series"), into four separate classes of shares to be named,
as previously indicated, "Class A Shares," "Class B Shares,"
"Class C Shares" and "Class I Shares" and to provide investors
with a conversion feature from Class B Shares to the Class A
Shares, which conversion feature would thereby eliminate any
distribution services fee then in effect under any plan adopted
pursuant to Rule 12b-1 of the Investment Company Act of 1940
("1940 Act") for such Class B Shares; and
WHEREAS, This Board of Trustees believes that the creation
of four separate classes of shares as provided herein will be in
the best interests of and will have no negative effects upon the
current shareholders of the Fund;
NOW, THEREFORE, the establishment and designation of
separate classes of shares of any series of the Fund is approved
in accordance with the following provisions:
<PAGE> 2
1. Subject to the conditions hereinafter set forth, the
shares of any series shall be divided into four classes to be
known respectively as the "Class A Shares," the "Class B Shares,"
the "Class C Shares" and the "Class I Shares," which classes
shall have such preferences and special or relative rights and
privileges as may be determined from time to time by this Board
of Trustees subject always to the Amended Declaration of Trust
and the 1940 Act and the rules and regulations thereunder.
2. Subject to the terms of the Amended Declaration of
Trust, the Class A Shares, Class B Shares, Class C Shares and
Class I Shares will have the same rights and privileges except
that:
(A) the Class A Shares
(1) shall be sold subject to an initial sales charge
as described in the prospectus for the Fund as from time to time
in effect or shall be issued to shareholders in connection with
the conversion feature as hereinafter described;
(2) shall have an administrative service fee;
(3) shall not have a plan of distribution adopted
under Rule 12b-1 of the 1940 Act ("Rule 12b-1 plan") and no fees
payable under the Rule 12b-1 plans for the Class B Shares or
Class C Shares shall be allocated or charged to the Class A
Shares; and
(4) shall have such dividend reinvestment, exchange
and redemption rights and privileges as may be described in the
prospectus for the Fund as from time to time in effect; and
(B) the Class B Shares
(1) shall be sold without an initial sales charge but
subject to a contingent deferred sales charge imposed upon the
redemption of the Class B shares as described in the prospectus
of the Fund as from time to time in effect;
(2) shall have an administrative service fee;
(3) shall have a Rule 12b-1 plan and any fees payable
from time to time under such plan shall be allocated and charged
to, and any voting rights with respect to such plan shall be
exercisable by, the Class B Shares only;
(4) shall convert to Class A Shares within a specified
number of years as hereinafter described; and
2
<PAGE> 3
(5) shall have such purchase, dividend reinvestment,
exchange and redemption rights and privileges associated
therewith as may be described in the prospectus for the Fund as
from time to time in effect; and
(C) the Class C Shares
(1) shall be sold without any initial sales charge or
any contingent deferred sales charge;
(2) shall have an administrative service fee;
(3) shall have a Rule 12b-1 plan and any fees payable
from time to time under such plan shall be allocated and charged
to, and any voting rights with respect to such plan shall be
exercisable by, the Class C Shares only; and
(4) shall have such purchase, dividend reinvestment,
exchange and redemption rights and privileges associated
therewith as may be described in the prospectus for the Fund as
from time to time in effect; and
(D) the Class I Shares
(1) shall be sold without any initial sales charge or
any contingent deferred sales charge;
(2) shall not have an administrative service fee;
(3) shall not have a Rule 12b-1 plan and no fees
payable under the plans for the Class B Shares or Class C Shares
shall be allocated or charged to the Class I Shares; and
(4) shall have such dividend reinvestment, exchange
and redemption rights and privileges as may be described in the
prospectus for the Fund as from time to time in effect.
3. Any shares of the Fund that are issued and outstanding
at the time when shares of the Fund are effectively divided into
separate classes of shares as set forth above shall be classified
as Class A Shares.
4. Class A Shares of a series shall be issued to holders
of Class B Shares of the same series pursuant to the following
described conversion feature:
(A) Class B Shares will convert to Class A Shares six
years after issuance of such Class B Shares; provided, however,
that any Class B Shares issued in exchange for shares originally
classified as Initial Shares of Kemper Portfolios, formerly known
as Kemper Investment Portfolios (KP), whether in connection with
a reorganization with a series of KP or otherwise, shall convert
3
<PAGE> 4
to Class A Shares seven years after issuance of such Initial
Shares if such Initial Shares were issued prior to February 1,
1991;
(B) Class B Shares issued upon reinvestment of income
and capital gain dividends and other distributions will convert
to Class A Shares on a pro rata basis with other Class B Shares;
and
(C) Conversion to Class A Shares shall be based upon
the relative net asset values of the Class A Shares and the Class
B Shares at the time of conversion.
IN WITNESS WHEREOF, the undersigned have this 27th day of
May, 1994 signed these presents.
/s/ Charles M. Kierscht
--------------------------------
Charles M. Kierscht
321 Princeton Road
Hinsdale, Illinois 60521
(signatures continue)
4
<PAGE> 5
/s/ David W. Belin
---------------------------------
David W. Belin, Trustee
1705 Plaza Circle
Des Moines, Iowa 50322
/s/ Lewis A. Burnham
---------------------------------
Lewis A. Burnham, Trustee
16410 Avila Boulevard
Tampa, Florida 33613
/s/ Donald L. Dunaway
---------------------------------
Donald L. Dunaway, Trustee
235A North Elm Grove Road
Brookfield, Wisconsin 53005
/s/ Robert B. Hoffman
---------------------------------
Robert B. Hoffman, Trustee
1448 North Lake Shore Drive,
Apt. 7-8A
Chicago, IL 60610
/s/ Donald R. Jones
---------------------------------
Donald R. Jones, Trustee
1776 Beaver Pond Road
Inverness, Illinois 60067
---------------------------------
Charles M. Kierscht, Trustee
321 Princeton Road
Hinsdale, Illinois 60521
/s/ William P. Sommers
---------------------------------
William P. Sommers, Trustee
2181 Parkside Ave.
Hillsborough, California 94010
/s/ Stephen B. Timbers
---------------------------------
Stephen B. Timbers, Trustee
1448 North Lake Shore Drive,
Apt. 12-1/2C
Chicago, Illinois 60610
<PAGE> 1
EXHIBIT 99.B5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 4th day of January, 1996, by and between
KEMPER TECHNOLOGY FUND, a Massachusetts business trust (the
"Fund"), and KEMPER FINANCIAL SERVICES, INC., a Delaware
corporation (the "Adviser").
WHEREAS, the Fund is an open-end management investment
company registered under the Investment Company Act of 1940, the
shares of beneficial interest ("Shares") of which are registered
under the Securities Act of 1933;
WHEREAS, the Fund is authorized to issue Shares in separate
series or portfolios with each representing the interests in a
separate portfolio of securities and other assets;
WHEREAS, the Fund currently offers or intends to offer
Shares in one portfolio, the Initial Portfolio, together with any
other Fund portfolios which may be established later and served
by the Adviser hereunder, being herein referred to collectively
as the "Portfolios" and individually referred to as a
"Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Adviser
to render investment advisory and management services to the
Initial Portfolio, and the Adviser is willing to render such
services;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the
investment adviser for the Initial Portfolio and other Portfolios
hereunder and to manage the investment and reinvestment of the
assets of each such Portfolio in accordance with the applicable
investment objectives and policies and limitations, and to
administer the affairs of each such Portfolio to the extent
requested by and subject to the supervision of the Board of
Trustees of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of portfolio
securities for the Fund's account with brokers or dealers
selected by it; and, in connection therewith, the Adviser is
authorized as the agent of the Fund to give instructions to the
Custodian of the Fund as to the deliveries of securities and
payments of cash for the account of the Fund. In connection with
the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board of
Trustees of the Fund determines, the Adviser shall not be deemed
<PAGE> 2
to have acted unlawfully or to have breached any duty, created by
this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker or dealer an amount of commission
for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determined in good
faith that such amount of commission was reasonable in relation
to the value of the brokerage and research services provided by
such broker or dealer viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with
respect to the clients of the Adviser as to which the Adviser
exercises investment discretion. The Fund recognizes that all
research services and research that the Adviser receives or
generates are available for all clients, and that the Fund and
other clients may benefit thereby. The investment of funds shall
be subject to all applicable restrictions of the Agreement and
Declaration of Trust and By-Laws of the Fund as may from time to
time be in force.
The Adviser accepts such employment and agrees during such
period to render such services, to furnish office facilities and
equipment and clerical, bookkeeping and administrative services
for the Fund, to permit any of its officers or employees to serve
without compensation as trustees or officers of the Fund if
elected to such positions and to assume the obligations herein
set forth for the compensation herein provided. The Adviser
shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided
or authorized, shall have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the Fund.
It is understood and agreed that the Adviser, by separate
agreements with the Fund, may also serve the Fund in other
capacities.
2. In the event that the Fund establishes one or more
portfolios other than the Initial Portfolio with respect to which
it desires to retain the Adviser to render investment advisory
and management services hereunder, it shall notify the Adviser in
writing. If the Adviser is willing to render such services, it
shall notify the Fund in writing whereupon such portfolio or
portfolios shall become a Portfolio or Portfolios hereunder.
3. For the services and facilities described in Section 1,
the Fund will pay to the Adviser at the end of each calendar
month, an investment management fee for each Portfolio computed
by applying the following annual rates to the applicable average
daily net assets of the Portfolio:
2
<PAGE> 3
<TABLE>
<CAPTION>
Applicable Average
Daily Net Assets
(Thousands) Annual Rate
------------------ -----------
<S> <C>
$0 - $ 250,000 .58 of 1%
$ 250,000 - $ 1,000,000 .55 of 1%
$ 1,000,000 - $ 2,500,000 .53 of 1%
$ 2,500,000 - $ 5,000,000 .51 of 1%
$ 5,000,000 - $ 7,500,000 .48 of 1%
$ 7,500,000 - $10,000,000 .46 of 1%
$10,000,000 - $12,500,000 .44 of 1%
Over $12,500,000 .42 of 1%
</TABLE>
The fee as computed above shall be computed separately for,
and charged as an expense of, each Portfolio based upon the
average daily net assets of such Portfolio. For the month and
year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month
and year, respectively.
4. The services of the Adviser to the Fund under this
Agreement are not to be deemed exclusive, and the Adviser shall
be free to render similar services or other services to others so
long as its services hereunder are not impaired thereby.
5. In addition to the fee of the Adviser, the Fund shall
assume and pay any expenses for services rendered by a custodian
for the safekeeping of the Fund's securities or other property,
for keeping its books of account, for any other charges of the
custodian, and for calculating the net asset value of the Fund as
provided in the prospectus of the Fund. The Adviser shall not be
required to pay and the Fund shall assume and pay the charges and
expenses of its operations, including compensation of the
trustees (other than those affiliated with the Adviser), charges
and expenses of independent auditors, of legal counsel, of any
transfer or dividend disbursing agent, and of any registrar of
the Fund, costs of acquiring and disposing of portfolio
securities, interest, if any, on obligations incurred by the
Fund, costs of share certificates and of reports, membership dues
in the Investment Company Institute or any similar organization,
costs of reports and notices to shareholders, other like
miscellaneous expenses and all taxes and fees payable to federal,
state or other governmental agencies on account of the
registration of securities issued by the Fund, filing of trust
documents or otherwise. The Fund shall not pay or incur any
obligation for any expenses for which the Fund intends to seek
3
<PAGE> 4
reimbursement from the Adviser as herein provided without first
obtaining the written approval of the Adviser. The Adviser shall
arrange, if desired by the Fund, for officers or employees of the
Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or
appointed to such positions and subject to their individual
consent and to any limitations imposed by law.
If expenses borne by the Fund for those Portfolios which the
Adviser manages in any fiscal year (including the Adviser's fee,
but excluding interest, taxes, fees incurred in acquiring and
disposing of portfolio securities, distribution services fees,
extraordinary expenses and any other expenses excludable under
state securities law limitations) exceed any applicable
limitation arising under state securities laws, the Adviser will
reduce its fee or reimburse the Fund for any excess to the extent
required by such state securities laws. If for any month the
expenses of the Fund properly chargeable to the income account
shall exceed 1/12 of the percentage of average net assets
allowable as expenses, the payment to the Adviser for that month
shall be reduced and if necessary the Adviser shall make a refund
payment to the Fund so that the total net expense will not exceed
such percentage. As of the end of the Fund's fiscal year,
however, the foregoing computations and payments shall be
readjusted so that the aggregate compensation payable to the
Adviser for the year is equal to the percentage calculated in
accordance with Section 3 hereof of the average net asset value
as determined as described herein throughout the fiscal year,
diminished to the extent necessary so that the total of the
aforementioned expense items of the Fund shall not exceed the
expense limitation. The aggregate of repayments, if any, by the
Adviser to the Fund for the year shall be the amount necessary to
limit the said net expense to said percentage in accordance with
the foregoing.
The net asset value for each Portfolio shall be calculated
in accordance with the provisions of the Fund's prospectus or as
the trustees may determine in accordance with the provisions of
the Investment Company Act of 1940. On each day when net asset
value is not calculated, the net asset value of a Portfolio shall
be deemed to be the net asset value of such Portfolio as of the
close of business on the last day on which such calculation was
made for the purpose of the foregoing computations.
6. Subject to applicable statutes and regulations, it is
understood that trustees, officers or agents of the Fund are or
may be interested in the Adviser as officers, directors, agents,
shareholders or otherwise, and that the officers, directors,
shareholders and agents of the Adviser may be interested in the
Fund otherwise than as a trustee, officer or agent.
4
<PAGE> 5
7. The Adviser shall not be liable for any error of judgment
or of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except loss
resulting from willful misfeasance, bad faith or gross negligence
on the part of the Adviser in the performance of its obligations
and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
8. This Agreement shall become effective with respect to the
Initial Portfolio on the date hereof and shall remain in full
force until March 1, 1996, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force
from year to year thereafter with respect to each Portfolio, but
only as long as such continuance is specifically approved for
each Portfolio at least annually in the manner required by the
Investment Company Act of 1940 and the rules and regulations
thereunder; provided, however, that if the continuation of this
Agreement is not approved for a Portfolio, the Adviser may
continue to serve in such capacity for such Portfolio in the
manner and to the extent permitted by the Investment Company Act
of 1940 and the rules and regulations thereunder.
This Agreement shall automatically terminate in the event of
its assignment and may be terminated at any time without the
payment of any penalty by the Fund or by the Adviser on sixty
(60) days written notice to the other party. The Fund may effect
termination with respect to any Portfolio by action of the Board
of Trustees or by vote of a majority of the outstanding voting
securities of such Portfolio.
This Agreement may be terminated with respect to any
Portfolio at any time without the payment of any penalty by the
Board of Trustees or by vote of a majority of the outstanding
voting securities of such Portfolio in the event that it shall
have been established by a court of competent jurisdiction that
the Adviser or any officer or director of the Adviser has taken
any action which results in a breach of the covenants of the
Adviser set forth herein.
The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth
in the Investment Company Act of 1940 and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of
the Adviser to receive payments on any unpaid balance of the
compensation described in Section 3 earned prior to such
termination.
9. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
5
<PAGE> 6
10. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
11. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments
thereto, all of which are on file with the Secretary of The
Commonwealth of Massachusetts, and the limitation of shareholder
and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as
such representatives and not individually, and the obligations of
the Fund hereunder are not binding upon any of the trustees,
officers, or shareholders of the Fund individually but are
binding upon only the assets and property of the Fund. With
respect to any claim by the Adviser for recovery of that portion
of the investment management fee (or any other liability of the
Fund arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or otherwise,
the Adviser shall have recourse solely against the assets of that
Portfolio to satisfy such claim and shall have no recourse
against the assets of any other Portfolio for such purpose.
12. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 11 hereof which
shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of Illinois.
6
<PAGE> 7
13. This Agreement is the entire contract between the parties
relating to the subject matter hereof and supersedes all prior
agreements between the parties relating to the subject matter
hereof.
IN WITNESS WHEREOF, the Fund and the Adviser have caused
this Agreement to be executed as of the day and year first above
written.
KEMPER TECHNOLOGY FUND
By: /s/ John E. Peters
-------------------------------
Title: Vice President
----------------------------
ATTEST:
/s/ Philip J. Collora
-----------------------------
Title: Secretary
-----------------------
KEMPER FINANCIAL SERVICES, INC.
By: /s/ Patrick H. Dudasik
-------------------------------
Title: Senior Vice President
----------------------------
ATTEST:
/s/ David F. Dierenfeldt
-----------------------------
Title: Assistant Secretary
-----------------------
7
<PAGE> 1
EXHIBIT 99.B6(a).
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 4th day of January, 1996, between KEMPER
TECHNOLOGY FUND, a Massachusetts business trust (the "Fund"), and
KEMPER DISTRIBUTORS, INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto
as follows:
1. The Fund hereby appoints KDI to act as agent for the
distribution of shares of beneficial interest (hereinafter called
"shares") of the Fund in jurisdictions wherein shares of the Fund
may legally be offered for sale; provided, however, that the Fund
in its absolute discretion may (a) issue or sell shares directly
to holders of shares of the Fund upon such terms and conditions
and for such consideration, if any, as it may determine, whether
in connection with the distribution of subscription or purchase
rights, the payment or reinvestment of dividends or
distributions, or otherwise; or (b) issue or sell shares at net
asset value to the shareholders of any other investment company,
for which KDI shall act as exclusive distributor, who wish to
exchange all or a portion of their investment in shares of such
other investment company for shares of the Fund. KDI shall
appoint various financial service firms ("Firms") to provide
distribution services to investors. The Firms shall provide such
office space and equipment, telephone facilities, personnel,
literature distribution, advertising and promotion as is
necessary or beneficial for providing information and
distribution services to existing and potential clients of the
Firms. KDI may also provide some of the above services for the
Fund.
KDI accepts such appointment as distributor and principal
underwriter and agrees to render such services and to assume the
obligations herein set forth for the compensation herein
provided. KDI shall for all purposes herein provided be deemed
to be an independent contractor and, unless expressly provided
herein or otherwise authorized, shall have no authority to act
for or represent the Fund in any way. KDI, by separate agreement
with the Fund, may also serve the Fund in other capacities. The
services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar
services or other services to others so long as its services
hereunder are not impaired thereby.
In carrying out its duties and responsibilities hereunder,
KDI will, pursuant to separate written contracts, appoint various
Firms to provide advertising, promotion and other distribution
<PAGE> 2
services contemplated hereunder directly to or for the benefit of
existing and potential shareholders who may be clients of such
Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to
sell such part of the authorized shares of the Fund remaining
unissued as from time to time shall be effectively registered
under the Securities Act of 1933 ("Securities Act"), at prices
determined as hereinafter provided and on terms hereinafter set
forth, all subject to applicable federal and state laws and
regulations and to the Agreement and Declaration of Trust of the
Fund.
2. KDI shall sell shares of the Fund to or through qualified
Firms in such manner, not inconsistent with the provisions hereof
and the then effective registration statement (and related
prospectus) of the Fund under the Securities Act, as KDI may
determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the
Fund without the prior consent of the Fund. In addition to sales
made by it as agent of the Fund, KDI may, in its discretion, also
sell shares of the Fund as principal to persons with whom it does
not have selling group agreements.
Shares of any class of any series of the Fund offered for
sale or sold by KDI shall be so offered or sold at a price per
share determined in accordance with the then current prospectus.
The price the Fund shall receive for all shares purchased from it
shall be the net asset value used in determining the public
offering price applicable to the sale of such shares. Any excess
of the sales price over the net asset value of the shares of the
Fund sold by KDI as agent shall be retained by KDI as a
commission for its services hereunder. KDI may compensate Firms
for sales of shares at the commission levels provided in the
Fund's prospectus from time to time. KDI may pay other
commissions, fees or concessions to Firms, and may pay them to
others in its discretion, in such amounts as KDI shall determine
from time to time. KDI shall be entitled to receive and retain
any applicable contingent deferred sales charge as described in
the Fund's prospectus. KDI shall also receive any distribution
services fee payable by the Fund as provided in Section 8 hereof.
KDI will require each Firm to conform to the provisions
hereof and the Registration Statement (and related prospectus) at
the time in effect under the Securities Act with respect to the
public offering price or net asset value, as applicable, of the
Fund's shares, and neither KDI nor any such Firms shall withhold
the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively
registered under the Securities Act for sale as herein
2
<PAGE> 3
contemplated such shares as KDI shall reasonably request and as
the Securities and Exchange Commission shall permit to be so
registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares
whenever, in its sole discretion, it deems such action to be
desirable.
4. The Fund will execute any and all documents and furnish
any and all information that may be reasonably necessary in
connection with the qualification of its shares for sale
(including the qualification of the Fund as a dealer where
necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required
without its consent to comply with any requirement which in its
opinion is unduly burdensome). The Fund will furnish to KDI from
time to time such information with respect to the Fund and its
shares as KDI may reasonably request for use in connection with
the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various
Firms to issue and deliver on behalf of the Fund such
confirmations of sales made by it pursuant to this agreement as
may be required. At or prior to the time of issuance of shares,
KDI will pay or cause to be paid to the Fund the amount due the
Fund for the sale of such shares. Certificates shall be issued
or shares registered on the transfer books of the Fund in such
names and denominations as KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to
the extent that it shall have received purchase orders therefor.
KDI will not make, or authorize Firms or others to make (a) any
short sales of shares of the Fund; or (b) any sales of such
shares to any trustee or officer of the Fund or to any officer or
director of KDI or of any corporation or association furnishing
investment advisory, managerial or supervisory services to the
Fund, or to any corporation or association, unless such sales are
made in accordance with the then current prospectus relating to
the sale of such shares. KDI, as agent of and for the account of
the Fund, may repurchase the shares of the Fund at such prices
and upon such terms and conditions as shall be specified in the
current prospectus of the Fund. In selling or reacquiring shares
of the Fund for the account of the Fund, KDI will in all respects
conform to the requirements of all state and federal laws and the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., relating to such sale or reacquisition, as the
case may be, and will indemnify and save harmless the Fund from
any damage or expense on account of any wrongful act by KDI or
any employee, representative or agent of KDI. KDI will observe
and be bound by all the provisions of the Agreement and
Declaration of Trust of the Fund (and of any fundamental policies
adopted by the Fund pursuant to the Investment Company Act of
1940, notice of which shall have been given to KDI) which at the
3
<PAGE> 4
time in any way require, limit, restrict, prohibit or otherwise
regulate any action of the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of
its operations not specifically assumed or otherwise to be
provided by KDI under this Agreement. The Fund will pay or cause
to be paid expenses (including the fees and disbursements of its
own counsel) of any registration of the Fund and its shares under
the United States securities laws and expenses incident to the
issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent.
KDI will pay all expenses (other than expenses which one or more
Firms may bear pursuant to any agreement with KDI) incident to
the sale and distribution of the shares issued or sold hereunder,
including, without limiting the generality of the foregoing, all
(a) expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other
literature, advertising and selling aids in connection with the
offering of the shares for sale (except that such expenses need
not include expenses incurred by the Fund in connection with the
preparation, typesetting, printing and distribution of any
registration statement or prospectus, report or other
communication to shareholders in their capacity as such), (b)
expenses of advertising in connection with such offering and (c)
expenses (other than the Fund's auditing expenses) of qualifying
or continuing the qualification of the shares for sale and, in
connection therewith, of qualifying or continuing the
qualification of the Fund as a dealer or broker under the laws of
such states as may be designated by KDI under the conditions
herein specified. No transfer taxes, if any, which may be
payable in connection with the issue or delivery of shares sold
as herein contemplated or of the certificates for such shares
shall be borne by the Fund, and KDI will indemnify and hold
harmless the Fund against liability for all such transfer taxes.
8. For the services and facilities described herein in
connection with Class B shares and Class C shares of each series
of the Fund, the Fund will pay to KDI at the end of each calendar
month a distribution services fee computed at the annual rate of
.75% of average daily net assets attributable to the Class B
shares and Class C shares of each such series. For the month and
year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month
and year, respectively. The foregoing fee shall be in addition
to and shall not be reduced or offset by the amount of any
contingent deferred sales charge received by KDI under Section 2
hereof.
The net asset value shall be calculated in accordance with
the provisions of the Fund's current prospectus. On each day
when net asset value is not calculated, the net asset value of a
4
<PAGE> 5
share of any class of any series of the Fund shall be deemed to
be the net asset value of such a share as of the close of
business on the last previous day on which such calculation was
made. The distribution services fee for any class of a series of
the Fund shall be based upon average daily net assets of the
series attributable to the class and such fee shall be charged
only to such class.
9. KDI shall prepare reports for the Board of Trustees of
the Fund on a quarterly basis in connection with the Fund's
distribution plan for Class B shares and Class C shares showing
amounts paid to the various Firms and such other information as
from time to time shall be reasonably requested by the Board of
Trustees.
10. To the extent applicable, this Agreement constitutes the
plan for the Class B shares and Class C shares of each series of
the Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940; and this Agreement and plan shall be approved and
renewed in accordance with Rule 12b-1 for such Class B shares and
Class C shares separately.
This Agreement shall become effective on the date hereof and
shall continue until March 1, 1996; and shall continue from year
to year thereafter only so long as such continuance is approved
in the manner required by the Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of
its assignment and may be terminated at any time without the
payment of any penalty by the Fund or by KDI on sixty (60) days
written notice to the other party. The Fund may effect
termination with respect to any class of any series of the Fund
by a vote of (i) a majority of the Board of Trustees, (ii) a
majority of the trustees who are not interested persons of the
Fund and who have no direct or indirect financial interest in
this Agreement or in any agreement related to this Agreement, or
(iii) a majority of the outstanding voting securities of the
class. Without prejudice to any other remedies of the Fund, the
Fund may terminate this Agreement at any time immediately upon
KDI's failure to fulfill any of its obligations hereunder.
This Agreement may not be amended to increase the amount to
be paid to KDI by the Fund for services hereunder with respect to
a class of any series of the Fund without the vote of a majority
of the outstanding voting securities of such class. All material
amendments to this Agreement must in any event be approved by a
vote of the Board of Trustees of the Fund including the trustees
who are not interested persons of the Fund and who have no direct
or indirect financial interest in this Agreement or in any
agreement related to this Agreement, cast in person at a meeting
called for such purpose.
5
<PAGE> 6
The terms "assignment", "interested" and "vote of a majority
of the outstanding voting securities" shall have the meanings set
forth in the Investment Company Act of 1940 and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of
KDI to receive payments on any unpaid balance of the compensation
described in Section 8 earned prior to such termination.
11. KDI will not use or distribute, or authorize the use,
distribution or dissemination by Firms or others in connection
with the sale of Fund shares any statements other than those
contained in the Fund's current prospectus, except such
supplemental literature or advertising as shall be lawful under
federal and state securities laws and regulations. KDI will
furnish the Fund with copies of all such material.
12. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
13. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
14. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust, and all amendments
thereto, all of which are on file with the Secretary of The
Commonwealth of Massachusetts, and the limitation of shareholder
and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as
such representatives and not individually, and the obligations of
the Fund hereunder are not binding upon any of the Trustees,
officers or shareholders of the Fund individually but are binding
upon only the assets and property of the Fund. With respect to
any claim by KDI for recovery of any liability of the Fund
arising hereunder allocated to a particular series or class,
whether in accordance with the express terms hereof or otherwise,
KDI shall have recourse solely against the assets of that series
or class to satisfy such claim and shall have no recourse against
the assets of any other series or class for such purpose.
15. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 14 hereof which
shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of Illinois.
6
<PAGE> 7
16. This Agreement is the entire contract between the parties
relating to the subject matter hereof and supersedes all prior
agreements between the parties relating to the subject matter
hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this
Agreement to be executed as of the day and year first above
written.
KEMPER TECHNOLOGY FUND
By: /s/ John E. Peters
-------------------------------
Title: Vice President
----------------------------
ATTEST:
/s/ Philip J. Collora
-----------------------------
Title: Secretary
-----------------------
KEMPER DISTRIBUTORS, INC.
By: /s/ Patrick H. Dudasik
-------------------------------
Title: Chief Financial Officer
and Treasurer
----------------------------
ATTEST:
/s/ David F. Dierenfeldt
-----------------------------
Title: Secretary
-----------------------
7
<PAGE> 1
EXHIBIT 99.B6(b)
SELLING GROUP AGREEMENT KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street, Chicago, Illinois 60603
Dear Financial Services Firm:
As principal underwriter and distributor, we invite you to
join a Selling Group for the distribution of shares of the Kemper
Mutual Funds (herein called "Funds"), but only in those states in
which the shares of the respective Funds may legally be offered
for sale. As exclusive agent of each of the Funds, we offer to
sell to you shares of the Funds on the following terms:
1. In all sales of these shares to the public you shall act
as dealer for your own account, and in no transaction shall you
have any authority to act as agent for the issuer, for us, or
for any other member of the Selling Group.
2. Orders received from you will be accepted by us only at
the public offering price applicable to each order, as
established by the Prospectus of each Fund, subject to the
discount, commission or other concession, if any, as provided in
such Prospectus. Upon receipt from you of any order to purchase
shares of a Fund, we shall confirm to you in writing or by wire
to be followed by a confirmation in writing. Additional
instructions may be forwarded to you from time to time. All
orders are subject to acceptance or rejection by us in our sole
discretion.
3. You may offer and sell shares to your customers only at
the public offering price determined in the manner described in
the applicable Prospectus. The public offering price is the net
asset value per share as provided in the applicable Prospectus
plus, with respect to certain Funds, a sales charge from which
you shall receive a discount equal to a percentage of the
applicable offering price as provided in the applicable
Prospectus. You shall receive a sales commission, with respect to
certain Funds, equal to a percentage of the amount invested as
provided in the applicable Prospectus. You shall receive a
distribution service fee, for certain Funds for which such fees
are available, as provided in the applicable Prospectus which fee
shall be payable with respect to such assets, for such periods
and at such intervals as are from time to tome specified by us.
The discounts or other concessions to which you may be entitled
in connection with sales to your customers pursuant to any
special features of a Fund (such as cumulative discounts, letters
of intent, etc., the terms of which shall be as described in the
applicable Prospectus and related forms) shall be in accordance
with the terms of such features. You may receive an
administrative service fee, with respect to certain Funds for
which such fees are available, as provided in the applicable
Prospectus, which fee shall be payable with respect to such
<PAGE> 2
assets, for such periods and at such intervals as are from time
to time specified by us.
4. By accepting this agreement, you agree:
(a) To purchase shares only from us or from your
customers.
(b) That you will purchase shares from us only to cover
purchase orders already received from your customers, or for your
own bona fide investments.
(c) That you will not purchase shares from your
customers at a price lower than the bid price then quoted by or
for the Fund involved. You may, however, sell shares for the
account of your customer to the Fund, or to us as agent for the
Fund, at the bid price currently quoted by or for the Fund and
charge your customer a fair commission for handling the
transaction.
(d) That you will not withhold placing with us orders
received from your customers so as to profit yourself as a result
of such withholding.
5. We will not accept from you any conditional orders for
shares.
6. If any shares confirmed to you under the terms of this
agreement are repurchased by the issuing Fund or by us as agent
for the Fund, or are tendered for repurchase, within seven
business days after the date of our confirmation of the original
purchase order, you shall forthwith refund to us the full
discount, commission, finder's fee or other concession, if any,
allowed or paid to you on such shares.
7. Payment for shares ordered from us shall be in New York
clearing house funds and must be received by the appropriate
Fund's shareholder service agent within seven days after our
acceptance of your order (or such shorter time period as may be
required by applicable regulations). If such payment is not
received, we reserve the right, without notice, forthwith to
cancel the sale or, at our option, to sell the shares ordered
back to the Fund, in which case we may hold you responsible for
any loss, including loss of profit suffered by us as a result of
your failure to make such payment.
8. Shares sold to you hereunder shall be available in
negotiable form for delivery at the appropriate Fund's
shareholder services agent, against payment, unless other
instructions have been given.
9. All sales will be made subject to our receipt of shares
from the Fund. We reserve the right, in our discretion, without
notice, to suspend sales or withdraw the offering of shares
entirely. We reserve the right to modify, cancel or change the
terms of this agreement, upon 15 days prior written notice to
you. Also, the sales charges, discounts, commissions or other
concessions, service fees of any kind provided for hereunder are
subject to change at any time by the Funds and us.
10. All communications to us should be sent to the address
in the heading above. Any notice to you shall be duly given if
mailed or telegraphed to you at the address specified by you
below.
<PAGE> 3
11. This agreement shall be construed in accordance with the
laws of Illinois. This agreement is subject to the Prospectuses
of the Funds from time to time in effect, and, in the event of a
conflict, the terms of the Prospectuses shall control. References
herein to the "Prospectus" of a Fund shall mean the prospectus
and statement of additional information of such Fund as from time
to time in effect. Any changes, modifications or additions
reflected in any such Prospectus shall be effective on the date
of such Prospectus (or supplement thereto) unless specified
otherwise.
12. This agreement is subject to the Additional Stipulations
and Conditions on the reverse side hereof, all of which are a
part of this agreement.
Kemper Distributors, Inc.
By
----------------------------
Authorized Signature
Title
-------------------------
We have read the foregoing agreement and accept and agree to the
terms and conditions thereof.
Firm
-------------------------
Witness
------------------------ By
----------------------------
Authorized Representative
Dated Title
------------------------- -------------------------
<PAGE> 4
ADDITIONAL STIPULATIONS AND CONDITIONS
13. No person is authorized to make any representations
concerning shares of any Fund except those contained in the
Prospectus of such Fund and in printed information subsequently
issued by the Fund or by us as information supplemental to such
Prospectus. If you wish to use your own advertising with respect
to a Fund, all such advertising must be approved by us or by the
Fund prior to use. You shall be responsible for any required
filing of such advertising.
14. Your acceptance of this agreement constitutes a
representation (i) that you are a registered security dealer and
a member in good standing of the National Association of
Securities Dealers, Inc. and that you agree to comply with all
state and federal laws, rules and regulations applicable to
transactions hereunder and to the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., including
specifically Section 26, Article III thereof, or (ii) if you are
offering and selling shares of the Funds only in jurisdictions
outside of the several states, territories and possessions of the
United States and are not otherwise required to be a member of
the National Association of Securities Dealers, Inc., that you
nevertheless agree to conduct your business in accordance with
the spirit of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and to observe the laws
and regulations of the applicable jurisdiction. You likewise
agree that you will not offer to sell shares of any Fund in any
state or other jurisdiction in which they may not lawfully be
offered for sale.
15. You shall make available an investment management
account for your customers through the Funds and shall provide
such office space and equipment, telephone facilities, personnel
and literature distribution as is necessary or appropriate for
providing information and services to your customer. Such
services and assistance may include, but not be limited to,
establishment and maintenance of shareholder accounts and
records, processing purchase and redemption transactions,
answering routine inquiries regarding the Funds, and such other
services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule, or regulation. You agree
to release, indemnify and hold harmless the Funds, us and our
respective representatives and agents from any and all direct or
indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you, your officers,
employees or agents regarding the purchase, redemption or
transfer of registration of shares of the Funds for accounts of
you, your customers and other shareholders or from any
unauthorized or improper use of any on-line computer facilities.
You shall prepare such periodic reports for us as shall
reasonably be requested by us. You shall immediately inform the
Funds or us of all written complaints received by you from Fund
shareholders relating to the maintenance of their accounts and
shall promptly answer all such complaints and other similar
correspondence. You shall provide the Funds and us on a timely
<PAGE> 5
basis with such information as may be required to complete
various regulatory forms.
16. As a result of the necessity to compute the amount of
any contingent deferred sales charge due with respect to the
redemption of shares, you may not hold shares of a Fund imposing
such a charge in an account registered in your name or in the
name of your nominee for the benefit of certain of your customers
except with our prior written consent. Except as otherwise
permitted by us, shares of such a Fund owned by a shareholder
must be in a separate identifiable account for such shareholder.
17. Shares of certain Funds have been divided into separate
classes: Class A Shares, Class B Shares and Class C Shares.
Class A shares are offered at net asset value plus an initial
sales charge. Class B Shares are offered at net asset value
without an initial sales charge but are subject to a contingent
deferred sales charge and a Rule 12b-1 fee and have a conversion
feature. Class C Shares are offered at net asset value without an
initial sales charge or contingent deferred sales charge but are
subject to a Rule 12b-1 fee and have no conversion feature.
Please see the appropriate Prospectuses for a more complete
description of the distinctions between the classes of shares.
It is important to investors not only to choose Funds
appropriate for their investment objectives, but also to choose
the appropriate distribution arrangement, based on the amount
invested and the expected duration of the investment. To assist
investors in these decisions, we have instituted the following
policies with respect to orders for shares of the Funds. The
following policies and procedures with respect to sales of
classes of shares of the Funds apply to each broker/dealer that
distributes shares of the Funds.
1. All purchase orders for $500,000 or more (not including
street name or omnibus accounts) should be for class A Shares.
2. Any purchase order of less than $500,000 may be for
either Class A, Class B or Class C Shares in light of the
relevant facts and circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold the
shares; and
c. any other relevant circumstances such as the
availability of purchases under a Letter of Intent, Combined
Purchases or Cumulative Discount Privilege.
There are instances when one pricing structure may be more
appropriate than another. For example, investors who would
qualify for a reduced sales charge on Class A Shares may
determine that payment of a reduced front-end sales charge is
preferable to payment of an ongoing Rule 12b-1 fee. On the other
hand, investors whose orders would not qualify for such a
discount and who plan to hold their investment for more than six
years may wish to defer the sales charge and would consider Class
B Shares. Investors who prefer not to pay an initial sales charge
and who plan to redeem their shares within six years might
consider Class C Shares.
Appropriate supervisory personnel within your organization
must ensure that all employees receiving investor inquiries about
<PAGE> 6
the purchase of shares of the Funds advise the investor of the
available pricing structures offered by the Funds and the impact
of choosing one method over another, including breakpoints and
the availability of Letters of Intent, Combined Purchases and
Cumulative Discounts. In some instances it may be appropriate
for a supervisory person to discuss a purchase with the investor.
18. This agreement shall be in substitution of any prior
selling group agreement between you and us regarding these
shares. This agreement shall not be applicable to the provision
of services for Cash Equivalent Fund, Tax-Exempt California Money
Market Fund, Tax Exempt New York Money Market Fund, Investors
Cash Trust and similar wholesale money market funds. The payment
of related distribution and services fees, shall be subject to
separate services agreements.
<PAGE> 1
EXHIBIT 99.B8(a)
CUSTODY AGREEMENT
AGREEMENT, made the 1st day of March, 1995 by and between
Kemper Technology Fund, a Massachusetts business trust having its
principal place of business at 120 South LaSalle Street, Chicago,
Illinois 60603 ("Fund") and Investors Fiduciary Trust Company, a
trust company organized and existing under the laws of Missouri,
having its principal place of business at Kansas City, Missouri
("Custodian").
WHEREAS, Fund wants to appoint Investors Fiduciary Trust
Company as Custodian to have custody of a portion of Fund's
portfolio securities and monies pursuant to this Agreement; and,
for purposes related to its foreign investments held outside the
United States, Fund wants another custodian to have custody of
the remainder of Fund's portfolio securities and monies pursuant
to a separate agreement; and
WHEREAS, Investors Fiduciary Trust Company wants to accept
such appointment;
NOW, THEREFORE, for and in consideration of the mutual
promises contained herein, the parties hereto, intending to be
legally bound, mutually covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN.
Fund hereby constitutes and appoints Investors Fiduciary
Trust Company as Custodian of Fund which is to include:
A. Custody of the securities and monies at any time
owned by Fund and received by Custodian; and
B. Performing certain accounting and record keeping
functions relating to its function as Custodian for Fund and
each of its Portfolios.
2. DELIVERY OF CORPORATE DOCUMENTS.
Fund has delivered or will deliver to Custodian prior to the
effective date of this Agreement, copies of the following
documents and all amendments or supplements thereto,
properly certified or authenticated:
A. Resolutions of the Board of Trustees of Fund
appointing Investors Fiduciary Trust Company as Custodian
hereunder and approving the form of this Agreement; and
<PAGE> 2
B. Resolutions of the Board of Trustees of Fund
authorizing certain persons to give instructions on behalf
of Fund to Custodian and authorizing Custodian to rely upon
written instructions over their signatures.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
All Fund's securities and monies, except as permitted
by the Investment Company Act of 1940 ("1940 Act"), will be
delivered either to Custodian or to The Chase Manhattan
Bank, N.A., pursuant to a separate custody agreement. Fund
will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, portfolio
securities acquired by it and monies then owned by it except
as permitted by the 1940 Act or from time to time coming
into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility
or liability whatsoever for or on account of securities or
monies not so delivered. All securities so delivered to
Custodian (other than bearer securities) shall be registered
in the name of Fund or its nominee, or of a nominee of
Custodian, or shall be properly endorsed and in form for
transfer satisfactory to Custodian.
B. Safekeeping
Custodian will receive delivery of and keep safely the
assets of Fund delivered to it from time to time. Custodian
will not deliver any such assets to any person except as
permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of this
Agreement. Custodian shall be responsible only for the
monies and securities of Fund held directly by it or its
nominees or sub-custodian under this Agreement; provided
that Custodian's responsibility for any sub-custodian
appointed at the Fund's direction for purposes of (i)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a
common custodian or sub-custodian; or (ii) providing
depository and clearing agency services with respect to
certain variable rate demand note securities ("special sub-
custodian") shall be further limited as set forth in this
Agreement. Custodian may participate directly or
indirectly through a sub-custodian in the Depository Trust
Company, the Treasury/Federal Reserve Book Entry System,
the Participants Trust Company and any other securities
depository approved by the Board of Trustees of the Fund,
subject to compliance with the provisions of Rule 17f-4
under the 1940 Act including, without limitation, the
2
<PAGE> 3
specific provisions of subsections (a) (1) through (d) (4)
thereof.
C. Registration of Securities
Custodian will hold stocks and other registerable
portfolio securities of Fund registered in the name of Fund
or in the name of any nominee of Custodian for whose
fidelity and liabilities Custodian shall be fully
responsible, or in street certificate form, so-called, with
or without any indication of fiduciary capacity. Unless
otherwise instructed, Custodian will register all such
portfolio securities in the name of its authorized nominee.
D. Exchange of Securities
Upon receipt of instructions, Custodian will exchange,
or cause to be exchanged, portfolio securities held by it
for the account of Fund for other securities or cash issued
or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares,
change of par value, conversion or otherwise, and will
deposit any such securities in accordance with the terms of
any reorganization or protective plan. Without
instructions, Custodian is authorized to exchange securities
held by it in temporary form for securities in definitive
form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefore,
to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption,
except that Custodian shall receive instructions prior to
surrendering any convertible security.
E. Purchases or Sales of Investments of Fund
Fund shall, on each business day on which a purchase or
sale of a portfolio security shall be made by it, deliver to
Custodian instructions which shall specify with respect to
each such transaction:
(1) The name of the issuer and description of the security;
(2) The number of shares or the principal amount purchased
or sold, and accrued interest, if any;
(3) The trade date;
(4) The settlement date;
(5) The date when the securities sold were purchased by
Fund or other information identifying the securities
sold and to be delivered;
3
<PAGE> 4
(6) The price per unit and the brokerage commission, taxes
and other expenses in connection with the transaction;
(7) The total amount payable or receivable upon such
transaction; and
(8) The name of the person from whom or the broker or
dealer through whom the transaction was made.
In accordance with such purchase instructions, Custodian
shall pay for out of monies held for the account of Fund,
but only insofar as monies are available therein for such
purpose, and receive the portfolio securities so purchased
by or for the account of Fund. Such payment shall be made
only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian.
In accordance with such sales instructions, Custodian will
deliver or cause to be delivered the securities thus
designated as sold for the account of Fund to the broker or
other person specified in the instructions relating to such
sale, such delivery to be made only upon receipt of payment
therefor in such form as shall be satisfactory to Custodian,
with the understanding that Custodian may deliver or cause
to be delivered securities for payment in accordance with
the customs prevailing among dealers in securities.
F. Purchases or Sales of Options and Futures
Transactions
Fund will, on each business day on which a purchase or
sale of the following options and/or futures shall be made
by it, deliver to Custodian instructions which shall specify
with respect to each such purchase or sale:
(1) Securities Options
(a) The underlying security;
(b) The price at which purchased or sold;
(c) The expiration date;
(d) The number of contracts;
(e) The exercise price;
(f) Whether opening, exercising, expiring or closing
the transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased;
(i) Market on which option traded; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.
4
<PAGE> 5
(2) Options on Indices
(a) The index;
(b) The price at which purchased or sold;
(c) The exercise price;
(d) The premium;
(e) The multiple;
(f) The expiration date;
(g) Whether the transaction is an opening, exercising,
expiring or closing transaction;
(h) Whether the transaction involves a put or call;
(i) Whether the option is written or purchased; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.
(3) Securities Index Futures Transactions
(a) The last trading date specified in the contract
and, when available, the closing level, thereof;
(b) The index level on the date the contract is
entered into;
(c) The multiple;
(d) Any margin requirements;
(e) The need for a segregated margin account (in
addition to instructions; and, if not already in
the possession of Custodian, Fund shall deliver a
substantially complete and executed custodial
safekeeping account and procedural agreement which
shall be incorporated into this Custody
Agreement); and
(f) The name and address of the futures commission
merchant through whom the sale or purchase was
made.
(4) Options on Index Futures Contracts
(a) The underlying index futures contract;
(b) The premium;
(c) The expiration date;
(d) The number of options;
(e) The exercise price;
(f) Whether the transaction involves an opening,
exercising, expiring or closing transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased; and
(i) The market on which the option is traded.
G. Securities Pledged to Secure Loans
(1) Upon receipt of instructions, Custodian will
release or cause to be released securities held in custody
to the pledgee designated in such instructions by way of
5
<PAGE> 6
pledge or hypothecation to cure any loan incurred by Fund;
provided, however, that the securities shall be released
only upon payment to Custodian of the monies borrowed,
except that in cases where additional collateral is required
to secure a borrowing already made, further securities may
be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions,
Custodian will pay, but only from funds available for such
purpose, any such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.
(2) Upon receipt of instructions, Custodian will
release securities held in custody to the borrower
designated in such instructions; provided, however, that the
securities shall be released only upon deposit with
Custodian of full cash collateral as specified in such
instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned
securities. Upon receipt of instructions and the loaned
securities, Custodian will release the cash collateral to
the borrower.
H. Routine Matters
Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time
to time by the Board of Trustees of Fund.
I. Demand Deposit Account
Custodian will open and maintain a demand deposit
account or accounts in the name of Custodian, subject only
to draft or order by Custodian upon receipt of instructions.
All monies received by Custodian from or for the account of
Fund shall be deposited in said account or accounts.
When properly authorized by a resolution of the Board
of Trustees of Fund, Custodian may open and maintain an
additional demand deposit account or accounts in such other
banks or trust companies as may be designated in such
resolution, such accounts, however, to be in the name of
Custodian and subject only to its draft or order.
6
<PAGE> 7
J. Income and Other Payments to Fund
Custodian will:
(1) collect, claim and receive and deposit for the
account of Fund all income and other payments which become
due and payable on or after the effective date of this
Agreement with respect to the securities deposited under
this Agreement, and credit the account of Fund with such
income on the payable date;
(2) execute ownership and other certificates and
affidavits for all federal, state and local tax purposes in
connection with the collection of bond and note coupons; and
(3) take such other action as may be necessary or
proper in connection with:
(a) the collection, receipt and deposit of such income
and other payments, including but not limited to the
presentation for payment of:
(1) all coupons and other income items requiring
presentation;
(2) all other securities which may mature or be
called, redeemed, retired or otherwise become
payable and regarding which the Custodian has
actual knowledge, or notice of which is contained
in publications of the type to which it normally
subscribes for such purpose; and
(b) the endorsement for collection, in the name of
Fund, of all checks, drafts or other negotiable
instruments.
Custodian, however, shall not be required to institute
suit or take other extraordinary action to enforce
collection except upon receipt of instructions and upon
being indemnified to its satisfaction against the costs and
expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and
other similar items and deal with the same pursuant to
instructions. Unless prior instructions have been received
to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund
on the last trade date prior to the date of expiration of
such rights.
7
<PAGE> 8
K. Payment of Dividends and Other Distributions
On the declaration of any dividend or other
distribution on the shares of beneficial interest of any
Portfolio ("Portfolio Shares") by the Board of Trustees of
Fund, Fund shall deliver to Custodian instructions with
respect thereto, including a copy of the Resolution of said
Board of Trustees certified by the Secretary or an Assistant
Secretary of Fund wherein there shall be set forth the
record date as of which shareholders are entitled to receive
such dividend or distribution, and the amount payable per
share on such dividend or distribution.
On the date specified in such Resolution for the
payment of such dividend or other distribution, Custodian
shall pay out of the monies held for the account of Fund,
insofar as the same shall be available for such purposes,
and credit to the account of the Dividend Disbursing Agent
for Fund, such amount as may be necessary to pay the amount
per share payable in cash on Portfolio Shares issued and
outstanding on the record date established by such
Resolution.
L. Portfolio Shares Purchased by Fund
Whenever any Portfolio Shares are purchased by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice,
Custodian shall charge such aggregate dollar amount to the
custody account of Fund and either deposit the same in the
account maintained for the purpose of paying for the
purchase of Portfolio Shares or deliver the same in
accordance with such advice.
M. Portfolio Shares Purchased from Fund
Whenever Portfolio Shares are purchased from Fund, Fund
will deposit or cause to be deposited with Custodian the
amount received for such shares. Custodian shall not have
any duty or responsibility to determine that Fund Shares
purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
N. Proxies and Notices
Custodian will promptly deliver or mail to Fund all
proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements
affecting or relating to securities held by Custodian for
Fund and will, upon receipt of instructions, execute and
8
<PAGE> 9
deliver or cause its nominee to execute and deliver such
proxies or other authorizations as may be required. Except
as provided by this Agreement or pursuant to instructions
hereafter received by Custodian, neither it nor its nominee
shall exercise any power inherent in any such securities,
including any power to vote the same, or execute any proxy,
power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver
with respect thereto, or take any other similar action.
O. Disbursements
Custodian will pay or cause to be paid insofar as funds
are available for the purpose, bills, statements and other
obligations of Fund (including but not limited to
obligations in connection with the conversion, exchange or
surrender of securities owned by Fund, interest charges,
variation margin, dividend disbursements, taxes, management
fees, administration-distribution fees, custodian fees,
legal fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
P. Books, Records and Accounts
Custodian acknowledges that all the records it shall
prepare and maintain pursuant to this Agreement shall be the
property of Fund and that upon request of Fund it shall make
Fund's records available to it, along with such other
information and data as are reasonably requested by Fund,
for inspection, audit or copying, or turn said records over
to Fund.
Custodian shall, within a reasonable time, render to
Fund as of the close of business on each day, a detailed
statement of the amounts received or paid and of securities
received or delivered for the account of Fund during said
day. Custodian shall, from time to time, upon request by
Fund, render a detailed statement of the securities and
monies held for Fund under this Agreement, and Custodian
shall maintain such books and records as are necessary to
enable it do so and shall permit such persons as are
authorized by Fund, including Fund's independent public
accountants, to examine such records or to confirm the
contents of such records; and, if demanded, shall permit
federal and state regulatory agencies to examine said
securities, books and records. Upon the written
instructions of Fund or as demanded by federal or state
regulatory agencies, Custodian shall instruct any sub-
custodian to permit such persons as are authorized by Fund
9
<PAGE> 10
to examine the books, records and securities held by such
sub-custodian which relate to Fund.
Q. Appointment of Sub-Custodian
Notwithstanding any other provisions of this Agreement,
all or any of the monies or securities of Fund may be held
in Custodian's own custody or in the custody of one or more
other banks or trust companies acting as sub-custodians as
may be approved by resolutions of Fund's Board of Trustees,
evidenced by a copy thereof certified by the Secretary or
Assistant Secretary of Fund. Any sub-custodian must have
the qualifications required for custodians under the 1940
Act unless exempted therefrom. Any sub-custodian may
participate directly or indirectly in the Depository Trust
Company, the Treasury/Reserve Book Entry System, the
Participants Trust Company and any other securities
depository approved by the Board of Trustees of the Fund to
the same extent and subject to the same conditions as
provided hereunder. Neither Custodian nor sub-custodian
shall be entitled to reimbursement by Fund for any fees or
expenses of any sub-custodian; provided that Custodian shall
not be liable for, and Fund shall hold Custodian harmless
from, the expenses of any special sub-custodian. The
appointment of a sub-custodian shall not relieve Custodian
of any of its obligations hereunder; provided that Custodian
shall be responsible to Fund for any loss, damage, or
expense suffered or incurred by Fund resulting from the
actions or omissions of a special sub-custodian only to the
extent the special sub-custodian is liable to Custodian.
R. Multiple Portfolios
If Fund shall issue shares of more than one Portfolio
during the term hereof, Custodian agrees that all securities
and other assets of Fund shall be segregated by Portfolio
and all books and records, account values or actions shall
be maintained, held, made or taken, as the case may be,
separately for each Portfolio.
S. Other Custodian
Pursuant to instructions, Custodian will transmit
securities and moneys of Fund to The Chase Manhattan Bank,
N.A., as custodian for Fund.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means
written or oral instructions to Custodian from an authorized
person of Fund. Certified copies of resolutions of the
Board of Trustees of Fund naming one or more persons
10
<PAGE> 11
authorized to give instructions in the name and on behalf of
Fund may be received and accepted by Custodian as conclusive
evidence of the authority of any person so to act and may be
considered to be in full force and effect (and Custodian
shall be fully protected in acting in reliance thereon)
until receipt by Custodian of notice to the contrary.
Unless the resolution authorizing any person to give
instructions specifically requires that the approval of
anyone else shall first have been obtained, Custodian shall
be under no obligation to inquire into the right of the
person giving such instructions to do so. Notwithstanding
any of the foregoing provisions of this Section 4, no
authorizations or instructions received by Custodian from
Fund shall be deemed to authorize or permit any trustee,
officer, employee, or agent of Fund to withdraw any of the
securities or monies of Fund upon the mere receipt of
instructions from such trustee, officer, employee or agent.
B. No later than the next business day immediately
following each oral instruction referred to herein, Fund
shall give Custodian written confirmation of each such oral
instruction. Either party may electronically record any
oral instruction whether given in person or via telephone.
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall hold harmless and indemnify Fund
from and against any loss or liability arising out of
Custodian's failure to comply with the terms of this
Agreement or arising out of Custodian's negligence, willful
misconduct, or bad faith. Custodian may request and obtain
the advice and opinion of counsel for Fund or of its own
counsel with respect to questions or matters of law, and it
shall be without liability to Fund for any action taken or
omitted by it in good faith, in conformity with such advice
or opinion.
B. If Fund requires Custodian in any capacity to
take, with respect to any securities, any action which
involves the payment of money by it, or which in Custodian's
opinion might make it or its nominee liable for payment of
monies or in any other way, Custodian shall be and be kept
indemnified by Fund in an amount and form satisfactory to
Custodian against any liability on account of such action.
C. Custodian shall be entitled to receive, and Fund
agrees to pay to Custodian, on demand, reimbursement for
such cash disbursements, costs and expenses as may be agreed
upon from time to time by Custodian and Fund.
D. Custodian shall be protected in acting as
custodian hereunder upon any instructions, advice, notice,
11
<PAGE> 12
request, consent, certificate or other instrument or paper
reasonably appearing to it to be genuine and to have been
properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof
of any fact or matter required to be ascertained from Fund
hereunder, a certificate signed by Fund's President, or
other officer specifically authorized for such purpose.
E. Without limiting the generality of the foregoing,
Custodian shall be under no duty or obligation to inquire
into, and shall not be liable for:
(1) The validity of the issue of any securities
purchased by or for Fund, the legality of the purchase
thereof or evidence of ownership required by Fund to be
received by Custodian, or the propriety of the decision
to purchase or amount paid therefor;
(2) The legality of the sales of any securities
by or for Fund, or the propriety of the amount paid
therefor;
(3) The legality of the issue or sale of any
shares of Fund, or the sufficiency of the amount to be
received therefor;
(4) The legality of the purchase of any shares of
Fund, or the propriety of the amount to be paid
therefor; or
(5) The legality of the declaration of any
dividend by Fund, or the legality of the issue of any
shares of Fund in payment of any share dividend.
F. Custodian shall not be liable for, or considered
to be the custodian of, any money represented by any check,
draft, wire transfer, clearing house funds, uncollected
funds, or instrument for the payment of money received by it
on behalf of Fund, until Custodian actually receives such
money, provided only that it shall advise Fund promptly if
it fails to receive any such money in the ordinary course of
business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.
G. Subject to the obligations of Custodian under
Section 3.B. hereof, Custodian shall not be responsible for
loss occasioned by the acts, neglects, defaults or
insolvency of any broker, bank, trust company, or any other
person with whom Custodian may deal in the absence of negli-
gence, misconduct or bad faith on the part of Custodian.
12
<PAGE> 13
H. Custodian or any sub-custodian shall provide Fund
for its approval by its Board of Trustees agreements with
banks or trust companies which will act as sub-custodian for
Fund pursuant to this Agreement; and, as set forth in
Section 3.B hereof, Custodian shall be responsible for the
monies and securities of the Fund held by it or its nominees
or sub-custodians under this Agreement, but not for monies
and securities of the Fund held by any special sub-custodian
except to the extent the special sub-custodian is liable to
Custodian.
6. COMPENSATION.
Fund shall pay to Custodian such compensation at such times
as may from time to time be agreed upon in writing by Custodian
and Fund. Custodian may charge such compensation against monies
held by it for the account of Fund. Custodian shall also be
entitled, notwithstanding the provisions of Sections 5B or 5C
hereof, to charge against any monies held by it for the account
of Fund the amount of any loss, damage, liability or expense for
which it shall be entitled to reimbursement under the provisions
of this Agreement. Custodian shall not be entitled to
reimbursement by Fund for any loss or expenses of any sub-
custodian; provided that Custodian shall not be liable for, and
Fund shall hold Custodian harmless from, the expenses of any
special sub-custodian.
7. TERMINATION.
Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than sixty (60) days
prior to the date upon which such termination shall take effect.
Upon termination of this Agreement, Fund shall pay to Custodian
such compensation for its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall use its
best efforts to obtain a successor custodian. Unless the holders
of a majority of the outstanding shares of Fund vote to have the
securities, funds and other properties held under this Agreement
delivered and paid over to some other person, firm or corporation
specified in the vote, having not less than Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other
qualifications for custodian as set forth in the Bylaws of Fund,
the Board of Trustees of Fund shall, forthwith upon giving or
receiving notice of termination of this Agreement, appoint as
successor custodian a bank or trust company having such
qualifications. Custodian shall, upon termination of this
Agreement, deliver to the successor custodian so specified or
appointed, at custodian's office, all securities then held by
Custodian hereunder, duly endorsed and in form for transfer, and
all funds and other properties of Fund deposited with or held by
13
<PAGE> 14
Custodian hereunder, and shall cooperate in effecting changes in
book-entries at the Depository Trust Company, the
Treasury/Federal Reserve Book-Entry System, the Participants
Trust Company and any other securities depository holding assets
of the Fund. In the event no such vote has been adopted by the
shareholders of Fund and no written order designating a successor
custodian shall have been delivered to Custodian on or before the
date when such termination shall become effective, then Custodian
shall deliver the securities, funds and properties of Fund to a
bank or trust company at the selection of Custodian and meeting
the qualifications for custodian, if any, set forth in the Bylaws
of Fund and having not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its
last published report. Upon either such delivery to a successor
custodian, Custodian shall have no further obligations or
liabilities under this Agreement. Thereafter such bank or trust
company shall be the successor custodian under this Agreement and
shall be entitled to reasonable compensation for its services.
In the event that no such successor custodian can be found, Fund
will submit to its shareholders, before permitting delivery of
the cash and securities owned by Fund to anyone other than a
successor custodian, the question of whether Fund shall be
liquidated or shall function without a custodian. Not-
withstanding the foregoing requirement as to delivery upon
termination of this Agreement, Custodian may make any other
delivery of the securities, funds and property of Fund which
shall be permitted by the 1940 Act and Fund's Agreement and
Declaration of Trust and Bylaws then in effect. Except as
otherwise provided herein, neither this Agreement nor any portion
thereof may be assigned by Custodian without the consent of Fund,
authorized or approved by a resolution of its Board of Trustees.
8. NOTICES.
Notices, requests, instructions and other writings received
by Fund at 120 South LaSalle Street, Chicago, Illinois 60603 or
at such other address as Fund may have designated by certified
resolution of the Board of Trustees to Custodian and notices,
requests, instructions and other writings received by Custodian
at its offices at 21 West 10th Street, Kansas City, Missouri
64105, or to such other address as it may have designated to Fund
in writing, shall be deemed to have been properly given
hereunder.
9. MISCELLANEOUS.
A. This Agreement is executed and delivered in the
State of Missouri and shall be governed by the laws of the
State of Missouri (except as to Section 9.H. hereof which
shall be governed in accordance with the laws of The
Commonwealth of Massachusetts).
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<PAGE> 15
B. All the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by the respective successors and assigns of the
parties hereto.
C. No provisions of the Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by both parties hereto.
D. The captions in this Agreement are included for
convenience of reference only, and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
E. This Agreement shall become effective at the close
of business on the date hereof.
F. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and
the same instrument.
G. If any part, term or provision of this Agreement
is by the courts held to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
H. All parties hereto are expressly put on notice of
Fund's Agreement and Declaration of Trust, which is on file
with the Secretary of The Commonwealth of Massachusetts, and
the limitation of shareholder and trustee liability
contained therein. This Agreement has been executed by and
on behalf of Fund by its representatives as such
representatives and not individually, and the obligations of
Fund hereunder are not binding upon any of the Trustees,
officers or shareholders of Fund individually but are
binding upon only the assets and property of Fund. With
respect to any claim by Custodian for recovery of that
portion of the compensation (or any other liability of Fund
arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or
otherwise, Custodian shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall
have no recourse against the assets of any other Portfolio
for such purpose.
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<PAGE> 16
I. This Agreement, together with the Fee Schedule, is
the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective authorized officers.
KEMPER TECHNOLOGY FUND
By: /s/ John E. Peters
------------------------------
Title: Vice President
---------------------------
Attest: /s/ Philip J. Collora
-----------------------
Title: Secretary
------------------------
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Joseph F. Smith
------------------------------
Title: E. V. P.
---------------------------
Attest: /s/ Marvin Rau
----------------------
Title: Secretary
-----------------------
16
<PAGE> 1
EXHIBIT 99.B8(b)
FOREIGN CUSTODY AGREEMENT
AGREEMENT dated February 1, 1988 between THE CHASE MANHATTAN
BANK, N.A. ("Bank") and KEMPER TECHNOLOGY FUND ("Fund").
1. Custody Account. The Bank agrees to establish and
maintain (a) a custody account in the name of the Fund ("Custody
Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money
and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the
same or evidencing or representing any other rights or interests
therein and other similar property (hereinafter called
"Securities") and from time to time received by the Bank or its
subcustodian (as defined in the last sentence of Section 3) for
the account of the Fund, and (b) a deposit account in the name of
the Fund ("Deposit Account") for any and all cash in any currency
received by the Bank or its subcustodian for the account of the
Fund, which cash shall not be subject to withdrawal by draft or
check.
2. Maintenance of Securities Abroad. Securities in the
Custody Account shall be held in the country or other
jurisdiction as shall be specified from time to time in
Instructions, provided that such country or other jurisdiction
shall be one in which the principal trading market for such
Securities is located or the country or other jurisdiction in
which such Securities are to be presented for payment or are
acquired for the Custody Account and cash in the Deposit Account
shall be credited to an account in such amounts and in the
country or other jurisdiction as shall be specified from time to
time in Instructions, provided that such country or other
jurisdiction shall be one in which such cash is the legal
currency for the payment of public or private debts.
3. Eligible Foreign Custodians and Securities
Depositories. The Fund's Board of Trustees authorizes the Bank
to hold the Securities in the Custody Account and the cash in the
Deposit Account in custody and deposit accounts, respectively,
which have been established by the Bank with one of its branches,
a branch of a qualified U.S. bank, an eligible foreign custodian
or an eligible foreign securities depository; provided, however,
that the Bank has recommended and the Board has approved the use
of, and the Bank's contract with, such eligible foreign custodian
or eligible foreign securities depository by resolution, and a
certified copy of such resolution has been provided to the Bank.
<PAGE> 2
Furthermore, if one of its branches, a branch of a qualified U.S.
bank or an eligible foreign custodian is selected to act as the
Bank's subcustodian to hold any of the Securities or cash, such
entity is authorized to hold such Securities or cash in its
account with any eligible foreign securities depository in which
it participates. For purposes of this Agreement (a) "qualified
U.S. bank" shall mean a qualified U.S. bank as defined in Rule
17f-5 under the Investment Company Act of 1940 ("Investment
Company Act"); (b) "eligible foreign custodian" shall mean (i) a
banking institution or trust company incorporated or organized
under the laws of a country other than the United States that is
regulated as such by that country's government or an agency
thereof and that has shareholders' equity in excess of $200
million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of
a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other than
the United States and that has shareholders' equity in excess of
$100 million in U.S. currency (or a foreign currency equivalent
thereof) or (iii) a banking institution or trust company
incorporated or organized under the laws of a country other than
the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that
is incorporated or organized under the laws of a country other
than the United States which has such other qualifications as
shall be authorized or permitted by a rule, regulation,
interpretation or exemptive order promulgated by or under the
authority of the Securities and Exchange Commission, specified in
Instructions and approved by the Bank; and (c) "eligible foreign
securities depository" shall mean a securities depository or
clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the
central system for handling of securities or equivalent book-
entries in that country or (ii) a transnational system for the
central handling of securities or equivalent book-entries.
Hereinafter the term "subcustodian" will refer to any branch
of a qualified U.S. bank, any eligible foreign custodian or any
eligible foreign securities depository with which the Bank has
entered an agreement of the type contemplated hereunder regarding
Securities and/or cash held in or to be acquired for the Custody
Account or the Deposit Account.
4. Use of Subcustodian. With respect to Securities and
other assets which are maintained by the Bank in the physical
custody of a subcustodian pursuant to Section 3 (as used in this
Section 4, the term "Securities" means such Securities and other
assets),
-2-
<PAGE> 3
(a) The Bank will identify on its books as belonging
to the Fund any Securities held by such subcustodian.
(b) In the event that a subcustodian permits any of
the Securities placed in its care to be held in an eligible
foreign securities depository, such subcustodian will be
required by its agreement with the Bank to identify on its
books such Securities as being held for the account of the
Bank as a custodian for its customers.
(c) Any Securities in the Custody Account held by a
subcustodian of the Bank will be subject only to the
instructions of the Bank or its agents; and any Securities
held in an eligible foreign securities depository for the
account of a subcustodian will be subject only to the
instructions of such subcustodian.
(d) The Bank will only deposit Securities in an
account with a subcustodian which includes exclusively the
assets held by the Bank for its customers, and the Bank will
cause such account to be designated by such subcustodian as
a special custody account for the exclusive benefit of
customers of the Bank.
(e) Any agreement the Bank shall enter into with a
subcustodian with respect to the holding of Securities
shall require that (i) the Securities are not subject to any
right, charge, security interest, lien or claim of any kind
in favor of such subcustodian except for their safe custody
or administration and (ii) beneficial ownership of such
Securities is freely transferable without the payment of
money or value other than for safe custody or
administration; provided, however, that the foregoing shall
not apply to the extent that any of the above-mentioned
rights, charges, etc. result from any compensation or other
expenses arising with respect to the safekeeping of
Securities pursuant to such agreement or from any
arrangements made by the Fund with any such subcustodian.
(f) The Bank shall allow independent public
accountants of the Fund such reasonable access to the
records of the Bank relating to the Securities held in the
Custody Account as is required by such accountants in
connection with their examination of the books and records
pertaining to the affairs of the Fund. The Bank shall,
subject to restrictions under applicable law, also obtain
from any subcustodian with which the Bank maintains the
physical possession of any Securities in the Custody Account
an undertaking to permit independent public accountants of
the Fund such reasonable access to the records of such
-3-
<PAGE> 4
subcustodian as may be required in connection with their
examination of the books and records pertaining to the
affairs of the Fund. The Bank shall furnish to the Fund
such reports (or portions thereof) of the Bank's external
auditors as relate directly to the Bank's system of internal
accounting controls applicable to the Bank's duties under
this Agreement. The Bank shall use its best efforts to
obtain and furnish the Fund with similar reports with
respect to each eligible foreign custodian and eligible
foreign securities depository holding Securities of the
Fund.
(g) The Bank will supply to the Fund from time to time
as mutually agreed upon a statement in respect to any
Securities in the Custody Account held by a subcustodian,
including an identification of the entity having possession
of the Securities, and the Bank will send to the Fund an
advice or notification of any transfers of Securities to or
from the Custody Account, indicating, as to Securities
acquired for the Fund, the identity of the entity having
physical possession of such Securities. In the absence of
the filing in writing with the Bank by the Fund of
exceptions or objections to any such statement within sixty
(60) days following receipt of the statement, the Fund shall
be deemed to have approved such statement; and in such case
or upon written approval of the Fund of any such statement
the Bank shall, to the extent permitted by law, be released,
relieved and discharged with respect to all matters and
things set forth in such statement as though such statement
had been settled by the decree of a court of competent
jurisdiction in an action in which the Fund and all persons
having any equity interest in the Fund were parties.
(h) The Bank hereby warrants to the Fund that in its
opinion, after due inquiry, the established procedures to be
followed by each of its branches, each branch of a qualified
U.S. bank, each eligible foreign custodian and each eligible
foreign securities depository holding the Fund's Securities
pursuant to this Agreement afford protection for such
Securities at least equal to that afforded by the Bank's
established procedures with respect to similar securities
held by the Bank (and its securities depositories) in New
York.
5. Deposit Account Payments. Subject to the provisions of
Section 7, the Bank shall make, or cause its subcustodians to
make, payments of cash credited to the Deposit Account only
-4-
<PAGE> 5
(a) in connection with the purchase of Securities for
the Fund and the delivery of such Securities to, or the
crediting of such Securities to the account of, the Bank or
its subcustodian, each such payment to be made at prices as
its subcustodian, each such payment to be made at prices as
confirmed by Instructions (as defined in Section 9 hereof)
from Authorized Persons (as defined in Section 10 hereof);
(b) for the purchase or redemption of shares of the
capital stock of the Fund and the delivery to, or crediting
to the account of, the Bank or its subcustodian of such
shares to be so purchased or redeemed;
(c) for the payment for the account of the Fund of
dividends, interest, taxes, management or supervisory fees,
capital distributions or operating expenses;
(d) for the payments to be made in connection with
the conversion, exchange or surrender of Securities held in
the Custody Account;
(e) for transmittal either to United Missouri Bank of
Kansas City, National Association, or to Investors Fiduciary
Trust Company, as Custodian for the Fund;
(f) for other proper corporate purposes of the Fund;
or
(g) upon the termination of this Custody Agreement as
hereinafter set forth.
All payments of cash for a purpose permitted by subsection (a),
(b), (c), (d) or (e) of this Section 5 will be made only upon
receipt by the Bank of Instructions from Authorized Persons which
shall specify the purpose for which the payment is to be made and
the applicable subsection of this Section 5. In the case of any
payment to be made for the purpose permitted by subsection (f) of
this Section 5, the Bank must first receive a certified copy of a
resolution of the Board adequately describing such payment,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made. Any
payment pursuant to subsection (g) of this Section 5 will be made
in accordance with Section 17.
In the event that any payment made under this Section 5
exceeds the funds available in the Deposit Account, the Bank may,
in its discretion, advance the Fund an amount equal to such
excess and such advance shall be deemed a loan from the Bank to
the Fund, payable on demand, bearing interest at the rate of
interest customarily charged by the Bank on similar loans.
-5-
<PAGE> 6
If the Bank causes the Deposit Account to be credited on the
payable date for interest, dividends or redemptions, the Fund
will promptly return to the Bank any such amount or property so
credited upon oral or written notification that neither the Bank
nor its subcustodian can collect such amount or property in the
ordinary course of business. The Bank or its subcustodian, as
the case may be, shall have no duty or obligation to institute
legal proceedings, file a claim or proof of claim in any
insolvency proceeding or take any other action with respect to
the collection of such amount or property beyond its ordinary
collection procedures.
6. Custody Account Transactions. Subject to the
provisions of Section 7, Securities in the Custody Account will
be transferred, exchanged or delivered by the Bank or its
subcustodians only
(a) upon sale of such Securities for the Fund and
receipt by the Bank or its subcustodian only of payment
therefor, each such payment to be in the amount confirmed by
Instructions from Authorized Persons;
(b) when such Securities are called, redeemed or
retired, or otherwise become payable;
(c) in exchange for or upon conversion into other
Securities along or other Securities and cash pursuant to
any plan or merger, consolidation, reorganization,
recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to
their terms into other Securities;
(e) upon exercise of subscription, purchase or other
similar rights represented by such Securities;
(f) for the purpose of exchanging interim receipts or
temporary Securities for definitive Securities;
(g) for the purpose of delivery either to United
Missouri Bank of Kansas City, National Association, or to
Investors Fiduciary Trust Company, as Custodian for the
Fund;
(h) for the purpose of redeeming in kind shares of the
Fund against delivery to the Bank or its subcustodian of
such shares to be so redeemed;
(i) for other proper trust purposes of the Fund;
-6-
<PAGE> 7
(j) upon the termination of this Custody Agreement as
hereinafter set forth.
All transfers, exchanges or deliveries of Securities in the
Custody Account for a purpose permitted by either subsection (a),
(b), (c), (d), (e), (f) or (g) of this Section 6 will be made,
except as provided in Section 8, only upon receipt by the Bank of
Instructions from Authorized Persons which shall specify the
purpose of the transfer, exchange or delivery to be made and the
applicable subsection of this Section 6. In the case of any
transfer or delivery to be made for the purpose permitted by
subsection (h) of this Section 6, the Bank must first receive
Instructions from Authorized Persons specifying the shares held
by the Bank or its subcustodian to be so transferred or delivered
and naming the person or persons to whom transfers or delivery of
such shares shall be made. In the case of any transfer, exchange
or delivery to be made for the purpose permitted by subsection
(i) of this Section 6, the Bank must first receive a certified
copy of a resolution of the Board adequately describing such
transfer, exchange or delivery, declaring such purpose to be a
proper trust purpose, and naming the person or persons to whom
delivery of such Securities shall be made. Any transfer or
delivery pursuant to subsection (j) of this Section 6 will be
made in accordance with Section 17.
7. Custody Account Procedures. With respect to any
transaction involving Securities held in or to be acquired for
the Custody Account, the Bank in its discretion may cause the
Deposit Account to be credited on the contractual settlement date
with the proceeds of any sale or exchange of Securities from the
Custody Account and to be debited on the contractual settlement
date for the cost of Securities purchased or acquired for the
Custody Account. The Bank may reverse any such credit or debit
if the transaction with respect to which such credit or debit
were made fails to settle within a reasonable period, determined
by the Bank in its discretion, after the contractual settlement
date, except that if any Securities delivered pursuant to this
Section 7 are returned by the recipient thereof, the Bank may
cause any such credits and debits to be reversed at any time.
With respect to any transactions as to which the Bank does not
determine so to credit or debit the Deposit Account, the proceeds
from the sale or exchange of Securities will be credited and the
cost of such Securities purchased or acquired will be debited to
the Deposit Account on the date such proceeds or Securities are
received by the Bank.
Notwithstanding the preceding paragraph, settlement and
payment for Securities received for, and delivery of Securities
out of, the Custody Account may be effected in accordance with
the customary or established securities trading or securities
-7-
<PAGE> 8
processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such
Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives
Instructions from Authorized Persons to the contrary, the Bank
will, or will instruct its subcustodian to,
(a) present for payment any Securities in the Custody
Account which are called, redeemed or retired or otherwise
become payable and all coupons and other income items which
call for payment upon presentation to the extent that the
Bank or subcustodian is aware of such opportunities for
payment, and hold cash received upon presentation of such
Securities in accordance with the provisions of Sections 2,
3 and 4 of this Agreement;
(b) in respect of Securities in the Custody Account,
execute in the name of the Fund such ownership and other
certificates as may be required to obtain payments in
respect thereof;
(c) exchange interim receipts or temporary Securities
in the Custody Account for definitive Securities;
(d) convert moneys received with respect to Securities
of foreign issue into United States dollars or any other
currency necessary to effect any transaction involving the
Securities whenever it is practicable to do so through
customary banking channels, using any method or agency
available, including, but not limited to, the facilities of
the Bank, its subsidiaries, affiliates or subcustodians; and
(e) in the event of any loss of Securities or Cash,
use its best efforts to ascertain the circumstances relating
to such loss and promptly report the same to the Fund.
9. Instructions. As used in this Agreement, the term
"Instructions" means instructions of the Fund received by the
Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction system
acceptable to the Bank which the Bank reasonably believes in good
faith to have been given by Authorized Persons or which are
transmitted with proper testing or authentication pursuant to
terms and conditions which the Bank may specify.
-8-
<PAGE> 9
Any Instructions delivered to the Bank by telephone shall
promptly thereafter be confirmed in writing by an Authorized
Person (which confirmation may bear the facsimile signature of
such Person), but the Fund will hold the Bank harmless for its
failure to send such confirmation in writing, the failure of such
confirmation to conform to the telephone instructions received or
the Bank's failure to produce such confirmation at any subsequent
time provided that the Bank has timely advised the Fund of its
failure to send such confirmation in writing or the failure of
such confirmation to conform to the telephone instructions
received. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until cancelled or
superceded. If the Bank requires test arrangements, authen-
tication methods or other security devices to be used with
respect to instructions, any Instructions given by the Fund
thereafter shall be given and processed in accordance with such
terms and conditions for the use of such arrangements, methods or
devices as the Bank may put into effect and modify from time to
time. The Fund shall safeguard any testkeys, identification
codes or other security devices which the Bank shall make
available to it. The Bank may electronically record any
Instructions given by telephone, and any other telephone
discussions, with respect to the Custody Account.
10. Authorized Persons. As used in this Agreement, the
term "Authorized Persons" means such officers or such agents of
the Fund as have been designated by a resolution of the Board, a
certified copy of which has been provided to the Bank, to act on
behalf of the Fund in the performance of any acts which
Authorized Persons may do under this Agreement. Such persons
shall continue to be Authorized Persons until such time as the
Bank receives instructions from Authorized Persons that any such
officer or agent is no longer an Authorized Person.
11. Nominees. Securities in the Custody Account which are
ordinarily held in registered form may be registered in the name
of the Bank's nominee or, as to any Securities in the possession
of an entity other than the Bank, in the name of such entity's
nominee. The Fund agrees to hold any such nominee harmless from
any liability as a holder of record of such Securities. The Bank
may without notice to the Fund cause any such Securities to cease
to be registered in the name of any such nominee and to be
registered in the name of the Fund. In the event that any
Securities registered in the name of the Bank's nominee or held
by one of its subcustodians and registered in the name of such
subcustodian's nominee are called for partial redemption by the
issuer of such Security, the Bank may allot, or cause to be
allotted, the called portion to the respective beneficial holders
of such class of security in any manner the Bank deems to be fair
and equitable.
-9-
<PAGE> 10
12. Standard of Care. The Bank shall be responsible for
the performance of only such duties as are set forth herein or
contained in Instructions given to the Bank by Authorized Persons
which are not contrary to the provisions of this Agreement. The
Bank will use reasonable care with respect to the safekeeping of
Securities in the Custody Account. The Bank shall be liable to
the Fund for any loss which shall occur as the result of the
failure of a subcustodian or an eligible foreign securities
depository engaged by such subcustodian to exercise reasonable
care with respect to the safekeeping of such Securities and other
assets to the same extent that the Bank would be liable to the
Fund if the Bank were holding such Securities and other assets in
New York. In the event of any loss to the Fund by reason of the
failure of the Bank or its subcustodian or an eligible foreign
securities depository engaged by such subcustodian to utilize
reasonable care, the Bank shall be liable to the Fund to the
extent of the Fund's damages, to be determined based on the
market value of the property which is the subject of the loss at
the date of discovery of such loss and without reference to any
special conditions or circumstances. The Bank shall be held to
the exercise of reasonable care in carrying out this Agreement
but shall be indemnified by, and shall be without liability to,
the Fund for any action taken or omitted by the Bank in good
faith without negligence. The Bank shall be entitled to rely,
and may act, on advice of counsel (who may be counsel for the
Fund) on all matters and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
The Bank need not maintain any insurance for the benefit of
the Fund. However, the Bank represents and warrants that it
presently maintains a bankers' blanket bond ("Bond") which
provides standard fidelity and non-negligent loss coverage with
respect to securities which may be held by the Bank and
securities which may be held in the offices of foreign banks and
foreign securities depositories which may be utilized by the Bank
pursuant to this Agreement. The Bank agrees that if at any time
the Bank for any reason discontinues such coverage, it shall
immediately notify the Fund in writing. The Bank represents that
only the named insured on the Bond, which includes the Bank but
not any of the Bank's customers, is directly protected against
loss. The Bank represents that while it might resist a claim of
one of its customers to recover for a loss not covered by the
Bond, as a practical matter, where a claim is brought and loss is
possibly covered by the Bond, the Bank would give notice of the
claim to its insurer, and the insurer would normally determine
whether to defend the claim against the Bank or to pay the claim
on behalf of the Bank.
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<PAGE> 11
All collections of funds or other property paid or
distributed in respect of Securities in the Custody Account shall
be made at the risk of the Fund. The Bank shall have no
liability for any loss occasioned by delay in the actual receipt
of notice by the Bank or by its subcustodian of any payment,
redemption or other transaction regarding Securities in the
Custody Account in respect of which the Bank has agreed to take
action as provided in Section 8 hereof. The Bank shall not be
liable for any action taken in good faith upon Instructions or
upon any certified copy of any resolution of the Board and may
rely on the genuineness of any such documents which it may in
good faith believe to be validly executed. The Bank shall not be
liable for any loss resulting from, or caused by, the direction
of the Fund to maintain custody of any Securities or cash in a
foreign country including, but not limited to, losses resulting
from nationalization, expropriation, currency restrictions, acts
of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.
13. Compliance with Securities and Exchange Commission
Rules and Orders. To the extent that a condition of a rule,
regulation, interpretation or exemptive order promulgated by or
under the authority of the Securities and Exchange Commission
applies to the Bank or the Fund each shall be solely responsible
to assure that this Agreement and the maintenance of Securities
and cash under this Agreement complies with any such rule,
regulation, interpretation or exemptive order.
14. Corporate Action. The Bank or its subcustodian is to
forward promptly to the Fund all communications relative to the
Securities in the Custody Account. Such communications as call
for voting or the exercise of rights or other specific action
(including material relative to legal proceedings intended to be
transmitted to security holders) shall be transmitted to the Fund
by means which will permit the Fund to take timely action. The
Bank or its subcustodian will cause its nominee to execute and
deliver to the Fund proxies relating to Securities in the Custody
Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted.
Proxies relating to bearer Securities will be delivered in
accordance with written instructions from Authorized Persons.
Bank hereby agrees that Bank shall create, maintain, and
retain all records relating to its activities and obligations
under this Agreement in such manner as will meet the obligations
of the Fund under the Investment Company Act, particularly
Section 31 thereof and Rules 31a-1, 31a-2 and 31a-3 thereunder,
and applicable Federal, state and foreign tax laws and other laws
or administrative rules or procedures, in each case as currently
in effect, which may be applicable to the Fund. All records so
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<PAGE> 12
maintained in connection with the performance of its duties under
this Agreement shall be preserved and maintained as required by
regulation and in the event of termination of the Agreement,
shall be available to the Fund or its agent upon request.
15. Fees and Expenses. The Fund agrees to pay to the Bank
from time to time such compensation for its services pursuant to
this Agreement as may be mutually agreed upon in writing from
time to time including reimbursement of the Bank's reasonable
out-of-pocket or incidental expenses, including legal fees. The
Fund hereby agrees to hold the Bank harmless from any liability
or loss resulting from any taxes or other governmental charges,
and any expenses related thereto, which may be imposed, or
assessed with respect to the Custody Account or any Securities in
the Custody Account and also agrees to hold the Bank, its
subcustodians, and their respective nominees harmless from any
liability as a record holder of Securities in the Custody
Account. The Bank is authorized to charge any account of the
Fund for such items and the Bank shall have a lien on Securities
in the Custody Account and on cash in the Deposit Account for any
amount owing to the Bank from time to time under this Agreement.
16. Effectiveness. This Agreement shall be effective on
the date first noted above; provided, however, that the Board has
provided the Bank a certified copy of a resolution that (i)
approves each of the subcustodians listed in Appendix A hereto
and the terms of the custody agreement between the Bank and each
such subcustodian attached as Exhibits I through hereof, and
(ii) states that the Board has determined that the use of each
such subcustodian and the terms of each such subcustody agreement
are consistent with the best interests of the Fund and its
shareholders.
17. Termination. This Agreement may be terminated by the
Fund or the Bank by 60 days written notice to the other, sent by
registered mail, provided that any termination by the Fund shall
be authorized by a resolution of its Board, a certified copy of
which shall accompany such notice of termination, and provided
further, that such resolution shall specify the names of the
persons to whom the Bank shall deliver the Securities in the
Custody Account and to whom the cash in the Deposit Account shall
be paid. If notice of termination is given by the Bank, the Fund
shall, within 60 days following the giving of such notice,
deliver to the Bank a certified copy of a resolution of its Board
specifying the names of the persons to whom the Bank shall
deliver the Securities in the Custody Account and to whom the
cash in the Deposit Account shall be paid. In either case the
Bank will deliver such Securities and cash to the persons so
specified, after deducting therefrom any amounts which the Bank
determines to be owed to it under Section 15. If within 60 days
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<PAGE> 13
following the giving of a notice of termination by the Bank, the
Bank does not receive from the Fund a certified copy of a
resolution of the Board specifying the names of the persons to
whom the Bank shall deliver the Securities in the Custody Account
and to whom the cash in the Deposit Account shall be paid, the
Bank, at its election, may deliver such Securities and pay such
cash to a bank or trust company doing business in the State of
New York to be held and disposed of pursuant to the provisions of
this Agreement, or to Authorized Persons, or may continue to hold
such Securities and cash until a certified copy of one or more
resolutions as aforesaid is delivered to the Bank. Concurrently
with the delivery of such Securities, the Bank shall deliver to
the Company, or such other person as the Company shall instruct,
the records referred to in Section 14 hereof which are in the
possession or control of the Bank. The obligations of the
parties hereto regarding the use of reasonable care, indemnities
and payment of fees and expenses shall survive the termination of
this Agreement.
18. Notices. Any notice or other communication from the
Fund to the Bank is to be sent to the office of the Bank at 1211
Avenue of the Americas (33rd floor), New York, New York, 10036,
Attention Global Custody Division, or such other address as may
hereafter be given to the Company in accordance with the notice
provisions hereunder, and any notice from the Bank to the Fund is
to be mailed postage prepaid, addressed to the Fund at the
address appearing below, or as it may hereafter be changed on the
Bank's records in accordance with notice hereunder from the Fund.
19. Governing Law and Successors and Assigns. This
Agreement shall be governed by the law of the State of New York
and shall not be assignable by either party, but shall bind the
successors and assigns of the Fund and the Bank.
20. Headings. The headings of the paragraphs hereof are
included for convenience of reference only and do not form a part
of this Agreement.
21. Additional Portfolios. If the Fund shall issue shares
of more than one portfolio during the term hereof, the Bank
agrees that all securities and other assets of the Fund shall be
segregated by portfolio and all books and records, account values
or actions shall be maintained, held, made or taken, as the case
may be, separately for each portfolio. Other than as encompassed
by the preceding sentence, references in this Agreement to "the
Fund" are applicable either to the entire trust or to a
particular portfolio or portfolios, as the context may make
reasonable and appropriate. If the Fund has more than one
portfolio, Instructions shall designate the portfolio or
portfolios to which they apply.
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<PAGE> 14
22. Disclaimer. All parties hereto are expressly put on
notice of the Fund's Agreement and Declaration of Trust and all
amendments thereto, all of which are on file with the Secretary
of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and
the obligations of the Fund hereunder are not binding upon any of
the Trustees, officers or shareholders of the Fund individually
but are binding upon only the assets and property of the Fund.
With respect to any claim by Bank for recovery of that portion of
the compensation (or any other liability of the Fund arising
hereunder) allocated to a particular portfolio, whether in
accordance with the express terms hereof or otherwise, the Bank
shall have recourse solely against the assets of that portfolio
to satisfy such claim and shall have no recourse against the
assets of any other portfolio for such purpose.
KEMPER TECHNOLOGY FUND
By: /s/ Charles M. Kierscht
-------------------------
President
Address for Record: 120 South LaSalle Street
Chicago, Illinois 60603
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Catherine A. Lee
--------------------------
Vice President
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<PAGE> 1
EXHIBIT 99.B9(a)
AGENCY AGREEMENT
AGREEMENT dated the 1st day of January, 1989, by and between
KEMPER TECHNOLOGY FUND, a Massachusetts business trust having its
principal place of business at 120 South LaSalle Street, Chicago,
IL 60603 ("Fund"), and INVESTORS FIDUCIARY TRUST COMPANY, a state
chartered trust company organized and existing under the laws of
the State of Missouri having its principal place of business at
127 West 10th Street, Kansas City, Missouri 64105 ("IFTC").
WHEREAS, Fund wants to appoint IFTC as Transfer Agent and
Dividend Disbursing Agent, and IFTC wants to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
--------------------------------------
In connection with the appointment of IFTC as Transfer
Agent and Dividend Disbursing Agent for Fund, there
will be filed with IFTC the following documents:
A. A certified copy of the resolutions of the Board
of Trustees of Fund appointing IFTC as Transfer
Agent and Dividend Disbursing Agent, approving the
form of this Agreement, and designating certain
persons to give written instructions and requests
on behalf of Fund.
B. A certified copy of the Agreement and Declaration
of Trust of Fund and any amendments thereto.
C. A certified copy of the Bylaws of Fund.
D. Copies of Registration Statements filed with the
Securities and Exchange Commission.
E. Specimens of all forms of outstanding share
certificates as approved by the Board of Trustees
of Fund, with a certificate of the Secretary of
Fund as to such approval.
<PAGE> 2
F. Specimens of the signatures of the officers of the
Fund authorized to sign share certificates and
individuals authorized to sign written
instructions and requests on behalf of the Fund.
G. An opinion of counsel for Fund:
(1) With respect to Fund's organization and
existence under the laws of The Commonwealth
of Massachusetts.
(2) With respect to the status of all shares of
Fund covered by this appointment under the
Securities Act of 1933, and any other
applicable federal or state statute.
(3) To the effect that all issued shares are, and
all unissued shares will be when issued,
validly issued, fully paid and non-
assessable.
2. Certain Representations and Warranties of IFTC. IFTC
represents and warrants to Fund that:
A. It is a trust company duly organized and existing
and in good standing under the laws of the State
of Missouri.
B. It is duly qualified to carry on its business in
the State of Missouri.
C. It is empowered under applicable laws and by its
Articles of Incorporation and Bylaws to enter into
and perform the services contemplated in this
Agreement.
D. All requisite corporate proceedings have been
taken to authorize it to enter into and perform
this Agreement.
E. It has and will continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.
F. It is, and will continue to be, registered as a
transfer agent under the Securities Exchange Act
of 1934.
-2-
<PAGE> 3
3. Certain Representations and Warranties of Fund. Fund
represents and warrants to IFTC that:
A. It is a business trust duly organized and existing
and in good standing under the laws of The
Commonwealth of Massachusetts.
B. It is an investment company registered under the
Investment Company Act of 1940.
C. A registration statement under the Securities Act
of 1933 has been filed and will be effective with
respect to all shares of Fund being offered for
sale at any time and from time to time.
D. All requisite steps have been or will be taken to
register Fund's shares for sale in all applicable
states, including the District of Columbia.
E. Fund and its Trustees are empowered under
applicable laws and by the Fund's Agreement and
Declaration of Trust and Bylaws to enter into and
perform this Agreement.
4. Scope of Appointment.
--------------------
A. Subject to the conditions set forth in this
Agreement, Fund hereby employs and appoints IFTC
as Transfer Agent and Dividend Disbursing Agent
effective the date hereof.
B. IFTC hereby accepts such employment and
appointment and agrees that it will act as Fund's
Transfer Agent and Dividend Disbursing Agent.
IFTC agrees that it will also act as agent in
connection with Fund's periodic withdrawal payment
accounts and other open-account or similar plans
for shareholders, if any.
C. IFTC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and
obligations hereunder in accordance with industry
practice.
D. Fund agrees to use all reasonable efforts to
deliver to IFTC in Kansas City, Missouri, as soon
as they are available, all its shareholder account
records.
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<PAGE> 4
E. Subject to the provisions of Sections 20 and 21
hereof, IFTC agrees that it will perform all the
usual and ordinary services of Transfer Agent and
Dividend Disbursing Agent and as agent for the
various shareholder accounts, including, without
limitation, the following: issuing, transferring
and cancelling share certificates, maintaining all
shareholder accounts, preparing shareholder
meeting lists, mailing proxies, receiving and
tabulating proxies, mailing shareholder reports
and prospectuses, withholding federal income
taxes, preparing and mailing checks for
disbursement of income and capital gains
dividends, preparing and filing all required U.S.
Treasury Department information returns for all
shareholders, preparing and mailing confirmation
forms to shareholders and dealers with respect to
all purchases and liquidations of Fund shares and
other transactions in shareholder accounts for
which confirmations are required, recording
reinvestments of dividends and distributions in
Fund shares, recording redemptions of Fund shares
and preparing and mailing checks for payments upon
redemption and for disbursements to systematic
withdrawal plan shareholders.
5. Compensation and Expenses.
-------------------------
A. In consideration for the services provided
hereunder by IFTC as Transfer Agent and Dividend
Disbursing Agent, Fund will pay to IFTC from time
to time compensation as agreed upon for all
services rendered as Agent, and also, all its
reasonable out-of-pocket expenses and other
disbursements incurred in connection with the
agency. Such compensation will be set forth in a
separate schedule to be agreed to by Fund and
IFTC. The initial agreement regarding
compensation is attached as Exhibit A.
B. Fund agrees to promptly reimburse IFTC for all
reasonable out-of-pocket expenses or advances
incurred by IFTC in connection with the
performance of services under this Agreement
including, but not limited to, postage (and first
class mail insurance in connection with mailing
share certificates), envelopes, check forms,
continuous forms, forms for reports and
statements, stationery, and other similar items,
telephone and telegraph charges incurred in
-4-
<PAGE> 5
answering inquiries from dealers or shareholders,
microfilm used each year to record the previous
year's transactions in shareholder accounts and
computer tapes used for permanent storage of
records and cost of insertion of materials in
mailing envelopes by outside firms. IFTC may, at
its option, arrange to have various service
providers submit invoices directly to the Fund for
payment of out-of-pocket expenses reimbursable
hereunder.
6. Efficient Operation of IFTC System.
-----------------------------------
A. In connection with the performance of its services
under this Agreement, IFTC is responsible for the
accurate and efficient functioning of its system
at all times, including:
(1) The accuracy of the entries in IFTC's records
reflecting purchase and redemption orders and
other instructions received by IFTC from
dealers, shareholders, Fund or its principal
underwriter.
(2) The timely availability and the accuracy of
shareholder lists, shareholder account
verifications, confirmations and other
shareholder account information to be
produced from IFTC's records or data.
(3) The accurate and timely issuance of dividend
and distribution checks in accordance with
instructions received from Fund.
(4) The accuracy of redemption transactions and
payments in accordance with redemption
instructions received from dealers,
shareholders or Fund or other authorized
persons.
(5) The deposit daily in Fund's appropriate
special bank account of all checks and
payments received from dealers or
shareholders for investment in shares.
(6) The requiring of proper forms of
instructions, signatures and signature
guarantees and any necessary documents
supporting the rightfulness of transfers,
redemptions and other shareholder account
-5-
<PAGE> 6
transactions, all in conformance with IFTC's
present procedures with such changes as may
be deemed reasonably appropriate by IFTC or
as may be reasonably approved by or on behalf
of Fund.
(7) The maintenance of a current duplicate set of
Fund's essential or required records, as
agreed upon from time to time by Fund and
IFTC, at a secure distant location, in form
available and usable forthwith in the event
of any breakdown or disaster disrupting its
main operation.
7. Indemnification.
---------------
A. Fund shall indemnify and hold IFTC harmless from
and against any and all claims, actions, suits,
losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of
or attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with
the agency relationship created by this Agreement,
provided that IFTC has acted in good faith,
without negligence and without willful misconduct.
B. IFTC shall indemnify and hold Fund harmless from
and against any and all claims, actions, suits,
losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of
or attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with
the agency relationship created by this Agreement,
provided that IFTC has not acted in good faith,
without negligence and without willful misconduct.
C. In order that the indemnification provisions
maintained in this Section 7 shall apply, upon the
assertion of a claim for which either party (the
"Indemnifying Party") may be required to provide
indemnification hereunder, the party seeking
indemnification (the "Indemnitee") shall promptly
notify the Indemnifying Party of such assertion,
and shall keep such party advised with respect to
all developments concerning such claim. The
Indemnifying Party shall be entitled to assume
control of the defense and the negotiations, if
any, regarding settlement of the claim. If the
Indemnifying Party assumes control, the Indemnitee
shall have the option to participate in the
-6-
<PAGE> 7
defense and negotiations of such claim at its own
expense. The Indemnitee shall in no event
confess, admit to, compromise, or settle any claim
for which the Indemnifying Party may be required
to indemnify it except with the prior written
consent of the Indemnifying Party, which shall not
be unreasonably withheld.
8. Certain Covenants of IFTC and Fund.
----------------------------------
A. All requisite steps will be taken by Fund from
time to time when and as necessary to register the
Fund's shares for sale in all states in which
Fund's shares shall at the time be offered for
sale and require registration. If at any time
Fund receives notice of any stop order or other
proceeding in any such state affecting such
registration or the sale of Fund's shares, or of
any stop order or other proceeding under the
Federal securities laws affecting the sale of
Fund's shares, Fund will give prompt notice
thereof to IFTC.
B. IFTC hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to
Fund for safekeeping of share certificates, check
forms, and facsimile signature imprinting devices,
if any; and for the preparation or use, and for
keeping account of, such certificates, forms and
devices. Further, IFTC agrees to carry insurance,
as specified in Exhibit B hereto, with insurers
reasonably acceptable to Fund and in minimum
amounts that are reasonably acceptable to Fund,
which will not be changed without the consent of
Fund, which consent shall not be unreasonably
withheld, and which will be expanded in coverage
or increased in amounts from time to time if and
when reasonably requested by Fund. If IFTC
determines that it is unable to obtain any such
insurance upon commercially reasonable terms, it
shall promptly so advise Fund in writing. In such
event, Fund shall have the right to terminate this
Agreement upon 30 days notice.
C. To the extent required by Section 31 of the
Investment Company Act of 1940 and Rules
hereunder, IFTC agrees that all records maintained
by IFTC relating to the services to be performed
by IFTC under this Agreement are the property of
-7-
<PAGE> 8
Fund and will be preserved and will be surrendered
promptly to Fund on request.
D. IFTC agrees to furnish Fund semi-annual reports of
its financial condition, consisting of a balance
sheet, earnings statement and any other reasonably
available financial information reasonably
requested by Fund. The annual financial
statements will be certified by IFTC's certified
public accountants.
E. IFTC represents and agrees that it will use all
reasonable efforts to keep current on the trends
of the investment company industry relating to
shareholder services and will use all reasonable
efforts to continue to modernize and improve its
system without additional cost to Fund.
F. IFTC will permit Fund and its authorized
representatives to make periodic inspections of
its operations at reasonable times during business
hours.
G. If IFTC is prevented from complying, either
totally or in part, with any of the terms or
provisions of this Agreement, by reason of fire,
flood, storm, strike, lockout or other labor
trouble, riot, war, rebellion, accidents, acts of
God, equipment, utility or transmission failure or
damage, and/or any other cause or casualty beyond
the reasonable control of IFTC, whether similar to
the foregoing matters or not, then upon written
notice to Fund, the requirements of this Agreement
that are affected by such disability, to the
extent so affected, shall be suspended during the
period of such disability; provided, however, that
IFTC shall make reasonable effort to remove such
disability as soon as possible. During such
period, Fund may seek alternate sources of service
without liability hereunder; and IFTC will use all
reasonable efforts to assist Fund to obtain
alternate sources of service. IFTC shall have no
liability to Fund for nonperformance because of
the reasons set forth in this Section 8.G; but if
a disability that, in Fund's reasonable belief,
materially affects IFTC's ability to perform its
obligations under this Agreement continues for a
period of 30 days, then Fund shall have the right
to terminate this Agreement upon 10 days written
notice to IFTC.
-8-
<PAGE> 9
9. Adjustment.
----------
In case of any recapitalization, readjustment or other
change in the structure of Fund requiring a change in
the form of share certificates, IFTC will issue or
register certificates in the new form in exchange for,
or in transfer of, the outstanding certificates in the
old form, upon receiving the following:
A. Written instructions from an officer of Fund.
B. Certified copy of any amendment to the Agreement
and Declaration of Trust or other document
effecting the change.
C. Certified copy of any order or consent of each
governmental or regulatory authority required by
law for the issuance of the shares in the new
form, and an opinion of counsel that no order or
consent of any other government or regulatory
authority is required.
D. Specimens of the new certificates in the form
approved by the Board of Trustees of Fund, with a
certificate of the Secretary of Fund as to such
approval.
E. Opinion of counsel for Fund:
(1) With respect to the status of the shares of
Fund in the new form under the Securities Act
of 1933, and any other applicable federal or
state laws.
(2) To the effect that the issued shares in the
new form are, and all unissued shares will be
when issued, validly issued, fully paid and
non-assessable.
10. Share Certificates.
------------------
Fund will furnish IFTC with a sufficient supply of
blank share certificates and from time to time will
renew such supply upon the request of IFTC. Such
certificates will be signed manually or by facsimile
signatures of the officers of Fund authorized by law
and Fund's Bylaws to sign share certificates and, if
required, will bear the trust seal or facsimile
thereof.
-9-
<PAGE> 10
11. Death, Resignation or Removal of Signing Officer.
------------------------------------------------
Fund will file promptly with IFTC written notice of any
change in the officers authorized to sign share
certificates, written instructions or requests,
together with two signature cards bearing the specimen
signature of each newly authorized officer, all as
certified by an appropriate officer of the Fund. In
case any officer of Fund who will have signed manually
or whose facsimile signature will have been affixed to
blank share certificates will die, resign, or be
removed prior to the issuance of such certificates,
IFTC may issue or register such share certificates as
the share certificates of Fund notwithstanding such
death, resignation, or removal, until specifically
directed to the contrary by Fund in writing. In the
absence of such direction, Fund will file promptly with
IFTC such approval, adoption, or ratification as may be
required by law.
12. Future Amendments of Agreement and Declaration of Trust
-------------------------------------------------------
and Bylaws.
----------
Fund will promptly file with IFTC copies of all
material amendments to its Agreement and Declaration of
Trust and Bylaws and Registration Statement made after
the date of this Agreement.
13. Instructions, Opinion of Counsel and Signatures.
-----------------------------------------------
At any time IFTC may apply to any officer of Fund for
instructions, and may consult with legal counsel for
Fund at the expense of Fund, or with its own legal
counsel at its own expense, with respect to any matter
arising in connection with the agency; and it will not
be liable for any action taken or omitted by it in good
faith in reliance upon such instructions or upon the
opinion of such counsel. IFTC is authorized to act on
the orders, directions or instructions of such persons
as the Board of Trustees of Fund shall from time to
time designate by resolution. IFTC will be protected
in acting upon any paper or document, including any
orders, directions or instructions, reasonably believed
by it to be genuine and to have been signed by the
proper person or persons; and IFTC will not be held to
have notice of any change of authority of any person so
authorized by Fund until receipt of written notice
thereof from Fund. IFTC will also be protected in
recognizing share certificates that it reasonably
-10-
<PAGE> 11
believes to bear the proper manual or facsimile
signatures of the officers of Fund, and the proper
countersignature of any former Transfer Agent or
Registrar, or of a Co-Transfer Agent or Co-Registrar.
14. Papers Subject to Approval of Counsel.
-------------------------------------
The acceptance by IFTC of its appointment as Transfer
Agent and Dividend Disbursing Agent, and all documents
filed in connection with such appointment and
thereafter in connection with the agencies, will be
subject to the approval of legal counsel for IFTC,
which approval will not be unreasonably withheld.
15. Certification of Documents.
--------------------------
The required copy of the Agreement and Declaration of
Trust of Fund and copies of all amendments thereto will
be certified by the appropriate official of The
Commonwealth of Massachusetts; and if such Agreement
and Declaration of Trust and amendments are required by
law to be also filed with a county, city or other
officer or official body, a certificate of such filing
will appear on the certified copy submitted to IFTC. A
copy of the order or consent of each governmental or
regulatory authority required by law for the issuance
of Fund shares will be certified by the Secretary or
Clerk of such governmental or regulatory authority,
under proper seal of such authority. The copy of the
Bylaws and copies of all amendments thereto and copies
of resolutions of the Board of Trustees of Fund will be
certified by the Secretary or an Assistant Secretary of
Fund.
16. Records.
-------
IFTC will maintain customary records in connection with
its agency, and particularly will maintain those
records required to be maintained pursuant to sub-
paragraph (2)(iv) of paragraph (b) of Rule 31a-1 under
the Investment Company Act of 1940, if any.
17. Disposition of Books, Records and Cancelled
-------------------------------------------
Certificates.
------------
IFTC will send periodically to Fund, or to where
designated by the Secretary or an Assistant Secretary
of Fund, all books, documents, and all records no
longer deemed needed for current purposes and share
-11-
<PAGE> 12
certificates which have been cancelled in transfer or
in exchange, upon the understanding that such books,
documents, records, and share certificates will not be
destroyed by Fund without the consent of IFTC (which
consent will not be unreasonably withheld), but will be
safely stored for possible future reference.
18. Provisions Relating to IFTC as Transfer Agent.
---------------------------------------------
A. IFTC will make original issues of share
certificates upon written request of an officer of
Fund and upon being furnished with a certified
copy of a resolution of the Board of Trustees
authorizing such original issue, an opinion of
counsel as outlined in Section 1.G or 9.E of this
Agreement, the certificates required by Section 10
of this Agreement and any other documents required
by Section 1 or 9 of this Agreement.
B. Before making any original issue of certificates,
Fund will furnish IFTC with sufficient funds to
pay any taxes required on the original issue of
the shares. Fund will furnish IFTC such evidence
as may be required by IFTC to show the actual
value of the shares. If no taxes are payable,
IFTC will upon request be furnished with an
opinion of outside counsel to that effect.
C. Shares will be transferred and new certificates
issued in transfer, or shares accepted for
redemption and funds remitted therefor, upon
surrender of the old certificates in form deemed
by IFTC properly endorsed for transfer or
redemption accompanied by such documents as IFTC
may deem necessary to evidence the authority of
the person making the transfer or redemption, and
bearing satisfactory evidence of the payment of
any applicable share transfer taxes. IFTC
reserves the right to refuse to transfer or redeem
shares until it is satisfied that the endorsement
or signature on the certificate or any other
document is valid and genuine, and for that
purpose it may require a guarantee of signature by
such persons as may from time to time be specified
in the prospectus related to such shares or
otherwise authorized by Fund. IFTC also reserves
the right to refuse to transfer or redeem shares
until it is satisfied that the requested transfer
or redemption is legally authorized, and it will
incur no liability for the refusal in good faith
-12-
<PAGE> 13
to make transfers or redemptions which, in its
judgment, are improper, unauthorized, or otherwise
not rightful. IFTC may, in effecting transfers or
redemptions, rely upon Simplification Acts or
other statutes which protect it and Fund in not
requiring complete fiduciary documentation.
D. When mail is used for delivery of share
certificates, IFTC will forward share certificates
in "nonnegotiable" form as provided by Fund by
first class mail, all such mail deliveries to be
covered while in transit to the addressee by
insurance arranged for by IFTC.
E. IFTC will issue and mail subscription warrants and
certificates provided by Fund and representing
share dividends, exchanges or split-ups, or act as
Conversion Agent upon receiving written instruc-
tions from any officer of Fund and such other
documents as IFTC deems necessary.
F. IFTC will issue, transfer, and split-up
certificates upon receiving written instructions
from an officer of Fund and such other documents
as IFTC may deem necessary.
G. IFTC may issue new certificates in place of
certificates represented to have been lost,
destroyed, stolen or otherwise wrongfully taken,
upon receiving indemnity satisfactory to IFTC, and
may issue new certificates in exchange for, and
upon surrender of, mutilated certificates. Any
such issuance shall be in accordance with the
provisions of law governing such matter and any
procedures adopted by the Board of Trustees of the
Fund of which IFTC has notice.
H. IFTC will supply a shareholder's list to Fund
properly certified by an officer of IFTC for any
shareholder meeting upon receiving a request from
an officer of Fund. It will also supply lists at
such other times as may be reasonably requested by
an officer of Fund.
I. Upon receipt of written instructions of an officer
of Fund, IFTC will address and mail notices to
shareholders.
-13-
<PAGE> 14
J. In case of any request or demand for the
inspection of the share books of Fund or any other
books of Fund in the possession of IFTC, IFTC will
endeavor to notify Fund and to secure instructions
as to permitting or refusing such inspection.
IFTC reserves the right, however, to exhibit the
share books or other books to any person in case
it is advised by its counsel that it may be held
responsible for the failure to exhibit the share
books or other books to such person.
19. Provisions Relating to Dividend Disbursing Agency.
-------------------------------------------------
A. IFTC will, at the expense of Fund, provide a
special form of check containing the imprint of
any device or other matter desired by Fund. Said
checks must, however, be of a form and size
convenient for use by IFTC.
B. If Fund wants to include additional printed
matter, financial statements, etc., with the
dividend checks, the same will be furnished to
IFTC within a reasonable time prior to the date of
mailing of the dividend checks, at the expense of
Fund.
C. If Fund wants its distributions mailed in any
special form of envelopes, sufficient supply of
the same will be furnished to IFTC but the size
and form of said envelopes will be subject to the
approval of IFTC. If stamped envelopes are used,
they must be furnished by Fund; or, if postage
stamps are to be affixed to the envelopes, the
stamps or the cash necessary for such stamps must
be furnished by Fund.
D. IFTC will maintain one or more deposit accounts as
Agent for Fund, into which the funds for payment
of dividends, distributions, distributions,
redemptions or other disbursements provided for
hereunder will be deposited, and against which
checks will be drawn.
20. Termination of Agreement.
------------------------
A. This Agreement may be terminated by either party
upon sixty (60) days prior written notice to the
other party.
-14-
<PAGE> 15
B. Fund, in addition to any other rights and
remedies, shall have the right to terminate this
Agreement forthwith upon the occurrence at any
time of any of the following events:
(1) Any interruption or cessation of operations
by IFTC or its assigns which materially
interferes with the business operation of
Fund.
(2) The bankruptcy of IFTC or its assigns or the
appointment of a receiver for IFTC or its
assigns.
(3) Any merger, consolidation or sale of
substantially all the assets of IFTC or its
assigns.
(4) The acquisition of a controlling interest in
IFTC or its assigns, by any broker, dealer,
investment adviser or investment company
except as may presently exist.
(5) Failure by IFTC or its assigns to perform its
duties in accordance with this Agreement,
which failure materially adversely affects
the business operations of Fund and which
failure continues for thirty (30) days after
written notice from Fund.
(6) The registration of IFTC or its assigns as a
transfer agent under the Securities Exchange
Act of 1934 is revoked, terminated or
suspended for any reason.
C. In the event of termination, Fund will promptly
pay IFTC all amounts due to IFTC hereunder. Upon
termination of this Agreement, IFTC shall deliver
all shareholder and account records pertaining to
Fund either to Fund or as directed in writing by
Fund.
21. Assignment.
----------
A. Except for the assignment of responsibilities
pursuant to the Services Agreement ("Services
Agreement") between IFTC and Kemper Service
Company ("KSVC"), which Fund has approved, neither
this Agreement nor any rights or obligations
hereunder may be assigned by IFTC without the
-15-
<PAGE> 16
written consent of Fund; provided, however, no
assignment will relieve IFTC of any of its
obligations hereunder.
B. This Agreement including, without limitation, the
provisions of Section 7 will inure to the benefit
of and be binding upon the parties and their
respective successors and assigns including KSVC
pursuant to the aforesaid Services Agreement.
C. KSVC is authorized by Fund to use the system
services of DST Systems, Inc.
22. Confidentiality.
---------------
A. Except as provided in the last sentence of Section
18.J hereof, or as otherwise required by law, IFTC
will keep confidential all records of and
information in its possession relating to Fund or
its shareholders or shareholder accounts and will
not disclose the same to any person except at the
request or with the consent of Fund.
B. Except as otherwise required by law, Fund will
keep confidential all financial statements and
other financial records (other than statements and
records relating solely to Fund's business
dealings with IFTC) and all manuals, systems and
other technical information and data, not publicly
disclosed, relating to IFTC's operations and
programs furnished to it by IFTC pursuant to this
Agreement and will not disclose the same to any
person except at the request or with the consent
of IFTC. Notwithstanding anything to the contrary
in this Section 22.B, if an attempt is made
pursuant to subpoena or other legal process to
require Fund to disclose or produce any of the
aforementioned manuals, systems or other technical
information and data, Fund shall give IFTC prompt
notice thereof prior to disclosure or production
so that IFTC may, at its expense, resist such
attempt.
23. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties by either party
herein contained will survive the execution and
delivery of this Agreement.
-16-
<PAGE> 17
24. Miscellaneous.
-------------
A. This Agreement is executed and delivered in the
State of Illinois and shall be governed by the
laws of said state (except as to Section 24.G
hereof which shall be governed by the laws of The
Commonwealth of Massachusetts).
B. No provisions of this Agreement may be amended or
modified in any manner except by a written
agreement properly authorized and executed by both
parties hereto.
C. The captions in this Agreement are included for
convenience of reference only, and in no way
define or limit any of the provisions hereof or
otherwise affect their construction or effect.
D. This Agreement shall become effective as of the
date hereof.
E. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be
deemed an original but all of which together shall
constitute one and the same instrument.
F. If any part, term or provision of this Agreement
is held by the courts to be illegal, in conflict
with any law or otherwise invalid, the remaining
portion or portions shall be considered severable
and not be affected, and the rights and
obligations of the parties shall be construed and
enforced as if the Agreement did not contain the
particular part, term or provision held to be
illegal or invalid.
G. All parties hereto are expressly put on notice of
Fund's Agreement and Declaration of Trust which is
on file with the Secretary of The Commonwealth of
Massachusetts, and the limitation of shareholder
and trustee liability contained therein. This
Agreement has been executed by and on behalf of
Fund by its representatives as such
representatives and not individually, and the
obligations of Fund hereunder are not binding upon
any of the Trustees, officers or shareholders of
the Fund individually but are binding upon only
the assets and property of Fund. With respect to
any claim by IFTC for recovery of that portion of
the compensation and expenses (or any other
-17-
<PAGE> 18
liability of Fund arising hereunder) allocated to
a particular Portfolio, whether in accordance with
the express terms hereof or otherwise, IFTC shall
have recourse solely against the assets of that
Portfolio to satisfy such claim and shall have no
recourse against the assets of any other Portfolio
for such purpose.
H. This Agreement, together with the Fee Schedule, is
the entire contract between the parties relating
to the subject matter hereof and supersedes all
prior agreements between the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officer as of the
day and year first set forth above.
KEMPER TECHNOLOGY FUND
By /s/ Charles M. Kierscht
-----------------------------
Title: President
-------------------------
ATTEST:
/s/ Robert J. Engling
-------------------------
Title: Secretary
-----------------
INVESTORS FIDUCIARY TRUST COMPANY
By /s/ Larry W. Rinne
------------------------------
Title: President
---------------------------
ATTEST:
/s/ Cheryl Naegler
--------------------------
Title: Assistant Secretary
------------------
-18-
<PAGE> 19
EXHIBIT A
---------
FEE SCHEDULE
------------
<TABLE>
<CAPTION>
Transfer Agency Function by Fund Fee Payable
-------------------------------- ------------
<S> <C>
1. Maintenance of open shareholder $6.00 per year
account. account
2. Maintenance of closed shareholder $6.00 per year
account. account
3. Establishment of new shareholder $4.00 per new
account. account
4. Payment of dividend. $.25 per
dividend payment
per account
5. Dividend reinvestment from Kemper $.50 per
Unit Investment Trusts. transaction
6. Process purchase or redemption of $1.00 per
shares transaction. transaction
7. All other shareholder account $1.00 per
transactions. transaction
</TABLE>
The out-of-pocket expenses of IFTC will be reimbursed by Fund in
accordance with the provisions of paragraph 5 of the Agency
Agreement. All fees will be subject to offset by earnings
allowances under the Custody Agreement between Fund and IFTC.
<PAGE> 20
EXHIBIT B
---------
IFTC INSURANCE COVERAGE
-----------------------
DESCRIPTION OF POLICY:
BROKERS BLANKET BOND, STANDARD FORM 14
Covering losses caused by dishonesty of employees, physical
loss of securities on or outside of premises while in
possession of authorized person, loss caused by forgery or
alteration of checks or similar instruments.
ERRORS AND OMISSIONS INSURANCE
Covering replacement of destroyed records and computer
errors and omissions.
SPECIAL FORGERY BOND
Covering losses through forgery or alteration of checks or
drafts of customers processed by insured but drawn on or
against them.
MAIL INSURANCE (APPLIES TO ALL FULL SERVICE OPERATIONS)
Provides indemnity for the following types of securities
lost in the mails:
Non-negotiable securities mailed to domestic locations
via registered mail.
Non-negotiable securities mailed to domestic locations
via first-class or certified mail.
Non-negotiable securities mailed to foreign locations
via registered mail.
Negotiable securities mailed to all locations via
registered mail.
<PAGE> 1
EXHIBIT 99.B9(b)
Supplement to Agency Agreement
------------------------------
Supplement to Agency Agreement ("Supplement") made as of May
31, 1994 by and between the registered investment company
executing this document (the "Fund") and Investors Fiduciary
Trust Company ("Agent").
WHEREAS, the Fund and Agent are parties to an Agency
Agreement ("Agency Agreement") dated January 1, 1989, as
supplemented from time to time;
WHEREAS, Section 5.A. of the Agency Agreement provides that
the fees payable by the Fund to Agent thereunder shall be as set
forth in a separate schedule to be agreed to by the Fund and
Agent; and
WHEREAS, the parties desire to reflect in this Supplement
the revised fee schedule for the Agency Agreement as in effect as
of the date hereof;
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein provided, the parties agree as follows:
1. The revised fee schedule for services provided by Agent
to the Fund under the Agency Agreement as in effect as of the
date hereof is set forth in Exhibit A attached hereto.
2. This Supplement shall become a part of the Agency
Agreement and subject to its terms and shall supersede all
previous fee schedules under such agreement as of the date
hereof.
IN WITNESS WHEREOF, the Fund and Agent have duly executed
this Supplement as of the day and year first set forth above.
KEMPER TECHNOLOGY FUND
By: /s/ John E. Peters
-----------------------------
Title: Vice President
--------------------------
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Joseph F. Smith
-----------------------------
Title: E V P
--------------------------
<PAGE> 2
EXHIBIT A
---------
FEE SCHEDULE (Multiple Classes of Shares)
-----------------------------------------
<TABLE>
<CAPTION>
Transfer Agency Function Fee Payable by Fund
------------------------ -------------------
Class A, C and I Class B
---------------- -------
<S> <C> <C>
1. Annual open shareholder account
fee (per year per account).
a. Non-daily dividend series. $6.00 $6.00
b. Daily dividend series. $8.00 $8.00
2. Annual closed shareholder account
fee (per year per account). $6.00 $6.00
3. Contingent deferred sales charge
account fee (per year per open Not
account). Applicable $2.25
4. Establishment of new shareholder
account (per new account). $4.00 $4.00
5. Payment of dividend (per dividend
per account). $.40 $.40
6. Automated transaction (per
transaction).** $.50 $.50
7. Non-monetary transactions fee
(per year per open account). $2.00 $2.00
8. All other shareholder inquiry,
correspondence and research
transactions (per transaction). $1.25 $1.25
9. Disaster recovery fee (per year
per open and closed account). $.40 $.40
</TABLE>
The out-of-pocket expenses of IFTC will be reimbursed by Fund in
accordance with the provisions of Section 5 of the Agency
Agreement. All fees will be subject to offset by earnings
allowances under the Custody Agreement between Fund and IFTC.
<PAGE> 3
-----------------
* The new shareholder account fee is not applicable to Class
A Share accounts established in connection with a conversion from
Class B Shares.
** Automated transaction includes, without limitation, money
market series purchases and redemptions, ACH purchases,
systematic exchanges and conversions from Class B Shares to Class
A Shares.
<PAGE> 1
EXHIBIT 99.B9(c)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this 1st day of August, 1990, by and between
KEMPER TECHNOLOGY FUND, a Massachusetts business trust (the
"Fund"), and KEMPER FINANCIAL SERVICES, INC., a Delaware
corporation ("KFS").
In consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KFS to provide information and
administrative services for the benefit of the Fund and its
shareholders. In this regard, KFS shall appoint various broker-
dealer firms and other financial services firms ("Firms") to
provide related services and facilities for their clients who are
shareholders of the Fund ("clients"). The Firms shall provide
such office space and equipment, telephone facilities and
personnel as is necessary or beneficial for providing information
and services to shareholders of the Fund. Such services and
assistance may include, but are not limited to, establishing and
maintaining shareholder accounts and records, processing purchase
and redemption transactions, answering routine client inquiries
regarding the Fund and its special features, assistance to
clients in changing dividend and investment options, account
designations and addresses, and such other services as the Fund
or KFS may reasonably request. KFS may also provide some of the
above services for the Fund directly.
KFS accepts such appointment and agrees during such period to
render such services and to assume the obligations herein set
forth for the compensation herein provided. KFS shall for all
purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.
KFS, by separate agreement with the Fund, may also serve the Fund
in other capacities. In carrying out its duties and
responsibilities hereunder, KFS will appoint various Firms to
provide administrative and other services described herein
directly to or for the benefit of shareholders of the Fund who
may be clients of such Firms. Such Firms shall at all times be
deemed to be independent contractors retained by KFS and not the
Fund. KFS and not the Fund will be responsible for the payment
of compensation to such Firms for such services.
2. For the services and facilities described in Section 1, the
Fund will pay to KFS at the end of each calendar month an
administrative service fee computed at an annual rate of up to
0.25 of 1% of the average daily net assets of the Fund. The
<PAGE> 2
current fee schedule is set forth as Appendix I hereto. For the
month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis
of the number of days that the Agreement is in effect during such
month and year, respectively. The services of KFS to the Fund
under this Agreement are not to be deemed exclusive, and KFS
shall be free to render similar services or other services to
others.
The net asset value for each share of the Fund shall be
calculated in accordance with the provisions of the Fund's
current prospectus. On each day when net asset value is not
calculated, the net asset value of a share of the Fund shall be
deemed to be the net asset value of such a share as of the close
of business on the last day on which such calculation was made
for the purpose of the foregoing computations.
3. The Fund shall assume and pay all charges and expenses of
its operations not specifically assumed or otherwise to be
provided by KFS under this Agreement.
4. This Agreement may be terminated at any time without the
payment of any penalty by the Fund or by KFS on sixty (60) days
written notice to the other party. Termination of this Agreement
shall not affect the right of KFS to receive payments on any
unpaid balance of the compensation described in Section 2 hereof
earned prior to such termination. This Agreement may not be
amended to increase the amount to be paid to KFS for services
hereunder above .25 of 1% of the average daily net assets of the
Fund without the vote of a majority of the outstanding voting
securities of the Fund. All material amendments to this
Agreement must in any event be approved by vote of the Board of
Trustees of the Fund.
5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
6. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
7. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust and all amendments thereto,
all of which are on file with the Secretary of The Commonwealth
of Massachusetts, and the limitation of shareholder and trustee
liability contained therein. This Agreement has been executed by
and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the
Fund hereunder are not binding upon any of the trustees, officers
-2-
<PAGE> 3
or shareholders of the Fund individually but are binding upon
only the assets and property of the Fund.
8. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 7 hereof which
shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of Illinois.
IN WITNESS WHEREOF, the Fund and KFS have caused this Agreement
to be executed as of the day and year first above written.
KEMPER TECHNOLOGY FUND KEMPER FINANCIAL SERVICES, INC.
By: /s/ Charles M. Kierscht By: /s/ John E. Peters
-------------------------- -----------------------------
Title: President Title: Executive Vice President
----------------------- --------------------------
-3-
<PAGE> 4
APPENDIX I
----------
KEMPER TECHNOLOGY FUND
FEE SCHEDULE FOR ADMINISTRATIVE
SERVICES AGREEMENT
Pursuant to Section 2 of the Administrative Services Agreement to
which this Appendix is attached, the Fund and KFS agree that the
initial administrative service fee will be computed at an annual
rate of .25 of 1% (the "Fee Rate"). For purposes of computing
the fee due KFS, the Fee Rate shall be applied against the amount
of assets of the Fund for which a broker-dealer or other
financial services firm is listed on the records of the Fund as
"dealer of record," which shall not include KFS.
Dated: August 1, 1990
KEMPER TECHNOLOGY FUND KEMPER FINANCIAL SERVICES, INC.
By: /s/ Charles M. Kierscht By: /s/ John E. Peters
------------------------- -----------------------------
Title: President Title: Executive Vice President
---------------------- --------------------------
<PAGE> 1
EXHIBIT 99.B9(d)
AMENDMENT TO ADMINISTRATIVE
SERVICES AGREEMENT
(Class A, B, C and I Shares)
Amendment to Administrative Services Agreement ("Amendment")
made as of May 31, 1994 by and between the registered investment
company executing this document (the "Fund") and Kemper Financial
Services, Inc. ("KFS").
WHEREAS, The Fund and KFS are parties to an Administrative
Services Agreement ("ASF Agreement") dated August 1, 1990, as
supplemented and amended from time to time;
WHEREAS, The Fund currently issues shares in four separate
classes for each series of the Fund, if there is more than one,
being designated as Class A Shares, Class B Shares, Class C
Shares and Class I Shares; and
WHEREAS, The parties want to reflect in this Amendment the
effect upon the fee schedule under the ASF Agreement of the
division of the shares of the Fund into separate classes;
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein provided, the parties agree as follows:
1. The administrative services fee under the ASF Agreement
will be calculated separately for each class of each series of
the Fund as an expense of such class at the annual rates and in
accordance with the procedures specified in the ASF Agreement;
provided, however, that no administrative services fee shall be
payable with respect to the Class I Shares.
2. This Amendment shall become a part of the ASF
Agreement.
IN WITNESS WHEREOF, the Fund and KFS have duly executed this
Amendment as of the day and year first set forth above.
KEMPER TECHNOLOGY FUND
By: /s/ John E. Peters
------------------------------
Title: Vice President
----------------------------
KEMPER FINANCIAL SERVICES, INC.
By: /s/ Patrick H. Dudasik
-------------------------------
Title: Senior Vice President
-----------------------------
<PAGE> 1
EXHIBIT 99.B9(e)
ASSIGNMENT AND ASSUMPTION
ASSIGNMENT AND ASSUMPTION ("Assignment and Assumption") made
and entered into as of February 1, 1995 by and between Kemper
Financial Services, Inc., a Delaware corporation ("Assignor"),
and Kemper Distributors, Inc., a Delaware corporation
("Assignee").
WHEREAS, Assignor serves as administrator for Kemper
Technology Fund, a Massachusetts business trust (the "Fund"),
pursuant to that certain Administrative Services Agreement dated
August 1, 1990 by and between Assignor and the Fund, as may have
been amended, (the "Agreement");
WHEREAS, Assignee is a wholly-owned subsidiary of Assignor;
WHEREAS, It has been proposed that the rights, duties and
responsibilities of Assignor under the Agreement be transferred
to and assumed by Assignee;
WHEREAS, The Fund has determined that such transfer of
rights, duties and responsibilities is reasonable and in the best
interests of the Fund and the Fund's shareholders; and
NOW, THEREFORE, in consideration of the covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. Assignment and Assumption. Assignor assigns and
transfers to Assignee all of Assignor's rights, interests,
liabilities, duties and obligations under the Agreement
("Assigned Rights and Obligations"). Assignee accepts the
foregoing assignment and transfer of the Assigned Rights and
Obligations and agrees to assume, pay, perform and otherwise be
fully responsible for the same.
2. Further Assurances. From time to time, at the
request of either party, the other party will execute and deliver
such further instruments of assignment, transfer and assumption
and take such further action as may be required to assign,
transfer and assume the Assigned Rights and Obligations.
3. Applicable Law. This Assignment and Assumption shall
be governed by the laws of the State of Illinois.
<PAGE> 2
4. Amendments. This Assignment and Assumption may only
be amended by the written agreement of the parties.
IN WITNESS WHEREOF, the parties have each caused this
Assignment and Assumption to be executed on its behalf by a duly
authorized officer as of the date first written above.
KEMPER FINANCIAL SERVICES, INC.
By: /s/ Patrick H. Dudasik
--------------------------
Its: Senior Vice President
KEMPER DISTRIBUTORS, INC.
By: /s/ James L. Greenawalt
--------------------------
Its: Executive Vice President
The undersigned hereby acknowledges and consents to the foregoing
Assignment and Assumption as of February 1, 1995.
KEMPER TECHNOLOGY FUND
By: /s/ John E. Peters
------------------------------
Its: Vice President
-2-
<PAGE> 1
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Kemper Technology Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Technology Fund as of October 31, 1995
and the related statements of operations for the year then ended and changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the fiscal periods since 1986. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of October 31, 1995, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper Technology Fund at October 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the fiscal
periods since 1986, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
November 28, 1995
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated November 28, 1995 in the Registration Statement (Form
N-1A) of Kemper Technology Fund and its incorporation by reference in the
related Prospectus of Kemper Equity Funds, filed with the Securities and
Exchange Commission in the Post-Effective Amendment No. 64 to the Registration
Statement under the Securities Act of 1933 (File No. 2-10668) and in this
Amendment No. 64 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-0547).
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
January 25, 1996
<PAGE> 1
EXHIBIT 99.B14.(a)
KEMPER
RETIREMENT PLAN PROTOTYPE
A Keogh/Corporate Retirement
Plan for Professionals and
Small Corporations
THE KEMPER RED BOOK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
CHOOSING YOUR PLAN................................... SECTION 1
PLAN INSTALLATION FORMS.............................. SECTION 2
PARTICIPANT RECORDS ................................. SECTION 3
PLAN DOCUMENT ....................................... SECTION 4
</TABLE>
<PAGE> 3
CHOOSING YOUR PLAN
RETIREMENT PLANNING SOLUTIONS THAT BENEFIT BOTH YOU AND YOUR EMPLOYEES
Providing for retirement is an increasing concern for employers, as well
as employees. With a shrinking work force, employers will have to be more
competitive than ever to attract a qualified staff. The rising costs of
traditional pension plans, however, can be a significant financial drain
on a company's profits. So how can a company remain competitive and not
risk its bottom line?
Many employers have discovered that defined contribution plans such as
Money Purchase and Profit Sharing plans provide a viable solution that can
benefit both the company and its employees.
FIND OUT IF ONE OF THESE PLANS IS RIGHT FOR YOU...
With the variety of retirement plans available today, it's often difficult
to know which one is best for your company's needs. If you're a sole
proprietor, independent contractor, owner of a small business or in
private practice, with few or no employees, and are looking for a way to
save for retirement and reduce your tax liabilities, consider one of these
plans.
PROFIT SHARING PLAN
A profit sharing plan is just that - a plan that enables the
employees to participate in the profits of the company. The
flexibility of contribution limits and the relative ease of
maintenance make profit sharing plans an attractive alternative for
both employers and employees.
A profit sharing plan allows employees to participate in the
company's success, thereby giving further incentive for employee
productivity and loyalty. More profits mean higher contributions, up
to legal limits.
MONEY PURCHASE PLAN
A money purchase plan shares many of the same advantages and features
of a profit sharing plan, but has a higher contribution level. It
has the same eligibility requirements, tax benefits and distribution
choices. The difference is in the contribution limits and
requirements.
- Allows for higher contribution levels
- Contribution levels are fixed
Because there is a fixed contribution formula, required contributions
can be easily computed and budgeted. Once a percentage has been
determined, contributions are mandatory each year, and for the same
percentage level - regardless of whether the company is profitable
that year. Failure to contribute the required amount in a year could
result in stiff tax penalties, and jeopardize the qualified status of
the plan.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TYPE OF PLAN PROFIT SHARING MONEY PURCHASE COMBINATION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TYPE OF CONTRIBUTION Flexible Fixed Flexible/Fixed
- ------------------------------------------------------------------------------------------------------------
MAXIMUM ANNUAL 15% of 25% of 25% of
CONTRIBUTION LIMIT Eligible Payroll Eligible Payroll Eligible Payroll
- ------------------------------------------------------------------------------------------------------------
PARTICIPANT 25% of Compensation 25% of Compensation 25% of Compensation
ANNUAL LIMIT not to Exceed $30,000 not to Exceed $30,000 not to Exceed $30,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
COMBINED MONEY PURCHASE AND PROFIT SHARING PLAN
Many employers like the idea of making contributions as high as 25% of
eligible payroll, but are not comfortable committing to this every year.
Fortunately, the IRS allows a combination or "paired" plan that gives the
"best of both worlds."
- Higher contribution levels of a money purchase plan
- Flexible contribution limits of a profit sharing plan
Paired plans combine the flexibility of a profit sharing plan with the
higher contribution limits of a money purchase pension plan. A combined
plan lets you enjoy control over a portion of the contribution similar to
a profit sharing plan, but also offers the higher contribution limits
found in a money purchase plan. Employees are assured that they will be
provided with at least some level of retirement benefit.
Typically, if an employer wishes to maximize the contribution, he or she
would set the money purchase plan contribution at 10%, which would be
mandatory each year, and allow the remaining 15% to be a part of the
profit sharing plan, which is contingent on whether or not the company can
afford it. That way, the employer is only locked into a 10% mandatory
contribution rather than 25%.
THE KEMPER RED BOOK KEOGH PROTOTYPE
The Plan Document, contained in the last section of this booklet, provides
the plan parameters for self-employed partnerships and corporations, and
has been amended for the Tax Reform Act of 1986. Investors Fiduciary Trust
Company (IFTC) will act as trustee for a plan using Kemper mutual funds.
Kemper Investors Life Insurance Company (KILICO) annuities do not require
a trustee. Before any contributions can be made to the plan, an Adoption
Agreement (see section entitled "Plan Installation Forms") that outlines
the plan parameters must be signed and dated.
ELIGIBILITY
Since the plan is employer-sponsored, the employer has the ability to
establish minimum requirements for plan participation, generally based on
age and years of service. As the employer, you decide how flexible plan
participation will be, keeping within certain minimum requirements set by
the IRS. Of course, eligibility requirements may be lower. Those who must
be eligible for the plan are:
- Any employee over age 21, AND
- Employees who have had at least two years of service, AND
- Employees who are not covered by a collective bargaining agreement.
All employees (including leased and control group) who fulfill eligibility
requirements, except for union employees covered under a collective
bargaining agreement, are eligible participants in the plan. Entry dates
for the plan are semi-annual.
CONTRIBUTIONS
One of the most important benefits of the plan is that the employer's
contributions are a tax-deductible business expense. This special tax
treatment makes it one of the few remaining tax shelters available.
All plan participants employed on the last day of the plan year will share
in the employer's contribution regardless of the hours worked during the
plan year. Terminated participants will share in the employer's
contribution only if they completed at least 501 hours of service during
the plan year in which they terminated.
Compensation is defined as an employee's total gross salary earned while
the employee was actually a plan participant. Rollover contributions are
allowed if the Employer wishes. Employee after-tax contributions are not
allowed under this plan document.
<PAGE> 5
CHOOSING YOUR PLAN
DISTRIBUTIONS
Terminated participants will receive their distribution on the 60th day of
the plan year following separation of service. If the value of the account
is more than $3,500 the participant must agree to take his or her money,
and the participant can choose lump sum or installment payments. If the
account value is $3,500 or less, the participant receives a lump sum
payment. Participants are always 100% vested.
Kemper Financial Services, Inc. will provide self-trusteed, variable
documents which allow you to vary the plan parameters. Please contact your
representative or Kemper Financial Services, Inc. at 1-800-621-5027.
QUESTIONS AND ANSWERS
Q. WHAT IS THE DEADLINE FOR ESTABLISHING A RETIREMENT PLAN?
A. The plan must be established on or before the last day of the taxable
year for which a deduction is to be taken.
Q. DOES "ESTABLISH" MEAN THERE MUST BE ASSETS IN THE PLAN?
A. Yes, at least $250 is required to open and establish the account in
the tax year. The balance of the contribution must comply with tax
deadlines.
Q. WHAT IS THE DEADLINE FOR MAKING CONTRIBUTIONS ONCE THE PLAN IS
ESTABLISHED?
A. Contributions for any year must be made before the latest possible
filing date for the Employer's federal income tax return for that
year, including extensions.
Q. SHOULD I BE BONDED?
A. Yes, Employers should be bonded if the plan covers employees other
than the owner(s) and the owner(s) spouse; the bond must cover at
least 10% of the plan's assets; the face value of the bond may not be
less than $1,000.
Q. WHAT IS MEANT BY "YEAR OF SERVICE" WHEN DETERMINING WHO IS ELIGIBLE
TO PARTICIPATE IN THE PLAN?
A. "Year of Service" for purposes of eligibility means 12 consecutive
months during which an employee completes at least 1,000 hours of
service. The 12-month period begins on the day an employee performs
his or her first hour of service.
Q. WHEN DOES AN EMPLOYEE PARTICIPATE ONCE ELIGIBILITY REQUIREMENTS ARE
MET?
A. The employee becomes a Participant on the first day of the Plan Year,
or the first day of the seventh month of the Plan Year, following
satisfaction of the eligibility requirement. For example, if the Plan
Year is a calendar year and an employee satisfies the eligibility
requirement on March 1, he or she will enter the plan on July 1.
Q. CAN THE EMPLOYEE CONTRIBUTE UNDER THIS PLAN?
A. Pre-tax employee salary reduction contributions may be allowed, but
only if you elect to include the 401(k) arrangement found in Article
XIII of the Profit Sharing Adoption Agreement. After-tax
contributions are not allowed.
Q. WHAT IS SOCIAL SECURITY INTEGRATION?
A. When your overall retirement plan scheme combines Social Security
with your private retirement plan, this is called integration.
Integration allows you to take advantage of the Social Security tax
payments you already make when designing your private retirement
plan's formula. The result favors the highly paid employees because
they receive a larger portion of the total contribution.
Contribution formulas and worksheets for self-employed participants
in integrated plans are available from Kemper Financial Services upon
request.
Q. WHAT IS THE COMPENSATION FOR A SOLE PROPRIETOR?
A. If you are a sole proprietor or your business is a partnership, you
must base contributions on earned income, which is defined as net
profits minus the amount you contributed to the plan. Your net
profits are shown on the Schedule C form for a sole proprietor, and
the schedule K-1 form for a partnership. Contributions for all other
employees are based on gross earnings actually paid for services
rendered.
<PAGE> 6
Q. WHAT DOES IT MEAN TO "AMEND AND RESTATE" A PLAN?
A. To amend and restate your plan means you have updated your plan in
its entirety by replacing the plan document with a new plan document.
This may be necessary if your existing plan document prohibits plan
investments with Kemper or because of changes in the laws governing
qualified retirement plans.
Many employers are now formally updating their plans to comply with
the Tax Reform Act of 1986. These amendments must be retroactive to
the first day of your 1987 plan year unless interim amendments were
adopted for the 1987 and 1988 plan years.
INVESTING YOUR PLAN ASSETS
One of the most important decisions you have to make is where to invest
your plan's assets. The better your plan's investment performance, the
easier it will be for you and your employees to retire in comfort. You'll
want to select investments with a broad range of objectives to meet the
diverse investment needs of your employees, and take great care in
choosing the company that will manage your plan's assets.
...WITH KEMPER
That's why many plans like yours invest their plan assets with Kemper.
Kemper Financial Services, Inc. has managed investments for over 40 years
and has more than $67 billion in assets under management. Kemper offers a
variety of investment products to fit almost every investment objective.
Kemper's mutual funds and annuities provide investments to suit the needs
of either the aggressive or the conservative investor. Employees can
select the investments that best match their specific needs and
requirements. Consider Kemper's experience and professional managers when
choosing the investments for your plan.
FUNDING THE PLAN
...WITH MUTUAL FUNDS
The Employer completes the Employer Contribution Schedule. Each eligible
employee completes an Employee Enrollment Form. All necessary forms and a
check made payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419356
Kansas City, MO 64141-6356
The IFTC Trustee fee is $12 per account, per participant, per year, with a
$24 maximum charge per participant.
...WITH ANNUITIES
A KILICO Enrollment Application is completed for each plan participant.
Please call Policyholder Services for the proper forms at 1-800-554-5426.
The check should be made payable to Kemper Investors Life Insurance
Company and mailed to:
Kemper Investors Life Insurance Company
P.O. Box 95963
Chicago, IL 60694
There are no trustee fees when using KILICO products.
<PAGE> 7
CHOOSING YOUR PLAN
...WITH UNIT INVESTMENT TRUSTS
For a Kemper Capital Markets enrollment kit, please call Kemper
Capital Markets at 1-800-621-5024. Applications and a check made
payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419430
Kansas City, MO 64141-6430
The IFTC Trustee fee is $12 per account, per participant, per year,
with a $24 maximum charge per participant.
To obtain additional prospectuses for any of the Kemper products,
containing more complete information including management fees and
expenses, please contact your representative or Kemper Financial Services,
Inc. at 1-800-621-5027. Please read the prospectus carefully before you
invest or send money.
GETTING STARTED
The next two sections, "Plan Installation Forms" and "Participant
Records," provide the necessary forms to complete the installation of
the plan. Please read the instructions at the beginning of each
section carefully before completing the applicable forms.
If you are a sole proprietor and do not have any covered employees,
complete the Adoption Agreement only.
The last section, "Plan Document," is provided for your reference
only.
<PAGE> 8
PLAN INSTALLATION FORMS
GETTING STARTED
COMPLETE THE FOLLOWING DOCUMENTS AND RETURN ORIGINALS TO THE APPROPRIATE
ADDRESS SHOWN UNDER THE PRECEDING SECTION ENTITLED "FUNDING THE PLAN."
REMEMBER TO RETAIN A PHOTOCOPY FOR YOUR RECORDS.
ADOPTION AGREEMENT
Complete the information requested ONLY for the particular type
of plan you've selected (either profit sharing, money purchase or a
combination).
ENROLLMENT FORM
Photocopy and complete an enrollment form for EACH eligible participant.
SUMMARY PLAN DESCRIPTION CARD
Complete this card ONLY if you have Employees.
ASSET TRANSFER FORM
Complete this form ONLY if there are existing plan assets.
<PAGE> 9
"LINE-BY-LINE" INSTRUCTIONS FOR COMPLETING YOUR ADOPTION AGREEMENT
- Specify the type of business entity adopting the plan by checking the
appropriate box.
- Enter the address of the business. This may be a home address if there is
no separate business address.
- Enter the Employer's Taxpayer Identification Number (TIN). If you do not
presently have a TIN for your business, you should apply for one using IRS
Form SS-4. Form SS-4 is available from Kemper Financial Services upon
request.
- Enter the name of the Employer on the blank line provided. If the
Employer is a sole proprietor who does not have a formal business name,
enter the name of the individual adopting the plan.
ARTICLE I
1.17 (A) In most situations the Plan Year End will be December 31, but if
the Employer operates on a fiscal year, then enter the
appropriate date.
(B) If item (b) is left blank, the Limitation Year will be the same
as the Plan Year.
1.18 (A) If this Adoption Agreement is used to establish a new plan,
rather than amend an older plan, check item l.18(a) and skip
item 1.18(b).
(B) Complete item 1.18(b) if this is a restatement of an older plan.
ARTICLE II
2.01 (A) Check (1) or (2) to define the minimum age requirement (if any)
that must be attained before an employee is eligible to
participate in the plan.
(B) Check (1), (2) or (3) to define the minimum service (if any)
that must be completed before an employee is eligible to
participate in the plan. The plan defines a Year of Service as a
12 consecutive month period in which the employee works 1,000
hours or more. The 12 consecutive month period begins on the
date the employee first performs an Hour of Service and each
anniversary thereof.
ARTICLE III
3.01 If this is a MONEY PURCHASE PENSION PLAN, indicate the base
contribution rate in the first blank. The base contribution rate
must equal or exceed 3%. If the plan will be integrated with
Social Security, enter the integration rate in the second blank
and complete the integration level section.
3.04 If this is a PROFIT SHARING PLAN and the contribution allocation
will be integrated with Social Security, complete the
integration level section 13.00. If this is a PROFIT SHARING
PLAN, check here if you wish to include employee salary deferral
contributions. If you do NOT want to allow employee salary
deferral contributions, skip this item and go directly to the
"Effective Date Addendum" of Article V.
ARTICLE XIII
13.00 If this is a Profit Sharing Plan, check here if you wish to
include employee salary deferral contributions. If you do not
want to allow employee salary deferral contributions, skip this
item and go directly to the "Effective Date Addendum."
13.05 Enter a date, which is no later than April 15th, by which a
participant must notify you if he or she has exceeded the dollar
limit for employee salary deferral contributions. For
administrative ease, March 1 is recommended.
13.08(A) Leave blank and skip to item 13.09 if the Employer will not make
regular matching contributions to the plan. Check 13.08(a) if
the Employer intends to match the salary deferral contributions
of ALL participants.
(B) Check 13.08(b) if Highly Compensated Employees will not receive
the Employer's regular matching contribution.
(C) Enter the amount of the Employer's matching contribution on the
line provided. Note that the employer is REQUIRED to make this
matching contribution each year.
(D) If 13.08(d) is left blank, all of a participant's salary
deferral contributions will be matched by the Employer.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible for
the matching contribution.
13.09(A) Leave blank and skip to item 13.12 if the Employer will not make
Qualified Matching Contributions to the Plan.
Check 13.09(a) if the Employer intends to contribute Qualified
Matching Contributions for ALL participants.
<PAGE> 10
PLAN INSTALLATION FORMS
(B) Check 13.09 (b) if Highly Compensated Employees will not
receive the Qualified Matching Contribution.
(C) Enter the amount of the Employer's Qualified Matching
Contribution on the line provided. Note that the employer is
REQUIRED to make this Qualified Matching Contribution each
year.
(D) If (d) is left blank, all of a participant's salary deferral
contributions will be eligible for the qualified matching
contribution.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible
for the Qualified Matching Contribution.
13.12(A) Check 13.12 (a) if the Employer intends to contribute Qualified
Nonelective Contributions for ALL participants.
(B) Check 13.12 (b) if Highly Compensated Employees will not
receive Qualified Nonelective Contributions.
(C) If (c) is checked, a participant's share of the qualified
nonelective contribution will be based on the participant's
total compensation.
(D) If (d) is checked, only compensation up to the stated dollar
amount will be used to calculate a participant's share of the
qualified nonelective contribution.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
(A)(1) Check (1) and enter a percentage on the line provided if
you wish to establish a maximum deferral percentage.
(2) Check (2) and enter a percentage on the line provided if
you wish to establish a minimum deferral percentage.
(3) Check (3) if no restrictions are imposed on a participant's
salary reduction contributions.
(B) Check (1), (2), (3) OR (4) to restrict when a participant
may stop their salary deferral contributions.
(C) Check (1), (2), (3) OR (4) to indicate when a participant
may resume making salary deferral contributions.
(D) Check (1), (2), (3) OR (4) to indicate how frequently a
participant may change the amount of his or her salary
deferral contributions.
ARTICLE V
EFFECTIVE DATE ADDENDUM
If you are restating an older plan, complete only if the
effective date of the restatement is before January 1,1989
AND these specific provisions have changed as a result of
the restatement. If a provision listed below has changed, the
date on which that provision begins to apply may be later
than your restated effective date if you check the applicable
box. Indicate the later effective date by inserting a date
on the line provided.
If this is a NEW PLAN, skip the Effective Date Addendum and go
directly to "Participation Agreement."
PARTICIPATION AGREEMENT
If the Employer has an ownership interest in another business
which results in a controlled group of businesses as defined
by the Internal Revenue Code, then each related business must
sign the Participation Agreement as a Participating Employer.
The "Signatory Employer" is the Employer who also signs the
Execution Page of the adoption agreement.
If the employer sponsoring this plan has no ownership interest
in any other business, skip the Participation Agreement and go
directly to "Execution Page."
EXECUTION PAGE
The Employer should sign and date the appropriate Adoption
Agreement. The signature of the sole proprietor, general
partner or corporate officer belongs on the line above
"Employer." Whoever witnesses the Employer's signature should
sign on the line beside "Attest."
The Dealer/Agent should complete the dealer information section.
<PAGE> 11
ADOPTION AGREEMENT #001
STANDARDIZED PROFIT SHARING/401(K) PLAN
(PAIRED PROFIT SHARING PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:
________________________________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN):________________________
THE EMPLOYER HEREBY ESTABLISHES THE ____________________________________________
Name of Employer
PROFIT SHARING PLAN in accordance with all the terms of the KEMPER RETIREMENT
PLAN PROTOTYPE KEOGH/CORPORATE AND TRUST AGREEMENT attached hereto, which the
Employer has received, read, accepts and hereby incorporates into this
STANDARDIZED PROFIT SHARING/401(K) PLAN ADOPTION AGREEMENT #001 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending ________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: ________.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The Effective Date of the Plan is the first day of the
Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This Plan
is a substitution and amendment of an existing retirement plan
originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan,
an Employee must satisfy the following eligibility conditions:
(A) Age requirement. (Choose one)
/ / (1) Age __________ (specify age, not exceeding 21).
/ / (2) No age requirement.
(B) Service requirement. (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service without an intervening Break
in Service. See Section 2.03(a) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date (if
employed on that date) coincident with or immediately following the
date the Employee completes the eligibility conditions described in
Options (a) and (b) of this Adoption Agreement Section 2.01.
<PAGE> 12
PLAN INSTALLATION FORMS
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The amount of the Employer's annual contribution to the Trust will
equal the amount (or additional amount) the Employer may from time to
time deem advisable, irrespective of whether the Employer has Net
Profits.
3.04 CONTRIBUTION ALLOCATION
Profit Sharing plan - Employer contributions for the plan year will
be allocated to participants' accounts as follows: [NOTE: IF THE
EMPLOYER WILL NOT BE INTEGRATING THE PLAN WITH SOCIAL SECURITY OR
ADOPTING THE PAIRED MONEY PURCHASE PENSION PLAN #002, SKIP STEPS ONE,
TWO AND THREE BELOW AND GO DIRECTLY TO STEP FOUR.]
STEP ONE: Contributions will be allocated to each participant's
account in the ratio that each participant's total compensation bears
to all participants' total compensation, but not in excess of 3% of
each participant's total compensation.
STEP TWO: Any contributions remaining after the allocation in Step
One will be allocated to each participant's account in the ratio
that each participant's compensation for the plan year in excess of
the integration level bears to the excess compensation of all
participants, but not in excess of 3%.
STEP THREE: Any contributions remaining after the allocation in Step
Two will be allocated to each participant's account in the ratio that
the sum of each participant's total compensation plus excess
compensation bears to the sum of all participant's total compensation
plus total excess compensation, but not in excess of the
profit-sharing maximum disparity rate.
STEP FOUR: Any remaining employer contributions or forfeitures will
be allocated to each participant's account in the ratio that each
participant's total compensation for the plan year bears to all
participants' total compensation for that year.
The integration level shall be equal to the amount elected by the
employer in the Adoption Agreement. The taxable wage base (TWB) is
the maximum amount of earnings which may be considered wages for a
year under Section 3121(a)(1) of the Code in effect as of the
beginning of the plan year.
Compensation shall mean compensation as defined in Section 1.12 of
the plan.
The integration level is equal to (Choose one):
/ / Taxable Wage Base (TWB)
/ / $_______ (a dollar amount less than the TWB)
/ / ________ % of TWB (not to exceed 100%)
The maximum Profit Sharing disparity rate is equal to the lesser of:
(a) 2.7% or
(b) the applicable percentage determined in accordance with the
table below:
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN: BUT NOT MORE THAN: THE APPLICABLE PERCENTAGE IS:
- ------------------------ ------------------ -----------------------------
<S> <C> <C>
$0 X(*) 2.7%
X(*) of TWB 80% of TWB 1.3%
80% of TWB Y(**) of TWB 2.4%
</TABLE>
* X = the greater of $10,000 or 20% of the TWB.
**Y = any amount more than 80% of the TWB but less than 100% of the TWB.
If the integration level used is equal to the TWB, the applicable
percentage is 2.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
________________________________________________________________
________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
employer discretion.)
<PAGE> 13
ARTICLE XIII
401(k) ARRANGEMENT
13.00 / / CHECK THIS BOX IF THIS PLAN IS A 401(k) PLAN AND COMPLETE THE
FOLLOWING:
13.01 ELIGIBILITY
If the service requirement elected by the Employer at Section 2.01 of
this Adoption Agreement is two (2) years, an Employee's eligibility
to make elective deferrals will be determined as if the service
requirement at Section 2.01 were one (1) year.
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
Participants who claim Excess Elective Deferrals for the preceding
taxable year must submit their claims in writing to the plan
administrator by ___________________________________________________.
Specify a date no later than April 15
13.06 ACTUAL DEFERRAL PERCENTAGE TEST
Qualified Matching Contributions and Qualified Nonelective
Contributions may be taken into account as Elective Deferrals for
purposes of calculating the Actual Deferral Percentages. In
determining Elective Deferrals for the purpose of the ADP test, the
employer shall include Qualified Matching Contributions and Qualified
Nonelective Contributions under this plan or any other plan of the
employer, as provided by regulations under the Code.
The amount of Qualified Matching Contributions taken into account as
Elective Deferrals for purposes of calculating the Actual Deferral
Percentage, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Matching Contributions.
The amount of Qualified Nonelective Contributions taken into account
as Elective Deferrals for purposes of calculating the Actual Deferral
Percentages, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Nonelective Contributions.
13.08 MATCHING CONTRIBUTIONS
The employer will make Matching Contributions to the plan on behalf
of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Matching Contribution account an amount equal
to [______] percent of the participant's Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$______], or in excess of [______] percent, of
the participant's Compensation.
13.09 QUALIFIED MATCHING CONTRIBUTIONS
The Employer will make Qualified Matching Contributions to the plan
on behalf of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Qualified Matching Contribution account an
amount equal to [_____] percent of the participant's
Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$________], or in excess of [_______] percent, of
the participant's Compensation.
<PAGE> 14
PLAN INSTALLATION FORMS
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS
In computing the Average Contribution Percentage, the Employer shall
take into account, and include as Contribution Percentage Amounts
Elective Deferrals and Qualified Nonelective Contributions under this
plan or any other plan of the Employer, as provided by regulations.
The amount of Qualified Nonelective Contributions that are taken into
account as Contribution Percentage Amounts for purposes of
calculating the Average Contribution Percentage, subject to such
other requirements as may be prescribed by the Secretary of the
Treasury, shall be an amount determined by the Employer.
The amount of Elective Deferrals taken into account as Contribution
Percentage Amounts for purposes of calculating the Average
Contribution Percentage, subject to such other requirements as may be
prescribed by the Secretary of the Treasury, shall be an amount
determined by the Employer.
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer will make Qualified Nonelective Contributions to the
plan. If the Employer does make such contributions to the plan, then
the amount of such contributions for each Plan Year shall be an
amount determined by the Employer.
Allocation of Qualified Nonelective Contributions shall be made to
the accounts of [ELECT ONE]:
/ / (A) All participants
/ / (B) Only Nonhighly Compensated participants
Allocation of Qualified Nonelective Contributions shall be made
[ELECT ONE]:
/ / (C) In the ratio that each participant's Compensation for the
Plan Year bears to the total Compensation of all
participants for such Plan Year.
/ / (D) In the ratio that each participant's Compensation not in
excess of [$______] for the Plan Year bears to the total
Compensation of all participants not in excess of [$______]
for such Plan Year.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
The following rules and restrictions apply to an Employee's salary
reduction agreement:
(A) Limitation on Amount. The Employee's salary reduction
contributions: (Choose at least one)
/ / (1) May not exceed _________% of Compensation for the
Plan Year, subject to the annual additions
limitation described in Part 2 of Article III of
the Plan.
/ / (2) Based on percentages of Compensation must equal at
least _________% of Compensation for the
reduction period.
/ / (3) No maximum limitation other than the annual
additions limitation.
(B) An Employee may revoke, on a prospective basis, a salary
reduction agreement: (Choose one)
/ / (1) Once during any Plan Year but not later than _________
of the Plan Year.
/ / (2) As of any Plan Entry Date.
/ / (3) As of the first day of any month.
/ / (4) Other (specify, but must be at least once per Plan
Year).
(C) An Employee who revokes his or her salary reduction agreement
may file a new salary reduction agreement with an effective
date: (Choose one):
/ / (1) No earlier than the first day of the next Plan Year.
/ / (2) As of any subsequent Plan Entry Date.
/ / (3) As of the first day of any month subsequent to the
month in which he or she revoked an Agreement.
/ / (4) Other (specify, but must be at least once per Plan
Year following the Plan Year of revocation).
(D) A Participant may increase or may decrease, on a prospective
basis, his salary reduction percentage or dollar amount:
/ / (1) As of the beginning of each payroll period.
/ / (2) As of the first day of each month.
/ / (3) As of any Plan Entry Date.
/ / (4) Other (specify, but must permit an increase or a
decrease at least once per Plan Year).
<PAGE> 15
ARTICLE V
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated
Effective Date specified in Adoption Agreement Section 1.18 is
earlier than January 1,1989, and if a different restated effective
date applies to at least one of the provisions listed in this
addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES
In lieu of the restated Effective Date in Adoption Agreement Section
1.18, the following Special Effective Dates apply:
(Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION
The Compensation definition of Section 1.12 (other than
the $200,000 limitation) is effective for Plan Years
beginning after ______. [Note: May not be effective
later than the first day of the first Plan Year beginning
after the Employer executes this Adoption Agreement to
restate the Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS
The eligibility conditions specified in Adoption Agreement
Section 2.01 are effective for Plan Years beginning after
December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA
The contribution formula elected under Adoption Agreement
Section 3.01 is effective for Plan Years beginning after
December 31, 1988.
/ / (D) ELIMINATION OF NET PROFITS
The requirement for the Employer not to have net profits
to contribute to this Plan is effective for Plan Years
beginning after __________________. [Note: The date
specified may not be earlier than December 31, 1985.]
For Plan Years prior to the Special Effective Date, the terms of the
Plan prior to its restatement under this Adoption Agreement will
control for purposes of the designated provisions.
<PAGE> 16
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the
____________________________________________________________________
Name of Employer
PROFIT SHARING PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the
Plan as made by ________________, the Signatory Employer to the
Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: _________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) the adoption of a new plan by the Employer.
/ / (B) the adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
_________________________________________________________________
and having an original effective date of __________________________.
Dated this ______ day of _______ ,19__.
Attest:__________________________ By: ___________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted:________________________ By:____________________________
Date Signatory Employer
Accepted:________________________ Investors Fiduciary Trust Company
Date
By:____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 17
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer by its
duly authorized officers, has executed this Adoption Agreement on this _______
day of _________,19__.
Attest:______________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:____________________________ By:__________________________________
Date Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Pension Plan with this Paired Profit Sharing Plan, identified
by 3-digit Adoption Agreement number: 002. This Adoption Agreement may be used
only in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Pension Plan, it may rely on the Plan Sponsor's
opinion letter covering this Plan for purposes of plan qualification. For this
purpose, the Employer has not maintained another plan if this Plan, or the
Paired Pension Plan, amended and restated that prior plan and the prior plan
was the same type of plan as the restated plan. If the Employer maintains or
has maintained another plan other than a Paired Pension Plan, including a
welfare benefit fund, as defined in Code Section 419(e), which provides post-
retirement medical benefits for key employees (as defined in Code Section
419A(d)(3)), or an individual medical account (as defined in Code Section
415(1)(2)), the Employer may not rely on this Plan's qualified status unless
it obtains a determination letter from the applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 18
PLAN INSTALLATION FORMS
ADOPTION AGREEMENT #002
STANDARDIZED MONEY PURCHASE PENSION PLAN
(PAIRED PENSION PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:____________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN): ______________________
THE EMPLOYER HEREBY ESTABLISHES THE ___________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN in accordance with all the terms of the KEMPER
RETIREMENT PLAN PROTOTYPE KEOGH/CORPORATE and TRUST AGREEMENT attached hereto,
which the Employer has received, read, accepts and hereby incorporates into
this STANDARDIZED MONEY PURCHASE PENSION PLAN ADOPTION AGREEMENT #002 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending
every __________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: _______.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The "Effective Date" of the Plan is the first day of
the Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This
Plan is a substitution and amendment of an existing retirement
plan originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation
Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an
Employee must satisfy the following eligibility conditions:
/ / (A) Age requirement: (Choose one)
/ / (1) Age ______ (specify age, not exceeding 21).
/ / (2) No age requirement.
/ / (B) Service Requirement: (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service, without an intervening Break in
Service. See Section 2.03(A) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date
(if employed on that date) coincident with or immediately
following the date the Employee completes the eligibility
conditions described in Options (a) and (b) of this Adoption
Agreement Section 2.01.
<PAGE> 19
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The Employer will contribute for each participant who either
completes more than 500 hours of service during the Plan Year, or is
employed by the Employer on the last day of the Plan Year, an amount
equal to ______% (base contribution percentage, not less than 3%) of
each Participant's Compensation (as defined in Section 1.12 of the
Plan) for the Plan Year, plus _________% (not to exceed the base
contribution percentage by more than the lesser of: (1) the base
contribution percentage, or (2) the maximum disparity rate of such
Participant's Compensation in excess of the integration level.
NOTE: IF THE EMPLOYER ALSO MAINTAINS PAIRED PROFIT SHARING PLAN
#001, ONLY ONE OF THE PLANS MAY BE INTEGRATED.
The integration level shall be equal to the amount elected by the
Employer. The taxable wage base is the maximum amount of earnings
which may be considered wages for a year under Section 3121(a)(1) of
the Code in effect as of the beginning of the Plan Year.
The integration level is equal to: (Choose one)
/ / Taxable Wage Base (TWB)
/ / $_________ (a dollar amount less than the taxable wage base)
/ / __________ % of TWB (not to exceed 100%)
The maximum disparity rate is equal to the lesser of:
(A) 5.7%
(B) the applicable percentage determined in accordance with the
table below.
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN BUT NOT MORE THAN THE APPLICABLE PERCENTAGE IS
- ------------------------- ----------------- ----------------------------
<S> <C> <C>
$0 X(*) 5.7%
X(*) of TWB 80% of TWB 4.3%
80% of TWB Y(**) 5.4%
(*) X = the greater of $10,000 or 20% of the TWB.
(**) Y = any more than 80% of the TWB but less than 100% of the TWB.
</TABLE>
If the integration level is equal to taxable wage base the
applicable percentage is 5.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
______________________________________________________________________
______________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
Employer discretion.)
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is earlier than January 1, 1989,
and a different restated effective date applies to at least one of the
provisions listed in this addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES. In lieu of the restated Effective
Date in Adoption Agreement Section 1.18, the following Special Effective Dates
apply: (Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION. The Compensation definition of Section
1.12 (other than the $200,000 limitation) is effective for Plan
Years beginning after ____________. [Note: May not be effective
later than the first day of the first Plan Year beginning after
the Employer executes this Adoption Agreement to restate the
Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years
beginning after December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula
elected under Adoption Agreement Section 3.01 is effective for
Plan Years beginning after December 31, 1988.
For Plan Years prior to the Special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions.
<PAGE> 20
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the
_______________________________________________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to be bound
by, all of the elections granted under the provisions of the Plan as made
by _________, the Signatory Employer to the Execution Page of the Adoption
Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: ___________________________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) The adoption of a new plan by the Employer.
/ / (B) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
______________________________________________________________________
and having an original effective date of ___________. Dated this ____
day of ______________, 19__.
Attest: ________________________ By: ______________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted: ______________________ By: _____________________________
Date Signatory Employer
Accepted: ______________________ Investors Fiduciary Trust Company
Date
BY: _____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 21
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer, by its
duly authorized officers, has executed this Adoption Agreement on this
__________ day of _______, 19__.
Attest:________________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:______________________________ By:__________________________________
Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its Plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Profit Sharing Plan with this Paired Pension Plan, identified
by 3-digit Adoption Agreement number 001. This Adoption Agreement may be only
used in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Profit Sharing Plan, it may rely on the Plan
Sponsor's opinion letter covering this Plan for purposes of plan qualification.
For this purpose, the Employer has not maintained another plan if this Plan, or
the Paired Profit Sharing Plan, amended and restated that prior plan and the
prior plan was the same type of plan as the restated plan. If the Employer
maintains or later adopts or has maintained another plan other than a Paired
Profit Sharing Plan, including a welfare benefit fund, as defined in Code
Section 419(e), which provides post-retirement medical benefits for key
employees (as defined in Code Section 419A(d)(3)), or an individual medical
account (as defined in Code Section 415(1)(2)), the Employer may not rely on
this Plan's qualified status unless it obtains a determination letter from the
applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 22
PLAN INSTALLATION FORMS
EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS
INSTRUCTIONS:
1. Complete this form for each participant.
2. Enclose a check for the sum of all contributions made payable to
Investors Fiduciary Trust Company.
3. Deliver a prospectus(es) to each participant. (Participants should be
provided with a prospectus for each fund in which they are invested.)
Note: If you are enrolling more than five participants or if you are
enrolling participants for a 401(k) plan, you should use the KemFlex
Employer Master Account Application (Form-07) and a separate KemFlex
Employee Enrollment Form (Form-36) for each employee.
PARTICIPANT INFORMATION
______________________________________________________________________________
Name of Plan Date
______________________________________________________________________________
Participant Name
______________________________________________________________________________
Participant Social Security Number Participant Birthday
______________________________________________________________________________
Statement Mailing Address
______________________________________________________________________________
City State Zip Code
INVESTMENT SELECTION
FUND NAME AMOUNT
$
_______________________________________ ______________________
_______________________________________ ______________________
_______________________________________ ______________________
TOTAL $
______________________
THIS FORM SHOULD BE USED ONLY FOR MUTUAL FUND PURCHASES. TO FUND WITH
ANNUITIES, CALL KILICO CUSTOMER SERVICE AT 1-800-554-5426 AND REQUEST FORM
L-1004 (FORM L-1005 FOR 401(k) PLANS). TO FUND WITH UNIT INVESTMENT TRUSTS
CONTACT UIT CUSTOMER SERVICE AT 1-800-422-2848 AND REQUEST A UIT RETIREMENT
PLAN APPLICATION.
<PAGE> 23
PLAN INSTALLATION FORMS
ASSET TRANSFER FORM
INSTRUCTIONS:
This form is provided for your use in substituting the Kemper Red Book
Keogh Retirement Plan Prototype for your present qualified defined
contribution (profit sharing or money purchase pension plan).
1. Consult with your attorney or other tax advisor as to the
consequences of such an amendment.
2. Contact the present custodian bank, trustee or insurance company to
determine their requirements with respect to such transfer of assets.
3. Fill out the appropriate Kemper Red Book Keogh Retirement Plan
Prototype Adoption Agreement and Employee Enrollment Form for Mutual
Funds. Attach this Statement to it, and submit them to Investors
Fiduciary Trust Company, P.O. Box 419356, Kansas City, MO 64141-6356.
4. This statement and a letter of acceptance will be sent to the former
custodian, trustee or insurance company by IFTC. This statement
should suffice as instruction with respect to transmitting the funds
to Investors Fiduciary Trust Company, but the present custodian,
trustee, or insurance company may ask you to use its own form or
instructions, or impose additional requirements.
5. Indicate the total amount transferred on behalf of each participant
in the "Total Account Balance" column opposite the name of each
participant.
We hope this information will be useful to you; if you have any questions,
call Kemper's Sales Support Department at 1-800-621-5027.
To:____________________________________________________________________________
Current Custodian, Trustee or Insurance Company
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
The undersigned Employer previously established a qualified retirement plan on
____________, 19____ described as:
_______________________________________________________________________________
Indicate Plan Name - for example, ABC, Inc. Profit Sharing Plan
The undersigned Employer has amended and restated the plan and named Investors
Fiduciary Trust Company as a trustee of the Plan effective ___________, 19____.
The undersigned employer hereby directs the above named custodian bank, trustee
or insurance company now holding assets of the Plan to liquidate all said
assets and transfer the proceeds directly to Investors Fiduciary Trust Company,
P.O. Box 419356, Kansas City, MO 64141-6356, as trustee of the Plan, as amended
and restated.
The following is an accurate description of the allocations of Plan assets. If
you are transferring any voluntary contributions, please notify us of each
account balance.
Participant Total Account Balance
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
Employer's Signature Date
AFTER MAKING A COPY FOR YOUR RECORDS, ATTACH THIS FORM TO THE ADOPTION
AGREEMENT AND THE EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS (PREVIOUS PAGE).
MAIL ALL FORMS TO INVESTORS FIDUCIARY TRUST COMPANY, P.O. BOX 419356,
KANSAS CITY, MO 64141-6356.
<PAGE> 24
PARTICIPANT RECORDS
PARTICIPANT RECORDS
The following forms allow you to complete the administrative details
that are required of you as a plan sponsor. After they have been distributed to
and completed by your employees, they should be kept on record in your
files and should NOT be returned to Kemper.
NOTICE TO INTERESTED PARTIES
If you have employees, this notice should be posted
with other labor relations information bulletins.
BENEFICIARY FORMS
Photocopy and distribute to EACH participant.
Collect and file with other plan records.
PRE-RETIREMENT NOTICE AND WAIVER
Distribute to each affected participant (see instructions).
Collect and file Waiver.
DISTRIBUTION ELECTION FORM
Photocopy and distribute ONLY to employees terminating employment.
Collect and file with other plan records.
<PAGE> 25
NOTICE TO INTERESTED PARTIES
1. Notice To: All Employees of ______________________________________________
Name of Employer
2. _______________________________ has ______________________________________
Name of Employer Adopted/Amended
the plan described below on ______________________________________________
Date
3. Name of Plan _____________________________________________________________
4. 3-Digit Plan Identification Number _______________________________________
5. Opinion Letter Number
/ / PS-D257426a
/ / MP-D257427a
6. Sponsor: Kemper Growth Fund, Inc., 120 South LaSalle Street, Chicago, IL
60603
7. Employer's TIN __________________________________________________________
8. Address of Employer _____________________________________________________
_________________________________________________________________________
9. Address of Key Director having jurisdiction of plan _____________________
_________________________________________________________________________
10. It ____________________ contemplated that the Plan will be submitted to
is/is not
the Internal Revenue Service for an advance determination as to whether
or not it meets the qualification requirements of section 401 of the
Internal Revenue Code with respect to its _______________________________
_________________________________________________________________________
Initial Qualification/Amendment
11. All Employees who have completed ___ Years of Service and attained age ___
are eligible to participate.
12. The IRS _________________ previously issued a determination letter with
has/has not
respect to the qualification of this Plan.
13. You have the right to submit to the Key District Director, at the above
address, either individually or jointly with other interested parties,
your comments as to whether this Plan meets the qualification requirements
of the Internal Revenue Code. You may instead, individually or jointly
with other interested parties, request the Department of Labor to submit,
on your behalf, comments to the Key District Director regarding
qualification of the Plan. If the Department declines to comment on all or
some of the matters you raise, you may, individually, or jointly if your
request was made to the Department jointly, submit your comments on these
matters to the Key District Director.
<PAGE> 26
PARTICIPANT RECORDS
14. The Department of Labor may not comment on behalf of interested parties
unless requested to do so by the lesser of 10 Employees or 10 percent of
the Employees who qualify as interested parties. The number of persons
needed for the Department to comment with respect to this Plan is ______.
If you request the Department to comment, your comment must in writing and
must specify the matters upon which comments are requested, and must also
include: (1) the information contained in items 2 through 9 of this
Notice; and (2) the number of persons needed for the Department to
comment. A request to the Department to comment should be addressed as
follows: Administrator of Pension and Welfare Benefit Programs, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, DC 20216,
Attn: 3001 Comment Request.
15. Comments submitted by you to the Key District Director must be in writing
and received by him by
_________________________________________________________________________
75 days after adoption date
However, if there are matters that you request the Department of Labor to
comment upon on your behalf, and the Department declines, you may submit
comments on these matters to the Key District Director to be received by
him within 15 days from the time the Department notifies you that it will
not comment on a particular matter, or by ___________________________,
75 days after adoption date
whichever is later, but in no event later than ___________________________.
90 days after adoption date
A request to the Department to comment on your behalf must be received by
it by ___________________________ if you wish to preserve your right to
45 days after adoption date
comment on a matter upon which the Department declines to comment, or by
_____________________________ if you wish to waive that right.
55 days after adoption date
16. Detailed instructions regarding the requirements for notification of
interested parties may be found in Sections 16, 17, and 18 of Revenue
Procedure 92-6. Additional information concerning this __________________
adoption/amendment
(including where applicable, an updated copy of the Plan and related Trust
Agreement, a copy of the Adoption Agreement establishing the Plan, and
copies of Section 16 of Revenue Procedure 92-6) is available during the
hours of __________ for inspection and copying. (There is a nominal charge
for copying and mailing.)
<PAGE> 27
DESIGNATION OF BENEFICIARY
ALL PARTICIPANTS MUST COMPLETE. RETURN TO YOUR EMPLOYER.
_______________________________________________________________________________
Name of Plan Date
_______________________________________________________________________________
Last Name First Name MI
_______________________________________________________________________________
Social Security Number
_______________________________________________________________________________
Date of Birth (month, day, year) Sex
I hereby designate the person(s) named below as the beneficiary of my vested
account(s) payable under the Plan by reason of my death. I UNDERSTAND THAT IF I
DESIGNATE ANYONE OTHER THAN MY SPOUSE AS THE SOLE BENEFICIARY, THE SPOUSAL
CONSENT PORTION OF THIS FORM MUST BE SIGNED IN THE PRESENCE OF A NOTARY PUBLIC
OR A REPRESENTATIVE OF THE PLAN.
_______________________________________________________________________________
Name of Beneficiary (Full given name)
_______________________________________________________________________________
Relation to Participant
_______________________________________________________________________________
Address (if different from Participant)
If more than one person is named as beneficiary, any payments to which they may
be entitled will be paid in equal shares to such of the designated persons as
shall then be living; or if none, then pursuant to the terms of Section 8.02 of
the Plan.
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND CONTINGENT
BENEFICIARIES.
____________________________________ ____________________________
Date of this Designation Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named in the foregoing
"Designation of Beneficiary," hereby consent to and accept the beneficiary
designation, without regard to whether I survive or predecease my spouse. I
understand this consent allows the beneficiary(ies) named above to be paid
amounts which would otherwise be paid to me. This consent is irrevocable unless
my spouse changes the designation. If my spouse changes the designation I
understand I must file a similar consent to the new designation, or my consent
is no longer effective.
___________________________________ ____________________________________
Date Signature of Spouse
___________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 28
PARTICIPANT RECORDS
PRE-RETIREMENT SURVIVOR ANNUITY MEMORANDUM
INSTRUCTIONS:
This memorandum must be provided to married money purchase pension plan and
certain profit sharing plan participants unless their spouse is the beneficiary
of at least 50% of the participant's account balance. A participant should
receive this memorandum during the Plan Year in which they turn age 32. They
will have the right to waive it, with spousal consent, during the Plan Year in
which the participant turns age 35. A married participant age 35 or older
should immediately be given this memorandum and the Waiver of Pre-retirement
Survivor Annuity form.
________________________________________________________________________ Plan
Name of Employer
PRE-RETIREMENT SURVIVOR ANNUITY. The Plan requires the Employer to distribute a
pre-retirement survivor annuity to your surviving spouse if your death occurs
before distributions have begun and you and your spouse are married during the
one year period ending on the date of your death.
Under the pre-retirement survivor annuity, your spouse will receive lifetime
monthly annuity payments. The Employer will purchase the annuity contract from
an insurance company using 50% of your vested account balance (including the
proceeds, if any, of life insurance contracts purchased on your behalf under
the Plan). The contract will be given to your surviving spouse as evidence of a
right to receive the annuity payments from the insurance company. Generally,
the Employer may not begin payment of the annuity prior to the date a
participant would have reached age 65 without the surviving spouse's consent.
However, the surviving spouse may elect to have distribution of the
pre-retirement survivor annuity at any time following the participant's death.
If, at the time of your death, 50% of your account balance is less than
$3,500, the Employer will pay your spouse a lump sum payment instead of the
annuity.
WAIVER ELECTION. The Plan requires payment of the pre-retirement survivor
annuity unless you have a valid waiver election in effect on the date of your
death. To have a valid waiver you and your spouse must complete the waiver
election form. YOUR WAIVER ELECTION IS NOT VALID UNLESS YOUR SPOUSE, DURING THE
ELECTION PERIOD, ALSO CONSENTS IN WRITING TO YOUR BENEFICIARY DESIGNATION,
UNLESS YOUR SPOUSE IS THE SOLE PRIMARY BENEFICIARY. Your waiver election is not
valid unless you and your spouse make the election within the election period.
The election period begins on the first day of the Plan Year immediately before
your 35th birthday or, if later, the date you receive this notice. The election
period ends on the date of your death. If you wish, you may waive the
pre-retirement survivor annuity prior to the beginning of the election period.
However, on the first day of the election period mentioned above, you and your
spouse would have to complete a second waiver form. If you terminate
employment, you may waive the pre-retirement survivor annuity at any time after
the date of your termination. You may revoke or make a new waiver election as
often as you like during the election period. You may revoke a waiver election
without your spouse's consent, but your spouse would have to consent to a new
waiver. A waiver election is valid only for the spouse consenting to the
waiver. Therefore, you should inform the Employer of any change in your marital
status.
FINANCIAL EFFECT OF YOUR ELECTION. If you and your spouse do NOT waive the
pre-retirement survivor annuity, the Employer will pay your surviving spouse
the pre-retirement survivor annuity and pay the remaining value of the account
to your designated beneficiary. If the Employer pays your spouse the annuity,
the Plan does not need your spouse's consent to the beneficiary designation.
Under a pre-retirement survivor annuity, your surviving spouse will receive
lifetime income. Benefits will not continue to other beneficiaries after your
spouse's death. Your surviving spouse can choose a lump sum or installment
payments instead of the pre-retirement survivor annuity.
If you and your spouse waive the pre-retirement survivor annuity, the Employer
will pay your entire vested account balance to your designated beneficiary. The
Plan generally requires payment of the death benefit in lump sum. If your
beneficiary receives a lump sum payment, the Employer will provide the
beneficiary a notice of the special tax benefits, if any, available for the
distribution. If your vested account balance at the time of your death exceeds
$3,500, your beneficiary may choose a lump sum or installment payments. Under
the installment method, the Employer will continue payments from your account
until the entire account has been depleted. Furthermore, your vested account
balance will continue to earn investment income. If a vested account balance
remains in the Plan at the time of your primary beneficiary's death, the Plan
will pay the remaining account balance to your primary beneficiary's estate,
unless your beneficiary designation directs otherwise. If you and your spouse
waive the pre-retirement survivor annuity, your spouse must consent to the
identity of the designated beneficiary but does not have to consent to the form
of payment made to the beneficiary.
PROCEDURE. If you and your spouse wish to have the pre-retirement survivor
annuity apply, YOU DO NOT NEED TO MAKE ANY ELECTION. If you and your spouse do
NOT wish to have the pre-retirement survivor annuity apply, sign the enclosed
Waiver of Pre-retirement Survivor Annuity election form within the election
period. We also have enclosed a Designation of Beneficiary Form.
PARTICIPANTS SHOULD RETAIN THIS IN THEIR FILES
<PAGE> 29
WAIVER OF PRE-RETIREMENT SURVIVOR ANNUITY
MARRIED PARTICIPANTS MUST COMPLETE THIS FORM IF THEY WISH TO WAIVE PAYMENT OF A
PRE-RETIREMENT SURVIVOR ANNUITY. RETURN TO YOUR EMPLOYER.
__________________________________________________________________________ Plan
Name of Employer
I elect to waive payment of a pre-retirement survivor annuity if my death
occurs before distributions have begun under the Plan. The Employer has given
me an explanation of the terms of the Pre-retirement Survivor Annuity, my right
to make this waiver election, the time period during which I may make this
waiver election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand I may revoke this election at any
time during the election period.
______________________________________ _______________________________________
Date Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named above, consent to the Waiver
of the Pre-retirement Survivor Annuity form of payment. I understand the terms
of the Pre-retirement Survivor Annuity, my right not to consent to this waiver
election, the time period during which my spouse and I may make this waiver
election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand my consent is irrevocable unless
my spouse revokes the waiver election. I further understand my consent is valid
only if I consent, in writing, to my spouse's beneficiary designation or any
change in my spouse's beneficiary designation, unless my spouse has designated
me as sole primary beneficiary.
________________________________ ___________________________________________
Date Signature of Spouse
____________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 30
PARTICIPANT RECORDS
DISTRIBUTION ELECTION
PARTICIPANTS MUST COMPLETE THIS FORM ONLY IF THEIR ACCOUNT(S) IS OVER $3,500.
RETURN TO YOUR EMPLOYER.
_______________________________________________________________________ Plan
Name of Employer
A. INDICATE THE FORM OF DISTRIBUTION PAYMENT.
I, the undersigned Participant, elect payment of my account balance in
the following manner:
(1) / / I elect to transfer my distribution directly to a Kemper
IRA and defer taxes until I actually receive the money.
(Complete a Kemper IRA application if electing this
option.)
(2) / / In a lump sum.
(3) / / In a series of _______________________________
(monthly, quarterly, or annual)
installments over ____ years.
(4) / / In a qualified joint and survivor annuity contract.
(5) / / I elect to postpone distribution until the age of 65.
___________________________________ __________________________________
Date Signature of Participant
NOTE TO MARRIED MONEY PURCHASE PENSION PLAN AND CERTAIN PROFIT SHARING
PLAN PARTICIPANTS: If you requested payment of your account balance in a
form other than a qualified joint and survivor annuity, your spouse must
consent by signing Section B.
B. CONSENT OF SPOUSE
I, __________________________, spouse of the Participant, hereby consent
to the form of distribution payment elected above. I understand that by
giving this consent I am giving up the right to receive annuity benefit
payments which would otherwise be payable to me for my lifetime. I
understand my consent is irrevocable unless my spouse changes the form of
distribution payment. I understand any change is subject to my consent,
unless my spouse elects to receive the qualified joint and survivor
annuity.
___________________________________ ______________________________________
Date Signature of Participant
___________________________________ ______________________________________
Signature of Witness Title
IMPORTANT NOTE: A PARTICIPANT MAY WAIVE A QUALIFIED JOINT AND SURVIVOR
ANNUITY CONTRACT, AND A SPOUSE MAY CONSENT TO SUCH WAIVER PROVIDED THIS
ELECTION IS MADE WITHIN 90 DAYS OF THE FIRST PLAN DISTRIBUTION.
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 31
PLAN DOCUMENT
RETIREMENT PLAN
PROTOTYPE DOCUMENT
The following Plan Document and Opinion Letters
are part of your permanent plan records and may be consulted to
reference specific plan provisions.
<PAGE> 32
KEMPER RED BOOK
KEOGH RETIREMENT PLAN PROTOTYPE TRUST AGREEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I, DEFINITIONS
1.01 EMPLOYEE.............................................1
1.02 TRUSTEE..............................................1
1.03 PLAN ................................................1
1.04 ADOPTION AGREEMENT ..................................1
1.05 PLAN ADMINISTRATOR ..................................1
1.06 ADVISORY COMMITTEE...................................1
1.07 EMPLOYEE.............................................1
1.08 SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE .............1
1.09 HIGHLY COMPENSATED EMPLOYEE..........................1
1.10 PARTICIPANT..........................................2
1.11 BENEFICIARY..........................................2
1.12 COMPENSATION.........................................2
1.13 EARNED INCOME .......................................3
1.14 ACCOUNT..............................................3
1.15 ACCRUED bENEFIT .....................................3
1.16 NONFORFEITABLE.......................................3
1.17 PLAN YEAR/LIMITATION YEAR............................3
1.18 EFFECTIVE DATE ......................................3
1.19 PLAN ENTRY DATE .....................................3
1.20 ACCOUNTING DATE .....................................3
1.21 TRUST................................................3
1.22 TRUST FUND ..........................................3
1.23 NONTRANSFERABLE ANNUITY .............................3
1.24 ERISA ...............................................3
1 25 CODE.................................................3
1 26 SERVICE .............................................3
1 27 HOUR OF SERVICE .....................................3
1.28 DISABILITY...........................................4
1.29 SERVICE FOR PREDECESSOR EMPLOYER ....................4
1.30 RELATED EMPLOYERS....................................4
1.31 LEASED EMPLOYEES ....................................5
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES ...................5
1.33 TAXABLE WAGE BASE ...................................5
1.34 PAIRED PLANS ........................................5
1.35 MEMBER OF A COLLECTIVE BARGAINING UNIT ..............6
1.36 DESIGNATED INVESTMENT COMPANY .......................6
ARTICLE II, EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY..........................................6
2.02 YEAR OF SERVICE - PARTICIPATION .....................6
2.03 BREAK IN SERVICE - PARTICIPATION.....................6
2.04 PARTICIPATION UPON RE-EMPLOYMENT ....................6
2.05 CHANGE IN EMPLOYEE STATUS ...........................6
2.06 ELECTION NOT TO PARTICIPATE .........................6
</TABLE>
<PAGE> 33
PLAN DOCUMENT
<TABLE>
<S> <C>
ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT ..............................................7
3.02 DETERMINATION OF CONTRIBUTION .......................7
3.03 TIME OF PAYMENT OF CONTRIBUTION .....................7
3.04 RESERVED ............................................7
3.05 ACCRUAL OF BENEFIT ..................................7
3.06 .....................................................7
3.07 .....................................................7
3.08 .....................................................7
3.09 .....................................................7
3.10 .....................................................8
3.11 .....................................................8
3.12 .....................................................8
3.13 .....................................................8
3.14 .....................................................8
3.15 LIMITATIONS ON ALLOCATIONS ..........................8
3.16 SPECIAL ALLOCATION LIMITATION .......................9
3.17 DEFINED BENEFIT PLAN LIMITATION .....................9
3.18 DEFINITIONS - ARTICLE III ........................9-11
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS ............11
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS ...............11
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS .................11
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY...........12
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION .12
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT..........12
ARTICLE V, TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE ..............................12
5.02 VESTING ............................................12
ARTICLE VI, TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT ..............13-15
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT ............15-17
6.03 BENEFIT PAYMENT ELECTIONS...........................17
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND
SURVIVING SPOUSES ...............................17-19
6.05 WAIVER ELECTION - QUALIFIED JOINT AND
SURVIVOR ANNUITY ...................................19
6.06 WAIVER ELECTION - PRE-RETIREMENT
SURVIVOR ANNUITY ................................19-20
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS.......20
ARTICLE VII, TRUSTEE, POWERS AND DUTIES
7.01 INVESTMENT OF TRUST ASSETS .........................21
7.02 VOTING AND OTHER ACTION ............................21
7.03 REPORTS OF THE TRUSTEE AND EMPLOYER ................21
7.04 TRUSTEE FEES AND EXPENSES OF THE ACCOUNT ...........21
7.05 CONCERNING THE TRUSTEE .............................22
7.06 AMENDMENT ..........................................22
7.07 RESIGNATION OR REMOVAL OF TRUSTEE...................22
7.08 TERMINATION OF TRUST ...............................22
7.09 MISCELLANEOUS ......................................22
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION ............................23
8.02 NO BENEFICIARY DESIGNATION..........................23
8.03 PERSONAL DATA TO COMMITTEE..........................23
8.04 ADDRESS FOR NOTIFICATION............................23
8.05 ASSIGNMENT OR ALIENATION ...........................23
8.06 NOTICE OF CHANGE IN TERMS ..........................24
</TABLE>
<PAGE> 34
<TABLE>
<S> <C>
8.07 LITIGATION AGAINST THE TRUST .......................24
8.08 INFORMATION AVAILABLE...............................24
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS ............24
8.10 PARTICIPANT DIRECTION OF INVESTMENT ................24
ARTICLE IX, ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANT'S ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES ....................25
9.02 TERM ...............................................25
9.03 POWERS .............................................25
9.04 GENERAL ............................................25
9.05 FUNDING POLICY .....................................25
9.06 MANNER OF ACTION ...................................25
9.07 INTERESTED MEMBER ..................................25
9.08 INDIVIDUAL ACCOUNTS ................................25
9.09 VALUE OF PARTICIPANT'S ACCRUED BENEFIT .............26
9.10 ALLOCATIONS AND DISTRIBUTION OF NET INCOME
GAIN OR lOSS .......................................26
9.11 INDIVIDUAL STATEMENT................................26
9.12 ACCOUNT CHARGED ....................................26
9.13 MISSING BENEFICIARY ................................26
ARTICLE X, PROVISIONS RELATING TO INSURANCE
10.01 INSURANCE BENEFIT OR ANNUITY ......................27
10.02 FORM OF CONTRACT AND PREMIUM ......................27
10.03 LIMITATION OF LIFE INSURANCE PROTECTION ...........27
ARTICLE XI, MISCELLANEOUS
11.01 EVIDENCE ..........................................28
11.02 NO RESPONSIBILITY FOR EMPLOYER ACTION .............28
11.03 FIDUCIARIES NOT INSURERS ..........................28
11.04 WAIVER OF NOTICE ..................................28
11.05 SUCCESSORS.........................................28
11.06 WORD USAGE ........................................28
11.07 EMPLOYER'S RIGHT TO PARTICIPATE....................28
11.08 EMPLOYMENT NOT GUARANTEED .........................28
ARTICLE XII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 EXCLUSIVE BENEFIT .................................29
12.02 AMENDMENT BY EMPLOYER..............................29
12.03 AMENDMENT BY PLAN SPONSOR..........................30
12.04 DISCONTINUANCE.....................................30
12.05 MERGER/DIRECT TRANSFER.............................30
12.06 TERMINATION........................................31
ARTICLE XIII, CODE SECTION 401(k) ARRANGEMENTS
13.01 ELIGIBILITY........................................32
13.02 SALARY REDUCTION AGREEMENT ........................32
13.03 DEFINITIONS ....................................32-33
13.04 ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION ......33
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS ......33-34
13.06 ACTUAL DEFERRAL PERCENTAGE TEST ...................34
13.07 DISTRIBUTION OF EXCESS CONTRIBUTIONS...............35
13.08 MATCHING CONTRIBUTIONS ............................35
13.09 QUALIFIED MATCHING CONTRIBUTIONS ..................35
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS ..........35-36
13.11 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS ....36
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS ...............36
13.13 DISTRIBUTION REQUIREMENTS..........................37
</TABLE>
<PAGE> 35
PLAN DOCUMENT
ARTICLE I
DEFINITIONS
1.01 "EMPLOYER" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "TRUSTEE" means Investors Fiduciary Trust Company.
1.03 "PLAN" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement
which the Employer has executed.
1.04 "ADOPTION AGREEMENT" means the document executed by the Employer and the
Trustee by which the Employer establishes or continues this Plan.
1.05 "PLAN ADMINISTRATOR" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition
to his other duties, the Plan Administrator has full responsibility for
compliance with the reporting and disclosure rules under ERISA with
respect to this Agreement.
1.06 "ADVISORY COMMITTEE" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "EMPLOYEE" means any employee of the employer maintaining the Plan or of
any other employer required to be aggregated with such employer under
Code Section 4l4(b), (c), (m) or (o). The term employee shall also
include any leased employee deemed to be an employee of any employer
described in the previous paragraph as provided in Code Section 4l4(n)
or (o).
1.08 "SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned
Income but for the fact that the trade or business did not have net
earnings) for the taxable year from the trade or business for which the
Plan is established. "Owner-Employee" means a Self-Employed Individual
who is the sole proprietor in the case of a sole proprietorship. If the
Employer is a partnership, "Owner-Employee" means a Self-Employed
Individual who is a partner and owns more than 10% of either the capital
or profits interest of the partnership.
1.09 "HIGHLY COMPENSATED EMPLOYEE" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(A) is a 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles
of Code Section 318, for an unincorporated entity);
(B) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(C) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is
part of the top-paid 20% group of Employees (based on
Compensation for the relevant year);
(D) has Compensation in excess of 50% of the dollar amount prescribed
in Code Section 415(b)(1)(A) (relating to defined benefit plans)
and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in
the Plan Year but not during the preceding 12-month period and does not
satisfy clause (a) in either period, the Employee is a Highly
Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken
into account under clause (d) will not exceed the greater of 3 or 10% of
the total number (after application of the Code Section 414(q)
exclusions) of Employees, but no more than 50 officers. If no Employee
satisfies the Compensation requirement in clause (d) for the relevant
year, the Advisory Committee will treat the highest paid officer as
satisfying clause (d) for that year.
For purposes of this Section, "Compensation" means Compensation as
defined in Section 1.12, and Compensation must include: (i) elective
deferrals under a Code Section 401(k) arrangement or under a Simplified
Employee Pension maintained by the Employer; and (ii) amounts paid by
the Employer which are not currently includible in the Employee's gross
income because of Code Sections 125 (cafeteria plans) or 403(b)
(tax-sheltered annuities). The Advisory Committee must make the
determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the top paid 20% group, the
top 100 paid Employees, the number of officers includible in clause (d)
and the relevant Compensation, consistent with Code Section 414(q) and
regulations issued under that Code section. The Employer may make a
calendar year election to determine the Highly Compensated Employees for
the Plan Year, as prescribed by Treasury regulations. A calendar year
election must apply to all plans and arrangements of the Employer. For
purposes of applying any nondiscrimination test required under the Plan
or under the Code, in a manner consistent with applicable Treasury
regulations, the Advisory Committee will not treat as a separate
Employee a family member (a spouse, a lineal ascendant or descendant, or
a spouse of lineal ascendant or descendant) of a Highly Compensated
Employee described in clause (a) of this Section, or a family member of
one of the ten Highly Compensated Employees with the greatest
Compensation for the Plan Year, but will treat the Highly Compensated
Employee and all family members as a single Highly Compensated Employee.
This aggregation rule applies to a family member even if that family
member is a Highly Compensated Employee without family aggregation.
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<PAGE> 36
The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs
no Service for the Employer during the Plan Year, and was a Highly
Compensated Employee either for the separation year or any Plan Year
ending on or after his 55th birthday. If the former Employee's
Separation from Service occurred prior to January 1, 1987, he is a
Highly Compensated Employee only if he satisfied clause (a) of this
Section 1.09 or received Compensation in excess of $50,000 during: (1)
the year of his Separation from Service (or the prior year); or (2) any
year ending after his 54th birthday.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees treated as
officers and the Compensation that is considered, will be made in
accordance with Code Section 414(q) and the regulations thereunder.
1.10 "PARTICIPANT" is any Employee other than a Member of a Collective
Bargaining Unit who is eligible to be and becomes a Participant in
accordance with the provisions of Section 2.01.
1.11 "BENEFICIARY" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes
entitled to a benefit under the Plan remains a Beneficiary under the
Plan until the Trustee has fully distributed his benefit to him. A
Beneficiary's right to (and the Plan Administrator's, the Advisory
Committee's or a Trustee's duty to provide to the Beneficiary)
information or data concerning the Plan does not arise until he first
becomes entitled to receive a benefit under the Plan.
1.12 "COMPENSATION" means compensation as that term is defined in Section
3.18(b) of the Plan. If compensation for any prior plan year is taken
into account in determining an employee's contributions or benefits for
the current year, the compensation for such prior year is subject to the
applicable annual compensation limit in effect for that prior year. For
this purpose, for years beginning before January 1, 1990, the applicable
annual compensation limit is $200,000. For any self-employed individual
covered under the plan, compensation will mean earned income.
Compensation shall include only that compensation which is actually paid
to the participant during the applicable period. Except as provided
elsewhere in this plan, the applicable period shall be the plan year.
Furthermore, notwithstanding the above, the definition of compensation
includes elective contributions made by the Employer on the Employee's
behalf. "Elective contributions" are amounts excludible from the
Employee's gross income under Code Section 402(a)(8) (relating to a Code
Section 401(k) arrangement), Code Section 402(h) (relating to a
Simplified Employee Pension), Code Section 125 (relating to a cafeteria
plan) or Code Section 403(b) (relating to a tax-sheltered annuity) and
contributed at the Employee's election. The term "Compensation" does
not include:
(A) Employer contributions (other than "elective contributions") to a
plan of deferred compensation to the extent the contributions are
not included in the gross income of the Employee for the taxable
year in which contributed, on behalf of an Employee to a
Simplified Employee Pension Plan to the extent such contributions
are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of
whether such amounts are includible in the gross income of the
Employee when distributed.
(B) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture.
(C) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option.
(D) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent
that the premiums are not includible in the gross income of the
Employee), or contributions made by an Employer (whether or not
under a salary reduction agreement) towards the purchase of an
annuity contract described in Code Section 403(b) (whether or
not the contributions are excludible from the gross income of the
Employee), other than "elective contributions," if elected in the
Employer's Adoption Agreement.
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.12, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into
account only Compensation actually paid for the relevant period.
For any Plan Year beginning after December 31, 1988, the Advisory
Committee must take into account only the first $200,000 (or such larger
amount as the Commissioner of Internal Revenue may prescribe under Code
Section 415(d)) of any Participant's Compensation, except that the dollar
increase in effect on January 1 of any calendar year is effective for
years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1,1990. If a plan determines
compensation on a period of time that contains fewer than 12 calendar
months, then the annual compensation limit is an amount equal to the
annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12. The $200,000
Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under
Section 1.09 and who is either (i) the Employee's spouse; or (ii) the
Employee's lineal descendant who has not attained age 19 before the
close of the year. If, as a result of the application of such rules, the
adjusted $200,000 limitation is exceeded, then (except for purposes of
determining the portion of compensation up to the integration level if
this plan provides for permitted disparity, the Advisory Committee will
apply the contribution and allocation provisions of Article III by
prorating the $200,000 (or adjusted) limitation among the affected
individuals in proportion to each such individual's Compensation
determined prior to application of this limitation.
2
<PAGE> 37
PLAN DOCUMENT
NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees: Compensation
means Compensation as defined in this Section 1.12.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Code Section 22(e)(3)) is the compensation such
Participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled Participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Code Section 414(g)) and contributions made on behalf of
such participant are nonforfeitable when made.
1.13 "EARNED INCOME" means net earnings from self-employment in the trade
or business with respect to which the Employer has established the
Plan, provided personal services of the individual are a material
income producing factor. The Advisory Committee will determine net
earnings without regard to items excluded from gross income and the
deductions allocable to those items. Net earnings are reduced by
contributions by the employer to a qualified plan to the extent
deductible under Code Section 404. The Advisory Committee will
determine net earnings after the deduction allowed to the
Self-Employed Individual for all contributions made by the Employer
to a qualified plan and, for Plan Years beginning after December 31,
1989, the deduction allowed to the Self-Employed under Code
Section 164(f) for self-employment taxes.
1.14 "ACCOUNT" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Employer's Plan.
1.15 "ACCRUED BENEFIT" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and
Employee contributions and earnings thereon including rollovers
whether vested before or after death and including the proceeds of
insurance contracts on the participant's life, if any.
1.16 "NONFORFEITABLE" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's
Accrued Benefit.
1.17 "PLAN YEAR" means the fiscal year, of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's
Adoption Agreement also must specify the "Limitation Year" applicable
to the limitations on allocations described in Article III. If the
Employer maintains Paired Plans, each Plan must have the same Plan
Year.
1.18 "EFFECTIVE DATE" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "PLAN ENTRY DATE" means the first day of the Plan Year or the first
day of the sixth month of the Plan Year.
1.20 "ACCOUNTING DATE" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all
Plan allocations for a particular Plan Year as of the Accounting Date
of that Plan Year.
1.21 "TRUST" means the separate Trust created under the Employer's Plan.
1.22 "TRUST FUND" means all property of every kind held or acquired by the
Trustee under the Employer's Plan, other than incidental benefit
insurance contracts.
1.23 "NONTRANSFERABLE ANNUITY" means an annuity which by its terms provides
that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security for the performance of an obligation or for any
purpose to any person other than Kemper Investors Life Insurance
Company. If the Trustee distributes an annuity contract, the contract
must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
l.25 "CODE" means the Internal Revenue Code of 1986, as amended.
1.26 "SERVICE" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave
of absence authorized by the Employer under a uniform,
nondiscriminatory policy applicable to all Employees. "Separation from
Service" means a separation from Service with the Employer maintaining
this Plan.
1.27 "HOUR OF SERVICE" means:
(A) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment, for the performance of duties for the
Employer. The Advisory Committee credits Hours of Service
under this paragraph (a) to the Employee for the computation
period in which the Employee performs the duties, irrespective
of when paid;
(B) Each Hour of Service for back pay, irrespective of mitigation
of damages, to which the Employer has agreed or for which the
Employee has received an award. The Advisory Committee credits
Hours of Service under this paragraph (b) to the Employee for
the computation period(s) to which the award or the agreement
pertains rather than for the computation period in which the
award, agreement or payment is made; and
3
<PAGE> 38
(C) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment (irrespective of whether the employment
relationship is terminated) for reasons other than for the
performance of duties during a computation period, such as
leave of absence, vacation, holiday, sick leave, illness,
incapacity (including disability), layoff, jury duty or
military duty. The Advisory Committee will credit no more than
501 Hours of Service under this paragraph (c) to an Employee
on account of any single continuous period during which the
Employee does not perform any duties (whether or not such
period occurs during a single computation period). The
Advisory Committee credits Hours of Service under this
paragraph (c) in accordance with the rules of paragraphs (b)
and (c) of Labor Reg. Section 2530.200b-2, which the Plan, by
this reference, specifically incorporates in full within this
paragraph (c).
The Advisory Committee will not credit an Hour of Service under more
than one of the above paragraphs. A computation period for purposes of
this Section 1.27 is the Plan Year, Year of Service period, Break in
Service period or other period, as determined under the Plan provision
for which the Advisory Committee is measuring an Employee's Hours of
Service. The Advisory Committee will resolve any ambiguity with
respect to the crediting of an Hour of Service in favor of the
Employee.
An Employee for whom a record of hours worked is not maintained shall
be credited with 45 Hours of Service for each week in which he or she
completes at least one Hour of Service.
Solely for purposes of determining whether the Employee incurs a Break
in Service under any provision of this Plan, the Advisory Committee
must credit Hours of Service during an Employee's unpaid absence
period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the
Employee's absence is due to the Employee's pregnancy, the birth of
the Employee's child, the placement with the Employee of an adopted
child, or the care of the Employee's child immediately following the
child's birth or placement. The Advisory Committee credits Hours of
Service under this paragraph on the basis of the number of Hours of
Service the Employee would receive if he were paid during the absence
period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours
per day during the absence period. The Advisory Committee will credit
only the number (not exceeding 501) of Hours of Service necessary to
prevent an Employee's Break in Service. The Advisory Committee credits
all Hours of Service described in this paragraph to the computation
period in which the absence period begins or, if the Employee does not
need these Hours of Service to prevent a Break in Service in the
computation period in which his absence period begins, the Advisory
Committee credits these Hours of Service to the immediately following
computation period.
Hours of service will also be credited for any individual considered
an employee for purposes of this Plan under Code Section 414(n) or
Section 414(o) and the regulations thereunder.
1.28 "DISABILITY" means inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12
months. The permanence and degree of such impairment shall be
supported by medical evidence. The Plan considers a Participant
disabled on the date the Advisory Committee determines the Participant
satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to
confirm disability. The Advisory Committee will apply the provisions
of this Section 1.28 in a nondiscriminatory, consistent and uniform
manner.
1.29 "SERVICE FOR PREDECESSOR EMPLOYER"
If the Employer maintains the plan of a predecessor employer, the Plan
treats service of the Employee with the predecessor employer as
service with the Employer. If the Employer does not maintain the plan
of a predecessor employer, the Plan does not credit service with the
predecessor employer.
1.30 "RELATED EMPLOYERS"
A related group is a controlled group of corporations (as
defined in Code Section 414(b)), trades or businesses (whether or not
incorporated) which are under common control (as defined in Code
Section 414(c)), or an affiliated service group (as defined in Code
Section 414(m) or in Code Section 414(o)). If the Employer is a member
of a related group, the term "Employer" includes the related group
members for purposes of crediting Hours of Service, determining Years
of Service and Breaks in Service under Articles II and V, applying the
limitations on allocations in Part 2 of Article III, applying the top
heavy rules and the minimum allocation requirements of Article III,
the definitions of Employee, Highly Compensated Employee, Compensation
and Leased Employee, and for any other purpose required by the
applicable Code section or by a Plan provision. However, an Employer
may contribute to the Plan only by being a signatory to the Execution
Page of the Adoption Agreement or to a Participation Agreement to the
Employer's Adoption Agreement. If one or more of the Employer's
related group members becomes Participating Employers by executing a
Participation Agreement to the Employer's Adoption Agreement, the term
"Employer" includes the participating related group members, for all
purposes of the Plan, and "Plan Administrator" means the Employer that
is the signatory to the Execution Page of the Adoption Agreement.
All Employees of the Employer or of any member of the Employer's
related group, are eligible to participate in the Plan, irrespective
of whether the related group member directly employing the Employee is
a Participating Employer.
4
<PAGE> 39
PLAN DOCUMENT
1.31 "LEASED EMPLOYEES"
The Plan treats a Leased Employee as an Employee of the Employer. A
Leased Employee is an individual (who otherwise is not an Employee of
the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer
(or for the Employer and any persons related to the Employer
determined in accordance with Code Section 414(n)(6) on a substantially
full-time basis for at least one year and who performs services
historically performed by employees in the Employer's business field.
If a Leased Employee is treated as an Employee by reason of this
Section 1.31 of the Plan, "Compensation" includes Compensation from
the leasing organization which is attributable to services performed
for the Employer. Contributions or benefits provided a leased employee
by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by
the recipient employer.
SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee
as an Employee if the leasing organization covers the employee in a
safe harbor plan and, prior to application of this safe harbor plan
exception, 20% or less of the Employer's Employees (other than Highly
Compensated Employees) are Leased Employees. A safe harbor plan is a
money purchase pension plan providing immediate participation, full
and immediate vesting, and a nonintegrated contribution formula equal
to at least 10% of the employee's compensation without regard to
employment by the leasing organization on a specified date. The safe
harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective
contributions (as defined in Section 1.12).
OTHER REQUIREMENTS. The Advisory Committee must apply this Section
1.31 in a manner consistent with Code Sections 414(n) and 414(o) and
the regulations issued under those Code sections. If a Leased
Employee is a Participant in the Plan and also participates in a
defined contribution plan maintained by the leasing organization,
then the Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without
taking into account the Leased Employee's allocation, if any, under
the leasing organization's plan.
1.32 "SPECIAL RULES FOR OWNER-EMPLOYEES"
The following special provisions and restrictions apply to
Owner-Employees:
If this plan provides contributions or benefits for one or more
owner-employees who control both the business for which this plan is
established and one or more other trades or businesses, this plan and
the plan established for other trades or businesses must, when looked
at as a single plan, satisfy sections 401(a) and (d) for the
employees of this and all other trades or businesses.
If the plan provides contributions or benefits for one or more
owner-employees who control one or more other trades or businesses,
the employees of the other trades or businesses must be included in a
plan which satisfies sections 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for
owner-employees under this plan.
If an individual is covered as an owner-employee under the plans of
two or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or businesses
which are controlled must be as favorable as those provided for him
under the most favorable plan of the trade or business which is not
controlled.
For purposes of the preceding paragraphs, an owner-employee, or two or
more owner-employees, will be considered to control a trade or
business if the owner-employee, or two or more owner-employees
together:
(1) own the entire interest in an unincorporated trade or
business, or
(2) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an owner-employee, or two or
more owner-employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such owner-employee, or such two or more owner-employees, are
considered to control within the meaning of the preceding sentence.
1.33 "TAXABLE WAGE BASE" means 100% of the taxable wage base as determined
under Section 230 of the Social Security Act in effect on the first
day of the plan year.
1.34 "PAIRED PLANS" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Kemper Retirement Plan Prototype
Keogh/Corporate, one Adoption Agreement being a Paired Profit Sharing
Plan and one Adoption Agreement being a Paired Pension Plan. A Paired
Profit Sharing Plan may include a Code Section 401(k) arrangement. A
Paired Pension Plan must be a money purchase pension plan. Paired
Plans must be the subject of a favorable opinion letter issued by
the National Office of the Internal Revenue Service.
5
<PAGE> 40
1.35 "MEMBER OF A COLLECTIVE BARGAINING UNIT" means any employee who is
included in a unit and whose terms and conditions of employment are
covered by a collective bargaining agreement between the Employer and
employee representatives which does not provide for participation in
the Plan, provided that there is evidence that, in connection with
such agreement, retirement benefits were the subject of good-faith
bargaining. For this purpose, the term "employee representatives" does
not include any organization more than half of whose members are
employees who are owners, officers or executives of the Employer.
1.36 "DESIGNATED INVESTMENT COMPANY" means any registered investment
company the investment manager or principal underwriter of which is
Kemper Financial Services, Inc. or an affiliate.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 "ELIGIBILITY"
Each Employee becomes a Participant in the Plan in accordance with the
participation option selected by the Employer in its Adoption
Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues
as a Participant in the Plan.
2.02 "YEAR OF SERVICE - PARTICIPATION"
For purposes of an Employee's participation in the Plan under Adoption
Agreement Section 2.01, the Plan takes into account all of his Years
of Service with the Employer, except that if an Employee has a Break
in Service before satisfying the Plan's requirement for eligibility,
Service before such break will not be taken into account. "Year of
Service" means a 12 consecutive month period during which the Employee
completes not less than 1,000 Hours of Service, measuring the
beginning of the first 12 month period from the Employment
Commencement Date, and each anniversary thereof. "Employment
Commencement Date" means the date on which the Employee first performs
an Hour of Service for the Employer.
2.03 "BREAK IN SERVICE - PARTICIPATION"
An Employee incurs a "Break in Service" if during any 12 consecutive
month period he does not complete more than 500 Hours of Service with
the Employer. The "12 consecutive month period" under this Section 2.03
is the same 12 consecutive month period for which the Plan measures
"Years of Service" under Section 2.02.
TWO-YEAR ELIGIBILITY. If the Employer elects a 2 years of service
condition for eligibility purposes under Adoption Agreement Section
2.01, the Plan treats an Employee who incurs a one year Break in
Service and who has never become a Participant as a new Employee on
the date he first performs an Hour of Service for the Employer after
the Break in Service.
2.04 "PARTICIPATION UPON RE-EMPLOYMENT"
A Participant whose employment terminates re-enters the Plan as a
Participant on the date of his re-employment. An Employee who
satisfies the Plans' eligibility conditions but who terminates
employment prior to becoming a Participant becomes a Participant on
the later of the Plan Entry Date on which he would have entered the
Plan had he not terminated employment or the date of his
re-employment. Any Employee who terminates employment prior to
satisfying the Plan's eligibility conditions becomes a Participant in
accordance with Adoption Agreement Section 2.01.
2.05 "CHANGE IN EMPLOYEE STATUS"
If a Participant has not incurred a Separation from Service but ceases
to be eligible to participate in the Plan, by reason of becoming a
member of a Collective Bargaining Unit, the Advisory Committee must
treat the Participant as an excluded employee during the period such a
Participant is a Member of a Collective Bargaining Unit. The Advisory
Committee determines a Participant's sharing in the allocation of
Employer contributions by disregarding his Compensation paid by the
Employer for services rendered in his capacity as a Member of a
Collective Bargaining Unit. However, during such period of exclusion,
the Participant, without regard to employment classification,
continues to receive credit for vesting under Article V for each
included Year of Service and the Participant' Account continues to
share fully in Trust Fund allocations under Section 9.11.
If an excluded employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment
classification, he will participate in the Plan immediately if he has
satisfied the eligibility conditions of Section 2.01 and would have
been a Participant had he not been an excluded employee during his
period of Service. Furthermore, the Plan takes into account all of the
Participant's included Years of Service with the Employer as an
Excluded Employee for purposes of vesting credit under Article V.
In the event a participant is no longer a member of an eligible class
of employees and becomes ineligible to participate but has not
incurred a break in service, such employee will participate
immediately upon returning to an eligible class of employees. If such
participant incurs a break in service, eligibility will be determined
under the break in service rules of the plan.
2.06 "ELECTION NOT TO PARTICIPATE"
The Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan.
6
<PAGE> 41
PLAN DOCUMENT
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS:
SECTIONS 3.01 THROUGH 3.06
3.01 "AMOUNT"
For each Plan Year, the Employer contributes to the Trust the amount
determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a
contribution to the Trust for any Plan Year to the extent the
contribution would exceed the Participants' Maximum Permissible
Amounts.
The Trustee, upon written request from the Employer, must return to
the Employer the amount of the Employer's contribution made by the
Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code Section 404. The
Trustee will not return any portion of the Employer's contribution
under the provisions of this paragraph more than one year after:
(A) The Employer made the contribution by mistake of fact; or
(B) The disallowance of the contribution as a deduction, and then,
only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to
the contribution, but the Trustee will decrease the Employer
contribution returnable for any losses attributable to it. The Trustee
may require the Employer to furnish it whatever evidence the Trustee
deems necessary to enable the Trustee to confirm the amount the
Employer has requested be returned is properly returnable under ERISA.
3.02 "DETERMINATION OF CONTRIBUTION"
The Employer, from its records, determines the amount of any
contributions to be made by it to the Trust under the terms of the
Plan.
3.03 "TIME OF PAYMENT OF CONTRIBUTION"
The Employer may pay its contribution for each Plan Year in one or
more installments without interest. The Employer must make its
contribution to the Trustee within the time prescribed by the Code or
applicable Treasury regulations.
3.04 "RESERVED"
3.05 "ACCRUAL OF BENEFIT"
The accrual of benefit shall be determined on the basis of the Plan
Year. In determining the amount of the Employer contribution to a
participant's account, only compensation with respect to that part of
a Plan Year the employee is actually a participant shall be taken into
account.
Employer contributions will be allocated to each Participant who
either completes 500 hours of service during the Plan Year or who is
employed by the Employer on the last day of the Plan Year.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.06 THROUGH 3.09
[Note: Sections 3.06 through 3.09 apply only to Participants in this
Plan who do not participate, and who have never participated, in
another qualified plan or in a welfare benefit fund as defined in Code
Section 419(e) or an individual medical account as defined in Code
Section 415(1)(2) maintained by the Employer.
3.06 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount. If the amount the
Employer otherwise would contribute to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the Employer will reduce the amount of its
contribution so the Annual Additions for the Limitation Year will
equal the Maximum Permissible Amount.
3.07 Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Advisory Committee may determine the
Maximum Permissible Amount on the basis of the Participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated.
3.08 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum
Permissible Amount for such Limitation Year on the basis of the
Participant's actual Compensation for such Limitation Year.
3.09 If, pursuant to Section 3.08 there is an Excess Amount with respect to
a Participant for a Limitation Year, the Advisory Committee will
dispose of such Excess Amount as follows:
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(A) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the
return would reduce the Excess Amount.
(B) If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
Contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each
succeeding Limitation Year if necessary.
(C) If, after the application of paragraph (b), an Excess Amount
still exists, and the Plan does not cover the Participant at
the end of the Limitation Year, then the Advisory Committee
will hold the Excess Amount unallocated in a suspense account.
The Advisory Committee will apply the suspense account to
reduce Employer Contributions for all remaining Participants
in the next Limitation Year, and in each succeeding Limitation
Year if necessary.
(D) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants. If a
suspense account is in existence at any time during a
limitation year pursuant to this section, it will not
participate in the allocation of the trust's investment gains
and losses. If a suspense account is in existence at any time
during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to
participants' accounts before any employer or any employee
contributions may be made to the plan for that limitation
year.
[Note: Sections 3.10 through 3.15 apply if, in addition to this Plan,
the Participant is covered under another qualified master or prototype
defined contribution plan maintained by the Employer, a welfare
benefit fund, as defined in Code Section 419(e) maintained by the
Employer or an individual medical account, as defined in Code Section
415(1)(2) maintained by the Employer which provides an annual
addition during any Limitation Year.]
3.10 The annual additions which may be credited to a participant's account
under this plan for any such limitation year will not exceed the
maximum permissible amount reduced by the annual additions credited to
a participant's account under the other plans and welfare benefit
funds for the same limitation year. If the annual additions with
respect to the participant under other defined contribution plans and
welfare benefit funds maintained by the employer are less than the
maximum permissible amount and the employer contribution that would
otherwise be contributed or allocated to the participant's account
under this plan would cause the annual additions for the limitation
year to exceed this limitation, the amount contributed or allocated
will be reduced so that the annual additions under all such plans and
funds for the limitation year will equal the maximum permissible
amount. If the annual additions with respect to the participant under
such other defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the maximum permissible amount,
no amount will be contributed or allocated to the participant's
account under this plan for the limitation year.
3.11 Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the Advisory Committee may determine the
amounts referred to in 3.10 above on the basis of the Participant's
estimated annual Compensation for such Limitation Year. The Advisory
Committee will make this determination on a reasonable and uniform
basis for all Participants similarly situated.
3.12 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts
referred to in 3.10 on the basis of the Participant's actual
Compensation for such Limitation Year.
3.13 If pursuant to Section 3.12, a Participant's Annual Additions under
this Plan and all such other plans result in an Excess Amount, such
Excess Amount will consist of the Amounts last allocated. The Advisory
Committee will determine the Amounts last allocated by treating the
Annual Additions attributable to a welfare benefit fund or individual
medical account as allocated first, irrespective of the actual
allocation date under the welfare benefit fund.
3.14 If the Advisory Committee allocates an Excess Amount to a Participant
on an allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Amount attributed to this Plan equals
the product of:
(i) the total Excess Amount allocated as of such date (including
any amount which the Advisory Committee would have allocated
but for the limitations of Code Section 415), times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount
allocated as of such date under all qualified master or
prototype defined contribution plans (determined without
regard to the limitations of Code Section 415).
3.15 The Advisory Committee will dispose of any Excess Amounts attributed
to this Plan as provided in Section 3.09.
[Note: Section 3.16 applies only to Participants who, in addition to
this Plan, participate in one or more qualified plans which are
qualified defined contribution plans other than a Master or Prototype
plan maintained by the Employer during the Limitation Year.]
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PLAN DOCUMENT
3.16 "SPECIAL ALLOCATION LIMITATION"
The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on behalf of any Participant are limited in
accordance with the provisions of Section 3.10 through 3.15, as though
the other plan were a Master or Prototype plan.
3.17 "DEFINED BENEFIT PLAN LIMITATION"
If the Employer maintains a defined benefit plan, or has ever
maintained a defined benefit plan which the Employer has terminated,
then the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The annual additions which may be credited to the
participant's account under this plan for any limitation year will be
limited in accordance with Section 3.17 of the adoption agreement. To
the extent necessary to satisfy the limitations of this Section 3.17,
the Employer will reduce the Participant's projected annual benefit
under the defined benefit plan under which the Participant
participates. The Employer also must provide in an addendum to its
Adoption Agreement the manner in which the Plan will satisfy the
top-heavy requirements of Code Section 416 after taking into account
the existence (or prior maintenance) of the defined benefit plan.
3.18 "DEFINITIONS - ARTICLE III"
For purposes of this Article III, the following terms mean:
(A) "ANNUAL ADDITION" - The sum of the following amounts
allocated on behalf of a Participant for a Limitation Year, of
(i) all Employer contributions; (ii) all forfeitures; and
(iii) all Employee contributions. Except to the extent
provided in Treasury regulations, Annual Additions include
excess contributions described in Code Section 401(k), excess
aggregate contributions described in Code Section 401(m) and
excess deferrals described in Code Section 402(g),
irrespective of whether the plan distributes or forfeits such
excess amounts. Annual Additions also include Excess Amounts
reapplied to reduce Employer contributions under Section 3.09.
Amounts allocated after March 31, 1984, to an individual
medical account (as defined in Code Section 415(1)(2))
included as part of a defined benefit pension or annuity plan
maintained by the Employer are Annual Additions. Furthermore,
Annual Additions include contributions paid or accrued after
December 31, 1985, for taxable years ending after December
31,1985, attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code Section 419A(d)(3)) under a welfare benefit
fund (as defined in Code Section 419(e)) maintained by the
Employer. For this purpose, any excess amount applied in the
limitation year to reduce employer contributions will be
considered annual additions for such limitation year.
(B) "COMPENSATION" - For purposes of applying the limitations of
Part 2 of this Article III, "Compensation" means a
participant's earned income, wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the employer maintaining the plan to the
extent that the amounts are includible in gross income
(including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, reimbursements and expense allowances), and
excluding the following:
(I) Employer contributions to a plan of deferred
compensation which are not includible in the
employee's gross income for the taxable year in which
contributed, or employer contributions under a
simplified employee pension plan to the extent such
contributions are deductible by the employee, or any
distributions from a plan of deferred compensation;
(II) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(III) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(IV) other amounts which received special tax benefits, or
contributions made by the employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in section 403(b) of
the Internal Revenue Code (whether or not the amounts
are actually excludible from the gross income of the
employee).
For purposes of applying the limitations of this article,
compensation for a limitation year is the compensation actually paid
or includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Section 22(e)(3) of the Code) is the compensation such
participant would have received for the limitation year if the
participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Section 414(g) of the Code) and contributions made on
behalf of such participant are nonforfeitable when made.
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<PAGE> 44
(C) "EMPLOYER" - The Employer that adopts this Plan and any
related employers described in Section 1.30. Solely for
purposes of applying the limitations of Part 2 of this Article
III, the Advisory Committee will determine related employers
described in Section 1.30 by modifying Code Sections 414(b)
and (c) in accordance with Code Section 415(h).
(D) "EXCESS AMOUNT" - The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(E) "LIMITATION YEAR" - The period selected by the Employer under
Adoption Agreement Section 1.17. All qualified plans of the
Employer must use the same Limitation Year. If the Employer
amends the Limitation Year to a different 12 consecutive
month period, the new Limitation Year must begin on a date
within the Limitation Year for which the Employer makes the
amendment, creating a short Limitation Year.
(F) "MASTER OR PROTOTYPE PLAN" - A plan the form of which is the
subject of a favorable opinion letter from the Internal
Revenue Service.
(G) "MAXIMUM PERMISSIBLE AMOUNT" - The lesser of (i) $30,000 (or,
if greater, one-fourth of the defined benefit dollar
limitation under Code Section 415(b)(1)(A)), or (ii) 25% of the
Participant's Compensation for the Limitation Year. If there
is a short Limitation Year because of a change in Limitation
Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
Number of months in the short Limitation Year: 12
The 25% compensation limitation shall not apply to any
contribution for medical benefits (within the meaning of Code
Section 401(h) or 419A(f)(2) which is otherwise treated as an
annual addition under Code Section 415(l)(1) or 419A(d)(2).
(H) "DEFINED CONTRIBUTION PLAN" - A retirement plan which
provides for an individual account for each participant and
for benefits based solely on the amount contributed to the
participant's account, and any income, expenses, gains and
losses, and any forfeitures of accounts of other participants
which the plan may allocate to such participant's account. The
Advisory Committee must treat all defined contribution plans
(whether or not terminated) maintained by the Employer as a
single plan. Solely for purposes of the limitations of Part 2
of this Article III, the Advisory Committee will treat
employee contributions made to a defined benefit plan
maintained by the Employer as a separate defined contribution
plan. The Advisory Committee also will treat as a defined
contribution plan an individual medical account (as defined in
Code Section 415(1)(2)) included as part of a defined benefit
plan maintained by the Employer and, for taxable years ending
after December 31,1985, a welfare benefit fund under Code
Section 419(e) maintained by the Employer to the extent there
are post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section
419A(d)(3)).
(I) "DEFINED BENEFIT PLAN" - A retirement plan which does not
provide for individual accounts for Employer contributions.
The Advisory Committee must treat all defined benefit plans
(whether or not terminated) maintained by the Employer as a
single plan.
[Note: The definitions in paragraphs (j) and (k) apply only if
the limitation described in Section 3.17 applies to the
Employer's Plan.]
(J) "DEFINED BENEFIT PLAN FRACTION" -PROJECTED annual benefit of
the Participant under the defined benefit plan(s) The lesser of
(I) 125% of the dollar limitation determined under
Code Section 415 (b) and (d) for the Limitation Year,
or
(II) 140% of the Participant's average Compensation
for his high three (3) consecutive Years of Service
To determine the denominator of this fraction, the
Advisory Committee will make any adjustment required under
Code Section 415(b) and will determine a Year of Service,
unless otherwise provided in an addendum to Adoption Agreement
Section 3.06, as a Plan Year in which the Employee completed
at least 1,000 Hours of Service. The "projected annual
benefit" is the annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if the plan
expresses such benefit in a form other than a straight life
annuity or qualified joint and survivor annuity) of the
Participant under the terms of the defined benefit plan on the
assumptions he continues employment until his normal
retirement age (or current age, if later) as stated in the
defined benefit plan, his compensation continues at the same
rate as in effect in the Limitation Year under consideration
until the date of his normal retirement age and all other
relevant factors used to determine benefits under the defined
benefit plan remain constant as of the current Limitation Year
for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits
in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the dollar
limitation used in the denominator of this fraction will not
be less than the Participant's Current Accrued Benefit. A
Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the
Participant had accrued as of the end of the 1986 Limitation
Year (the last Limitation Year beginning before January
1, 1987), determined without regard to any cost of living
adjustment occurring after May 5, 1986. This Current Accrued
Benefit rule applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 as in effect at the end of the 1986
Limitation Year.
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<PAGE> 45
PLAN DOCUMENT
Notwithstanding the above, if the participant was a
participant as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined
benefit plans maintained by the employer which were in
existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual
benefits under such plans which the participant had accrued as
of the close of the last limitation year beginning before
January 1,1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Section 415 for all limitation years beginning before January
1, 1987
(k) "DEFINED CONTRIBUTION PLAN FRACTION" - Section 5.5 Defined
contribution fraction: A fraction, the numerator of which is
the sum of the annual additions to the participant's account
under all the defined contribution plans (whether or not
terminated) maintained by the employer for the current and all
prior limitation years (including the annual additions
attributable to the participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the employer, and the annual
additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(1)(2) of the Code,
maintained by the employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and
all prior limitation years of service with the employer
(regardless of whether a defined contribution plan was
maintained by the employer). The maximum aggregate amount in
any limitation year is the lesser of 125 percent of the
dollar limitation determined under Sections 415(b) and (d) of
the Code in effect under Section 415(c)(1)(A) of the Code or
35 percent of the participant 's compensation for such year.
If the employee was a participant as of the end of the first
day of the first limitation year beginning after December 31,
1986, in one or more defined contribution plans maintained by
the employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise
exceed 1.0 under the terms of this plan. Under the adjustment,
an amount equal to the product of (l) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the
plan made after May 5, 1986, but using the Section 415
limitation applicable to the first limitation year beginning
on or after January 1, 1987.
The annual addition for any limitation year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
The average compensation for the three consecutive years of
service with the employer that produces the highest average.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 "PARTICIPANT ON DEDUCTIBLE CONTRIBUTIONS"
This Plan does not permit Participant nondeductible contributions. If,
prior to the adoption of this Plan, the Plan accepted Participant
nondeductible contributions for a Plan Year beginning after December
31, 1986, those contributions must satisfy the requirements of Code
Section 401(m) and must be maintained in a separate account which
will be nonforfeitable at all times. This Section 4.01 does not
prohibit the Plan's acceptance of Participant nondeductible
contributions prior to the first Plan Year commencing after the Plan
Year in which the Employer adopts this Plan.
4.02 "PARTICIPANT DEDUCTIBLE CONTRIBUTIONS"
The Plan will not accept Participant deductible contributions which
are made for a taxable year beginning after December 31, 1986.
Contributions made prior to that date will be maintained in a separate
account which will be nonforfeitable at all times. The account will
share in the gains and losses of the trust in the same manner as
described in Section 9.10 of the Plan. No part of the deductible
voluntary contribution account will be used to purchase life
insurance. Subject to Article VI, joint and survivor annuity
requirements (if applicable), the participant may withdraw any part of
the deductible voluntary contribution account by making a written
application to the Advisory Committee.
4.03 "PARTICIPANT ROLLOVER CONTRIBUTIONS"
Any Participant, with the Employer's written consent and after filing
with the Employer the form prescribed by the Advisory Committee, may
contribute cash or other property to the Trust other than as a
voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either
directly or indirectly from one qualified plan to another qualified
plan. Before accepting a rollover contribution, the Trustee may
require an Employee to furnish satisfactory evidence that the proposed
transfer is in fact a "rollover contribution" which the Code permits
an employee to make to a qualified plan. A rollover contribution is
not an Annual Addition under Part 2 of Article III.
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<PAGE> 46
The Employer will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the
Employer in its sole discretion, agrees to invest the rollover
contribution as part of the Trust Fund. The Employer will not have
any investment responsibility with respect to a Participant's
segregated rollover Account. The Participant, however, from time to
time, may direct the Employer in writing as to the investment of his
segregated rollover Account in shares of a Designated Investment
Company, annuity contract(s) or life insurance sold or distributed by
Kemper Financial Services, Inc. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from
investments made at the direction of the Participant. As of the
Accounting Date (or other valuation date) for each Plan Year, the
Advisory Committee will allocate and credit the net income (or net
loss) from a Participant's segregated rollover Account and the
increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Employer is
not liable nor responsible for any loss resulting to any Beneficiary,
nor to any Participant, by reason of any sale or investment made or
other action taken pursuant to and in accordance with the direction of
the Participant. In all other respects, the Employer will administer
and distribute a rollover contribution in the same manner as any
Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same
extent and in the same manner as a Participant. If an Employee makes a
rollover contribution to the Trust prior to satisfying the Plan's
eligibility conditions, the Advisory Committee and Trustee must treat
the Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan. If the Employee has a Separation from Service prior to
becoming a Participant, the Trustee will distribute his rollover
contribution Account to him as if it were an Employer contribution
Account.
4.04 "PARTICIPANT CONTRIBUTION - FORFEITABILITY"
A Participant's Accrued Benefit is, at all times, 100% Nonforfeitable.
4.05 "PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION"
A Participant, by giving prior written notice to the Trustee, may
withdraw all or any part of the value of his Accrued Benefit derived
from his Participant contributions described in this Article IV. A
distribution of Participant contributions must comply with the joint
and survivor requirements described in Article VI, if those
requirements apply to the Participant. A Participant may not exercise
his right to withdrawn the value of his Accrued Benefit derived from
his Participant contributions more than once during any Plan Year. The
Trustee, in accordance with the direction of the Advisory Committee,
will distribute a Participant's unwithdrawn Accrued Benefit
attributable to his Participant contributions in accordance with the
provisions of Article VI applicable to the distribution of the
Participant's Nonforfeitable Accrued Benefit.
4.06 "PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT"
The Advisory Committee must maintain, or must direct the Trustee to
maintain, a separate Account(s) in the name of each Participant to
reflect the Participant's Accrued Benefit under the Plan derived from
his Participant contributions. A Participant's Accrued Benefit derived
from his Participant contributions as of any applicable date is the
balance of his separate Participant contribution Account(s). A
separate account will be maintained by the trustee for the
nondeductible employee contribution of each participant.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 "NORMAL RETIREMENT AGE"
Normal Retirement Age is age 65.
5.02 "VESTING"
All contributions made by or on behalf of each participant, together
with all earnings thereon, shall immediately become, and at all times
shall remain, fully vested in such participant, and nonforfeitable.
The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b)) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
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<PAGE> 47
PLAN DOCUMENT
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 "TIME OF PAYMENT OF ACCRUED BENEFIT"
Unless, pursuant to Section 6.03, the Participant or the Beneficiary
elects in writing to a different time or method of payment, the
Advisory Committee will direct the Trustee to commence distribution of
a Participant's Nonforfeitable Accrued Benefit in accordance with this
Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of the
distribution to the Participant, exceeds $3,500 and the Participant
has not attained the later of Normal Retirement Age or age 62.
Furthermore, the Participant's spouse also must consent, in writing,
to any distribution, for which Section 6.04 requires the spouse's
consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the
Plan pays an amount as an annuity or in any other form. A distribution
date under this Article VI unless otherwise specified within the Plan,
is the 60th day of the Plan Year, or as soon as administratively
practicable following that distribution date. For purposes of the
consent requirements under this Article VI, if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of any
distribution, exceeds $3,500, the Advisory Committee must treat that
present value as exceeding $3,500 for purposes of all subsequent Plan
distributions to the Participant.
If the value of a participant's vested account balance derived from
employer and employee contribution exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the participant and the participant's
spouse (or where either the participant or the spouse has died, the
survivor) must consent to any distribution of such account balance.
The consent of the participant and the participant's spouse shall be
obtained in writing within the 90-day period ending on the annuity
starting date. The annuity starting date is the first day of the first
period for which an amount is paid an annuity or any other form. The
plan administrator shall notify the participant and the participant's
spouse of the right to defer any distribution until the participant's
account balance is no longer immediately distributable. Such
notification shall include a general description of the material
features, and explanation of the relative values of, the optional
forms of benefit available under the plan in a manner that would
satisfy the notice requirements of Code Section 417(a)(3), and shall be
provided no less than 30 days and no more than 90 days prior to the
annuity starting date. Notwithstanding the foregoing, only the
participant need consent to the commencement of a distribution in the
form of a qualified joint and survivor annuity while the account
balance is immediately distributable. (Furthermore, if payment in the
form of a qualified joint and survivor annuity is not required with
respect to the participant pursuant to Section 6.04(E) of the plan,
only the participant need consent to the distribution of an account
balance that is immediately distributable.) Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Code Section
401(a)(9) or to the extent that a distribution is required to satisfy
Code Sections 401(a)(9) or 415. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider) and if the employer or any entity within the same
controlled group as the employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as
defined in section 4975(e)(7) of the Code), the participant's account
balance may, without the participant's consent, be distributed
to the participant. However, if any entity within the same controlled
group as the employer maintains another defined contribution plan
(other than an employee stock ownership plan as defined in section
4975(e)(7) of the Code) then the participant's account balance will be
transferred, without the participant's consent, to the other plan if
the participant does not consent to an immediate distribution.
Notwithstanding the foregoing, only the participant need consent to
the commencement of a distribution in the form of a qualified joint
and survivor annuity while the account balance is immediately
distributable. (Furthermore, if payment in the form of a qualified
joint and survivor annuity is not required with respect to the
participant pursuant to Section 6.04(E) of the plan, only the
participant need consent to the distribution for an account balance
that is immediately distributable). Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Section 401(a)(9)
or Section 415 of the Code. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider), the participant's account balance may, without
the participant's consent, be distributed to the participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the
Code) within the same controlled group.
An account balance is immediately distributable if any part of the
account balance could be distributed to the participant (or surviving
spouse) before the participant attains or would have attained if not
deceased the later of normal retirement age or age 62.
For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
plan year beginning after December 31, 1988, the participant's vested
account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Section
72(o)(5)(B) of the Code.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH. For a
Participant who separates from Service with the Employer for a
reason other than death, the Advisory Committee will direct
the Trustee to commence distribution of the Participant's
Accrued Benefit, as follows:
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT
EXCEEDING $3,500. In a lump sum, on the 60th day
following the close of the Plan Year in which the
Participant's Separation from Service occurs.
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<PAGE> 48
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500. In a form and at the time elected by the
Participant, pursuant to Section 6.03. In the absence
of an election by the Participant, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in a
lump sum (or, if applicable, the normal annuity form
of distribution required under Section 6.04), on the
60th day following the close of the Plan Year in
which the latest of the following events occurs: (a)
the Participant attains Normal Retirement Age; (b)
the Participant attains age 62; or (c) the
Participant separates from Service. Notwithstanding
the foregoing, the failure of a participant and
spouse to consent to a distribution while a benefit
is immediately distributable shall be deemed to be an
election to defer commencement of payment of any
benefit sufficient to satisfy this section.
(3) DISABILITY. If the Participant terminates employment
because of disability, in lump sum, no later than the
60th day following the close of the Plan Year in
which the participant terminates employment because
of disability, subject to the requirements of this
Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and
(2).
(B) REQUIRED BEGINNING DATE. If any distribution commencement date
described under Paragraph (A) of this Section 6.01, either by
Plan provision or by Participant election (or nonelection), is
later than the Participant's Required Beginning Date, the
Advisory Committee instead must direct the Trustee to make
distribution under this Section 6.01 on the Participant's
Required Beginning Date. A Participant's Required Beginning
Date is the April 1 following the close of the calendar year
in which the Participant attains age 70-1/2. However, if the
Participant, prior to incurring a Separation from Service,
attained age 70-1/2 by January 1, 1988, and, for the five Plan
Year period ending in the calendar year in which he attained
age 70-1/2 and for all subsequent years, the Participant was
not a more than 5% owner (as defined in Section 1.09(a)), the
Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from
Service, or, if earlier, the April 1 following the close of
the calendar year in which the Participant becomes a more than
5% owner. Furthermore, if a Participant attained age 70-1/2
during 1988 and did not incur a Separation from Service prior
to January 1,1989, his Required Beginning Date is April 1,
1990. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum (or, if applicable, the
normal annuity form of distribution required under Section
6.04) unless the Participant, pursuant to the provisions of
this Article VI, makes a valid election to receive an
alternative form of payment.
(1) GENERAL RULE. The required beginning date of a
participant is the first day of April of the calendar
year following the calendar year in which the
participant attains age 70-1/2.
(2) TRANSITIONAL RULES. The required beginning date of a
participant who attains age 70-1/2 before January
1, 1988, shall be determined in accordance with (a) or
(b) below:
(A) NON-FIVE PERCENT OWNERS. The required
beginning date of a participant who is not a
five-percent owner is the first day of April
of the calendar year following the calendar
year in which the later of retirement or
attainment of age 70-1/2 occurs.
(B) FIVE-PERCENT OWNERS. The required beginning
date of a participant who is a five-percent
owner during any year beginning after
December 31, 1979, is the first day of April
following the later of:
(i) the calendar year in which the
participant attains age 70-1/2, or
(ii) the earlier of the calendar year
with or within which ends the plan
year in which the participant
becomes a five-percent owner, or the
calendar year in which the
participant retires.
The required beginning date of a participant who is not a
five-percent owner who attains age 70-1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1, 1990.
(3) FIVE-PERCENT OWNER. A participant is treated as a
five-percent owner for purposes of this section if
such participant is a five-percent owner as defined
in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to
whether the plan is top-heavy) at any time during
the plan year ending with or within the calendar
year in which such owner attains age 66-1/2 or any
subsequent plan year.
(4) Once distributions have begun to a five-percent owner
under this section, they must continue to be
distributed, even if the participant ceases to be a
five-percent owner in a subsequent year.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct
the Trustee, in accordance with this Section 6.01(C), to
distribute to the Participant's Beneficiary the Participant's
Nonforfeitable Accrued Benefit remaining in the Trust at the
time of the Participant's death.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT
DOES NOT EXCEED $3,500. The Advisory Committee,
subject to the requirements of Section 6.04, must
direct the Trustee to pay the deceased Participant's
Nonforfeitable Accrued Benefit in a single cash sum,
as soon as administratively practicable following the
Participant's death or, if later, the date on which
the Advisory Committee receives notification of or
otherwise confirms the Participant's death.
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<PAGE> 49
PLAN DOCUMENT
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEED
$3,500. The Advisory Committee will direct the Trustee to pay
the deceased Participant's Nonforfeitable Accrued Benefit at
the time and in the form elected by the Participant or, if
applicable by the Beneficiary, as permitted under this Article
VI. In the absence of an election, subject to the requirements
of Section 6.04, the Advisory Committee will direct the
Trustee to distribute the Participant's undistributed
Nonforfeitable Accrued Benefit in a lump sum on the first
distribution date following the close of the Plan Year in
which the Participant's death occurs or, if later, the first
distribution date following the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death.
If the death benefit is payable to the Participant's surviving
spouse in full, the surviving spouse, in addition to the
distribution options provided in this Section 6.01(C), may
elect distribution at any time or in any form (other than a
joint and survivor annuity) this Article VI would permit for a
Participant.
Subject to Article VI Joint and Survivor Annuity Requirements,
the requirements of this Article shall apply to any
distribution of a participant's interest and will take
precedence over any inconsistent provisions of this plan.
Unless otherwise specified, the provisions of this Article
apply to the calendar year beginning after December 31, 1984.
All distributions required under this Article shall be
determined and made in accordance with the proposed
regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed regulations.
6.02 "METHOD OF PAYMENT OF ACCRUED BENEFIT"
Subject to the annuity distribution requirements, if any, prescribed
by Section 6.04, and any restrictions prescribed by Section 6.03, a
Participant or Beneficiary may elect distribution under one, or any
combination, of the following methods: (a) by payment in a lump sum;
or (b) by payment in monthly, quarterly or annual installments over a
fixed reasonable period of time, not exceeding the life or life
expectancy of the Participant, or the joint and last survivor life or
life expectancy of the Participant and an individual the Participant
designates as his Beneficiary (his "designated Beneficiary").
The distribution options permitted under this Section 6.02 are
available only if the present value of the Participant Nonforfeitable
Accrued Benefit, at the time of the distribution to the Participant,
exceeds $3,500. To facilitate installment payments under this Article
VI, the Advisory Committee may direct the Trustee to segregate all or
any part of the Participant's Accrued Benefit in a separate Account.
The Trustee will invest the Participant's segregated Account in
Federally insured interest bearing savings account(s) or time
deposit(s) (or a combination of both), or in other fixed income
investments. A segregated Account remains a part of the Trust, but it
alone shares in any income it earns, and it alone bears any expense or
loss it incurs. A Participant or Beneficiary may elect to receive an
installment distribution in the form of a Nontransferable Annuity
Contract. Under an installment distribution, the Participant or
Beneficiary, at any time, may elect to accelerate the payment of all,
or any portion, of the Participant's unpaid Nonforfeitable Accrued
Benefit, subject to the requirements of Section 6.04.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS.
The Advisory Committee may not direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit,
nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of
payment which, as of the Required Beginning Date, does not
satisfy the minimum distribution requirements under Code
Section 401(a)(9) and the applicable Treasury regulations. The
minimum distribution for a calendar year equals the
Participant's Nonforfeitable Accrued Benefit as of the latest
valuation date preceding the beginning of the calendar year
divided by the Participant's life expectancy or, if
applicable, the joint and last survivor expectancy of the
Participant and his designated Beneficiary (as determined
under Section 8.01, subject to the requirements of the Code
Section 401(a)(9) regulations). The Advisory Committee will
increase the Participant's Nonforfeitable Accrued Benefit, as
determined on the relevant valuation date, for contributions
allocated after the valuation date and by December 31 of the
valuation calendar year, and will decrease the valuation by
distributions made after the valuation date and by December 31
of the valuation calendar year. For purposes of this
valuation, the Advisory Committee will treat any portion of
the minimum distribution for the first distribution calendar
year made after the close of that year as a distribution
occurring in that first distribution calendar year. In
computing a minimum distribution the Advisory Committee must
use the unisex life expectancy multiples under Treas. Reg.
Section 1.72-9. The Advisory Committee, only upon the
participant's written request, will not compute the minimum
distribution for a calendar year subsequent to the first
calendar year for which the Plan requires a minimum
distribution by redetermining the applicable life expectancy.
Otherwise, the Advisory Committee will redetermine the joint
life and last survivor expectancy of the Participant and a
nonspouse designated Beneficiary in a manner which takes into
account any adjustment to a life expectancy other than the
Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary,
a method of payment to the Participant (whether by Participant
election or by Advisory Committee direction) may not provide
more than incidental benefits to the Beneficiary. For Plan
Year beginning after December 31, 1988, the Plan must satisfy
the minimum distribution incidental benefit ("MDIB")
requirement in the Treasury regulations issued under Code
Section 401(a)(9) for distributions made on or after the
Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the
Advisory Committee will compute the minimum distribution
required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the
Participant's death, the Advisory Committee will compute the
minimum distribution required by this Section 6.02(A) solely
on the basis of the applicable life expectancy factor and will
disregard the MDIB factor.
15
<PAGE> 50
For Plan Years beginning prior to January l, 1989, the Plan
satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB
requirement or if the present value of the retirement benefits
payable solely to the Participant is greater than 50% of the
present value of the total benefits payable to the Participant
and his Beneficiaries. The Advisory Committee must determine
whether benefits to the Beneficiary are incidental as of the
date the Trustee is to commence payment of the retirement
benefits to the Participant, or as of any date the Trustee
redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar
year is due by the Participant's Required Beginning Date. The
minimum distribution for each subsequent distribution calendar
year, including the calendar year in which the Participant's
Required Beginning Date falls, is due by December 31 of that
year. If the Participant receives distribution in the form of
a Nontransferable Annuity Contract, the distribution satisfies
this Section 6.02(A) if the contract complies with the
requirements of Code Section 401(a)(9) and the applicable
Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES.
If any portion of the Participant's interest is payable to a
designated beneficiary, method of distribution to the
Participant's Beneficiary must satisfy Code Section 401(a)(9)
and the applicable Treasury regulations. If the Participant's
death occurs after his Required Beginning Date or, if earlier,
the date the Participant commences an irrevocable annuity
pursuant to Section 6.04, the method of payment to the
Beneficiary must provide for completion of payment over a
period which does not exceed the payment period which had
commenced for the Participant. If the Participant's death
occurs prior to his Required Beginning Date, and the
Participant had not commenced an irrevocable annuity pursuant
to section 6.04, the method of payment to the Beneficiary,
subject to Section 6.04, must provide for completion of
payment to the Beneficiary over a period not exceeding (i) by
December 31 of the calendar year containing the fifth
anniversary of the Participant's; or (ii) if the Beneficiary
is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of
the Participant's Nonforfeitable Accrued Benefit over a period
described in clause (ii) unless the Trustee will commence
payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which
the Participant's death occurred or, if later, and the
designated Beneficiary is the Participant's surviving spouse,
December 31 of the calendar year in which the Participant
would have attained age 70-1/2. If the Trustee will make
distribution in accordance with clause (ii), the minimum
distribution for a calendar year equals the Participant's
Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the
designated Beneficiary's life expectancy. The Advisory
Committee must use the unisex life expectancy multiples under
Treas. Section Reg. 1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written
request of the Participant or of the Participant's surviving
spouse, may recalculate the life expectancy of the
Participant's surviving spouse no more frequently than
annually, but may not recalculate the life expectancy of a
nonspouse designated Beneficiary after the Trustee commences
payment to the designated Beneficiary. The Advisory Committee
will apply this paragraph by treating any amount paid to the
Participant's child, which becomes payable to the
Participant's surviving spouse upon the child's attaining the
age of majority, as paid to the Participant' surviving spouse.
Upon the Beneficiary's written request, the Advisory Committee
must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon
as administratively practicable following the effective date
of that request.
If the participant has not made an election pursuant to this
Section 6.02 by the time of his or her death, the
participant's designated beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to
begin under this Section, or (2) December 31 of the calendar
year which contains the fifth anniversary of the date of death
of the participant. If the participant has no designated
beneficiary, or if the designated beneficiary does not elect a
method of distribution, distribution of the participant's
entire interest must be completed by December 31 of the
calendar year containing the fifth anniversary of the
participant's death.
For purposes of this Section 6.02, if the surviving spouse
dies after the participant, but before payments to such spouse
begin, the provisions of this Section 6.02, with the exception
of paragraph (b) therein, shall be applied as if the surviving
spouse were the participant.
For the purposes of this Section 6.02, distribution of a
participant's interest is considered to begin on the
Participant's required beginning date (or the date
distribution is required to begin to the surviving spouse). If
distribution in the form of an annuity irrevocably commences
to the Participant before the required beginning date, the
date distribution is considered to begin is the date
distribution actually commences.
APPLICABLE LIFE EXPECTANCY. The life expectancy (or joint and
last survivor expectancy) calculated using the attained age of
the Participant (or designated Beneficiary as of the
Participant's (or designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
16
<PAGE> 51
PLAN DOCUMENT
DISTRIBUTION CALENDAR YEAR. A calendar year for which a
minimum distribution is required. For distributions beginning
before the participant's death, the first distribution
calendar year is the calendar year immediately preceding the
calendar year which contains the participant's required
beginning date. For distributions beginning after the
participant's death, the first distribution calendar year is
the calendar year in which distributions are required to begin
pursuant to this Section 6.02 above.
6.03 "BENEFIT PAYMENT ELECTIONS"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide a benefit notice to a Participant who is eligible to make an
election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features
and relative values of those options, and the Participant's right to
defer distribution until he attains the later of Normal Retirement Age
or age 62.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit in
accordance with that election. Any election under this Section 6.03 is
subject to the requirements of Section 6.02 and of Section 6.04. The
Participant or Beneficiary must make an election under this Section
6.03 by filing his election with the Advisory Committee at any time
before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
(A) PARTICIPANT ELECTIONS AFTER SEPARATE FROM SERVICE. If the
present value of a Participant's Nonforfeitable Accrued
Benefit exceeds $3,500, he may elect to have the Trustee
commence distribution as of any distribution date, but not
earlier than the first distribution date of the first Plan
Year following the Participant's separation from service. The
Participant may reconsider an election at any time prior to
the annuity starting date and elect to commence distribution
as of any other distribution date. A Participant who has not
separated from Service may elect distribution as of any
distribution date following his attainment of Normal
Retirement Age.
(B) PARTICIPANT ELECTIONS PRIOR TO TERMINATION OF EMPLOYMENT. No
distribution options are permitted prior to a Participant's
Separation of Service.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds $3,500,
the Participant's Beneficiary may elect to have the Trustee
distribute the Participant's Nonforfeitable Accrued Benefit in
a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions
designated in writing by the Participant and not revoked as of
his date of death.
(D) TRANSITIONAL ELECTIONS. Notwithstanding the provisions of
Section 6.01 and 6.02, if the Participant (or Beneficiary)
signed a written distribution designation prior to January 1,
1984, the Advisory Committee must distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the requirements, if
applicable, of Sections 6.04, 6.05 and 6.06. This Section
6.03(D) does not apply to a pre-1984 distribution designation,
and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method
of distribution would have disqualified the Plan under Code
Section 401(a)(9) as in effect on December 31, 1983; (2) the
Participant did not have an Accrued Benefit as of December
31, 1983; (3) the distribution designation does not specify the
timing and form of the distribution and the death
Beneficiaries (in order of priority); (4) the substitution of
a Beneficiary modifies the payment period of the distribution;
or, (5) the Participant (or Beneficiary) modifies or revokes
the distribution designation. In the event of a revocation,
the Plan must distribute, no later than December 31 of the
calendar year following the year of revocation, the amount
which the Participant would have received under Section
6.02(A) if the election had not been in effect or, if the
Beneficiary revokes the election, the amount which the
Beneficiary would have received under Section 6.02(B) if the
election had not been in effect. The Advisory Committee will
apply this Section 6.03(D) to rollovers and transfers in
accordance with Part J of the Code Section 401(a)(9)
regulations.
6.04 "ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES"
(A) JOINT AND SURVIVOR ANNUITY. The Advisory Committee must direct
the Trustee to distribute a married or unmarried Participant's
Nonforfeitable Accrued Benefit in the form of a qualified
joint and survivor annuity, unless the Participant makes a
valid waiver election (described in Section 6.05) within the
90 day period ending on the annuity starting date. The
participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the plan. The
earliest retirement age is the earliest date on which, under
the plan, the participant could elect to receive retirement
benefits. If, as of the annuity starting date, the participant
is married, a qualified joint and survivor annuity is an
immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life
annuity for the Participant and a survivor annuity payable for
the remaining life of the Participant's surviving spouse equal
to not less than 50% and not more than 100% of the amount of
the annuity payable during the life of the Participant. If, as
of the annuity starting date, the Participant is not married,
a qualified joint and survivor annuity is an immediate life
annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the
annuity starting date, the Advisory Committee, without
Participant or spousal consent, must direct the Trustee to pay
the Participant's Nonforfeitable Accrued Benefit in a lump
sum, in lieu of a qualified joint and survivor annuity, in
accordance with Section 6.01, if the Participant's
Nonforfeitable Accrued Benefit is not greater than $3,500.
This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after
August 23, 1984.
17
<PAGE> 52
(B) PRE-RETIREMENT SURVIVOR ANNUITY. If a married Participant dies
prior to his annuity starting date, the Advisory Committee
will direct the Trustee to distribute a portion of the
Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a pre-retirement
survivor annuity, unless the Participant has a valid waiver
election (as described in Section 6.06) in effect within the
election period, or unless the Participant and his spouse were
not married throughout the one year period ending on the date
of his death. The surviving spouse may elect to have such
annuity distributed within a reasonable period after the
participant's death. The period which begins on the first day
of the plan year in which the participant attains age 35 and
ends on the date of the participant's death. If a participant
separates from service prior to the first day of the plan
year in which age 35 is attained, with respect to the account
balance as of the date of separation, the election period
shall begin on the date of separation. A pre-retirement
survivor annuity is an annuity which is purchasable with 50%
of the Participant's Nonforfeitable Accrued Benefit
(determined as of the date of the Participant's death) and
which is payable for the life of the Participant's surviving
spouse. The value of the pre-retirement survivor annuity is
attributable to Employer contributions and to Employee
contributions in the same proportion as the Participant's
Nonforfeitable Accrued Benefit is attributable to those
contributions. If the present value of the pre-retirement
survivor annuity does not exceed $3,500, the Advisory
Committee, on or before the annuity starting date (as
determined under Section 6.01(C)), must direct the Trustee to
make a lump sum distribution to the Participant's surviving
spouse, in lieu of a pre-retirement survivor annuity. This
Section 6.04(B) applies only to a Participant who dies after
August 22, 1984, and either (i) completes at least one Hour of
Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as
defined in Section 5.06) and completed at least one Hour of
Service with the Employer in a Plan Year beginning after
December 31, 1975.
(C) SURVIVING SPOUSE ELECTIONS. If the present value of the
pre-retirement survivor annuity exceeds $3,500, the
Participant's surviving spouse may elect to have the Trustee
commence payment of the pre-retirement survivor annuity at any
time following the date of the Participant's death, but not
later than the mandatory distribution periods described in
Section 6.02, and may elect either or any combination of the
two forms of payment described in Section 6.02, in lieu of the
pre-retirement survivor annuity. In the absence of an election
by the surviving spouse, the Advisory Committee must direct
the Trustee to distribute the pre-retirement survivor annuity
on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs (i)
the Participant's death; (ii) the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death; (iii) the date the Participant would have
attained Normal Retirement Age; or (iv) the date the
Participant would have attained age 62.
(D) SPECIAL RULES. If the Participant has in effect a valid waiver
election regarding the qualified joint and survivor annuity or
the pre-retirement survivor annuity, the Advisory Committee
must direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with Sections
6.01, 6.02 and 6.03. For purposes of applying this Article VI,
the Advisory Committee treats a former spouse as the
Participant's spouse or surviving spouse, and a current spouse
will not be treated as the spouse or surviving spouse, to the
extent provided under a qualified domestic relations order
described in Section 6.07. The provisions of this Section
6.04, and of Sections 6.05 and 6.06, apply separately to the
portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the
portion of the Participant's Nonforfeitable Accrued Benefit
not subject to that order. The spouse (surviving spouse) is
the spouse or surviving spouse of the participant, provided
that a former spouse will be treated as the spouse or
surviving spouse and a current spouse will not be treated as
the spouse or surviving spouse to the extent provided under a
qualified domestic relations order as described in Section
414(p) of the Code.
(E) PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing
plan, the preceding provisions of this Section 6.04 do not
apply to any Participant in the Plan except: (1) a Participant
as respects whom the Plan is a direct or indirect transferee
from a plan subject to the Code Section 417 requirements and
the Plan received the transfer after December 31, 1984, unless
the transfer is an elective transfer described in Section
12.06; (2) a Participant who elects a life annuity
distribution (if Section 12.02 of the Plan requires the Plan
to provide a life annuity distribution option); and (3) a
Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided
under this Plan. Sections 6.05 and 6.06 only apply to
Participants to whom the preceding provisions of this Section
6.04 apply.
This Section shall apply to a participant in a profit-sharing
plan, and to any distribution, made on or after the first day
of the first plan year beginning after December 31, 1988, from
or under a separate account attributable solely to accumulated
deductible employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of a
participant in a money purchase pension plan (including a
target benefit plan), if the following conditions are
satisfied: (1) the participant does not or cannot elect
payments in the form of a life annuity; and (2) on the death
of a participant, the participant's vested account balance
will be paid to the participant's surviving spouse, but if
there is no surviving spouse, or if the surviving spouse has
consented in a manner conforming to a qualified election, then
to the participant's designated beneficiary. The surviving
spouse may elect to have distribution of the vested account
balance commence within the 90-day period following the date
of the participant's death. The account balance shall be
adjusted for gains or losses occurring after the participant's
death in accordance with the provision of the plan governing
the adjustment of account balances for other types of
distributions. This section Section 6.04(E) shall not be
operative with respect to a participant in a profit-sharing
plan if the plan is a direct or indirect transferee of a
defined benefit plan, money purchase plan, a target benefit
plan, stock bonus, or profit-sharing plan which is subject to
the survivor annuity requirements of Section 401(a)(11) and
Section 417. If this Section 6.04(E) is operative, then the
provisions of this Article, other than this Section 6.04,
shall be inoperative.
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The participant may waive the spousal death benefit described in this
Section at any time provided that no such waiver shall be effective
unless it satisfies the conditions of Section 6.05 (other than the
notification requirement referred to therein) that would apply to the
participant's waiver of the qualified pre-retirement survivor annuity.
For purposes of this Section 6.04(E), vested account balance shall
mean, in the case of a money purchase pension plan or a target benefit
plan, the participant's separate account balance attributable solely
to accumulated deductible employee contributions within the meaning of
Section 72(o)(5)(B) of the Code. In the case of a profit-sharing plan,
vested account balance shall have the same meaning as Nonforfeitable
Accrued Benefit.
6.05 "WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide the Participant a written explanation of the terms and
conditions of the qualified joint and survivor annuity, the
Participant's right to make, and the effect of, an election to waive
the joint and survivor form of benefit, the rights of the
Participant's spouse regarding the waiver election and the
Participant's right to make, and the effect of, a revocation of a
waiver election. The Plan does not limit the number of times the
Participant may revoke a waiver of the qualified joint and survivor
annuity or make a new waiver during the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under
the qualified joint and survivor annuity) has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of
the election, and a notary public or the Plan Administrator (or his
representative) witnesses the spouse's consent, (b) the election
designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the participant without any further spousal consent;
(c) the spouse consents to the alternate form of payment designated by
the Participant or to any change in that designated form of payment,
and (d) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary
designation or to any change in the Participant's Beneficiary
designation. The spouse's consent to a waiver of the qualified joint
and survivor annuity is irrevocable, unless the Participant revokes
the waiver election. The spouse may execute a blanket consent to any
form of payment designation or to any Beneficiary designation made by
the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right.
The consent requirements of this Section 6.05 apply to a former spouse
of the Participant, to the extent required under a qualified domestic
relations order described in Section 6.07. A revocation of a prior
waiver may be made by a participant without the consent of the spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the participant has received notice as
provided in this Section 6.05.
The Plan Administrator will accept as valid a waiver election which
does not satisfy the spousal consent requirements if the Plan
Administrator establishes the Participant does not have a spouse, the
Plan Administrator is not able to locate the Participant's spouse, the
Participant is legally separated or has been abandoned (within the
meaning of State law) and the Participant has a court order to that
effect, or other circumstances exist under which the Secretary of the
Treasury will excuse the consent requirement. If the Participant's
spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
Any consent obtained from a spouse shall be effective only with
respect to such spouse.
6.06 "WAIVER ELECTION - PRE-RETIREMENT SURVIVOR ANNUITY"
The Plan Administrator must provide a written explanation of the
pre-retirement survivor annuity to each married Participant, within
the following period which ends last: (1) the period beginning on the
first day of the Plan Year in which the Participant attains age 32 and
ending on the last day of the Plan Year in which the Participant
attains age 35; (2) a reasonable period ending after an Employee
becomes a Participant; (3) a reasonable period ending after the joint
and survivor rules become applicable to the Participant; or (4) a
reasonable period ending after a fully subsidized pre-retirement
survivor annuity no longer satisfies the requirements for a fully
subsidized benefit. A reasonable period described in clauses (2), (3)
and (4) is the two-year period beginning one year before and ending
one year after the applicable event. If the Participant separates from
Service before attaining age 35, clauses (1), (2), (3) and (4) do not
apply and the Plan Administrator must provide the written explanation
within the two-year period beginning one year before and ending one
year after the Separation from Service. The written explanation must
describe, in a manner consistent with Treasury regulations, the terms
and conditions of the pre-retirement survivor annuity comparable to
the explanation of the qualified joint and survivor annuity required
under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the pre-retirement survivor annuity
or make a new waiver during the election period.
A Participant's waiver election of the pre-retirement survivor annuity
is not valid unless (a) the Participant makes the waiver election no
earlier than the first day of the Plan Year in which he attains age 35
and (b) the Participant's spouse (to whom the pre-retirement survivor
annuity is payable) satisfies the consent requirements described in
Section 6.05, except the spouse need not consent to the form of
benefit payable to the designated Beneficiary. The spouse's consent to
the waiver of the pre-retirement survivor annuity is irrevocable,
unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the
Participant separates from Service prior to the first day of the Plan
Year in which he attains age 35, the Plan Administrator will accept a
waiver election as respects the Participant's Accrued Benefit
attributable to his Service prior to his Separation from Service. If
the participant thereafter returns to employment with the employer,
the applicable period for such participant shall be redetermined.
Pre-age 35
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<PAGE> 54
waiver: A participant who will not yet attain age 35 as of the end of
any current Plan Year may make a special qualified election to waive
the qualified pre-retirement survivor annuity for the period beginning
on the date of such election and ending on the first day of the Plan
Year in which the participant will attain age 35. Such election shall
not be valid unless the participant receives a written explanation of
the qualified pre-retirement survivor annuity in such terms as are
comparable to the explanation required under Section 6.05. Qualified
pre-retirement survivor annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
participant attains age 35. Any new waiver on or after such date shall
be subject to the full requirements of this Article.
Notwithstanding the other requirements of this Section 6.06, the
respective notices prescribed by this Section need not be given to a
participant if (1) the plan "fully subsidizes" the costs of a
qualified joint and survivor annuity or qualified pre-retirement
survivor annuity, and (2) the plan does not allow the participant to
waive the qualified joint and survivor annuity or qualified
pre-retirement survivor annuity and does not allow a married
participant to designate a nonspouse beneficiary. For purposes of this
Section 6.06, a plan fully subsidizes the costs of a benefit if no
increase in cost, or decrease in benefits to the participant may
result from the participant's failure to elect another benefit. Any
consent obtained from a spouse shall be effective only with respect to
such spouse.
6.07 "DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS"
Nothing contained in this Plan prevents the Trustee, in accordance
with the direction of the Advisory Committee, from complying with the
provisions of a qualified domestic relations order (as defined in Code
Section 414(p)). This Plan specifically permits distribution to an
alternate payee under a qualified domestic relations order at any time,
irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code Section 414(p)) under the Plan.
A distribution to an alternate payee prior to the Participant's
attainment of earliest retirement age is available only if: (l) the
order specifies distribution at that time or permits an agreement
between the Plan and the alternate payee to authorize an earlier
distribution; and (2) if the present value of the alternate payee's
benefits under the Plan exceeds $3,500, and if the order requires, the
alternate payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. Nothing in this
Section 6.07 permits a Participant a right to receive distribution at
a time otherwise not permitted under the Plan nor does it permit the
alternate payee to receive a form of payment not permitted under the
Plan.
The Plan Administrator must establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon
receiving a domestic relations order, the Plan Administrator promptly
will notify the Participant and any alternate payee named in the
order, in writing, of the receipt of the order and the Plan's
procedures for determining the qualified status of the order. Within a
reasonable period of time after receiving the domestic relations
order, the Plan Administrator must determine the qualified status of
the order and must notify the Participant and each alternate payee, in
writing, of its determination. The Plan Administrator must provide
notice under this paragraph by mailing to the individual's address
specified in the domestic relations order, or in a manner consistent
with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Plan Administrator is making its
determination of the qualified status of the domestic relations order,
the Advisory Committee must make a separate accounting of the amounts
payable. If the Plan Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first
are payable following receipt of the order, the Advisory Committee
will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Plan Administrator does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee
to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
prospectively if the Plan Administrator later determines the order is
a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Advisory Committee may direct
the Trustee to invest any partitioned amount in a segregated
subaccount or separate account and to invest the account in Federally
insured, interest-bearing savings account(s) or time deposit(s) (or a
combination of both), or in other fixed income investments. A
segregated subaccount remains a part of the Trust, but it alone shares
in any income it earns, and it alone bears any expense or loss it
incurs. The Trustee will make any payments or distributions required
under this Section 6.07 by separate benefit checks of other separate
distribution to the alternate payee(s).
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<PAGE> 55
PLAN DOCUMENT
ARTICLE VII
TRUSTEE, POWERS AND DUTIES
7.01 "INVESTMENT OF TRUST ASSETS"
The Trustee shall accept and hold in the Trust such contributions of
money on behalf of the Employer and Participants as it may receive
from time to time, but not more frequently than once each month, from
the Employer. All such contributions of money shall be accompanied by
written instructions from the Employer specifying the Participants'
sub-accounts to which they are to be credited, the amount to be
invested in and the choice of Designated Investment Company stock, and
by furnishing such instructions the Employer represents to the Trustee
that the same are in accordance with any uniform rules adopted by the
Employer and made known to Participants. If written instructions are
not received, or if received, are in the opinion of the Trustee
unclear, the Trustee may hold all or a portion of the contributions in
cash without liability for rising security prices or distributions,
pending receipt of written instructions or clarification. A
Participant, through his Employer, may request an exchange of all or
part of the investment company shares held hereunder for any other
investment company shares eligible for purchase under the Plan, upon
terms and conditions and within the limitations imposed by the then
current prospectuses of the respective investment companies.
Investment in shares of the Designated Investment Company shall be
made at the price and in the manner in which such shares are then
being publicly offered by such investment company. All dividends and
capital gain distributions received on such shares shall be reinvested
in such shares. If any distribution on shares of the fund may be
received at the election of the shareholder in additional shares or in
cash or other property, the Trustee shall elect to receive it in
additional shares. Sales charges attributable to the acquisition of
shares shall be charged to the account of the Participant for which
such shares are acquired. All investment company shares acquired by
the Trustee shall be registered in the name of the Trustee or of its
registered nominee.
The Employer shall remit directly to the insurance company any
premiums life insurance or annuities which constitute contributions
under the Plan, and the Trustee shall have no duty to account
therefor. Any such life insurance and/or annuity contracts shall be
issued in restricted and nontransferable form and be held by the
Employer.
7.02 "VOTING AND OTHER ACTIONS"
The Trustee shall deliver, or cause to be executed and delivered, to
the Employer all notices, prospectuses, financial statements, proxies,
and proxy soliciting material relating to shares of Designated
Investment Company stock held pursuant to the Plan. The Trustee shall
not vote any of the shares of the Fund held hereunder.
7.03 "REPORTS OF THE TRUSTEE AND EMPLOYER"
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions under this Trust.
Not later than forty-five (45) days after the close of each Plan Year
(or after the Trustee's resignation or removal pursuant to Section XI
hereof), the Trustee shall file with the Employer and each Participant
or Beneficiary for whom account is maintained by the Trustee under
this Agreement a written report or reports reflecting the receipts,
disbursements and other transactions effected by it during such Plan
Year (or period ending with such resignation or removal) and the
assets and liabilities of such account at its close. Upon the
expiration of a period of sixty (60) days immediately following the
date on which such reports are filed, the Trustee shall be forever
released and discharged from all liability and accountability to
anyone with respect to its acts, transactions, duties, obligations or
responsibility as shown in or reflected by such reports, except with
respect to any such acts or transactions as to which written
objections have been filed with the Trustee within such sixty day
period.
The Employer shall furnish to the Trustee, and the Trustee shall
furnish to the Employer, such information relevant to the Plan and
Trust as may be required under the Internal Revenue Code and any
Regulations issued or forms adopted by the Treasury Department
thereunder.
The Trustee shall keep such records, make such identifications, and
file with the Internal Revenue Service such returns and other
information concerning the Trust as may be required of it under the
Internal Revenue Code and any Regulations issued or forms adopted by
the Treasury Department thereunder.
7.04 "TRUSTEE FEES AND EXPENSES OF THE ACCOUNT"
Any income taxes or other taxes of any kind whatsoever that may be
levied or assessed upon or in respect of the Trust, any transfer taxes
incurred in connection with the investment and reinvestment of the
assets of the Trust, all other administrative expenses incurred by the
Trustee in the performance of its duties including fees for legal
services rendered to the Trustee, and such compensation to the Trustee
as may be agreed upon from time to time between the Trustee and the
Employer shall be paid from the assets of the Trust and shall, unless
allocable to the Accounts of specific Participants, be charged
proportionately to their respective accounts.
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<PAGE> 56
7.05 "CONCERNING THE TRUSTEE"
The Trustee shall not be responsible in any way for the collection of
contributions provided for under the Plan, the purpose or propriety of
any distribution made pursuant to Section V hereof, or any other
action taken at the Employer's request. Nor shall the Trustee be
responsible for the administration of the Plan, its validity or
effect, or the qualification of the Plan or of the Trust Agreement
under the provisions of the Internal Revenue Code. The Trustee shall
not be required to examine the Plan or be charged with notice of its
provisions. The Trustee shall not be required to take any action upon
receipt of any notice from the Internal Revenue Service except to
forward a copy thereof to the Employer with a request for written
instructions. The Employer shall at all times fully indemnify and save
harmless the Trustee, its successors and assigns, from and against any
and all loss resulting from liability to which the Trustee may be
subject by reason of any act or conduct (except willful misconduct or
gross negligence) in its capacity as Trustee hereunder, including all
expenses reasonably incurred in its defense, in case the Employer
fails to provide such defense. The Trustee shall be under no duty to
take any action other than as herein specified with respect to the
Trust unless the Employer shall furnish the Trustee with instructions
in proper form and as authorized by the terms of the Plan; or to
defend or engage in any suit with respect to the Trust unless the
Trustee shall have first agreed in writing to do so and shall have
been fully indemnified to the satisfaction of the Trustee. The Trustee
shall be protected in acting upon any written order from the Employer
or any other notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly
executed, and, so long as it acts in good faith, in taking or omitting
to take any other action. The Trustee shall not be liable for interest
on any cash or cash balances maintained in the Trust pending
investment in accordance with appropriate directions from the
Employer.
7.06 "AMENDMENT"
If the Employer's plan fails to attain or retain qualification, such
plan will no longer participate in the prototype Plan and will be
considered an individually designed plan.
7.07 "RESIGNATION OR REMOVAL OF TRUSTEE"
The Trustee may resign at any time upon thirty (30) days notice in
writing to the Employer, and may be removed by the Employer at any
time upon thirty (30) days notice in writing to the Trustee. Upon such
resignation or removal, the Employer shall appoint a successor
Trustee. Upon receipt by the Trustee of written acceptance of such
appointment by the successor Trustee, the Trustee shall transfer and
pay over to such successor the assets of the Trust Account and all
records pertaining thereto. The Trustee is authorized, however, to
reserve such sum of money as it may deem advisable for payment of all
its fees, compensation, costs and expenses, or for payment of any
other liability constituting a charge on or against the assets of the
Trust or on or against the Trustee, with any balance of such reserve
remaining after the payment of all such items to be paid over to the
successor Trustee. The successor Trustee shall hold the assets paid
over to it under terms similar to those of this Agreement that qualify
under section 401 of the Code. If within thirty (30) days after the
Trustee's resignation or removal the Employer has not appointed a
successor Trustee which has accepted such appointment, the Trustee
shall, unless it elects to terminate the Trust pursuant to Section
XII, appoint such successor itself.
7.08 "TERMINATION OF TRUST"
The Trustee may elect to terminate the Trust if within thirty (30)
days after its resignation or removal pursuant to Section X the
Employer has not appointed a successor Trustee which has accepted such
appointment. The Trustee shall terminate the Trust upon receiving
notice of the Employer's death, if the Employer is a sole proprietor,
or upon receiving notice of the termination of the partnership, if the
Employer is a partnership, or upon receiving notice of the dissolution
of the corporation, if the Employer is a corporation, unless provision
is made by a successor to the business of the Employer for the
continuation of the Plan and this Agreement upon terms satisfactory to
the Trustee.
Termination of the Trust shall be effected by distributing all assets
thereof to the Participants and their designated beneficiaries
pursuant to the direction of the Employer (or in the absence of such
direction as determined by the Trustee), as on the termination of the
Plan. Upon the completion of such distribution, the Trustee shall be
relieved from all further liability with respect to all amounts so
paid.
7.09 "MISCELLANEOUS"
At no time shall it be possible for any part of the assets of the
Trust to be used for or diverted to purposes other than for the
exclusive benefit of Participants and Beneficiaries.
Any notice from the Trustee to the Employer, Participant or
Beneficiary provided for in this Agreement shall be effective if sent
by first class mail to the last address of record.
Upon receipt of a written request from the Employer, the Trustee shall
transfer the assets in the Trust for a Participant to any other
qualified plan maintained by the Employer for the benefit of such
Participant; and the Trustee shall have no further liability under the
Plan and Trust with respect to any assets so transferred.
This Agreement shall bind and inure to the benefit of the personal
representatives, successors and assigns of the Employer and the
Trustee.
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<PAGE> 57
PLAN DOCUMENT
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 "BENEFICIARY DESIGNATION"
Any Participant may from time to time designate, in writing, any
person or persons, contingently or successively, to whom the Trustee
will pay his Accrued Benefit (including any life insurance proceeds
payable to the Participant's Account) on event of his death and the
Participant may designate the form and method of payment. The Advisory
Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the
Advisory Committee, the form effectively revokes all designations
filed prior to that date by the same Participant.
COORDINATION WITH SURVIVOR REQUIREMENTS. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01
does not impose any special spousal consent requirements on the
Participant's Beneficiary designation. However, in the absence of
spousal consent (as required by Article VI) to the Beneficiary
designation: (1) any waiver of the joint and survivor annuity or of
the pre-retirement survivor annuity is not valid; and (2) if the
Participant dies prior to his annuity starting date, the Beneficiary
designation will apply only to the portion of the death benefit which
is not payable as a pre-retirement survivor annuity.
PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing plan,
and the Employer elects to apply the joint and survivor requirements
only to Participants described in Section 6.04(E), the Beneficiary
designation of a married Participant who is not described in Section
6.04(E) is not valid unless the Participant's spouse consents (in a
manner described in Section 6.05) to the Beneficiary designation. The
spousal consent requirement in this paragraph does not apply if the
Participant and his spouse are not married throughout the one year
period ending on the date of the Participant's death, or if the
Participant's spouse is the Participant's sole primary Beneficiary.
8.02 "NO BENEFICIARY DESIGNATION"
If a Participant fails to name a Beneficiary in accordance with
Section 8.01, or if the Beneficiary named by a Participant predeceases
him or dies before complete distribution of the Participant's Accrued
Benefit as prescribed by the Participant's Beneficiary form, then the
Trustee will pay the Participant's Accrued Benefit in accordance with
Section 6.02 in the following order of priority:
(A) The Participant's surviving spouse;
(B) The Participant's surviving children, including adopted
children, in equal shares;
(C) The Participant's surviving parents, in equal shares; or
(D) The legal representative of the estate of the last to die of
the Participant and his Beneficiary.
The Advisory Committee will direct the Trustee as to the method and to
whom the Trustee will make payment under this Section 8.02. If a
benefit is forfeited because the participant or beneficiary cannot be
found, such benefit will be reinstated if a claim is made by the
participant or beneficiary.
8.03 "PERSONAL DATA TO COMMITTEE"
Each Participant and each Beneficiary of a deceased Participant must
furnish to the Advisory Committee such evidence, data or information
as the Advisory Committee considers necessary or desirable for the
purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition
precedent that each Participant will furnish promptly full, true and
complete evidence, data and information when requested by the Advisory
Committee, provided the Advisory Committee advises each Participant of
the effect of his failure to comply with its request.
8.04 "ADDRESS FOR NOTIFICATION"
Each Participant and each Beneficiary of a deceased Participant must
file with the Advisory Committee from time to time, in writing, his
post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or
Beneficiary, at his last post office address filed with the Advisory
Committee, or as shown on the records of the Employer, binds the
Participant, or Beneficiary, for all purposes of this Plan.
8.05 "ASSIGNMENT OR ALIENATION"
Subject to Code Section 414(p) relating to qualified domestic
relations orders or domestic relations orders entered into before
January 1, 1985, neither a Participant nor a Beneficiary may
anticipate, assign or alienate voluntarily or involuntarily (either at
law or in equity) any benefit provided under the Plan, and the Trustee
will not recognize any such anticipation, assignment or alienation.
Furthermore, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.
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<PAGE> 58
8.06 "NOTICE OF CHANGE IN TERMS"
The Plan Administrator, within the time prescribed by ERISA and the
applicable regulations, must furnish all Participants and
Beneficiaries a summary description of any material amendment to the
Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 "LITIGATION AGAINST THE TRUST"
A court of competent jurisdiction may authorize any appropriate
equitable relief to redress violations of ERISA or to enforce any
provisions of ERISA or the terms of the Plan. A fiduciary may receive
reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 "INFORMATION AVAILABLE"
Any Participant in the Plan or any Beneficiary may examine copies of
the Plan description, latest annual report, any bargaining agreement,
this Plan and Trust, contract or any other instrument under which the
Plan was established or is operated. The Plan Administrator will
maintain all of the items listed in this Section 8.08 in his office,
or in such other place or places as he may designate from time to time
in order to comply with the regulations issued under ERISA, for
examination during reasonable business hours. Upon the written request
of a Participant or Beneficiary the Plan Administrator must furnish
him with a copy of any item listed in this Section 8.08. The Plan
Administrator may make a reasonable charge to the requesting person
for the copy so furnished.
8.09 "APPEAL PROCEDURE FOR DENIAL OF BENEFITS"
The Plan Administrator must provide adequate notice in writing to any
Participant or to any Beneficiary ("Claimant") whose claim for
benefits under the Plan the Advisory Committee has denied. The Plan
Administrator's notice to the Claimant must set forth:
(A) The specific reason for the denial;
(B) Specific references to pertinent Plan provisions on which the
Advisory Committee based its denial;
(C) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed; and
(D) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee
within 75 days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice
must further advise the Claimant that his failure to appeal
the action to the Advisory Committee in writing within the
75-day period will render the Advisory Committee's
determination final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his
duly authorized representative, may submit, in writing, whatever
issues and comments he, or his duly authorized representative, feels
are pertinent. The Claimant, or his duly authorized representative,
may review pertinent Plan documents. The Advisory Committee will
re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under
the circumstances. The Advisory Committee must advise the Claimant of
its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make
the rendering of a decision within the 60-day limit unfeasible, but in
no event may the Advisory Committee render a decision respecting a
denial for a claim for benefits later than 120 days after its receipt
of a request for review.
The Plan Administrator's notice of denial of benefit must identify the
name of each member of the Advisory Committee and the name and address
of the Advisory Committee member to whom the Claimant may forward
his appeal.
8.10 "PARTICIPANT DIRECTION OF INVESTMENT"
A Participant has the right to direct the Employer with respect to the
investment or re-investment of the assets comprising the Participant's
individual Account only if the Employer consents in writing to permit
such direction. If the Employer consents to Participant direction of
investment, the Employer and each Participant must execute a letter
agreement as a part of this Plan containing such conditions,
limitations and other provisions they deem appropriate before the
Employer will follow any Participant direction as respects the
investment or re-investment of any part of the Participant's
individual Account. The Employer is not liable for any loss, nor is
liable for any breach, resulting from a Participant's direction of the
investment of any part of his individual Account.
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PLAN DOCUMENT
ARTICLE IX
ADVISORY COMMITTEE -
DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 "MEMBERS' COMPENSATION, EXPENSES"
The Employer must appoint an Advisory Committee to administer the
Plan, the members of which may or may not be Participants in the Plan,
or which may be the Plan Administrator acting alone. The members of
the Advisory Committee will serve without compensation for services as
such, but the Employer will pay all expenses of the Advisory
Committee, including the expense for any bond required under ERISA.
9.02 "TERM"
Each member of the Advisory Committee serves until the appointment of
his successor.
9.03 "POWERS"
In case of a vacancy in the membership of the Advisory Committee, the
remaining members of the Advisory Committee may exercise any and all
of the powers, authority, duties and discretion conferred upon the
Advisory Committee pending the filling of the vacancy.
9.04 "GENERAL"
The Advisory Committee has the following powers and duties:
(A) To select a Secretary, who need not be a member of
the Advisory Committee;
(B) To determine the rights of eligibility of an Employee
to participate in the Plan, the value of a
Participant's Accrued Benefit and the Nonforfeitable
percentage of each Participant's Accrued Benefit;
(C) To adopt rules of procedure and regulations necessary
for the proper and efficient administration of the
Plan provided the rules are not inconsistent with the
terms of this Agreement;
(D) To enforce the terms of the Plan and the rules and
regulations it adopts;
(E) To direct the Trustee as respects the crediting and
distribution of the Trust;
(F) To review and render decisions respecting a claim for
(or denial of a claim for) a benefit under the Plan;
(G) To furnish the Employer with information which the
Employer may require for tax or other purposes;
(H) To engage the service of agents whom it may deem
advisable to assist it with the performance of its
duties;
(I) To establish and maintain a funding standard account
and to make credits and charges to the account to the
extent required by and in accordance with the
provisions of the Code.
The Advisory Committee must exercise all of its powers, duties
and discretion under the Plan in a uniform and
nondiscriminatory manner.
9.05 "FUNDING POLICY"
The Advisory Committee will review, not less often than annually, all
pertinent Employee information and Plan data in order to establish the
funding policy of the Plan and to determine the appropriate methods of
carrying out the Plan's objectives.
9.06 "MANNER OF ACTION"
The decision of a majority of the members appointed and qualified
controls.
9.07 "INTERESTED MEMBER"
No member of the Advisory Committee may decide or determine any matter
concerning the distribution, nature or method of settlement of his own
benefits under the Plan, except in exercising an election available to
that member in his capacity as a Participant, unless the Plan
Administrator is acting alone in the capacity of the Advisory
Committee.
9.08 "INDIVIDUAL ACCOUNTS"
The Advisory Committee will maintain, or direct the Trustee to
maintain, a separate Account, or multiple Accounts, in the name of
each Participant to reflect the Participant's Accrued Benefit under
the Plan.
The Advisory Committee will make its allocations, or request the
Trustee to make its allocations, to the Accounts of the Participants
in accordance with the provisions of Section 9.11. The Advisory
Committee may direct the Trustee to maintain a temporary segregated
investment Account in the name of a Participant to prevent a
distortion of income, gain or loss allocations under Section 9.11. The
Advisory Committee must maintain records of its activities.
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9.09 "VALUE OF PARTICIPANT'S ACCRUED BENEFIT"
The value of each Participant's Accrued Benefit consists of that
proportion of the net worth (at fair market value) of the Employer's
Trust Fund which the net credit balance in his Account (exclusive of
the cash value of incidental benefit insurance contracts) bears to the
total net credit balance in the Accounts (exclusive of the cash value
of the incidental benefit insurance contracts) of all Participants
plus the cash surrender value of any incidental benefit insurance
contracts held by the Employer on the Participant's life.
For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date
immediately preceding the date of the distribution.
9.10 "ALLOCATIONS AND DISTRIBUTION OF NET INCOME GAIN OR LOSS"
A "valuation date" under this Plan is each Accounting Date. As of each
valuation date, the Advisory Committee must adjust Accounts to reflect
net income, gain or loss since the last valuation date. The valuation
period is the period beginning the day after the last valuation date
and ending on the current valuation date.
The assets of the trust will be valued annually at fair market value
as of the last day of the plan year. On such date, the earnings and
losses of the trust will be allocated to each participant's account in
the ratio that such account balance bears to all account balances.
TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply
to all Participant Accounts other than segregated investment Accounts.
The Advisory Committee first will adjust the Participant Accounts, as
those Accounts stood at the beginning of the current valuation period,
for amounts charged during the valuation period to the Accounts in
accordance with Section 9.12 (relating to distributions) and Section
10.01 (relating to insurance premiums), for the cash value of
incidental benefit insurance contracts and for the amount of any
Account which the Trustee has fully distributed since the immediately
preceding valuation date. The Advisory Committee subject to Section
9.12, will allocate the net income, gain or loss pro rata to the
adjusted Participant Accounts. The allocable net income, gain or loss
is the net income (or net loss), including the increase or decrease in
the fair market value of assets, since the last valuation date.
SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs.
ADDITIONAL RULES. An Excess Amount or suspense account
described in Part 2 of Article III does not share in the allocation of
net income, gain or loss described in this Section 9.10. If the
Employer's Plan includes a Code Section 401(k) arrangement, the
Employer may specify in its Adoption Agreement alternate valuation
provisions authorized by that Adoption Agreement. This Section 9.10
applies solely to the allocation of net income, gain or loss of the
Trust. The Advisory Committee will allocate the Employer contributions
in accordance with Article III.
9.11 "INDIVIDUAL STATEMENT"
As soon as practicable after the Accounting Date of each Plan Year,
but within the time prescribed by ERISA and the regulations under
ERISA, the Plan Administrator will deliver to each Participant (and to
each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA
requires be furnished the Participant or Beneficiary. No Participant,
except a member of the Advisory Committee, has the right to inspect
the records reflecting the Account of any other Participant.
9.12 "ACCOUNT CHARGED"
The Advisory Committee will charge all distributions made to a
Participant or to his Beneficiary from his Account against the Account
of the Participant when made.
9.13 "MISSING BENEFICIARY"
If the Employer shall be unable to locate any Beneficiary entitled to
receive payment of any death benefit payable hereunder, after
reasonable search, for a period of two years after such benefit
becomes payable, the amount of such benefit shall cease to be payable
to such Beneficiary, and shall become payable instead to the personal
representative of such former Participant.
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<PAGE> 61
PLAN DOCUMENT
ARTICLE X
PROVISIONS RELATING TO INSURANCE
10.01 "INSURANCE BENEFIT ANNUITY"
The Employer in accordance with the direction of the respective
Participants in accordance with any uniform rules adopted by the
Employer and made known to Participants may elect to invest
contributions to the Plan in incidental life insurance benefits or
one or more annuity contracts distributed by Kemper Financial
Services, Inc. or an affiliate, provided, however, that:
(A) ORDINARY LIFE. The premiums paid for ordinary life
insurance on the life of a Participant must at all times
be less than 50% of the Employer contributions made on
behalf of such Participant. For purposes of these
incidental insurance provisions, ordinary life insurance
contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums.
(B) TERM. The premiums paid for term, universal and all
other life insurance which is not ordinary life insurance
on the life of any Participant may not exceed 25% of the
Employer contributions made on behalf of such
Participant.
(C) COMBINATION. If both ordinary life and term insurance are
purchased on the life of any Participant, the sum of the term
insurance premium plus one-half of the ordinary life premiums
may not exceed 25% of the Employer contributions made on
behalf of such Participant.
(D) ANNUITIES. The terms of any annuity contract purchased
and distributed by the Plan to a Participant shall comply
with the requirements of this Plan.
Such direction of the participant's creates a segregated
asset account. Except as provided in this Section 10.01
and Section 8.10, each participant will have a ratable
interest in all assets of the trust. It will be the
Employer's responsibility to see that the limitations of
this Article X are not exceeded.
10.02 "FORM OF CONTRACT AND PREMIUM"
The Employer shall apply for any contract under this Article X and
each application for contract, and the contracts themselves, shall
nominate and designate the Participant as sole owner, but each
contract shall be held by the Employer and shall be restricted and
not transferable.
The Employer shall pay directly to the insurance company all
amounts pursuant to an election under this Article X and shall
charge the premiums on any such contract(s) against the
contributions by or on behalf of such Participant. After payment
of any premium, the Employer shall remit the balance of such
contributions to the Trustee hereunder. The Employer shall hold
all contracts issued under the Plan and fully account for same to
the Trustee upon written request.
In the event of any conflicts between the terms of this Plan and
the terms of any insurance contracts hereunder, the Plan provisions
shall control.
Any dividends or credits earned on insurance contracts will be
allocated to the participant's account derived from employer
contributions for whose benefit the contract is held.
10.03 "LIMITATION OF LIFE INSURANCE PROTECTION"
The Employer shall not continue any life insurance protection for
any Participant beyond his actual termination of employment.
If the Employer holds any insurance contract(s) on the life of a
Participant when the Participant terminates his employment, subject
to Article VI, the Employer shall transfer the contract(s) to the
Participant endorsed so as to vest in the transferee all right,
title and interest to the contract(s), free and clear of the Plan;
subject, however, to restrictions as to surrender or payment of
benefits as the issuing insurance company may permit and as the
Employer shall direct.
Subject to Article VI, Joint and Survivor Annuity Requirements, the
contracts on a participant's life will be converted to cash or an
annuity or distributed to the participant upon commencement of
benefits.
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<PAGE> 62
ARTICLE XI MISCELLANEOUS
11.01 "EVIDENCE"
Anyone required to give evidence under the terms of the Plan may do
so by certificate, affidavit, document or other information which the
person to act in reliance may consider pertinent, reliable and
genuine, and to have been signed, made or presented by the proper
party or parties. Both the Advisory Committee and the Trustee are
fully protected in acting and relying upon any evidence described
under the immediately preceding sentence.
11.02 "NO RESPONSIBILITY FOR EMPLOYER ACTION"
Neither the Trustee nor the Advisory Committee has any obligation or
responsibility with respect to any action required by the Plan to be
taken by the Employer, any Participant or eligible Employee, or for
the failure of any of the above persons to act or make any payment or
contribution, or to otherwise provide any benefit contemplated under
this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the
Plan, or to determine the correctness of the amount of any Employer
contribution. Neither the Trustee nor the Advisory Committee need
inquire into or be responsible for any action or failure to act on
the part of the others. Any action required of a corporate Employer
must be by its Board of Directors or its designate.
11.03 "FIDUCIARIES NOT INSURERS"
The Trustee, the Advisory Committee, the Plan Administrator and the
Employer in no way guarantee the Trust Fund from loss or
depreciation. The Employer does not guarantee the payment of any
money which may be or becomes due to any person from the Trust Fund.
The liability of the Advisory Committee and the Trustee to make any
payment from the Trust Fund at any time and all times is limited to
the then available assets of the Trust.
11.04 "WAIVER OF NOTICE"
Any person entitled to notice under the Plan may waive the notice.
11.05 "SUCCESSORS"
The Plan is binding upon all persons entitled to benefits under the
Plan, their respective heirs and legal representatives, upon the
Employer, its successors and assigns, and upon the Trustee, the
Advisory Committee, the Plan Administrator and their successors.
11.06 "WORD USAGE"
Words used in the masculine also apply to the feminine where
applicable, and wherever the context of the Employer's Plan dictates,
the plural includes the singular and the singular includes the
plural.
11.07 "EMPLOYER'S RIGHT TO PARTICIPATE"
If the Employer's Plan fails to attain or retain qualification under
section 401 of the Code, the Plan will no longer participate in this
Kemper Simplified Prototype Retirement Plan and will be considered an
individually-designed plan.
11.08 "EMPLOYMENT NOT GUARANTEED"
Nothing contained in this Plan, or with respect to the establishment
of the Trust, or any modification of amendment to the Plan or Trust,
or in the creation of any Account, or the payment of any benefit,
gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the
Employer, or Employee of the Employer, or against the Trustee, or its
agents or employees, or against the Plan Administrator, except as
expressly provided by the Plan, the Trust, ERISA or by a separate
agreement.
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PLAN DOCUMENT
ARTICLE XII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 "EXCLUSIVE BENEFIT"
Any contribution made by the employer because of a mistake of fact
must be returned to the employer within one year of the contribution.
In the event that the Commissioner of Internal Revenue determines
that the plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the employer must be returned to the employer within one year after
the date the initial qualification is denied, but only if the
application for the qualification is made by the time prescribed by
law for filing the employer's return for the taxable year in which
the plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
12.02 "AMENDMENT BY EMPLOYER"
The Employer may change the choice of options in the adoption
agreement and add overriding language in the adoption agreement when
such language is necessary to satisfy Section 415 or Section 416 of
the Code because of the required aggregation of multiple plans, and
add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause
the plan to be treated as individually designed. An employer that
amends the plan for any other reason, including a waiver of the
minimum funding requirement under Section 412(d), will no longer
participate in this master or prototype plan and will be considered
to have an individually designed plan.
No amendment may authorize or permit any of the Trust Fund (other
than the part which is required to pay taxes and administration
expenses) to be used for or diverted to purposes other than for the
exclusive benefit of the Participants or their Beneficiaries or
estates. No amendment may cause or permit any portion of the Trust
Fund to revert to or become a property of the Employer. The Employer
also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the
Advisory Committee without the written consent of the affected
Trustee, the Plan Administrator or the affected member of the
Advisory Committee.
If the plan's vesting schedule is amended, or the plan is amended in
any way that directly or indirectly affects the computation of the
participant's nonforfeitable percentage or if the plan is deemed
amended by an automatic change to or from a top-heavy vesting
schedule, each participant with at least 3 years of service with the
employer may elect, within a reasonable period after the adoption of
the amendment or change, to have the nonforfeitable percentage
computed under the plan without regard to such amendment or change.
For participants who do not have at least one hour of service in any
plan year beginning after December 31, 1988, the preceding sentence
shall be applied by substituting "five years of service" for "three
years of service" where such language appears.
The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end
on the latest of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective; or
(3) 60 days after the participant is issued written notice of
the amendment by the employer or plan administrator.
Furthermore, if the vesting schedule of a plan is amended, in the
case of an employee who is a participant as of the later of the date
such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
employee's right to his employer-derived accrued benefit will not be
less than his percentage computed under the plan without regard to
such amendment.
CODE SECTION 411(D)(6) PROTECTED BENEFITS. An amendment (including
the adoption of this Plan as a restatement of an existing plan) may
not decrease a Participant's Accrued Benefit, except to the extent
permitted under Code Section 412(c)(8), and may not reduce or
eliminate Code Section 411 (d)(6) protected benefits determined
immediately prior to the adoption date (or, if later, the effective
date) of the amendment. An amendment reduces or eliminates Code
Section 411 (d)(6) protected benefits if the amendment has the effect
of either (1) eliminating or reducing an early retirement benefit or
a retirement-type subsidy (as defined in Treasury regulations), or
(2) except as provided by Treasury regulations, eliminating an
optional form of benefit. The Advisory Committee must disregard an
amendment to the extent application of the amendment would fail to
satisfy this paragraph. If the Advisory Committee must disregard an
amendment because the amendment would violate clause (1) or clause
(2), the Advisory Committee must maintain a schedule of the early
retirement option or other optional forms of benefit the Plan must
continue for the affected Participants.
The Employer must make all amendments in writing. Each amendment must
state the date to which it is either retroactively or prospectively
effective. See Section 11.08 for the effect of certain amendments
adopted by the Employer.
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<PAGE> 64
12.03 "AMENDMENT BY PLAN SPONSOR"
The Plan Sponsor, without the Employer's consent, may amend the Plan
and Trust, from time to time, in order to conform the Plan and Trust
to any requirement for qualification of the Plan and Trust under the
Internal Revenue Code. The Plan Sponsor may not amend the Plan in any
manner which would modify any election made by the Employer under the
Plan without the Employer's written consent.
For purposes of sponsoring organization amendments, the mass
submitter shall be recognized as the agent of the sponsoring
organization. If the sponsoring organization does not adopt the
amendments made by the mass submitter, it will no longer be identical
to or a minor modifier of the mass submitter plan.
12.04 "DISCONTINUANCE"
The Employer has the right, at any time, to suspend or discontinue
its contributions under the Plan, and to terminate, at any time, this
Plan and the Trust created under this Agreement. The Plan will
terminate upon the first to occur of the following:
(A) The date terminated by action of the Employer;
(B) The date the Employer is judicially declared bankrupt or
insolvent, unless the proceeding authorizes continued
maintenance of the Plan;
(C) The dissolution, merger, consolidation or reorganization
of the Employer or the sale by the Employer of all or
substantially all of its assets, unless the successor or
purchaser makes provision to continue the Plan, in which
event the successor or purchaser must substitute itself
as the Employer under this Plan.
In the event of a complete discontinuance of contributions under the
plan, the account balance of each affected participant will be
nonforfeitable.
12.05 "MERGER/DIRECT TRANSFER"
The Trustee may not consent to, or be a party to, any merger or
consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless immediately after the merger,
consolidation or transfer (if the plan is then terminated), the
surviving Plan provides each Participant a benefit equal to or
greater than the benefit each Participant would have received had the
Plan terminated immediately before the merger or consolidation or
transfer. The Trustee possesses the specific authority to enter into
merger agreements or direct transfer of assets agreements with the
trustees of other retirement plans described in Code Section 401(a),
including an elective transfer, and to accept the direct transfer of
plan assets, or to transfer plan assets, as a party to any such
agreement.
The Trustee may accept a direct transfer of plan assets on behalf of
an Employee prior to the date the Employee satisfies the Plan's
eligibility conditions. If the Trustee accepts such a direct transfer
of plan assets, the Advisory Committee and Trustee must treat the
Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan.
The Trustee, after August 9,1988, may not consent to, or be a
party to a merger, consolidation or transfer of assets with a defined
benefit plan, except with respect to an elective transfer. The
Trustee will hold, administer and distribute the transferred assets
as a part of the Trust Fund and the Trustee must maintain a separate
Employer contribution Account for the benefit of the Employee on
whose behalf the Trustee accepted the transfer in order to reflect
the value of the transferred assets. Unless a transfer of assets to
this Plan is an elective transfer, the Plan will preserve all Code
Section 411(d)(6) protected benefits with respect to those
transferred assets, in the manner described in Section 13.02. A
transfer is an elective transfer if: (1) the transfer satisfies the
first paragraph of this Section 13.06; (2) the transfer is voluntary,
under a fully informed election by the Participant; (3) the
Participant has an alternative that retains his Code Section
411(d)(6) protected benefits (including an option to leave his
benefit in the transferor plan, if that plan is not terminating); (4)
the transfer satisfies the applicable spousal consent requirements of
the Code; (5) the transferor plan satisfies the joint and survivor
notice requirements of the Code, if the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a
right to immediate distribution from the transferor plan, in lieu of
the elective transfer; (7) the transferred benefit is at least the
greater of the single sum distribution provided by the transferor
plan for which the Participant is eligible or the present value of
the Participant's accrued benefit under the transferor plan payable
at that plan's normal retirement age; (8) the Participant has a 100%
Nonforfeitable interest in the transferred benefit; and (9) the
transfer otherwise satisfies applicable Treasury regulations. An
elective transfer may occur between qualified plans of any type. Any
direct transfer of assets from a defined benefit plan after August 9,
1988, which is not an elective transfer will render the Employer's
Plan individually designed.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Plan
receives a direct transfer (by merger or otherwise) of elective
contributions (or amounts treated as elective contributions) under a
Plan with a Code Section 401(k) arrangement, the distribution
restrictions of Code Sections 401(k)(2) and (10) continue to apply
to those transferred elective contributions.
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<PAGE> 65
PLAN DOCUMENT
12.06 "TERMINATION"
Upon termination of the Plan, the distribution provisions of Article
VI remain operative, with the following exceptions:
(1) If the present value of the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit to him in
lump sum as soon as administratively practicable after
the Plan terminates; and
(2) If the present value of the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500, the Participant or the
Beneficiary, in addition may elect to have the Trustee
commence distribution of his Nonforfeitable Accrued
Benefit as soon as administratively practicable after the
Plan terminates.
To liquidate the Trust, the Advisory Committee will
purchase a deferred annuity contract for each Participant
which protects the Participant's distribution rights
under the Plan, if the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500 and the Participant does
not elect an immediate distribution pursuant to Paragraph
(2). The Trust will continue until the Trustee in
accordance with the direction of the Advisory Committee
has distributed all of the benefits under the Plan.
On each valuation date, the Advisory Committee will
credit any part of a Participant's Accrued Benefit
retained in the Trust with its proportionate share of the
Trust's income, expenses, gains and losses, both realized
and unrealized. Upon termination of the Plan, the Amount,
if any, in a suspense account under Article III will
revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A
resolution or amendment to freeze all future benefit
accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section
12.06.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If
the Employer's Plan includes a Code Section 401(k)
arrangement or if transferred assets described in Section
13.06 are subject to the distribution restrictions of Code
Sections 401(k)(2) and (10), the special distribution
provisions of this Section 12.06 are subject to the
restrictions of this paragraph. The portion of the Participant's
Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code
Section 401(k) arrangement as elective contributions) is
not distributable on account of Plan termination, as
described in this Section 12.06, unless: (a) the
Participant otherwise is entitled under the Plan to a
distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs
without the establishment of a successor plan. A
successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or
by a related employer) at the time of the termination of
the Plan or within the period ending twelve months after
the final distribution of assets. A distribution made
after March 31, 1988, pursuant to clause (b), must be part
of a lump sum distribution to the Participant of his
Nonforfeitable Accrued Benefit.
In the event of the termination or partial termination of
the plan, the account balance of each affected
participant will be nonforfeitable.
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ARTICLE XIII
CODE SECTION 401(k) ARRANGEMENTS
13.01 "ELIGIBILITY"
This Article XIII applies to an Employer's Plan only if the Plan
includes a Code Section 401(k) arrangement.
An employee's eligibility to make Elective Deferrals may not be
conditioned upon the completion of more than one (1) year of service
or the attainment of more than age twenty-one (21). An employee's
eligibility to receive Matching Contributions, Qualified Matching
Contributions, or Qualified Nonelective Contributions may be
conditioned upon the completion of up to two (2) years of service. No
contributions or benefits (other than Matching Contributions or
Qualified Matching Contributions) may be conditioned upon an
employee's Elective Deferrals.
The Employer must specify a reasonable period in the Adoption
Agreement of at least once each calendar year during which a
participant may elect to commence Elective Deferrals. Such election
may not be made retroactively. A participant's election to commence
elective Deferrals must remain in effect until modified or
terminated.
The Employer must also specify in the Adoption Agreement a reasonable
period at least once each calendar year to terminate an election or
to modify the amount or frequency of his or her Elective Deferrals.
13.02 "SALARY REDUCTION AGREEMENT"
The Employer will elect in its Adoption Agreement the terms of the
Code Section 401(k) arrangement under the Plan.
Any Employee eligible to participate in the Plan may file a salary
reduction agreement with the Advisory Committee. The salary reduction
agreement may not be effective earlier than the following date which
occurs last: (i) the Employee's Plan Entry Date (or, in the case of
a reemployed Employee, his reparticipation date under Article II);
(ii) the execution date of the Employee's salary reduction agreement;
(iii) the date the Employer adopts the Code Section 401(k)
arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code Section 401(k) arrangement, as specified
in the Employer's Adoption Agreement. A salary reduction agreement
must specify the amount of Compensation (as defined in Section 1.12)
or percentage of Compensation the Employee wishes to defer. The
salary reduction agreement will apply only to Compensation which
becomes currently available to the Employee after the effective
date of the salary reduction agreement. The Employer will apply a
reduction election to all Compensation (and to increases in such
Compensation) unless the Employee specifies in his salary reduction
agreement to limit the election to certain Compensation. The Employer
will specify in Adoption Agreement Section 3.01 the rules and
restrictions applicable to the Employee's salary reduction
agreements, however, under no circumstances, may a salary reduction
agreement or other deferral mechanism be adopted retroactively.
13.03 "DEFINITIONS"
For purposes of this Article XIII:
(1) "ACTUAL DEFERRAL PERCENTAGE" shall mean, for a specified
group of participants for a Plan Year, the average of the
ratios (calculated separately for each participant in
such group) of (1) the amount of employer contributions
actually paid over to the trust on behalf of such
participant for the Plan Year to (2) the participant's
Compensation for such Plan Year to (whether or not the
employee was a participant for the entire Plan Year).
Employer contributions on behalf of any participant shall
include: (1) any Elective Deferrals made pursuant to the
participant's deferral election, including Excess
Elective Deferrals of Highly Compensated Employees, but
excluding Elective Deferrals that are taken into account
in the Contribution Percentage test (provided the ADP
test is satisfied both with and without exclusion of
these Elective Deferrals); and (2) at the election of the
employer, Qualified Nonelective Contributions and
Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an employee who
would be a participant but for the failure to make
Elective Deferrals shall be treated as a participant on
whose behalf no Elective Deferrals are made.
(2) "AGGREGATE LIMIT" shall mean the sum of (i) 125 percent
of the greater of the ADP of the Nonhighly Compensated
Employees for the Plan Year or the ACP of Nonhighly
Compensated Employees under the plan subject to Code
Section 401(m) for the Plan Year beginning with or
within the Plan Year of the CODA and (ii) the lesser of
200% or two plus the lesser of such ADP or ACP. "Lesser"
is substituted for "greater" in (i) above, and "greater"
is substituted for "lesser" after "two plus the" in (ii),
if it would result in a larger Aggregate Limit.
(3) "AVERAGE CONTRIBUTION PERCENTAGE" shall mean the average
of the Contribution Percentages of the Eligible
Participants in a group.
(4) "CONTRIBUTION PERCENTAGE" shall mean the ratio (expressed
as a percentage) of the participant's Contribution
Percentage Amounts to the participant's Compensation for
the Plan Year (whether or not the employee was a
participant for the entire Plan Year).
32
<PAGE> 67
PLAN DOCUMENT
(5) "CONTRIBUTION PERCENTAGE AMOUNTS" shall mean the sum of
the Employee Contributions, Matching Contributions, and
Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP test) made under the
plan on behalf of the participant for the Plan Year. If
so elected in the adoption agreement the employer may
include Qualified Nonelective Contributions in the
Contribution Percentage Amounts. The employer also may
elect to use Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and
continues to be met following the exclusion of those
Elective Deferrals that are used to meet the ACP test.
(6) "ELECTIVE DEFERRALS" shall mean any employer
contributions made to the plan at the election of the
participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary reduction
agreement or other deferral mechanism. With respect to
any taxable year, a participant's Elective Deferral is
the sum of all Employer contributions made on behalf of
such participant pursuant to an election to defer under
any qualified CODA as described in Code Section 401(k),
any simplified employee pension cash or deferred
arrangement as described in Code Section 402(h)(1)(B),
any eligible deferred compensation plan under Code
Section 457, any plan as described under Code Section
501(c)(18), and any employer contributions made on behalf
of a participant for the purchase of an annuity contract
under Code Section 403(b) pursuant to a salary reduction
agreement.
(7) "ELIGIBLE PARTICIPANT" shall mean any employee who is
eligible to make an Employee Contribution, or an Elective
Deferral (if the employer takes such contributions into
account in the calculation of the Contribution
Percentage), or to receive a Matching Contribution
(including forfeitures) or a Qualified Matching
Contribution.
(8) "EXCESS AGGREGATE CONTRIBUTIONS" shall mean, with respect
to any Plan Year, the excess of:
(a) The aggregate Contribution Percentage Amounts
taken into account in computing the numerator of
the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such
Plan Year, over
(b) The maximum Contribution Percentage Amounts
permitted by the ACP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of their
Contribution Percentages beginning with the
highest of such percentages).
(9) "EXCESS CONTRIBUTIONS" shall mean, with respect to any
Plan Year, the excess of:
(a) The aggregate amount of employer contributions
actually taken into account in computing the ADP
of Highly Compensated Employees for such Plan
Year, over
(b) The maximum amount of such contributions
permitted by the ADP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs,
beginning with the highest of such percentages).
(10) "EXCESS ELECTIVE DEFERRALS" shall mean those Elective
Deferrals that are includible in a participant's gross
income under Section 402(g) of the Code to the extent such
participant's Elective Deferrals for a taxable year
exceed the dollar limitation under such Code section.
Excess Elective Deferrals shall be treated as annual
additions under the plan.
(11) "MATCHING CONTRIBUTION" shall mean an employer
contribution made to this or any other defined
contribution plan on behalf of a participant on account
of an Employee Contribution made by such participant, or
on account of a participant's Elective Deferral, under a
plan maintained by the employer.
(12) "QUALIFIED NONELECTIVE CONTRIBUTIONS" shall mean
contributions (other than Matching Contributions or
Qualified Matching Contributions) made by the employer
and allocated to participants' accounts that the
participants may not elect to receive in cash until
distributed from the plan; that are nonforfeitable when
made; and that are distributable only in accordance with
the distribution provisions that are applicable to
Elective Deferrals and Qualified Matching Contributions.
13.04 "ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION"
No participant shall be permitted to have Elective Deferrals made
under this plan, or any other qualified plan maintained by the
Employer, during any taxable year, in excess of the dollar limitation
contained in Section 402(g) of the Code in effect at the beginning of
such taxable year.
13.05 "DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS"
A participant may assign to this plan any Excess Elective Deferrals
made during a taxable year of the participant by notifying the plan
administrator on or before the date specified in the adoption
agreement of the amount of the Excess Elective Deferrals to be
assigned to the plan.
33
<PAGE> 68
Notwithstanding any other provision of the plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto,
shall be distributed no later than April 15 to any participant to
whose account Excess Elective Deferrals were assigned for the
preceding year and who claims Excess Elective Deferrals for such
taxable year.
Determination of income or loss: Excess Elective Deferrals shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Elective Deferrals is the sum of:
(1) income or loss allocable to the participant's Elective Deferral
account for the taxable year multiplied by a fraction, the numerator
of which is such participant's Excess Elective Deferrals for the year
and the denominator is the participant's account balance attributable
to Elective Deferrals without regard to any income or loss occurring
during such taxable year; and (2) ten percent of the amount
determined under (1) multiplied by the number of whole calendar
months between the end of the participant's taxable year and the date
of distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
13.06 "ACTUAL DEFERRAL PERCENTAGE TEST"
The Actual Deferral Percentage (hereinafter "ADP") for participants
who are Highly Compensated Employees for each Plan Year and the ADP
for participants who are Nonhighly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(1) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(2) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 2.0, provided that the
ADP for participants who are Highly Compensated Employees
does not exceed the ADP for participants who are
Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. The ADP for any participant who is a Highly
Compensated Employee for the Plan Year and who
is eligible to have Elective Deferrals (and
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test)
allocated to his or her accounts under two or
more arrangements described in Section 401(k)
of the Code, that are maintained by the
employer, shall be determined as if such
Elective Deferrals (and, if applicable, such
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both) were made under
a single arrangement. If a Highly Compensated
Employee participates in two or more cash or
deferred arrangements that have different Plan
Years, all cash or deferred arrangements ending
with or within the same calendar year shall be
treated as a single arrangement.
2. In the event that this plan satisfies the
requirements of Ssections 401(k), 401(a)(4), or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by determin-
ing the ADP of employees as if all such plans
were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(k) of the Code
only if they have the same Plan Year.
3. For purposes of determining the ADP of a
participant who is a five-percent owner or one
of the ten most highly paid Highly Compensated
Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching
Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) and
Compensation of such participant shall include
the Elective Deferrals (and, if applicable
Qualified Nonelective Contributions and
Qualified Matching Contributions, or both) and
Compensation for the Plan Year of Family Members
(as defined in Section 414(g)(6) of the Code).
Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as
separate employees in determining the ADP both
for participants who are Nonhighly Compensated
Employees and for participants who are Highly
Compensated Employees.
4. For purposes of determining the ADP test,
Elective Deferrals, Qualified Nonelective
Contributions and Qualified Matching
Contributions must be made before the last day
of the twelve-month period immediately following
the Plan Year to which contributions relate.
5. The employer shall maintain records sufficient
to demonstrate satisfaction of the ADP test and
the amount of Qualified Nonelective
Contributions of Qualified Matching
Contributions, or both, used in such test.
6. The determination and treatment of the ADP
amounts of any participant shall satisfy such
other requirements as may be prescribed by the
Secretary of the Treasury.
34
<PAGE> 69
PLAN DOCUMENT
13.07 "DISTRIBUTION OF EXCESS CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan
Year in which such excess amounts arose, a ten (10) percent excise
tax will be imposed on the employer maintaining the plan with respect
to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such employees. Excess
Contributions shall be allocated to Participants who are subject to
the family member aggregation rules of Section 414(g)(6) of the Code
in the manner prescribed by the regulations.
Excess Contributions (including the amounts recharacterized) shall be
treated as annual additions under the plan.
Determination of Income or Loss: Excess Contributions shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Contributions is the sum of: (1)
income or loss allocable to the participant's Elective Deferral
account (and, if applicable, the Qualified Nonelective Contribution
account or the Qualified Matching Contribution account or both) for
the Plan Year multiplied by a fraction, the numerator of which is
such participant's Excess contributions for the year and the
denominator is the participant's account balance attributable to
Elective Deferrals (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Contributions: Excess Contributions shall be
distributed from the participant's Elective Deferral account and
Qualified Matching Contribution account (if applicable) in proportion
to the participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan Year.
Excess Contributions shall be distributed from the participant's
Qualified Nonelective Contribution account only to the extent that
such Excess Contributions exceed the balance in the participant's
Elective Deferral account and Qualified Matching Contribution
account.
13.08 "MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Matching Contributions to the plan.
13.09 "QUALIFIED MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Qualified Matching Contributions to the plan.
13.10 "LIMITATIONS ON MATCHING CONTRIBUTIONS"
The ACP for participants who are Highly Compensated Employees for
each Plan Year and the ACP for participants who are Nonhighly
Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(A) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(B) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by two (2), provided that
the ACP for participants who are Highly Compensated
Employees does not exceed the ACP for participants who
are Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. Multiple Use: If one or more Highly Compensated
Employees participate in both a CODA and a plan
subject to the ACP test maintained by the
employer and the sum of the ADP or ACP of those
Highly Compensated Employees subject to either
or both tests exceeds the Aggregate Limit, then
the ACP of those Highly Compensated Employees
who also participate in a CODA will be reduced
(beginning with such Highly Compensated Employee
whose ACP is the highest) so that the limit is
not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage
Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP or ACP of the
Highly Compensated Employees are determined
after any corrections required to meet the ADP
or ACP tests. Multiple use does not occur if
either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the
ADP or ACP of the Nonhighly Compensated
Employees.
2. For purposes of this Section, the Contribution
Percentage for any participant who is a Highly
Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his
or her account under two or more plans described
in Section 401(a) of the Code, or arrangements
described in Section 401(k) of the Code that are
maintained by the employer, shall be determined
as if the total of such Contribution Percentage
Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more
cash or deferred arrangements that have
different plan years, all cash or deferred
arrangements ending with or within the same
calendar year shall be treated as a single
arrangement.
35
<PAGE> 70
3. In the event that this plan satisfies the
requirements of Sections 401(m), 401(a)(4) or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by
determining the Contribution Percentage of
employees as if all such plans were a single
plan. For plan years beginning after December
31, 1989, plans may be aggregated in order to
satisfy Section 401(m) of the Code only if they
have the same Plan Year.
4. For purposes of determining the Contribution
percentage of a participant who is a
five-percent owner or one of the most highly
paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation
of such participant shall include the
Contribution Percentage Amounts and Compensation
for the Plan Year of Family Members (as defined
in Section 414(g)(6) of the Code). Family
Members, with respect to Highly Compensated
Employees, shall be disregarded as separate
employees in determining the Contribution
Percentage both for participants who are
Nonhighly Compensated Employees and for
participants who are Highly Compensated
Employees.
5. For purposes of determining the Contribution
Percentage test, Employee Contributions are
considered to have been made in the Plan Year in
which contributed to the trust. Matching
Contributions and Qualified Nonelective
Contributions will be considered made for a Plan
Year if made no later than the end of the
twelve-month period beginning on the day after
the close of the Plan Year.
6. The employer shall maintain records sufficient
to demonstrate satisfaction of the ACP test and
the amount of Qualified Nonelective
Contributions or Qualified Matching
Contributions, or both, used in such test.
7. The determination and treatment of the
Contribution Percentage of any participant shall
satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
13.11 "DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan
Year to participants whose accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to participants who are
subject to the family member aggregation rules of Section 414(g)(6)
of the Code in the manner prescribed by the regulations. If such
Excess Aggregate Contributions are distributed more than 2-1/2 months
after the last day of the Plan Year in which such excess amounts
arose, a ten (10) percent excise tax will be imposed on the employer
maintaining the plan with respect to those amounts. Excess Aggregate
Contributions shall be treated as annual additions under the plan.
Determination of Income or Loss: Excess Aggregate Contributions shall
be adjusted for any income or loss up to the date of distribution.
The income or loss allocable to Excess Aggregate Contributions is the
sum of: (1) income or loss allocable to the participant's Employee
Contribution account, Matching Contribution account (if any, and if
all amounts therein are not used in the ADP test) and, if applicable,
Qualified Nonelective Contribution account and Elective Deferral
account for the Plan Year multiplied by a fraction, the numerator of
which is such participant's Excess Aggregate Contributions for the
year and the denominator is the participant's account balance(s)
attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Aggregate Contributions: Excess Aggregate
Contributions shall be distributed on a pro rata basis from the
participant's Matching Contribution account and qualified Matching
Contribution account (and, if applicable, the participant's Qualified
Nonelective Contribution account or Elective Deferral account, or
both).
Such determination shall be made after first determining Excess
Elective Deferrals pursuant to Section 13.03(10) and then
determining Excess Contributions pursuant to Section 13.03(9).
13.12 "QUALIFIED NONELECTIVE CONTRIBUTIONS"
The employer may elect to make Qualified Nonelective Contributions
under the plan on behalf of employees as provided in the adoption
agreement.
In addition, in lieu of distributing Excess Contributions as provided
in Section 13.07 of the plan, or Excess Aggregate Contributions as
provided in Section 13.11 of the plan, and to the extent elected by
the employer in the adoption agreement, the employer may make
Qualified Nonelective Contributions on behalf of Nonhighly
Compensated Employees that are sufficient to satisfy either the
Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
36
<PAGE> 71
PLAN DOCUMENT
13.13 "DISTRIBUTION REQUIREMENTS"
Elective Deferrals, Qualified Nonelective Contributions, and
Qualified Matching Contributions, and income allocable to each are
not distributable to a participant or his or her beneficiary or
beneficiaries, in accordance with such participant's or beneficiary
or beneficiaries election, earlier than upon separation from service,
death, or disability.
Such amounts may also be distributed upon:
1. Termination of the plan without the establishment of
another defined contribution plan.
2. The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within
the meaning of Section 409(d)(2) of the Code) used in a
trade or business of such corporation if such corporation
continues to maintain this plan after the disposition,
but only with respect to employees who continue
employment with the corporation acquiring such assets.
3. The disposition by a corporation to an unrelated entity
of such corporation's interest in a subsidiary (within
the meaning of Section 409(d)(3) of the Code) if such
corporation continues to maintain this plan, but only
with respect to employees who continue employment with
such subsidiary.
4. The attainment of age 59-1/2.
All distributions that may be made pursuant to one or
more of the foregoing distributable events are subject to
the spousal and participant consent requirements (if
applicable) contained in Sections 401(a)(11) and 417 of
the Code.
37
<PAGE> 72
IRS Letters
Serial No. D257426a
Serial No. D257427a
Dated: 3/19/91
<PAGE> 73
AMENDATORY AGREEMENT
Adoption of 401(a)(31) Model Amendment (Revenue Procedure 93-12)
Kemper Growth Fund, as Prototype Plan Sponsor ("Sponsor"), makes this
Amendatory Agreement to the Kemper Retirement Plan Prototype.
WITNESSETH
WHEREAS, it is necessary to amend the Prototype Plan basic plan
document to provide plan participants with the option of electing a direct
transfer of any eligible rollover distribution to an eligible retirement plan;
and
WHEREAS, the Prototype Plan gives the Sponsor authority, without the
approval of any adopting employer, to make amendments necessary to conform the
Prototype Plan to any requirement for qualification under the Internal Revenue
Code.
NOW THEREFORE, in consideration of the above premises, the Sponsor as
designated agent for all sponsoring organizations for purposes of making plan
amendments hereby amends the Prototype Plan to include the following amendment,
as an appendix to the basic plan document. This amendment, which is identical
to the model language in the Appendix of Revenue Procedure 93-12, applies to
any plan maintained by an employer under the Prototype Plan.
APPENDIX TO BASIC PLAN DOCUMENT
ARTICLE VI
6.02(C). THIS ARTICLE APPLIES TO DISTRIBUTIONS MADE ON OR AFTER JANUARY 1,
1993.
Notwithstanding any provision of the plan to the contrary that would
otherwise limit a distributee's election under the Article, a Distributee may
elect, at the time and in the manner prescribed by the plan administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
6.02(D). DEFINITIONS.
(1) ELIGIBLE ROLLOVER DISTRIBUTION: An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is on of a series of substantially equal
periodic payments (not less frequently than annually) make for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(2) ELIGIBLE RETIREMENT PLAN: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(3) DISTRIBUTEE: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving spouse
and the employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.
(4) DIRECT ROLLOVER: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
With respect to each adopting employer's plan maintained under this Prototype
Plan, this amendment is effective as of January 1, 1993.
IN WITNESS WHEREOF, the Sponsor has executed this Amendatory Agreement on the
20th day of January, 1993.
Kemper Growth Fund
By /s/ Paul Murphy
-----------------------------------------------------------
"Sponsor's" Authorized Representative
<PAGE> 74
APPENDIX ARTICLE B
RESOLVED, that Kemper Growth Fund ("Sponsor"), in its capacity as a prototype
sponsoring organization under IRS Revenue Procedure 89-9, amend the Prototype
Plan basic plan document by adopting Appendix Article B, a copy of which is
attached to this resolution. The amendment will be effective for all adopting
employers of the Prototype Plan for plan years beginning after December 31,
1993.
Adopted this seventeenth day of February, 1994.
Kemper Financial Services, Inc.
By: Paul Murphy
-------------------------------------------
*Sponsor's Authorized Representative
ARTICLE B
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93) and is an integral part of the basic plan
document. Section 11.07 applies to any modification or amendment of this
Article.
In addition to other applicable limitations set forth in the plan,
and notwithstanding any other provision of the plan to the contrary, for plan
years beginning on or after January 1, 1994, the annual compensation of each
employee taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
12 months, over which compensation is determined (determination period)
beginning in such calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the determination
period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference
in this plan to the limitation under Section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first plan year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
<PAGE> 1
Kemper Financial Services, Inc.
120 South LaSalle Street
Chicago, IL 60603
<PAGE> 2
EXHIBIT 99.B14.(b)
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (UNDER SECTION 408(a) OF THE
INTERNAL REVENUE CODE)
KEEP FOR YOUR RECORDS.
FORM 5305 DO NOT FILE WITH
INDIVIDUAL RETIREMENT TRUST ACCOUNT INTERNAL REVENUE
(REV. OCTOBER 1992) SERVICE
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
<TABLE>
<S><C>
State of } SS / / Amendment
----------------------------------------------------------------------------
County of
---------------------------------------------------------------------------
Grantor's name Grantor's date of birth
--------------------------------- --------------------------------------
Grantor's address Grantor's social security number
------------------------------ ----------------------------
Trustee's name INVESTORS FIDUCIARY TRUST COMPANY
------------------------------------------------------------------------------------------------
Trustee's address or principal place of business KANSAS CITY, MISSOURI
--------------------------------------------------------------
</TABLE>
The Grantor whose name appears above is establishing an Individual Retirement
Account under section 408(a) to provide for his or her retirement and for the
support of his or her beneficiaries after death. The Trustee named above has
given the Grantor the disclosure statement required under Regulations section
1.406-6. The Grantor has assigned the trust __________ dollars ($_______) in
cash. The Grantor and the Trustee made the following agreement:
ARTICLE I
The Trustee may accept additional cash contributions on behalf of the Grantor
for a tax year of the Grantor. The total cash contributions are limited to
$2,000 for the tax year unless the contribution is a rollover described in
section 402(c) (but only after December 31, 1992), 403(a)(4), 403(b)(8),
408(d)(3), or an employer contribution to a simplified employee pension plan as
described in section 408(1). Rollover contributions before January 1, 1993,
include rollovers described in section 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3) or an employer contribution to a simplified employee
pension plan described in section 408(k).
ARTICLE II
The Grantor's interest in the balance in the trust account is nonforfeitable.
ARTICLE III
1. No part of the trust funds may be invested in life insurance contracts, nor
may the assets of the trust account be commingled with other property except in
a common trust fund or common investment fund (within the meaning of section
408(a)(5).
2. No part of the trust funds may be invested in collectibles (within the
meaning of section 408(m).
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Grantor's interest in the trust account shall be made in
accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1. 401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Grantor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Grantor and
the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Grantor's entire interest in the trust account must be, or begin to be,
distributed by the Grantor's required beginning date, April 1 following the
calendar year end in which the Grantor reaches age 70 1/2. By that date, the
Grantor may elect, in a manner acceptable to the trustee, to have the balance
in the trust account distributed in:
(A) A single sum payment.
(B) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the grantor.
(C) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Grantor and his or her designated beneficiary.
(D) Equal or substantially equal annual payments over a specified period that
may not be longer than the Grantor's life expectancy.
(E) Equal or substantially equal payments over a specified period that may not
be longer than the joint life and last survivor expectancy of the Grantor and
his or her designated beneficiary.
4. If the Grantor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(A) If the Grantor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(B) If the Grantor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Grantor or, if the
Grantor has not so elected, at the election of the beneficiary or
beneficiaries, either
(I) Be distributed by the December 31 of the year containing the fifth
anniversary of the Grantor's death, or
(II) Be distributed in equal or substantially equal payments over the life or
life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Grantor's death. If, however,
the beneficiary is the Grantor's surviving spouse, then this distribution is
not required to begin before December 31 of the year in which the Grantor would
have turned age 70 1/2.
(C) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Grantor's required
beginning date, even though payments may actually have been made before that
date.
(D) If the Grantor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Grantor's entire interest in the trust as of the close of business
on December 31 of the preceding year by the life expectancy of the Grantor (or
the joint life and last survivor expectancy of the Grantor and the Grantor's
designated beneficiary, or the life expectancy of the designated beneficiary,
whichever applies). In the case of distributions under paragraph 3, determine
the initial life expectancy (or joint life and last survivor expectancy) using
the attained ages of the Grantor and designated beneficiary as of their
birthdays in the year the Grantor reaches age 70 1/2. In the case of a
distribution in accordance with paragraph 4(b)(ii), determine life expectancy
using the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
<PAGE> 3
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (CONTINUED)
ARTICLE V
1. The Grantor agrees to provide the Trustee with information necessary for the
Trustee to prepare any reports required under section 408(i) and Regulations
1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Grantor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signature appear below.
ARTICLE VIII
1. DEFINITIONS: "Designated Investment Company" shall mean any Kemper Mutual
Fund, or any other registered investment company with the same investment
advisor or principal underwriter, if certified to the Trustee as being
available for investment pursuant to this trust.
2. INVESTMENT OF ACCOUNT ASSETS: The amount of each contribution shall be
applied to the purchase of shares of a Designated Investment Company at the
price and in the manner in which such shares are then being publicly offered by
such investment company. All dividends and capital gain distributions received
on the shares of a Designated Investment Company other than Kemper Bond
Enhanced Securities Trust shall be reinvested in such shares. Any distributions
from the Kemper Bond Enhanced Securities Trust shall be invested in one of the
other Designated Investment Companies set forth in the prospectus and selected
by the Grantor, or in the absence of a selection will be invested in the Kemper
Money Market Fund-Government Securities Portfolio.
3. DISTRIBUTIONS: Notwithstanding the provisions of Article IV, if the Grantor
or a beneficiary does not choose a method of distribution in accordance with
Article IV, the Trustee is authorized, but is not required, to elect a
distribution option other than a single sum payment, to make distributions
pursuant to such election in kind, and to liquidate sufficient shares of a
Designated Investment Company to withhold federal income tax from distributions
as required by law. Further, the Trustee shall not be responsible for any
distribution or failure to distribute in the absence of written instructions
acceptable to the Trustee from the Trustee from the Grantor or beneficiary in
accordance with Article IV including, but not limited to, any tax or penalty
resulting from such distribution or failure to distribute.
4. AMENDMENT AND TERMINATION: The Grantor may, at any time, and from time to
time, terminate the Trust in whole or in part by delivering to the Trustee a
signed written copy of such termination and the Grantor delegated to the
Trustee the right to amend the Trust (including retroactive amendments) by
written notice to the Grantor mailed to his last address known to the Trustee,
and the Grantor shall be deemed to have consented to any such amendment,
provided that no amendment shall cause or permit any part of the asset of the
Trust Account to be diverted to purposes other than for the exclusive benefit
of the Grantor or beneficiaries, and no amendment shall be made except in
accordance with any applicable laws and regulations affecting this Trust.
5. RESIGNATION OR REMOVAL OF TRUSTEE: The Trustee may resign at any time upon
thirty (30) days of notice in writing to the Grantor, and may be removed by the
Grantor at any time upon thirty (30) days notice in writing to the Trustee.
Upon such resignation or removal, the Grantor shall appoint a successor
Trustee, which successor shall be a "bank" as defined in section 408(n). Upon
receipt by the Trustee of written acceptance of such appointment by the
successor Trustee, the Trustee shall transfer and pay over to such successor
the assets of the Trust Account and all records pertaining thereto. The Trustee
is authorized, however, to reserve such sum of money as it may deem advisable
for payment of all its fees, compensation, costs and expenses, or for payment
of any other liability constituting a charge on or against the assets of the
Trust Account or on or against the Trustee, which any balance of such reserve
remaining after the payment of such items to be paid over to the successor
Trustee. The successor Trustee shall hold the assets paid over to it under
terms similar to those of this Agreement that qualify under the provisions of
the Internal Revenue Code. If within thirty (30) days after the Trustee's
resignation or removal the Grantor has not appointed a successor trustee, which
has accepted with appointment, the Trustee shall appoint such successor itself.
6. TRUSTEE'S ANNUAL FEES: The Grantor shall be charged by the Trustee for its
services here-under in such amount as the Trustee shall establish from time to
time. Sufficient shares may be liquidated from the Trust Account to pay the
fee. The annual fee in effect on the date of this agreement is set forth in the
Application Guide. A different fee may be substituted at any time upon written
notice to the Grantor. A Grantor who does not consent to such new fee should
terminate this agreement pursuant to Paragraph 4 of Article IX within 30 days
of the notice to the new fee. If no such termination is made within 30 days of
the notice of the new fee, the Grantor will be deemed to have consented to the
new fee.
7. STATE LAW REQUIREMENTS: This Trust shall be construed, administered and
enforced according to the laws of the State of Missouri.
8. EXCESS CONTRIBUTIONS: If, because of an erroneous assumption as to earned
income for any other reason, a contribution which is an excess contribution is
made on behalf the Grantor for any year, adjustment of such excess contribution
shall be in accordance with the provisions of this paragraph. The full amount
of such excess contribution and net income attributable thereto shall be
distributed to the Grantor, in cash or kind upon written notice to the Trustee
from the Grantor which states the amount of such excess contribution.
9. INALIENABILITY OF BENEFITS: The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment, execution or levy
of any kind, and any attempt to cause such benefits to be subjected shall not
be recognized, except to such extent as may be required by law.
10. EXCHANGE PRIVILEGE: With respect to any of the Designated Investment
Company shares, the Grantor may, upon submission of written instructions
acceptable to the Trustee, cause such shares to be exchanged for shares of any
other Designated Investment Company meeting the requirements of this Trust upon
the terms and within the limitations imposed by the then current prospectus of
such investment company.
11. DESIGNATION OF BENEFICIARY: The Grantor shall have the right, by written
notice to the Trustee, to designate or change a beneficiary to receive any
benefit to which such Grantor may be entitled in the event of the Grantor's
death prior to the complete distribution of such benefit. If no such designation
is in effect on a Grantor's death, the beneficiary shall be the Grantor's
estate.
12. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS: Neither the Trustee
nor the Designated Investment Company will under any circumstances be
responsible for the timing, purpose or propriety of any contribution or of any
distribution made hereunder, nor shall the Trustee or the Designated Investment
Company incur any liability or responsibility for any tax imposed account of
any such contribution or distribution. Without limiting the generality of the
foregoing, neither the Trustee nor the Designated Investment Company is
obligated to make any distribution absent a specific direction from the Grantor
or the designated beneficiary to do so.
[KEMPER MUTUAL FUNDS LOGO]
INVESTMENT MANAGER:
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER:
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
Trustee Signature INVESTORS FIDUCIARY TRUST COMPANY Grantor's Signature
- --------------------------------------------------------------------------------
IRA-10B 2/95 203932
<PAGE> 4
IRA DISCLOSURE STATEMENT IMPORTANT--PLEASE RETAIN
IRAs: AN INTRODUCTION
WHAT IS AN IRA?
Your Individual Retirement Account (IRA) is a trust created for the exclusive
benefit of you and your beneficiaries. It is created by a written instrument
that meets the following requirements:
- - Contribution restrictions stated in Article I of the trust instrument.
- - Investment restrictions stated in Article III of the trust instrument.
- - Distribution of benefits requirements contained in Article IV of the trust
instrument.
- - The trustee is a bank as defined in the Internal Revenue Code.
- - You will have a non-forfeitable interest in your account.
ESTABLISHING THE PLAN
HOW DO I ESTABLISH MY KEMPER IRA?
Read this disclosure statement and retain it for your files.
Complete and sign the correct application. (2 applications are necessary if
both you and your spouse wish to establish an IRA).
MAKE CHECK PAYABLE TO THE KEMPER FUND OF YOUR CHOICE, AND MAIL COMPLETED
APPLICATION AND CONTRIBUTION TO:
INVESTORS FIDUCIARY TRUST COMPANY (IFTC)
P.O. BOX 419356
KANSAS CITY, MO 64141-6356
MAY I REVOKE MY IRA?
You have the right to revoke your account within seven days of the date on
which your application was signed. To revoke your account write to IFTC at the
address referenced above.
ELIGIBILITY
WHO CAN ADOPT AN IRA?
You may adopt an IRA if you are receiving compensation from employment,
earnings from self-employment or alimony, and have not attained age 70 1/2. You
may also adopt an IRA if you have received a qualifying rollover distribution
from another plan within the preceding 60 days or if you wish to transfer
assets from another IRA. See "Rollover/Transfer of Assets" section on the
following page.
WHAT ABOUT A NON-WORKING SPOUSE?
A spousal IRA allows an individual who qualifies for an IRA and his or her
non-working spouse to set up two IRA accounts: one for each spouse. See
"Contribution Limits" section below.
CONTRIBUTION LIMITS
HOW MUCH CAN I CONTRIBUTE EACH YEAR?
If you are receiving compensation you may contribute the lesser of $2,000 or
100% of your compensation.
For a year in which you are receiving compensation, but your spouse is not, you
can set up an IRA for your spouse and contribute the lesser of: $2,250 or 100%
of your compensation. The maximum contribution must be split between the two
accounts so that no more than $2,000 is placed in either account.
No contribution will be allowed for the year in which you attain age 70 1/2 and
thereafter.
FOR MY IRA, WHAT IS CONSIDERED COMPENSATION?
Compensation is defined as wages, salaries or professional fees, other amounts
received for personal services actually rendered (including income earned from
self-employment), and any taxable alimony received. It does not include earnings
from property such as interest, rents and dividends. If your compensation is
not includable in gross income (such as income earned from sources outside the
United States, it is not treated as compensation in determining the maximum
limitation for the deduction.
WHEN CAN A CONTRIBUTION BE MADE?
Your annual contribution may be made during the taxable year or no later than
the due date for filing your federal income tax return not including extensions.
WHAT HAPPENS IF I OVER-CONTRIBUTE TO MY IRA?
There is a 6% annual excise tax on contributions to an IRA over the annual
contributions limit. However, if you withdraw the excess contribution and
earnings thereon from the IRA before the due date for filing your federal
income tax return (including extensions) for the year of the excess
contribution, the excise tax is not imposed, the withdrawn contribution is not
taxable and the withdrawn earnings are taxable in the year the excess
contribution was made.
If the excess is not withdrawn, you may use the excess as part of next year's
contribution by reducing the next year's contribution by the amount of the
excess. You will, however, be liable for the 6% excise tax on the
over-contributed amount for each year it remains an excess contribution.
HOW DOES MY MARITAL STATUS AFFECT MY IRA?
Since a contribution is available to each eligible individual, both husband
and wife can contribute if each individually is eligible and each adopts a
separate individual retirement savings program. The contribution limitation is
computed separately for each spouse, whether or not they file a joint tax
return.
CAN MY EMPLOYER CONTRIBUTE TO MY IRA?
Yes, but these contributions are included in your gross income as compensation
and must be claimed as a deduction on your federal income tax return, just as
if you had received the money and made the contribution.
DEDUCTION LIMITS
HOW MUCH CAN I DEDUCT EACH YEAR?
If you and your spouse are not covered by a retirement plan at work, the
amount you can deduct is the same as the amount you can contribute (see
"Contribution Limit" above). If you or your spouse are covered by a retirement
plan at work, the $2,000 limit is reduced $10 for each $50 that your adjusted
gross income exceeds:
$40,000 (married filing jointly), $25,000 (single), or $0 (married filing
separately), and the $2,250 limit is reduced $10 for each $44.44 that your
adjusted gross income exceeds $40,000.
DISTRIBUTION FROM YOUR IRA
WHEN CAN I TAKE MONEY OUT OF MY IRA?
You can begin to take money out of your IRA without penalty after age 59 1/2,
but you must begin to take money out by April 1 following the year in which you
attain age 70-1/2.
WHAT IF I TAKE A DISTRIBUTION BEFORE AGE 59 1/2?
There is an additional tax equal to 10% of the taxable amount of a distribution
before age 59 1/2, unless you are disabled or take your distributions as a
series of substantially equal periodic payments over your life or life
expectancy or the joint lives or life expectancies of you and your beneficiary.
The amounts of such periodic payments may not be changed before the later of
five years or at attainment of age 59 1/2.
HOW ARE MY DISTRIBUTIONS TAXED?
The distributions are generally taxed as ordinary income in the year they are
received. Distributions are non-taxable to the extent they represent a return
of non-deductible contributions.
The non-taxable percentage of such a distribution is determined by dividing
the undistributed non-deductible contributions to all your IRAs by the total
value of all your IRAs (including SEPs and rollover IRAs).
DO I HAVE A CHOICE ON HOW TO RECEIVE MY DISTRIBUTIONS UPON RETIREMENT?
Yes, subject to the minimum distribution incidental benefit (MDIB) requirement
described below, distributions may be taken as:
- - Regular payments over the joint lives or life expectancies of you and your
designated beneficiary.
- - An annuity purchased with the money in your IRA payable over the joint lives
or life expectancies of you and your beneficiary.
- - Annuity or regular payments over any period shorter than the above.
- - A lump sum.
WHAT IS THE MINIMUM ANNUAL DISTRIBUTION?
The amount to be distributed for each year (commencing with the year in which
you attain age 70 1/2) must be at least an amount equal to the quotient
obtained by dividing the value of the IRA by your life expectancy or by the
joint and last survivor life expectancy of you and your designated beneficiary,
subject to the MDIB requirement described on the next page. The minimum
distribution for the year in which you attain age 70 1/2 may be deferred until
April 1 of the following year. Note that if you elect to defer the minimum
distribution for the year you attain age 70 1/2 to the following year, you will
be required to take 2 years' minimum distributions in that year. Life expectancy
and joint and last survivor expectancy are computed by use of the tables
contained in IRS Publication 590. For purposes of this computation, the life
expectancy of you or your spouse may be recalculated annually, while the life
expectancy of a nonspouse beneficiary may not be recalculated.
<PAGE> 5
IRA DISCLOSURE STATEMENT (CONTINUED)
WHAT IS THE MINIMUM DISTRIBUTION INCIDENTAL BENEFIT (MDIB) REQUIREMENT?
The MDIB Requirement requires that a death benefit under an IRA be incidental
to the primary purpose of the IRA which is to provide your retirement benefits.
Thus, if your designated beneficiary is more than 10 years younger, you must
assume he or she is exactly 10 years younger than you to determine your joint
and last survivor life expectancy.
WHAT IF I HAVE MORE THAN ONE IRA?
If you have more than one IRA, you may take the total amount of your minimum
distribution amounts from one IRA or you may allocate it among your IRAs.
WHAT IF I TAKE AN AMOUNT LESS THAN DESCRIBED ABOVE?
A 50% excise tax will be imposed on the difference between the minimum payout
required and the amount actually paid, unless the underdistribution was due to
reasonable cause.
WHAT ABOUT FEDERAL INCOME TAX WITHHOLDING?
The Trustee may be required to withhold 10% from any taxable distribution from
an IRA unless you elect no withholding at the time your distributions begin.
Whether or not you allow the Trustee to withhold, you may be required to make
quarterly estimated tax payments.
SPECIAL CONSIDERATIONS
CAN I USE MY IRA AS COLLATERAL FOR A LOAN?
No. If you use any portion of your IRA as security for a loan the portion so
used will be treated as distributed to you.
HAS THIS PLAN BEEN SUBMITTED TO THE IRS FOR APPROVAL?
The use of IRS Form 5305 (included in this packet) makes such submission
unnecessary.
ROLLOVER/TRANSFER OF ASSETS DO DISTRIBUTIONS FROM MY EMPLOYER'S TAX-QUALIFIED
PLAN QUALIFY FOR IRA ROLLOVER TREATMENT?
Yes, part or all of a lump-sum distribution or a series of distributions if
made during one calendar year as the result of termination of employment,
attainment of age 59 1/2, disability, death, or plan termination may be rolled
over into an IRA.
You do not have to roll over the total taxable amount of the distribution, but
whatever portion is not rolled over will be taxed as ordinary income in the
year received and will not qualify for either long-term capital gains or
special averaging. The maximum amount that can be rolled over is the total
distribution minus the dollar amount of any voluntary non-deductible
contributions you made.
Please consult your accountant regarding current IRS regulations on the tax
treatment of rollovers from tax-qualified plans.
WHEN MUST THE ROLLOVER BE COMPLETED?
The check and application must be sent to the IRA trustee within 60 days of
receipt of a qualifying distribution.
CAN I TAKE A TAX DEDUCTION FOR A ROLLOVER?
No. You are not allowed to take a tax deduction for the amount transferred
from a qualified employer's plan or retirement savings program to an IRA.
WHAT IS THE DIFFERENCE BETWEEN A ROLLOVER AND A DIRECT TRANSFER OF ASSETS?
With a rollover, you actually receive the distribution from an IRA or qualified
employer's plan. A direct transfer of assets occurs when the existing trustee or
custodian makes the check payable and sends the distribution directly to the
new trustee or custodian.
A rollover distribution from an IRA may be made to you only once a year. The
one year period begins on the date you receive the IRA distribution. There is
no minimum holding period for a direct transfer of assets from one trustee to
another.
WHAT STEPS DO I NEED TO TAKE TO PROCESS A ROLLOVER OR DIRECT TRANSFER OF
ASSETS?
You can do a rollover by notifying your current IRA trustee or custodian in
writing that you wish to take a distribution from your IRA and roll over to a
new IRA. Once the distribution is received you may either endorse the check over
to the new trustee or deposit the check received and issue a new check for the
amount received to the new trustee and send it along with an IRA Application to
the new trustee.
To accomplish a direct transfer of assets, you simply notify your existing
trustee in writing of your intentions. Then send a copy of the letter along
with an IRA application to the new trustee. Your old trustee will send your
distribution directly to the new trustee.
REPORTING REQUIREMENTS
DOES THE IRA REQUIRE A LOT OF PAPERWORK EACH YEAR?
No, unless you have to pay an excise or penalty tax or you received a
nontaxable distribution or you made a nondeductible contribution (other than a
rollover), no special income tax return is required. If an excise or penalty tax
is due you must file IRS Form 5329 with your Form 1040. If you designate an IRA
contribution as nondeductible you must attach Form 8606 to your 1040 for the
year of the nondeductible contribution and for any year you take a
non-deductible distribution (other than a rollover to another IRA).
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP)
DOES THE KEMPER IRA QUALIFY FOR A SEP?
Yes, but the SEP must be established and maintained by your employer. More
information about establishing a SEP is available from Kemper upon request.
WHAT IS THE MAXIMUM DEDUCTION FOR A SEP-IRA?
The lesser of 15% of your compensation with respect to the sponsoring employer
or $30,000.
FINANCIAL DISCLOSURE
WHAT ELSE DO I NEED TO KNOW ABOUT KEMPER'S IRAs?
Information about the fund or trust you have selected is included in the
appropriate prospectus. The acquisition cost and how the value of your account
changes are described in the prospectus.
A SHARES
If $1,000 is invested in Kemper Technology Fund, Kemper Total Return Fund,
Kemper Growth Fund, Kemper Small Capitalization Equity Fund, Kemper
International Fund or Kemper Blue Chip Fund, the amount of the sales charge
will be $57.50. If $1,000 is invested in Kemper Target Equity Funds, the amount
of the sales charge will be $50. If $1,000 is invested in Kemper High Yield
Fund, Kemper Income and Capital Preservation Fund, Kemper Diversified Income
Fund, Kemper Global Income Fund, Kemper U.S. Mortgage Fund or Kemper U.S.
Government Securities Fund, the amount of the sales charge will be $45. If
$1,000 is invested in Kemper Adjustable Rate U.S. Government Fund or Kemper
Short-Intermediate Government Fund, the amount of the sales charge will be $35.
If $1,000 is invested in Kemper Money Market Fund-Government Securities
Portfolio or Kemper Money Market Fund-Money Market Portfolio, there will be no
sales charge.
B SHARES
If $1,000 is invested in Kemper Mutual Funds B shares, there is no initial
sales charge. B shares are subject to an annual distribution fee and, on
redemption, may be subject to a contingent deferred sales charge and have a
conversion priveledge to A shares after 6 years.
C SHARES
If $1,000 is invested in Kemper Mutual Funds C shares, there is no initial
sales charge. C shares are subject to an annual distribution fee and have no
conversion priveledge.
There is an annual $12 trustee fee for the Kemper Family of Funds. An
individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by IFTC. This fee is subject to
change as provided in Article IX, Paragraph 6 of the trust instrument. These
fees are paid either by a separate check or by the liquidation of sufficient
shares or units. If not paid by a separate check, IFTC will automatically
deduct the annual trustee fee on or about May 1. If an account is opened after
May 1, IFTC will deduct the $12 annual trustee fee on or about December 1 in
the year the account is opened. (See "Application Guide" for more details.)
This fee is subject to change upon notice by IFTC to you as provided in Article
IX, Paragraph 6 of the trust instrument.
The deadline for an IRA contribution is generally April 15 of the year
following the taxable year for which the contribution will apply. IFTC and
Kemper will not be responsible for postal delays or delays resulting from
incomplete applications. Applications received by IFTC postmarked after the
deadline and improperly completed applications will be returned to the sender.
IRA-10A 7/94 [KEMPER MUTUAL FUNDS LOGO]
203921
<PAGE> 6
<TABLE>
<S> <C>
IRA APPLICATION (PLEASE PRINT) FOR ASSISTANCE IN COMPLETING THIS FORM, CALL
KEMPER SHAREHOLDER SERVICES AT 1-800-621-1048.
1. INFORMATION ABOUT YOU For internal use only
Name ___________________________________________________________________________
Address ________________________________________________________________________
City _______________________________ State _____________________ Zip ___________
Daytime Phone Number(_____)_____________________________________________
Social Security Number ________/___________/_________ Date of Birth ____/____/____
2. YOUR BENEFICIARIES (PLEASE INCLUDE SOCIAL SECURITY NUMBERS FOR ALL BENEFICIARIES)
Primary Beneficiary Name _____________________________________ Secondary Beneficiary Name ________________________________________
Address ______________________________________________________ Address ___________________________________________________________
City _____________________________ State __________ Zip ______ City _____________________________ State _______________ Zip ______
Relationship__________________________________________________ Relationship ______________________________________________________
SS#_____________/_____/__________ Date of Birth ____/____/____ SS# _______________ /______ /__________ Date of Birth ____/____/____
3. TYPE OF IRA (CHECK ONLY ONE)
/ / Individual / / Simplified Employee Plan (SEP) / / Spousal
4. TYPE OF TRANSACTION (CHECK ALL BOXES THAT APPLY)
/ / Contribution: (CIRCLE ONE) A. Individual B. Employer (ONLY APPLIES TO SEPS)
/ / Direct Transfer of Assets (PLEASE ATTACH IRA TRANSFER FORM)
/ / Rollover from: (CIRCLE ONE) A. Another Annual B. Another IRA, where the initial contribution C. A Qualified
Contribution IRA was from a qualified retirement plan Retirement Plan
/ / I have reached the age of 59 1/2 and am eligible to take a distribution without tax penalty from my IRA: (CIRCLE ONE)
A. IRA Distribution Form B. Please send my
is attached dividends in cash
5. YOUR INVESTMENT CHOICES ($250 MINIMUM PER FUND TO ESTABLISH AN IRA. $50 IF NUMBER 7 [BANK DIRECT DEPOSIT] SELECTED.)
(SEE FRONT CARD FOR FUND NAMES. NOTE NUMBER 9 BELOW REGARDING RECEIPT OF PROSPECTUS.)
/ / A Shares / / B Shares / / C Shares 199___ 199___
(PLEASE CHOOSE SHARE CLASS) (CIRCLE ONE) (CIRCLE ONE)
Indiv/Employer Indiv/Employer
Contribution Contribution Rollover Transfer
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Trustee Fee (OPTIONAL) $____________
6. TELEPHONE EXCHANGES
I authorize exchanges between Kemper Mutual Funds upon instruction from any person by telephone. / / YES / / NO
NOTE: IF NEITHER BOX IS CHECKED, THE TELEPHONE EXCHANGE PRIVILEGE WILL BE PROVIDED.
7. BANK DIRECT DEPOSIT
I authorize the Fund's agent to draw checks or initiate Automated Clearing House ("ACH") debits against the bank account on the
attached voided check in the amount of $_____ (minimum $50), beginning on the ____ day of _____ month and on the same day of each
month thereafter. If the date falls on a weekend or holiday, funds will be invested on the next business day. The investment will be
applied to the following Fund account(s). A $50 minimum per Fund applies.
Fund Name ______________________________ $_______________ (NOTE: THE BANK ACCOUNT MUST
Fund Name ______________________________ $_______________ HAVE CHECK OR DRAFT WRITING
Fund Name ______________________________ $_______________ PRIVILEGES.)
8. YOUR FINANCIAL REPRESENTATIVE
Representative _____________________________ Name of Firm ________________________________________________________
Address_____________________________________ City __________________________ State __________________ Zip ________
Rep. Daytime Phone (___)___________ Rep.#____________ Dealer #______________ Branch #______________
9. YOUR SIGNATURE BY SIGNING THIS APPLICATION ESTABLISHING AN IRA, THE UNDERSIGNED:
- - Establishes an Individual Retirement Account pursuant to the Employee Retirement Income Security Act of 1974 and in accordance
with all the terms of the Trust Agreement on Form 5305;
- - Appoints Investors Fiduciary Trust Company, or its successors, as Trustee of the account;
- - States that he or she has received, read, accepts and specifically incorporates herein the Trust Agreement on Form 5305 and
Disclosure Statement;
- - Agrees to promptly give instructions to the Trustee necessary to enable the Trustee to carry out its duties under the Trust
Agreement and;
- - Agrees that he or she has received and read the prospectus for the investment(s) selected and that this account will be
subject to the prospectus as amended from time to time.
Under penalties of perjury, I certify that the number shown on this form is my correct social security number, and that I have not
been notified by the IRS that I am subject to back-up withholding. I certify that I have the power and authority to establish this
account and select the privileges requested. Account holders can request the following telephone privilege on this application:
telephone exchange transactions. Please note that the telephone exchange privilege is automatic unless the account holder refuses
it. Neither a Fund nor its agents will be liable for any loss, expense or cost arising out of any telephone request pursuant to
this privilege, including any fraudulent or unauthorized request, and THE ACCOUNT HOLDER WILL BEAR THE RISK OF LOSS, so long as the
Fund or its agent reasonably believes, based upon reasonable verification procedures, that the telephonic instructions are genuine.
The verification procedures include recording instructions, requiring certain identifying information before acting upon
instructions, and sending written confirmations.
Your Signature _________________________________________________ Date ____________________________________________________________
IRA-10 2/95 203911
</TABLE>
<PAGE> 7
IRA APPLICATION GUIDE
1. INFORMATION ABOUT YOU
Fill this section out completely.
2. YOUR BENEFICIARIES
You can change your beneficiaries by writing a letter of instruction to
Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O. Box 419415,
Kansas City, MO 64141-6415. Reference your name, fund, and fund account number.
If you have more than one beneficiary, please identify the primary and
secondary beneficiary.
3. TYPE OF IRA
INDIVIDUAL: A working individual may contribute up to $2,000 or 100% of
compensation, whichever is less.
SIMPLIFIED EMPLOYEE PLAN (SEP): Must be established and maintained by the
employer. The maximum contribution is the lesser of 15% of your compensation
or $30,000. For more information on establishing a SEP, call Kemper
Shareholder Services at 1-800-621-1048.
SPOUSAL: Two applications are necessary if both you and your spouse wish to
establish an IRA. If you're contributing for both you and your non-working
spouse, the maximum contribution is the lesser of 100% of your compensation or
$2,250. The maximum contribution must be split between the two accounts so that
no more than $2,000 is placed in either account.
4. TYPE OF TRANSACTION
DIRECT TRANSFER OF ASSETS: When changing custodians on an existing IRA, the IRA
must be released by the present custodian. To obtain information concerning the
transfer of IRA assets call Kemper Shareholder Services at 1-800-621-1048.
ROLLOVER: With a rollover, you actually receive a distribution from an IRA, or
qualified employer's plan. Once the distribution is received, you may either
endorse the check over to the new trustee or deposit the check received and,
within 60 days of receipt, issue a new check for the amount received to the new
trustee and send it along with an IRA Application to the new trustee.
You may roll over your IRA as many times as you wish. However, each time you do
roll over, the funds must remain with the new trustee for at least 12 months.
(PLEASE NOTE: CONTACT YOUR ACCOUNTANT ABOUT THE TAX CONSEQUENCES OF RECEIVING
A CASH DISTRIBUTION FROM YOUR EMPLOYER'S TAX-QUALIFIED PLAN BEFORE
FORWARDING A CHECK TO KEMPER TO OPEN AN IRA. UNDER CURRENT IRS PROVISIONS, THERE
MAY BE TAX LIABILITY ASSOCIATED WITH TAKING PHYSICAL POSSESSION OF YOUR
DISTRIBUTION, INSTEAD OF AUTOMATICALLY TRANSFERRING YOUR BALANCE INTO A KEMPER
IRA).
5. YOUR INVESTMENT CHOICES
Elect your investment choice(s) from among the Kemper Funds for which you have
received a prospectus. The minimum investment to establish an IRA is $250 per
Fund; the minimum subsequent investment is $50. The minimum initial investment
is $50 per Fund if the Bank Direct Deposit option is selected.
TRUSTEE FEE
There is an annual $12 trustee fee for the Kemper Family of Funds.
An individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by Investors Fiduciary Trust
Company. This fee is subject to change as provided in Article IX of the
Individual Retirement Trust Account Form.
WHEN AND HOW THE $12 FEE IS AUTOMATICALLY DEDUCTED
If the $12 annual trustee fee is not paid by separate check, Investors
Fiduciary Trust Company will automatically deduct the $12 fee from your
account. Annual trustee fees are assessed on a calendar year basis.
If you opened your account prior to May 1st of the calendar year, the fee will
be deducted on May 1st. If you opened your account after May 1st of that
calendar year, the $12 fee will be deducted on December 1st. In every calendar
year after the year in which you opened your account, the fee will be deducted
on May 1st.
WHAT TO DO IF YOU ELECT TO PAY THE $12 ANNUAL FEE DIRECTLY
- - You may pay the first year fee by including $12 with your first contribution
and making the proper entry in Section 5 of the IRA Application.
- - If you elect to send in the $12 annual fee by separate check in subsequent
years, make sure to do so prior to the May 1st automatic deduction. Send a
letter referencing the exact name on your account, the fund name and the
account number. Make your check payable to Investors Fiduciary Trust Company
and mail to Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O.
Box 419356, Kansas City, MO 64141-6356.
6. TELEPHONE EXCHANGES
To make exchanges, call 1-800-621-1048. Please see the prospectus for exchange
privilege limitations. The exchange privilege may be modified, suspended or
terminated by a Fund.
7. BANK DIRECT DEPOSIT
With Bank Direct Deposit, you can make automatic contributions for as little as
$50 from your checking account into your Kemper IRA. There is no service
charge, no checks to write and it's a great way to invest for the future.
8. YOUR FINANCIAL REPRESENTATIVE
You must complete this section if you have a financial representative. The
information is necessary for proper identification of the account and can be
obtained from your representative.
9. YOUR SIGNATURE
Please be sure to sign and date this section.
10. RETURN YOUR APPLICATION
IF NOT A TRANSFER...
Mail the IRA APPLICATION, a check made payable to Kemper Fund of your choice
(and the IRA DISTRIBUTION FORM if applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419356 - KANSAS CITY, MO 64141-6356
FOR TRANSFERS ONLY...
Mail the IRA Application, IRA Transfer Form (and the IRA Distribution form if
applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419222 - KANSAS CITY, MO 64141-6222
FOR MORE INFORMATION
If you need further information, please contact your financial representative
directly or call Kemper Shareholder Services at 1-800-621-1048 7:00 a.m. to
6:00 p.m. Central Time (Monday-Friday) and 9:00 a.m. to 2:00 p.m. (Saturday).
If you have tax or legal questions, contact your tax advisor or any district
office of the IRS.
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 1
EXHIBIT 99.B16
EXHIBIT OF PERFORMANCE CALCULATIONS
This exhibit reflects the calculation of certain performance figures
that appear under "Performance" in the Part B Statement of Additional
Information ("Part B") of Kemper Technology Fund (the "Fund").
A. TOTAL RETURN.
1. Formula. The total return performance of the Fund for a specified
period equals the change in the value of a hypothetical $10,000 investment
("Initial Investment") from the beginning of the period to the end of the
period. It is assumed that all dividends are reinvested. Total return may
be computed either with or without adjustment for sales charge. It may be
expressed either as a dollar value change or as a percentage change. Total
return information is set forth in the Total Return Table that appears
under "Performance" in the Part B.
2. Performance Reflected. The representative total return calculations
reflected in this Section A are for the Fund for the one-year period ended
October 31, 1988.
3. Unadjusted Total Return. The column labeled "Percentage Increase
(unadjusted)" in the Total Return Table shows the total return of the Fund
as a percentage change without adjustment for any sales charge. The
percentage change in value of the Initial Investment for the period (i.e.,
the unadjusted total return) is calculated by determining the percentage
increase in the net asset value per share ("NAV") of the Fund over the
period and adjusting that for the dividends reinvested over the period.
There were two dividends during the period. The percentage change is then
calculated as follows:
Shares X Ending NAV
Percentage Change = ------------------- - 1
Beginning NAV
Ending NAV = NAV on October 31, 1988 = $9.39/Share
Beginning NAV = NAV on October 31, 1987 = $11.76/Share
Shares = Number of shares at the end of the period assuming a one share
investment at the beginning of the period and reinvestment of
dividends. "Shares" is computed under the following formula.
DIV DIV DIV
1 2 n
---- ---- -----
Shares = (1 + RNAV ) X (1 + RNAV )...X (1 + RNAV )
1 2 n
<PAGE> 2
DIV = Dollar amount distributed for the nth dividend of the
n period. n varies from 1 to 2 in the present example since there
were two dividends distributed.
RNAV = NAV on the date that the nth dividend in the period was
n reinvested. n varies from 1 to 2 in the present example.
The following data is presented:
n DIV RNAV
n n
--- ----- -----------
1 $2.55 $8.77/Share
2 0.07 9.24
$2.55 $0.07
Shares = (1+------------) X (1+-----------) = 1.300542
$8.77/Share $9.24/Share
1.300542 x $9.39/Share
Percentage Change = ---------------------- - 1 = 0.0384
$11.76/Share
The decimal return is converted to a percentage by multiplying by 100.
0.0384 x 100 = 3.84%
The column labeled "Ending Value (unadjusted)" in the Total Return Table
shows the total return of the Fund as a dollar value change without
adjustment for any sales charge. The Ending Value (unadjusted) is equal to
the Initial Investment ($10,000) plus the percentage change of such
investment over the period (calculated as described above).
$10,000 + (3.84% of $10,000) = $10,000 + (0.0384 x $10,000) = 10,384
4. Adjusted Total Return. The column labeled "Percentage Increase
(adjusted)" in the Total Return Table shows the total return of the Fund as
a percentage change with adjustment for the maximum sales charge.
The maximum sales charge for the Fund is 8.5% of the offering price. On
the $10,000 Initial Investment, the 8.5% sales charge would equal $850.
8.5% of $10,000 = 0.085 x $10,000 = $850
The Initial Investment adjusted for the maximum sales charge ("adjusted
Initial Investment") is calculated by deducting the sales charge from the
Initial Investment.
$10,000 - $850 = $9,150
The column labeled "Ending Value (adjusted)" in the Total Return Table
shows the total return of the Fund as a dollar value change with adjustment
for the maximum sales charge. The Ending Value (adjusted) is equal to the
adjusted Initial Investment plus the percentage change of such investment
<PAGE> 3
over the period. The percentage change over the period is calculated in
Sub-section 3 above.
$9,150 + (3.84% of $9,150) = $9,150 + (0.0384 x $9,150) = $9,502
Percentage Increase (adjusted) equals the percentage change of the Ending
Value (adjusted) from the Initial Investment.
$9,502
------- - 1 = 0.9502 - 1 = 0.0498
$10,000
The decimal return is converted to a percentage by multiplying by 100.
-0.0498 x 100 = -4.98%
B. AVERAGE ANNUAL TOTAL RETURN.
1. Formula. The average annual total return of the Fund for a specific
period is found by taking a hypothetical $1,000 investment ("Initial
Investment") at the beginning of the period, adjusting for the maximum
sales charge, and computing the redeemable value at the end of the period
("Redeemable Value"). 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. Thus, the following formula applies:
Redeemable Value 1/N
Average Annual Total Return = (------------------) - 1
Initial Investment
2. Performance Reflected. The representative average annual total return
calculation reflected in this Section B is for the Fund for the period
from October 31, 1978 to October 31, 1988.
3. Calculation. The maximum sales charge for the Fund is 8.5% of the
offering price. On the $1,000 Initial Investment, the 8.5% sales charge
would equal $85.
8.5% of $1,000 = 0.085 x $1,000 = $85
The Initial Investment adjusted for the maximum sales charge ("adjusted
Initial Investment") is calculated by deducting the sales charge from the
Initial Investment.
$1,000 - $85 = $915
The Redeemable Value is equal to the adjusted Initial Investment plus the
percentage change in the value of such investment over the period. The
percentage change over the period is calculated in the same manner as in
Sub-section 3 of Section A above. The percentage change over the period is
306.73%.
Redeemable Value = $915 + (306.73% of $915) = $915 + (3.0673 + $915) =
$3,722
<PAGE> 4
The period covered is from October 31, 1978 to October 31, 1988 or 10
years.
N = number of years in the period = 10
Using the formula provided above, average annual total return for the
period may then be calculated.
The Redeemable Value is divided by the Initial Investment.
($3,722 / $1,000) = 3.722
This quotient is taken to the Nth root.
The 10th root of 3.722 = 1.1404
1 is subtracted from the result.
1.1404 - 1 = 0.1404
The decimal return is converted to a percentage by multiplying by 100.
0.1404 x 100 = 14.04%
<PAGE> 1
EXHIBIT 99.B18
KEMPER MUTUAL FUNDS
MULTI-DISTRIBUTION SYSTEM PLAN
WHEREAS, each investment company adopting this
Multi-Distribution System Plan (each a "Fund" and collectively
the "Funds") is an open-end management investment company
registered under the Investment Company Act of 1940 (the "1940
Act");
WHEREAS, Kemper Financial Services, Inc. ("KFS") and/or
Dreman Value Advisors, Inc. ("DVA") serves as investment adviser
and Kemper Distributors, Inc. ("KDI") serves as principal
underwriter for each Fund;
WHEREAS, each Fund has a non-Rule 12b-1 administrative
services agreement with KDI providing for a service fee at an
annual rate of up to .25% of average daily net assets
("Administrative Plan");
WHEREAS, each Fund has established a Multi-Distribution
System enabling each Fund, as reflected in its prospectus, to
offer investors the option of purchasing shares (a) with a
front-end sales load (which may vary among Funds) and a service
fee (the "Front-End Load Option" or "Class A shares");
(b) without a front-end sales load, but subject to a Contingent
Deferred Sales Charge ("CDSC") (which may vary among Funds), a
Rule 12b-1 plan providing for a distribution fee and a service
fee (the "Deferred Option" or "Class B shares"); (c) without a
front-end sales load or CDSC but subject to a Rule 12b-1 Plan
providing for a distribution fee and to a service fee (the "Level
Load Option" or "Class C shares"); and (d) for certain Funds,
without a front-end load, CDSC, distribution fee or service fee
("Institutional Option" or "Class I shares"); and
WHEREAS, Rule 18f-3 under the 1940 Act permits open-end
management investment companies to issue multiple classes of
voting stock representing interests in the same portfolio
notwithstanding Sections 18(f)(1) and 18(i) under the 1940 Act
if, among other things, such investment companies adopt a written
plan setting forth the separate arrangement and expense
allocation of each class and any related conversion features or
exchange privileges;
NOW, THEREFORE, each Fund, wishing to be governed by Rule
18f-3 under the 1940 Act, hereby adopts this Multi-Distribution
System Plan as follows:
<PAGE> 2
1. Each class of shares will represent interests in the
same portfolio of investments of a Fund (or series), and be
identical in all respects to each other class, except as set
forth below. The only differences among the various classes of
shares of the same Fund (or series) will relate solely to:
(a) different distribution fee payments associated with any Rule
12b-1 Plan for a particular class of shares and any other costs
relating to implementing or amending such Plan (including
obtaining shareholder approval of such Plan or any amendment
thereto), which will be borne solely by shareholders of such
classes; (b) different service fees; (c) different shareholder
servicing fees; (d) different Class Expenses, which will be
limited to the following expenses determined by the Trustees to
be attributable to a specific class of shares: (i) printing and
postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses, and proxy statements
to current shareholders of a specific class; (ii) Securities and
Exchange Commission (the "Commission") registration fees incurred
by a specific class; (iii) litigation or other legal expenses
relating to a specific class; (iv) Trustee fees or expenses
incurred as a result of issues relating to a specific class; and
(v) accounting expenses relating to a specific class; (e) the
voting rights related to any 12b-1 Plan affecting a specific
class of shares; (f) conversion features; (g) exchange
privileges; and (h) class names or designations. Any additional
incremental expenses not specifically identified above that are
subsequently identified and determined to be properly applied to
one class of shares of a Fund (or series) shall be so applied
upon approval by a majority of the Trustees of such Fund,
including a majority of the Trustees who are not interested
persons of the Fund.
2. Under the Multi-Distribution System, certain expenses
may be attributable to a Fund, but not to a particular series or
class thereof. All such expenses will be borne by each class on
the basis of the relative aggregate net assets of the classes,
except in the case of a Fund that has series, in which case they
will first be allocated among series, based upon the relative
aggregate net assets of such series. Expenses that are
attributable to a particular series, but not to a particular
class thereof, will be borne by each class of such series on the
basis of the relative aggregate net assets of the classes.
Notwithstanding the foregoing, the underwriter, the investment
manager or other provider of services to any Fund may waive or
reimburse the expenses of a specific class or classes to the
extent permitted under Rule 18f-3 under the 1940 Act.
A class of shares may be permitted to bear expenses that are
directly attributable to such class including: (a) any
distribution fees associated with any Rule 12b-1 Plan for a
particular class and any other costs relating to implementing or
amending such Plan (including obtaining shareholder approval of
such Plan or any amendment thereto); (b) any service fees
attributable to such class; (c) any shareholder servicing fees
<PAGE> 3
attributable to such class; and (d) any Class Expenses determined
by the Trustees to be attributable to such class.
3. After a shareholder's Class B shares have been
outstanding for six years, they will automatically convert to
Class A shares of the same Fund (or series) at the relative net
asset values of the two classes and will thereafter not be
subject to a Rule 12b-1 Plan; provided, however, that any Class B
Shares issued in exchange for shares originally classified as
Initial Shares of Kemper Portfolios, formerly known as Kemper
Investment Portfolios (KP), whether in connection with a
reorganization with a series of KP or otherwise, shall convert to
Class A shares seven years after issuance of such Initial Shares
if such Initial Shares were issued prior to February 1, 1991.
Class B shares issued upon reinvestment of income and capital
gain dividends and other distributions will be converted to Class
A shares on a pro rata basis with the Class B shares.
4. Any conversion of shares of one class to shares of
another class is subject to the continuing availability of a
ruling of the Internal Revenue Service or an opinion of counsel
to the effect that the conversion of shares does not constitute a
taxable event under federal income tax law. Any such conversion
may be suspended if such a ruling or opinion is no longer
available.
5. To the extent exchanges are permitted, shares of any
class of a Fund will be exchangeable with shares of the same
class of another Fund, or with money market fund shares as
described in the applicable prospectus. Exchanges will comply
with all applicable provisions of Rule 11a-3 under the 1940 Act.
For purposes of calculating the time period remaining on the
conversion of Class B shares to Class A shares, Class B shares
received on exchange retain their original purchase date.
6. Dividends paid by a Fund (or series) as to each class
of its shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time, on the same day,
and will be in the same amount, except that any distribution
fees, service fees, shareholder servicing fees and Class Expenses
allocated to a class will be borne exclusively by that class.
7. Any distribution arrangement of a Fund, including
distribution fees and front-end and deferred sales loads, will
comply with Article III, Section 26, of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
8. All material amendments to this Plan for a Fund must be
approved by a majority of the members of the Fund's governing
board, including a majority of the board members who are not
interested persons of the Fund.
<PAGE> 4
Any open-end investment company may establish a
Multi-Distribution System and adopt this Multi-Distribution
System Plan by approval of a majority of the members of any such
company's governing board, including a majority of the board
members who are not interested persons of such company.
<PAGE> 1
EXHIBIT 99.B24
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ Stephen B. Timbers Trustee October 12, 1995
---------------------------
<PAGE> 2
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ David W. Belin Trustee October 12, 1995
--------------------------
<PAGE> 3
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ Lewis A. Burnham Trustee October 12, 1995
--------------------------
<PAGE> 4
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ Donald L. Dunaway Trustee October 12, 1995
--------------------------
<PAGE> 5
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ Robert B. Hoffman Trustee October 12, 1995
--------------------------
<PAGE> 6
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ Donald R. Jones Trustee October 12, 1995
--------------------------
<PAGE> 7
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ Shirley D. Peterson Trustee October 12, 1995
--------------------------
<PAGE> 8
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Technology Fund.
Signature Title Date
--------- ----- ----
/s/ William P. Sommers Trustee October 12, 1995
--------------------------
<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 1995 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000096790
<NAME> KEMPER TECHNOLOGY FUND
<SERIES>
<NUMBER> 0
<NAME> COMBINED FOR ALL CLASSES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 634,559
<INVESTMENTS-AT-VALUE> 1,010,007
<RECEIVABLES> 16,985
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,026,992
<PAYABLE-FOR-SECURITIES> 6,720
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,317
<TOTAL-LIABILITIES> 9,037
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 512,232
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,649
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 126,537
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 375,537
<NET-ASSETS> 1,017,955
<DIVIDEND-INCOME> 3,489
<INTEREST-INCOME> 1,788
<OTHER-INCOME> 0
<EXPENSES-NET> (7,295)
<NET-INVESTMENT-INCOME> (2,018)
<REALIZED-GAINS-CURRENT> 127,806
<APPREC-INCREASE-CURRENT> 196,817
<NET-CHANGE-FROM-OPS> 322,605
<EQUALIZATION> 114
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (92,581)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 304,301
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (4,542)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (7,295)
<AVERAGE-NET-ASSETS> 813,088
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<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 1995 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000096790
<NAME> KEMPER TECHNOLOGY FUND
<SERIES>
<NUMBER> 01
<NAME> CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 65,450
<SHARES-COMMON-PRIOR> 61,601
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 957,565
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,820
<NUMBER-OF-SHARES-REDEEMED> (12,664)
<SHARES-REINVESTED> 7,693
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.50
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 4.66
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.63
<EXPENSE-RATIO> .009
<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 1995 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000096790
<NAME> KEMPER TECHNOLOGY FUND
<SERIES>
<NUMBER> 02
<NAME> CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,851
<SHARES-COMMON-PRIOR> 449
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 41,034
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,556
<NUMBER-OF-SHARES-REDEEMED> (2,268)
<SHARES-REINVESTED> 114
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.45
<PER-SHARE-NII> (.15)
<PER-SHARE-GAIN-APPREC> 4.59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.39
<EXPENSE-RATIO> .018
<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 1995 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000096790
<NAME> KEMPER TECHNOLOGY FUND
<SERIES>
<NUMBER> 03
<NAME> CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 109
<SHARES-COMMON-PRIOR> 11
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,577
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 123
<NUMBER-OF-SHARES-REDEEMED> (28)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.45
<PER-SHARE-NII> (.15)
<PER-SHARE-GAIN-APPREC> 4.65
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.45
<EXPENSE-RATIO> .018
<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 1995 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000096790
<NAME> KEMPER TECHNOLOGY FUND
<SERIES>
<NUMBER> 04
<NAME> CLASS I
<MULTIPLIER>1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,214
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17,779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,586
<NUMBER-OF-SHARES-REDEEMED> (372)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.72
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 1.94
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.64
<EXPENSE-RATIO> .007
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.485(B)
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
January 25, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Kemper Technology Fund
To The Commission:
We are counsel to the above-referenced investment company (the "Fund") and as
such have participated in the preparation and review of Post-Effective
Amendment No. 64 to the Fund's registration statement being filed pursuant to
Rule 485(b) under the Securities Act of 1933. In accordance with paragraph
(b)(4) of Rule 485 and in reliance upon the oral approval of the staff of the
Commission, acting on behalf of the Commission, under Rule 485(b)(l)(ix) for
certain of the disclosures to be contained in the amendment, we hereby
represent that such amendment does not contain disclosures which would render
it ineligible to become effective pursuant to paragraph (b) thereof.
Very truly yours,
/s/Vedder, Price, Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
COK/dd
