Filed electronically with the Securities and Exchange Commission
on January 31, 2000
File No. 2-10668
File No. 811-0547
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /___/
Pre-Effective Amendment No. /___/
-----
Post-Effective Amendment No. 70 / X /
----
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /___/
Amendment No. 70 / X /
----
KEMPER TECHNOLOGY FUND
----------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, IL 60606
--------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 312-537-7000
Philip J. Collora, Vice President and Secretary
Kemper Technology Fund
222 South Riverside Plaza, Chicago, IL 60606
--------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/___/ Immediately upon filing pursuant to paragraph (b)
/___/ 60 days after filing pursuant to paragraph (a) (1)
/___/ 75 days after filing pursuant to paragraph (a) (2)
/ X / On February 1, 2000 pursuant to paragraph (b)
/___/ On __________________ pursuant to paragraph (a) (1)
/___/ On __________________ pursuant to paragraph (a) (2) of Rule 485
/___/ On __________________ pursuant to paragraph (a) (3) of Rule 485.
If appropriate, check the following box:
/___/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Part C - Page 1
<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD(SM)
February 1, 2000
Prospectus
KEMPER EQUITY FUNDS/GROWTH STYLE
Kemper Aggressive Growth Fund
Kemper Blue Chip Fund
Classic Growth Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Technology Fund
Kemper Total Return Fund
Kemper Value+Growth Fund
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
Kemper Funds [LOGO]
<PAGE>
HOW THE INVESTING IN
FUNDS WORK THE FUNDS
2 Kemper Aggressive 32 Kemper Technology 71 Choosing A Share
Growth Fund Fund Class
8 Kemper Blue Chip Fund 38 Kemper Total Return 76 How To Buy Shares
Fund
14 Kemper Classic Growth 77 How To Exchange Or
Fund 44 Kemper Value+Growth Sell Shares
Fund
20 Kemper Growth Fund 78 Policies You Should
50 Other Policies And Know About
26 Kemper Small Risks
Capitalization Equity 84 Understanding
Fund 51 Financial Highlights Distributions And
Taxes
<PAGE>
How The Funds Work
These funds invest mainly in common stocks, as a way of seeking growth of your
investment.
The funds invest mainly in growth companies: those that seem poised for
above-average growth of earnings. Each fund pursues its own goal.
Remember that mutual funds are investments, not bank deposits. They're not
guaranteed or insured by the FDIC or any other government agency. Their share
prices will go up and down, so be aware that you could lose money.
<PAGE>
TICKER SYMBOLS CLASS: A) KGGAX B) KGGBX C) KGGCX
Kemper
Aggressive Growth Fund
FUND GOAL The fund seeks capital appreciation through the use of
aggressive investment techniques.
2 | Kemper Aggressive Growth Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 65% of total assets in equities -- mainly
common stocks -- of U.S. companies. Although the fund can invest in stocks of
any size and market sector, it may invest in initial public offerings (IPOs) and
in growth-oriented market sectors, such as the technology sector. In fact, the
fund's stock selection methods may at times cause it to invest more than 25% of
total assets in a single sector. A sector is made up of numerous industries.
In choosing stocks, the portfolio managers look for individual companies in
growing industries that have innovative products and services, competitive
positions, repeat customers, effective management, control over costs and prices
and strong balance sheets and earnings growth.
To a limited extent, the managers may seek to take advantage of short-term
trading opportunities that result from market volatility. For example, the
managers may increase positions in favored companies when prices fall and may
sell fully valued companies when prices rise.
The fund normally will sell a stock when the managers believe its price is
unlikely to go much higher, its fundamental qualities have deteriorated, other
investments offer better opportunities or to adjust its emphasis in a given
industry.
[ICON]
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in U.S. common stocks, it could invest up to 25%
of total assets in foreign securities. Also, while the fund is permitted to use
various types of derivatives (contracts whose value is based on, for example,
indices, currencies or securities), the managers don't intend to use them as
principal investments, and might not use them all.
3 | Kemper Aggressive Growth Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform. When stock prices fall, you should expect the value of your
investment to fall as well. The fact that the fund may focus on one or more
sectors increases this risk, because factors affecting those sectors could
affect fund performance.
Similarly, because the fund isn't diversified and can invest a larger percentage
of assets in a given stock than a diversified fund, factors affecting that stock
could affect fund performance. Because a stock represents ownership in its
issuer, stock prices can be hurt by poor management, shrinking product demand
and other business risks. These may affect single companies as well as groups of
companies. Stocks of small companies (including most that issue IPOs) can be
highly volatile because their prices often depend on future expectations.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of companies, sectors,
economic trends, the relative attractiveness of different sizes of stocks
or other matters
o growth stocks may be out of favor for certain periods
o foreign securities may be more volatile than their U.S. counterparts, for
reasons such as currency fluctuations and political and economic
uncertainty
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may be appropriate for long-term investors who can accept an
above-average level of risk to their investment in exchange for potentially
higher performance.
- --------------------------------------------------------------------------------
4 | Kemper Aggressive Growth Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has two broad-based market indices (which, unlike the
fund, have no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1997 33.38
1998 13.98
1999 49.06
Best quarter: 33.20%, Q4 1999
Worst quarter: -18.97%, Q3 1998
- --------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- --------------------------------------------------------------------------------
Since 12/31/98 Since 12/31/96
1 Year Life of Class
- ------------------------------------------------------------------------------
Class A 40.49% 28.77%
- ------------------------------------------------------------------------------
Class B 44.75 29.85
- ------------------------------------------------------------------------------
Class C 47.46 30.22
- ------------------------------------------------------------------------------
Index 1 21.04 27.56
- ------------------------------------------------------------------------------
Index 2 20.90 25.53
- ------------------------------------------------------------------------------
Index 1: Standard and Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
Index 2: Russell 3000 Index, an unmanaged index of 3,000 of the largest
capitalized companies that are domiciled in the United States and whose common
stocks trade there.
The table includes the effects of maximum sales loads. In both the table and
the chart, total returns for 1997 through 1999 would have been lower if
operating expenses hadn't been reduced.
- --------------------------------------------------------------------------------
Kemper Aggressive Growth Fund | 5
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.41% 0.41% 0.41%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- --------------------------------------------------------------------------------
Other Expenses** 1.29 1.73 1.91
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.70 2.89 3.07
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a contingent deferred sales charge
of 1.00% if redeemed within one year of purchase and 0.50% if redeemed
during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $738 $1,080 $1,445 $2,468
- --------------------------------------------------------------------------------
Class B shares 692 1,195 1,723 2,670
- --------------------------------------------------------------------------------
Class C shares 410 948 1,611 3,383
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $738 $1,080 $1,445 $2,468
- --------------------------------------------------------------------------------
Class B shares 292 895 1,523 2,670
- --------------------------------------------------------------------------------
Class C shares 310 948 1,611 3,383
- --------------------------------------------------------------------------------
6 | Kemper Aggressive Growth Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's advisor, Scudder Kemper receives a management fee,
which was 0.41% of the fund's average daily net assets for the most recent
fiscal year. This fee is based on a rate of 0.65% of average daily net assets
which is adjusted up or down (to as low as 0.45% or as high as 0.85%) depending
on how the fund's Class A shares performed relative to the S&P 500 Index.
[ICON]
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Sewall F. Hodges Jesus A. Cabrera
Lead Portfolio Manager o Began investment career
o Began investment career in 1984
in 1978 o Joined the advisor in
o Joined the advisor in 1995 1999
o Joined the fund team o Joined the fund team
in 1999 in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
Kemper Aggressive Growth Fund | 7
<PAGE>
TICKER SYMBOLS CLASS: A) KBCAX B) KBCBX C) KBCCX
Kemper
Blue Chip Fund
FUND GOAL The fund seeks growth of capital and of income.
8 | Kemper Blue Chip Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 65% of total assets in common stocks of large
U.S. companies (those with market values of $1 billion or more). As of December
31, 1999, companies in which the fund invests have a median market
capitalization of approximately $32 billion.
In choosing stocks, the portfolio managers look for attractive "blue chip"
companies: large, well-known, established companies with sound financial
strength whose stock price is attractive relative to potential growth. The
managers look for factors that could signal future growth, such as new
management, products or business strategies.
The managers may favor securities from different industries and companies at
different times while still maintaining variety in terms of the industries and
companies represented.
The fund normally will sell a stock when the managers believe its price is
unlikely to go much higher, its fundamental qualities have deteriorated or other
investments offer better opportunities.
[ICON]
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in U.S. common stocks, it could invest up to 25%
of total assets in foreign securities. Also, while the fund is permitted to use
various types of derivatives (contracts whose value is based on, for example,
indices, currencies or securities), the managers don't intend to use them as
principal investments, and might not use them all.
9 | Kemper Blue Chip Fund
<PAGE>
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the large company portion of the U.S. stock
market. When prices of these stocks fall, you should expect the value of your
investment to fall as well. Large company stocks at times may not perform as
well as stocks of smaller or mid-size companies. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies.
To the extent that the fund focuses on a given industry, any factors affecting
that industry could affect portfolio securities. For example, a rise in
unemployment could hurt consumer goods makers, or the emergence of new
technologies could hurt computer software or hardware companies.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of companies, industries,
economic trends or other matters
o growth stocks may be out of favor for certain periods
o foreign securities may be more volatile than their U.S. counterparts, for
reasons such as currency fluctuations and political and economic
uncertainty
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Investors with long-term goals who want a core stock investment may be
interested in this fund.
- --------------------------------------------------------------------------------
10 | Kemper Blue Chip Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has two broad-based market indices (which, unlike the
fund, have no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1990 2.41
1991 44.43
1992 -1.20
1993 3.82
1994 -5.16
1995 31.72
1996 27.70
1997 26.21
1998 14.40
1999 26.08
Best quarter: 19.21%, Q4 1998
Worst quarter: -13.81%, Q3 1990
- --------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- --------------------------------------------------------------------------------
Since
Since Since 5/31/94 Since
12/31/98 12/31/94 Life of 12/31/89
1 Year 5 Years Class B/C 10 Years
- ------------------------------------------------------------------------------
Class A 18.81% 23.61% -- 15.30%
- ------------------------------------------------------------------------------
Class B 21.80 23.98 20.78% --
- ------------------------------------------------------------------------------
Class C 25.12 24.17 21.02 --
- ------------------------------------------------------------------------------
Index 1 21.04 28.56 25.70 18.21
- ------------------------------------------------------------------------------
Index 2 20.91 28.04 25.17 18.13
- ------------------------------------------------------------------------------
Index 1: Standard and Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
Index 2: Russell 1000 Index, an unmanaged price-only index of the 1,000 largest
capitalized companies that are domiciled in the United States and whose common
stocks are traded there.
The table includes the effects of maximum sales loads.
- --------------------------------------------------------------------------------
11 | Kemper Blue Chip Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.56% 0.56% 0.56%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.66 0.79 0.70
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.22 2.10 2.01
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a contingent deferred sales charge
of 1.00% if redeemed within one year of purchase and 0.50% if redeemed
during the second year following purchase. '
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $693 $940 $1,207 $1,967
- ------------------------------------------------------------------------------
Class B shares 613 958 1,329 1,999
- ------------------------------------------------------------------------------
Class C shares 304 631 1,083 2,338
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $693 $940 $1,207 $1,967
- ------------------------------------------------------------------------------
Class B shares 213 658 1,129 1,999
- ------------------------------------------------------------------------------
Class C shares 204 631 1,083 2,338
- ------------------------------------------------------------------------------
12 | Kemper Blue Chip Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.56% of its average daily net assets.
[ICON]
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Tracy McCormick Gary A. Langbaum
Lead Portfolio Manager o Began investment career
o Began investment career in 1970
in 1980 o Joined the advisor
o Joined the advisor in 1988
in 1994 o Joined the fund team
o Joined the fund team in 1998
in 1994
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
13 | Kemper Blue Chip Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KCGAX B) KCGBX C) KCGCX
Kemper Classic Growth Fund*
FUND GOAL The fund seeks long-term growth of capital with reduced share price
volatility compared with other growth mutual funds.
* Kemper Classic Growth Fund is properly know as Classic Growth Fund
14 | Kemper Classic Growth Fund
<PAGE>
The Fund's Main Strategy
The fund invests primarily in common stocks of U.S. companies. Although the fund
can invest in companies of any size, it generally focuses on established
companies with market values of $2 billion or more.
In choosing stocks, the portfolio managers look for individual companies that
have strong competitive positions, prospects for consistent growth, effective
management and strong balance sheets.
The managers use several strategies in seeking to reduce share price volatility.
They diversify the fund's investments, by company as well as by industry and
sector. They prefer to invest in companies whose stock appears reasonably valued
in light of potential growth based on various factors such as price-to-earnings
ratios and market capitalization. They also prefer to avoid companies whose
business fundamentals are deteriorating. Depending on their outlook, the
managers may increase or reduce the fund's exposure to a given industry or
company.
The fund will normally sell a stock when the managers believe it is too highly
valued, its fundamental qualities have deteriorated or its potential risks have
increased.
[ICON]
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in U.S. common stocks, it could invest up to 25%
of total assets in foreign securities. Also, while the fund is permitted to use
various types of derivatives (contracts whose value is based on, for example,
indices, currencies or securities), the managers don't intend to use them as
principal investments, and might not use them all.
15 | Kemper Classic Growth Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the large company portion of the U.S. stock
market. When prices of these stocks fall, you should expect the value of your
investment to fall as well. Large company stocks at times may not perform as
well as stocks of smaller or mid-size companies. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies.
To the extent that the fund focuses on a given industry, any factors affecting
that industry could affect portfolio securities. For example, a rise in
unemployment could hurt manufacturers of consumer goods.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of companies, industries,
risk factors or other matters
o growth stocks may be out of favor for certain periods
o foreign securities may be more volatile than their U.S. counterparts, for
reasons such as currency fluctuations and political and economic
uncertainty
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may make sense for investors interested in a long-term investment that
seeks to lower its share price volatility.
- --------------------------------------------------------------------------------
16 | Kemper Classic Growth Fund
<PAGE>
Performance
The bar chart shows the total returns for the fund's Class A shares, which may
give some idea of risk. The chart doesn't reflect sales loads; if it did,
returns would be lower. The table shows how the fund's returns over different
periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1999 33.78
Best quarter: 24.37%, Q4 1999
Worst quarter: -2.55%, Q3 1999
- ------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- ------------------------------------------------------------------------------
Since 12/31/98 Since 4/16/98
1 Year Life of Class
- ------------------------------------------------------------------------------
Class A 26.06% 19.13%
- ------------------------------------------------------------------------------
Class B 29.64 20.76
- ------------------------------------------------------------------------------
Class C 32.48 22.23
- ------------------------------------------------------------------------------
Index 21.04 19.80*
- ------------------------------------------------------------------------------
Index: Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), an
unmanaged, capitalization-weighted index that includes 500 large-cap U.S.
stocks.
The table includes the effects of maximum sales loads. In both the table and
the chart, total returns from the date of inception through 1999 would have been
lower if operating expenses hadn't been reduced.
* Index comparison begins 4/30/1998
- --------------------------------------------------------------------------------
17 | Kemper Classic Growth Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.70% 0.70% 0.70%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.99 1.10 1.47
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.69 2.55 2.92
- ------------------------------------------------------------------------------
Expense Waiver 0.25 0.25 0.25
- ------------------------------------------------------------------------------
Net Annual Operating Expenses*** 1.44 2.30 2.67
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a contingent deferred sales charge
of 1.00% if redeemed within one year of purchase and 0.50% if redeemed
during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
regulatory fees.
*** By contract, Scudder Kemper has agreed to waive 0.25% of its management
fee until 1/31/2001.
Based on the figures above (including one year of waived expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes operating expenses remain the
same and that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $713 $1,053 $1,417 $2,436
- ------------------------------------------------------------------------------
Class B shares 633 1,069 1,532 2,460
- ------------------------------------------------------------------------------
Class C shares 370 880 1,515 3,223
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $713 $1,053 $1,417 $2,436
- ------------------------------------------------------------------------------
Class B shares 233 769 1,332 2,460
- ------------------------------------------------------------------------------
Class C shares 270 880 1,515 3,223
- ------------------------------------------------------------------------------
18 | Kemper Classic Growth Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.45% of its average daily net assets.
[ICON]
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
William F. Gadsden Bruce F. Beaty
Co-lead Portfolio Manager Co-lead Portfolio Manager
o Began investment career o Began investment career
in 1981 in 1982
o Joined the advisor in o Joined the advisor
1983 in 1991
o Joined the fund team o Joined the fund team
in 1996 in 1996
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
19 | Kemper Classic Growth Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KGRAX B) KGRBX C) KGRCX
Kemper
Growth Fund
FUND GOAL The fund seeks growth of capital through professional management
and diversification of investments in securities that the investment manager
believes have the potential for capital appreciation.
20 | Kemper Growth Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 65% of total assets in common stocks of large
U.S. companies (those with market values of $1 billion or more). As of December
31, 1999, companies in which the fund invests have a median market
capitalization of approximately $43 billion.
In choosing stocks, the portfolio managers look for individual companies that
have strong product lines, effective management and leadership positions within
core markets. The managers also analyze each company's valuation, stock price
movements and other factors.
Based on their analysis, the managers classify stocks as follows:
Stable Growth (typically at least 70% of portfolio): companies with strong
business lines and potentially sustainable earnings growth
Accelerating Growth (typically up to 25% of portfolio): companies with a history
of strong earnings growth and the potential for continued growth at a rapid rate
Special Situations (typically up to 15% of portfolio): companies that appear
likely to become Stable Growth or Accelerating Growth companies through a new
product launch, restructuring, change in management or other catalyst
The managers intend to keep the fund's holdings diversified across industries
and companies, and generally keep its sector weightings similar to those of the
Russell 1000 Growth Index.
The fund normally will sell a stock when the managers believe its earnings
potential or its fundamental qualities have deteriorated or when other
investments offer better opportunities.
[ICON]
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
The fund could invest up to 25% of total assets in foreign securities. Also,
while the fund is permitted to use various types of derivatives (contracts whose
value is based on, for example, indices, currencies or securities), the managers
don't intend to use them as principal investments, and might not use them at
all.
21 | Kemper Growth Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the large company portion of the U.S. stock
market. When prices of these stocks fall, you should expect the value of your
investment to fall as well. Large company stocks at times may not perform as
well as stocks of smaller or mid-size companies. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies.
To the extent that the fund focuses on a given industry, any factors affecting
that industry could affect portfolio securities. For example, a rise in
unemployment could hurt consumer goods makers, or the emergence of new
technologies could hurt computer software or hardware companies.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of companies, industries,
economic trends or other matters
o growth stocks may be out of favor for certain periods
o foreign securities may be more volatile than their U.S. counterparts, for
reasons such as currency fluctuations and political and economic
uncertainty
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may be suitable for investors who want a moderate to aggressive
long-term growth fund with a large-cap emphasis.
- --------------------------------------------------------------------------------
22 | Kemper Growth Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has two broad-based market indices (which, unlike the
fund, have no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1990 3.86
1991 66.85
1992 -1.56
1993 1.63
1994 -5.91
1995 31.87
1996 16.34
1997 16.80
1998 14.22
1999 36.91
Best quarter: 29.11%, Q4 1999
Worst quarter: -22.18%, Q3 1998
- ------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- ------------------------------------------------------------------------------
Since
Since Since 5/31/94 Since
12/31/98 12/31/94 Life of 12/31/89
1 Year 5 Years Class B/C 10 Years
- ------------------------------------------------------------------------------
Class A 29.02% 21.45% -- 15.73%
- ------------------------------------------------------------------------------
Class B 32.48 21.51 18.53% --
- ------------------------------------------------------------------------------
Class C 35.69 21.83 18.83 --
- ------------------------------------------------------------------------------
Index 1 33.16 32.41 29.74 20.32
- ------------------------------------------------------------------------------
Index 2 21.04 28.56 25.70 18.21
- ------------------------------------------------------------------------------
Index 1: Russell 1000 Growth Index, an unmanaged capitalization-weighted index
containing the growth stocks in the Russell 1000 Index.
Index 2: Standard and Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
The table includes the effects of maximum sales loads.
- --------------------------------------------------------------------------------
23
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.54% 0.54% 0.54%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.52 0.89 0.61
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.06 2.18 1.90
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a contingent deferred sales charge
of 1.00% if redeemed within one year of purchase and 0.50% if redeemed
during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $677 $893 $1,126 $1,795
- ------------------------------------------------------------------------------
Class B shares 621 982 1,369 1,965
- ------------------------------------------------------------------------------
Class C shares 293 597 1,026 2,222
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $677 $893 $1,126 $1,795
- ------------------------------------------------------------------------------
Class B shares 221 682 1,169 1,965
- ------------------------------------------------------------------------------
Class C shares 193 597 1,026 2,222
- ------------------------------------------------------------------------------
24 | Kemper Growth Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.54% of its average daily net assets.
[ICON]
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Valerie F. Malter George P. Fraise
Co-lead Portfolio Manager Co-lead Portfolio Manager
o Began investment career o Began investment career
in 1985 in 1987
o Joined the advisor o Joined the advisor
in 1995 in 1997
o Joined the fund team o Joined the fund team
in 1999 in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
25 | Kemper Growth Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KSCAX B) KSCBX C) KSCCX
Kemper
Small Capitalization
Equity Fund
FUND GOAL The fund seeks maximum appreciation of investors' capital.
26 | Kemper Small Capitalization Equity Fund
<PAGE>
The Fund's Main Strategy
Under normal market conditions, the fund invests at least 65% of total assets in
small capitalization stocks similar in size to those comprising the Russell 2000
Index.
In choosing stocks, the portfolio manager looks for individual companies with a
history of revenue growth, effective management and strong balance sheets, among
other factors. In particular, the manager seeks companies that may benefit from
technological advances, new marketing methods and economic and demographic
changes.
The manager also considers the economic outlooks for various sectors and
industries, typically favoring those where high growth companies tend to be
clustered, such as medical technology, software and specialty retailing.
The manager may favor securities from different industries and companies at
different times, while still maintaining variety in terms of the industries and
companies represented.
The fund normally will sell a stock when the manager believe its price is
unlikely to go much higher, its fundamental qualities have deteriorated or other
investments offer better opportunities. The fund also sells securities of
companies that have grown in market capitalization above the maximum of the
Russell 2000 Index, as necessary to keep focused on smaller companies.
[ICON]
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in U.S. stocks, it could invest up to 25% of total
assets in foreign securities. Also, while the fund is permitted to use various
types of derivatives (contracts whose value is based on, for example, indices,
currencies or securities), the manager doesn't intend to use them as principal
investments, and might not use them at all.
27 | Kemper Small Capitalization Equity Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the small company portion of the U.S. stock
market. When prices of these stocks fall, you should expect the value of your
investment to fall as well. Small stocks tend to be more volatile than stocks of
larger companies, in part because small companies tend to be less established
than larger companies and the valuation of their stocks often depends on future
expectations. Because a stock represents ownership in its issuer, stock prices
can be hurt by poor management, shrinking product demand and other business
risks. These may affect single companies as well as groups of companies.
To the extent that the fund focuses on a given industry, any factors affecting
that industry could affect portfolio securities. For example, the emergence of
new technologies could hurt electronics or medical technology companies.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of companies, industries,
economic trends or other matters
o growth stocks may be out of favor for certain periods
o foreign securities may be more volatile than their U.S. counterparts, for
reasons such as currency fluctuations and political and economic
uncertainty
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Investors who are looking to add the growth potential of smaller companies or to
diversify a large-cap growth portfolio may want to consider this fund.
- --------------------------------------------------------------------------------
28 | Kemper Small Capitalization Equity Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has three broad-based market indices (which, unlike the
fund, have no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1990 -5.22
1991 69.01
1992 0.12
1993 16.79
1994 -3.31
1995 31.17
1996 14.09
1997 20.47
1998 -3.10
1999 33.62
Best quarter: 32.09%, Q4 1999
Worst quarter: -22.85%, Q3 1998
- ------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- ------------------------------------------------------------------------------
Since
Since Since 5/31/94 Since
12/31/98 12/31/94 Life of 12/31/89
1 Year 5 Years Class B/C 10 Years
- ------------------------------------------------------------------------------
Class A 25.92% 17.08% -- 14.83%
- ------------------------------------------------------------------------------
Class B 29.15 17.03 15.41% --
- ------------------------------------------------------------------------------
Class C 32.51 17.37 15.67 --
- ------------------------------------------------------------------------------
Index 1 21.04 28.56 25.70 18.21
- ------------------------------------------------------------------------------
Index 2 21.26 16.69 15.09 13.40
- ------------------------------------------------------------------------------
Index 3 43.09 18.99 17.62 13.51
- ------------------------------------------------------------------------------
Index 1: Standard and Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
Index 2: Russell 2000 Index, an unmanaged capitalization-weighted measure of
approximately 2,000 small U.S. stocks.
Index 3: Russell 2000 Growth Index, an unmanaged capitalization-weighted index
containing the growth stocks in the Russell 2000 Index.
The table includes the effects of maximum sales loads.
- ------------------------------------------------------------------------------
29 | Kemper Small Capitalization Equity Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.65% 0.65% 0.65%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.40 0.90 0.55
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.05 2.30 1.95
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $676 $890 $1,121 $1,784
- ------------------------------------------------------------------------------
Class B shares 633 1,018 1,430 2,030
- ------------------------------------------------------------------------------
Class C shares 298 612 1,052 2,275
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $676 $890 $1,121 $1,784
- ------------------------------------------------------------------------------
Class B shares 233 718 1,230 2,030
- ------------------------------------------------------------------------------
Class C shares 198 612 1,052 2,275
- ------------------------------------------------------------------------------
30 | Kemper Small Capitalization Equity Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management. Scudder Kemper's team
is comprised of investment professionals, economists, research analysts, traders
and other investment specialists, located across the United States and around
the world.
For serving as the fund's advisor, Scudder Kemper receives a management fee,
which was 0.65% of the fund's average daily net assets for the most recent
fiscal year. This fee is based on a rate of 0.65% of average daily net assets
which is adjusted up or down (to as low as 0.35% or as high as 0.95%) depending
on how the fund's Class A shares performed relative to the S&P 500 Index.
[ICON]
- --------------------------------------------------------------------------------
FUND MANAGER
Jesus A. Cabrera handles the fund's day-to-day management. He began his
investment career in 1984, joined the advisor in 1999 and joined the fund in
1999.
31 | Kemper Small Capitalization Equity Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KTCAX B) KTCBX C) KTCCX
Kemper
Technology Fund
FUND GOAL The fund seeks growth of capital.
32 | Kemper Technology Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 65% of total assets in common stocks of U.S.
companies in the technology sector. This may include companies of any size that
commit at least half of their assets to the technology sector, or derive at
least half of their revenues or net income from that sector. Examples of
industries within the technology sector are aerospace, electronics,
computers/software, medicine/biotechnology, geology and oceanography.
In choosing stocks, the portfolio managers look for individual companies that
have robust and sustainable earnings growth, large and growing markets,
innovative products and services and strong balance sheets, among other factors.
The managers may favor securities from different industries and companies within
the technology sector at different times, while still maintaining variety in
terms of the industries and companies represented.
The fund will normally sell a stock when the managers believe its price is
unlikely to go much higher, its fundamental qualities have deteriorated or other
investments offer better opportunities.
[ICON]
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in U.S. stocks, it could invest up to 25% of total
assets in foreign securities. Also, while the fund is permitted to use various
types of derivatives (contracts whose value is based on, for example, indices,
currencies or securities), the managers don't intend to use them as principal
investments, and might not use them at all.
33 | Kemper Technology Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform. When stock prices fall, you should expect the value of your
investment to fall as well. The fact that the fund concentrates in one sector
increases this risk, because factors affecting this sector affect fund
performance. For example, technology companies could be hurt by such factors as
market saturation, price competition and competing technologies.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. These may
affect single companies as well as groups of companies. Many technology
companies are smaller companies that may have limited business lines and
financial resources, making them highly vulnerable to business and economic
risks.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of companies, industries,
economic trends or other matters
o growth stocks may be out of favor for certain periods
o foreign securities may be more volatile than their U.S. counterparts,
for reasons such as currency fluctuations and political and economic
uncertainty
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may appeal to investors who want exposure to a sector that offers
attractive long-term growth potential and who can accept above-average risks.
- --------------------------------------------------------------------------------
34 | Kemper Technology Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has three market indices (which, unlike the fund, have no
fees or expenses). All figures on this page assume reinvestment of dividends and
distributions. As always, past performance is no guarantee of future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1990 0.44
1991 44.35
1992 -1.19
1993 11.69
1994 11.35
1995 42.77
1996 20.60
1997 7.11
1998 43.59
1999 114.28
Best quarter: 57.80%, Q4 1999
Worst quarter: -16.80%, Q3 1990
- ------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- ------------------------------------------------------------------------------
Since 12/31/98 Since 12/31/94 Since 5/31/94 Since 12/31/89
1 Year 5 Years Life of Class B/C 10 Years
- ------------------------------------------------------------------------------
Class A 102.02% 39.84% -- 25.29%
- ------------------------------------------------------------------------------
Class B 108.94 40.01 38.07% --
- ------------------------------------------------------------------------------
Class C 112.00 40.31 38.35 --
- ------------------------------------------------------------------------------
Index 1 33.16 32.41 29.74 20.32
- ------------------------------------------------------------------------------
Index 2 21.04 28.56 25.70 18.21
- ------------------------------------------------------------------------------
Index 3 123.33 49.90 54.73 32.24
- ------------------------------------------------------------------------------
Index 1: Russell 1000 Growth Index, an unmanaged capitalization-weighted index
containing the growth stocks in the Russell 1000 Index.
Index 2: Standard and Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
Index 3: Hambrecht & Quist Index, an unmanaged index composed of approximately
275 technology stocks, including companies from five technology groups: computer
hardware, computer software, communications, semiconductors and information
services.
The table includes the effects of maximum sales loads.
- --------------------------------------------------------------------------------
35 | Kemper Technology Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your
investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.53% 0.53% 0.53%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.43 0.65 0.55
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 0.96 1.93 1.83
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $667 $863 $1,075 $1,685
- ------------------------------------------------------------------------------
Class B shares 596 906 1,242 1,769
- ------------------------------------------------------------------------------
Class C shares 286 576 990 2,148
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $667 $863 $1,075 $1,685
- ------------------------------------------------------------------------------
Class B shares 196 606 1,042 1,769
- ------------------------------------------------------------------------------
Class C shares 186 576 990 2,148
- ------------------------------------------------------------------------------
36 | Kemper Technology Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.53% of its average daily net assets.
[ICON]
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
James B. Burkart Robert L. Horton
Co-lead Portfolio Manager o Began investment career
o Began investment career in 1993
in 1970 o Joined the advisor in 1996
o Joined the advisor in 1998 o Joined the fund team
o Joined the fund team in in 1999
1998
Tracy McCormick
Deborah L. Koch o Began investment career
Co-lead Portfolio Manager in 1980
o Began investment career o Joined the advisor
in 1985 in 1994
o Joined the advisor in 1992 o Joined the fund team in 1999
o Joined the fund team
in 1998 Virginea Stuart
o Began investment career
J. Brooks Dougherty in 1995
o Began investment career o Joined the advisor
in 1984 in 1996
o Joined the advisor in 1993 o Joined the fund team in 1999
o Joined the fund team
in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
37 | Kemper Technology Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KTRAX B) KTRBX C) KTRCX
Kemper
Total Return Fund
FUND GOAL The fund seeks the highest total return, a combination of income and
capital appreciation, consistent with reasonable risk.
38 | Kemper Total Return Fund
<PAGE>
The Fund's Main Strategy
The fund follows a flexible investment program, investing in a mix of growth
stocks and bonds.
The fund can buy many types of securities, among them common stocks, convertible
securities, corporate bonds, U.S. government bonds and mortgage- and
asset-backed securities. Generally, most are from U.S. issuers, but the fund may
invest up to 25% of total assets in foreign securities.
The portfolio managers may shift the proportion of the fund's holdings, at
different times favoring stocks or bonds (and within those asset classes,
different types of securities), while still maintaining variety in terms of the
securities, issuers and economic sectors represented.
In choosing individual stocks, the managers favor large companies with a history
of above-average growth, attractive prices relative to potential growth, sound
financial strength and effective management, among other factors.
The fund will normally sell a stock when it reaches a target price or when the
managers believe its fundamental qualities have deteriorated.
In deciding what types of bonds to buy and sell, the managers consider their
relative potential for stability and attractive income, and other factors such
as credit quality and market conditions. The fund may invest in bonds of any
duration.
[ICON]
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
Normally, this fund's bond component consists mainly of investment-grade bonds
(those in the top four grades of credit quality). However, the fund could invest
up to 35% of total assets in junk bonds (i.e., grade BB and below).
While the fund is permitted to use various types of derivatives (contracts whose
value is based on, for example, indices, currencies or securities), the managers
don't intend to use them as principal investments, and might not use them at
all.
39 | Kemper Total Return Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
The most important factor is how stock markets perform -- something that depends
on many influences, including economic, political and demographic trends. When
stock prices fall, the value of your investment is likely to fall as well. Stock
prices can be hurt by poor management, shrinking product demand and other
business risks. Stock risks tend to be greater with smaller companies.
The fund is also affected by the performance of bonds. A rise in interest rates
generally means a fall in bond prices and, in turn, a fall in the value of your
investment. Some bonds could be paid off earlier than expected, which would hurt
the fund's performance; with mortgage- or asset-backed securities, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield. Corporate bonds could perform less well than other
bonds in a weak economy.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of industries, companies,
the relative attractiveness of stocks and bonds or other matters
o foreign securities may be more volatile than their U.S. counterparts,
for reasons such as currency fluctuations and political and economic
uncertainty
o growth stocks may be out of favor for certain periods
o a bond could fall in credit quality or go into default
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Because it invests in a mix of stocks and bonds, this fund could make sense for
investors seeking asset class diversification in a single fund.
- --------------------------------------------------------------------------------
40 | Kemper Total Return Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has three broad-based market indices (which, unlike the
fund, have no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1990 4.11
1991 40.16
1992 2.49
1993 11.59
1994 -9.18
1995 25.80
1996 16.25
1997 19.14
1998 15.91
1999 14.60
Best quarter: 17.08%, Q1 1999
Worst quarter: -9.82%, Q3 1990
- ------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- ------------------------------------------------------------------------------
Since
Since Since 5/31/94 Since
12/31/98 12/31/94 Life of 12/31/89
1 Year 5 Years Class B/C 10 Years
- ------------------------------------------------------------------------------
Class A 8.03% 16.88% -- 12.70%
- ------------------------------------------------------------------------------
Class B 10.57 17.04 14.37% --
- ------------------------------------------------------------------------------
Class C 13.58 17.25 14.56 --
- ------------------------------------------------------------------------------
Index 1 21.04 28.56 25.70 18.21
- ------------------------------------------------------------------------------
Index 2 -2.15 7.61 6.90 7.65
- ------------------------------------------------------------------------------
Index 3 33.16 32.41 29.74 20.32
- ------------------------------------------------------------------------------
Index 1: Standard and Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
Index 2: Lehman Brothers Government/Corporate Bond Index, an unmanaged index of
government and investment-grade corporate debt securities of intermediate- and
long-term maturities.
Index 3: Russell 1000 Growth Index, an unmanaged capitalization-weighted index
containing the growth stocks in the Russell 1000 Index.
The table includes the effects of maximum sales loads.
- --------------------------------------------------------------------------------
41 | Kemper Total Return Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.53% 0.53% 0.53%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.50 0.76 0.62
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.03 2.04 1.90
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large
Order NAV Purchase Privilege (see "Policies You Should Know About --
Policies about transactions") may be subject to a contingent deferred
sales charge of 1.00% if redeemed within one year of purchase and 0.50%
if redeemed during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services
and similar expenses, which may vary with fund size and other factors.
"Other Expenses" are restated to reflect changes in certain
administrative and regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $674 $884 $1,111 $1,762
- ------------------------------------------------------------------------------
Class B shares 607 940 1,298 1,869
- ------------------------------------------------------------------------------
Class C shares 293 597 1,026 2,222
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $674 $884 $1,111 $1,762
- ------------------------------------------------------------------------------
Class B shares 207 640 1,098 1,869
- ------------------------------------------------------------------------------
Class C shares 193 597 1,026 2,222
- ------------------------------------------------------------------------------
42 | Kemper Total Return Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.53% of its average daily net assets.
[ICON]
- --------------------------------------------------------------------------------
FUND MANAGERS
The following people handle the fund's day-to-day management:
Gary A. Langbaum Tracy McCormick
Lead Portfolio Manager o Began investment career
o Began investment career in 1980
in 1970 o Joined the advisor
o Joined the advisor in 1994
in 1988 o Joined the fund team
o Joined the fund team in 1998
in 1995
Robert S. Cessine
o Began investment
career in 1982
o Joined the advisor
in 1993
o Joined the fund team
in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
43 | Kemper Total Return Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KVGAX B) KVGBX C) KVGCX
Kemper Value+Growth Fund
FUND GOAL The fund seeks growth of capital through a portfolio of growth
and value stocks. A secondary objective of the fund is the reduction of risk
over a full market cycle compared to a portfolio of only growth stocks or only
value stocks.
44 | KEMPER VALUE+GROWTH FUND
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 65% of total assets in U.S. common stocks.
Although the fund can invest in stocks of any size, it mainly chooses stocks
from among the 1,000 largest (as measured by market capitalization). The fund
manages risk by investing in both growth and value stocks.
While the fund's neutral mix is 50% for growth stocks and 50% for value stocks,
the managers may shift the fund's holdings depending on their outlook, at
different times favoring growth stocks or value stocks, while still maintaining
variety in terms of the securities, issuers and economic sectors represented.
Typically, adjustments in the fund's growth/value proportions are gradual. The
allocation to growth or value stocks may be up to 75% at any time.
In choosing growth stocks, the managers look for companies with a history of
above-average growth, attractive prices relative to potential growth and sound
financial strength, among other factors. With value stocks, the managers look
for companies whose stock prices are low in light of earnings, cash flow and
other valuation measures, while also considering such factors as dividend growth
rates and earnings estimates.
The fund will normally sell a stock when the managers believe its price is
unlikely to go much higher, its fundamental qualities have deteriorated or to
adjust the proportions of growth and value stocks.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
OTHER INVESTMENTS
While the fund invests mainly in U.S. common stocks, it could invest up to 25%
of total assets in foreign securities. Also, while the fund is permitted to use
various types of derivatives (contracts whose value is based on, for example,
indices, currencies or securities), the managers don't intend to use them as
principal investments, and might not use them at all.
KEMPER VALUE+GROWTH FUND | 45
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the large company portion of the U.S. stock
market. When large company stock prices fall, you should expect the value of
your investment to fall as well. Large company stocks at times may not perform
as well as stocks of smaller or mid-size companies. Because a stock represents
ownership in its issuer, stock prices can be hurt by poor management, shrinking
product demand and other business risks. These may affect single companies as
well as groups of companies.
In any given period, either growth stocks or value stocks will generally lag the
other; because the fund invests in both, it is likely to lag any fund that
focuses on the type of stock that outperforms during that period, and at times
may lag both.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of industries, companies, the
relative attractiveness of growth stocks and value stocks or other matters
o foreign securities may be more volatile than their U.S. counterparts, for
reasons such as currency fluctuations and political and economic
uncertainty
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund is designed for investors with long-term goals who want to gain
exposure to both growth and value stocks in a single fund.
46 | KEMPER VALUE+GROWTH FUND
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. (The chart doesn't
reflect sales loads; if it did, returns would be lower.) The table shows how the
fund's returns over different periods average out.
For context, the table has two broad-based market indices (which, unlike the
fund, have no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1996 25.56
1997 24.52
1998 18.88
1999 16.69
Best quarter: 20.65%, Q4 1999
Worst quarter: -22.85%, Q3 1998
- --------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- --------------------------------------------------------------------------------
Since 12/31/98 Since 10/16/95
1 Year Life of Class
- ------------------------------------------------------------------------------
Class A 9.97% 20.27%
- ------------------------------------------------------------------------------
Class B 12.87 20.75
- ------------------------------------------------------------------------------
Class C 15.80 21.00
- ------------------------------------------------------------------------------
Index 1 21.04 27.07*
- ------------------------------------------------------------------------------
Index 2 20.91 26.32*
- ------------------------------------------------------------------------------
Index 1: Standard and Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
Index 2: Russell 1000 Index, an unmanaged price-only index of 1,000 of the
largest capitalized companies that are domiciled in the United States and whose
common stocks are traded there.
The table includes the effects of maximum sales loads. In 1995, 1996, 1998 and
1999, for Class A Shares; and in 1995 through 1999, for Class B and C Shares,
total returns would have been lower in the table and the bar chart if operating
expenses hadn't been reduced.
* Index comparison begins 10/31/1995
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND | 47
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases (as %
of offering price) 5.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.70% 0.70% 0.70%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.76 0.89 1.26
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.46 2.34 2.71
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a contingent deferred sales charge
of 1.00% if redeemed within one year of purchase and 0.50% if redeemed
during the second year following purchase.
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
regulatory fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $715 $1,010 $1,327 $2,221
- ------------------------------------------------------------------------------
Class B shares 637 1,030 1,450 2,254
- ------------------------------------------------------------------------------
Class C shares 274 841 1,435 3,041
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $715 $1,010 $1,327 $2,221
- ------------------------------------------------------------------------------
Class B shares 237 730 1,250 2,254
- ------------------------------------------------------------------------------
Class C shares 374 841 1,435 3,041
- ------------------------------------------------------------------------------
48 | KEMPER VALUE+GROWTH FUND
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.70% of its average daily net assets.
FUND MANAGERS
The following people handle the fund's day-to-day
management:
Donald E. Hall William J. Wallace
Lead Portfolio Manager o Began investment career
o Began investment career in 1981
in 1982 o Joined the advisor
o Joined the advisor in 1987
in 1982 o Joined the fund team
o Joined the fund team in 1999
in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
KEMPER VALUE+GROWTH FUND | 49
<PAGE>
Other Policies And Risks
While the previous pages describe the main points of each fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, each fund's Board could
change that fund's investment goal without seeking shareholder approval
o As a temporary defensive measure, any of these funds could shift up to 100%
of assets into investments such as money market securities. This could
prevent losses, but would mean that the fund would not be pursuing its goal
o Scudder Kemper establishes a security's credit quality when it buys the
security, using independent ratings or, for unrated securities, its own
credit determination. When ratings don't agree, a fund may use the higher
rating. If a security's credit quality falls, the advisor will determine
whether selling it would be in the shareholders' best interests
o The funds may trade securities more actively than many funds, which could
mean higher expenses (thus lowering return) and higher taxable
distributions
o These funds' equity investments are mainly common stocks, but may also
include other types of equities, such as preferred or convertible stocks
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Euro conversion
Funds which invest in foreign securities could be affected by accounting
differences, changes in tax treatment or other issues related to the conversion
of certain European currencies into the euro, which is already underway. Scudder
Kemper is working to address euro-related issues as they occur and understands
that other key service providers are taking similar steps. Still, there's some
risk that this problem could materially affect a fund's operation (including its
ability to calculate net asset value and to handle purchases and redemptions),
its investments or securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This prospectus doesn't tell you about every policy or risk of investing in a
fund. For more information, request a copy of the Statement of Additional
Information (see back cover).
50
<PAGE>
Financial Highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by Ernst & Young LLP (except Kemper Classic Growth Fund, which has been audited
by PricewaterhouseCoopers LLP), whose reports, along with each fund's financial
statements, are included in that fund's annual report (see "Shareholder reports"
on the back cover).
Kemper Aggressive Growth Fund
Class A
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997(a)
- --------------------------------------------------------------------------------
Net asset value, beginning of period $10.98 $12.60 $9.50
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment loss (.11)(b) (.02) (.02)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.55 (1.05) 3.12
- --------------------------------------------------------------------------------
Total from investment operations 4.44 (1.07) 3.10
- --------------------------------------------------------------------------------
Less distribution from net realized gain -- .55 --
- --------------------------------------------------------------------------------
Net asset value, end of period $15.42 $10.98 $12.60
- --------------------------------------------------------------------------------
Total return (not annualized) (%) 40.44 (8.67) 32.63
- --------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- --------------------------------------------------------------------------------
Expenses absorbed by the fund (%) 1.30 1.25 1.49
- --------------------------------------------------------------------------------
Net investment loss (%) (.81) (.42) (.35)
- --------------------------------------------------------------------------------
Other ratios to average net assets (annualized)
- --------------------------------------------------------------------------------
Expenses by the fund (%) 1.59 1.46 --
- --------------------------------------------------------------------------------
Net investment loss (%) (1.10) (.63) --
- --------------------------------------------------------------------------------
(a) December 31, 1996 to September 30, 1997.
(b) Based on monthly average shares outstanding during the period.
51
<PAGE>
Class B
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997(a)
- --------------------------------------------------------------------------------
Net asset value, beginning of period $10.83 $12.52 $9.50
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment loss (.24)(b) (.04) (.08)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.47 (1.10) 3.10
- --------------------------------------------------------------------------------
Total from investment operations 4.23 (1.14) 3.02
- --------------------------------------------------------------------------------
Less distribution from net realized gain -- .55 --
- --------------------------------------------------------------------------------
Net asset value, end of period $15.06 $10.83 $12.52
- --------------------------------------------------------------------------------
Total return (not annualized) (%) 39.06 (9.30) 31.79
- --------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- --------------------------------------------------------------------------------
Expenses absorbed by the fund (%) 2.17 2.12 2.41
- --------------------------------------------------------------------------------
Net investment loss (%) (1.68) (1.29) (1.27)
- --------------------------------------------------------------------------------
Other ratios to average net assets (annualized)
- --------------------------------------------------------------------------------
Expenses (%) 2.77 2.81 --
- --------------------------------------------------------------------------------
Net investment loss (%) (2.28) (1.98) --
- --------------------------------------------------------------------------------
(a) December 31, 1996 to September 30, 1997.
(b) Based on monthly average shares outstanding during the period.
52
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997(a)
- --------------------------------------------------------------------------------
Net asset value, beginning of period $10.84 $12.53 $9.50
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment loss (.25)(b) (.04) (.07)
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.47 (1.10) 3.10
- --------------------------------------------------------------------------------
Total from investment operations 4.22 (1.14) 3.03
- --------------------------------------------------------------------------------
Less distribution from net realized gain -- .55 --
- --------------------------------------------------------------------------------
Net asset value, end of period $15.06 $10.84 $12.53
- --------------------------------------------------------------------------------
Total return (not annualized) (%) 38.93 (9.29) 31.89
- --------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- --------------------------------------------------------------------------------
Expenses absorbed by the fund (%) 2.30 2.10 2.19
- --------------------------------------------------------------------------------
Net investment loss (%) (1.81) (1.27) (1.05)
- --------------------------------------------------------------------------------
Other ratios to average net assets (annualized)
- --------------------------------------------------------------------------------
Expenses (%) 2.96 2.76 --
- --------------------------------------------------------------------------------
Net investment loss (%) (2.47) (1.93) --
- --------------------------------------------------------------------------------
Supplemental data for all classes
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997(a)
- ------------------------------------------------------------------------------
Net assets at end of period (in thousands) $74,350 37,332 11,609
- ------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 125 190 364
- ------------------------------------------------------------------------------
(a) December 31, 1996 to September 30, 1997.
(b) Based on monthly average shares outstanding during the period.
Notes: Total return does not reflect the effect of any sales charges. Per share
data for the period ended September 30, 1999 was determined based on average
shares outstanding. Scudder Kemper agreed to temporarily waive and absorb
certain operating expenses of the fund during the years ended September 30, 1999
and September 30, 1998. The Other Ratios to Average Net Assets are computed
without this waiver.
53
<PAGE>
Kemper Blue Chip Fund
Class A
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning of year $16.61 $17.68 $17.14 $14.87 $12.33
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment income (loss) .02(a) .11 .18 .22 .19
- --------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 4.55 1.17 3.70 3.45 2.57
- --------------------------------------------------------------------------------
Total from investment operations 4.57 1.28 3.88 3.67 2.76
- --------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------
Net investment income -- .16 .21 .20 .20
- --------------------------------------------------------------------------------
Net realized gain .42 2.19 3.13 1.20 .02
- --------------------------------------------------------------------------------
Total distributions .42 2.35 3.34 1.40 .22
- --------------------------------------------------------------------------------
Net asset value, end of year $20.76 $16.61 $17.68 $17.14 $14.87
- --------------------------------------------------------------------------------
Total return (%) 27.96 7.80 26.78 26.72 22.74
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses, before expense
reductions (%) 1.19 1.29 1.19 1.26 1.30
- --------------------------------------------------------------------------------
Expenses, net (%) 1.19 1.29 1.19 1.26 1.30
- --------------------------------------------------------------------------------
Net investment income (loss) (%) .13 .62 1.07 1.40 1.47
- --------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning of year $16.55 $17.61 $17.09 $14.82 $12.29
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment income (loss) (.14)(a) (.03) .04 .10 .09
- --------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 4.51 1.17 3.67 3.45 2.56
- --------------------------------------------------------------------------------
Total from investment operations 4.37 1.14 3.71 3.55 2.65
- --------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------
Net investment income -- .01 .06 .08 .10
- --------------------------------------------------------------------------------
Net realized gain .42 2.19 3.13 1.20 .02
- --------------------------------------------------------------------------------
Total distributions .42 2.20 3.19 1.28 .12
- --------------------------------------------------------------------------------
Net asset value, end of year $20.50 $16.55 $17.61 $17.09 $14.82
- --------------------------------------------------------------------------------
Total return (%) 26.83 6.96 25.62 25.82 21.76
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses, before expense
reductions (%) 2.07 2.10 2.06 2.08 2.06
- --------------------------------------------------------------------------------
Expenses, net (%) 2.07 2.10 2.06 2.08 2.06
- --------------------------------------------------------------------------------
Net investment income (loss) (%) (.75) (.19) .20 .58 .71
- --------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
54
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning of year $16.65 $17.69 $17.15 $14.88 $12.32
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment income (loss) (.13)(a) (.01) .03 .10 .07
- --------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 4.54 1.18 3.71 3.45 2.62
- --------------------------------------------------------------------------------
Total from investment operations 4.41 1.17 3.74 3.55 2.69
- --------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------
Net investment income -- .02 .07 .08 .11
- --------------------------------------------------------------------------------
Net realized gain .42 2.19 3.13 1.20 .02
- --------------------------------------------------------------------------------
Total distributions .42 2.21 3.20 1.28 .13
- --------------------------------------------------------------------------------
Net asset value, end of year $20.64 $16.65 $17.69 $17.15 $14.88
- --------------------------------------------------------------------------------
Total return (%) 26.91 7.08 25.71 25.75 22.04
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses, before expense reductions
(%) 1.98 2.03 2.00 2.05 2.01
- --------------------------------------------------------------------------------
Expenses, net (%) 1.97 2.03 2.00 2.05 2.01
- --------------------------------------------------------------------------------
Net investment income (loss) (%) (.65) (.12) .26 .61 .76
- --------------------------------------------------------------------------------
Supplemental data for all classes
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of period
(in thousands) $915,008 581,770 446,891 256,172 168,266
- ------------------------------------------------------------------------------
Portfolio turnover rate
(annualized) (%) 75 157 183 166 117
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
Note: Total return does not reflect the effect of any sales charges. Per share
data for the year ended October 31, 1999 was determined based on average shares
outstanding.
55
<PAGE>
Kemper Classic Growth Fund
Class A
- --------------------------------------------------------------------------------
Years ended August 31, 1999(a) 1999 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $22.63 $16.62 $20.30
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (c) (.02) (.04) .01
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.69 6.86 (3.69)
- ------------------------------------------------------------------------------
Total from investment operations 1.67 6.82 (3.68)
- ------------------------------------------------------------------------------
Less distributions from net realized gains on
investment transactions -- (.81) --
- ------------------------------------------------------------------------------
Net asset value, end of period $24.30 $22.63 $16.62
- ------------------------------------------------------------------------------
Total return (%) (d)(e) 7.38** 41.54 (18.13)**
- ------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period ($ millions) 62.6 54.7 7.2
- ------------------------------------------------------------------------------
Ratio of operating expenses, net, to average
daily net assets (%) 1.27* 1.24 1.24*
- ------------------------------------------------------------------------------
Ratio of operating expenses before expense
reductions, to average daily net assets (%) 1.52* 1.65 1.74*
- ------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets (%) (.44)* (.17) .10*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 58* 68 49
- ------------------------------------------------------------------------------
(a) For the period ended October 31, 1999.
(b) For the period April 16, 1998 (commencement of sale of Class A, B and C
shares) to August 31, 1998.
(c) Based on monthly average shares outstanding during the period.
(d) Total return would have been lower had certain expenses not been reduced.
(e) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
56
<PAGE>
Class B
- --------------------------------------------------------------------------------
Years ended August 31, 1999(a) 1999 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $22.37 $16.57 $20.30
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (c) (.05) (.22) (.05)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.66 6.83 (3.68)
- ------------------------------------------------------------------------------
Total from investment operations 1.61 6.61 (3.73)
- ------------------------------------------------------------------------------
Less distributions from net realized gains on
investment transactions -- (.81) --
- ------------------------------------------------------------------------------
Net asset value, end of period $23.98 $22.37 $16.57
- ------------------------------------------------------------------------------
Total return (%) (d)(e) 7.20** 40.30** (18.37)**
- ------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period ($ millions) 37.4 30.5 5.9
- ------------------------------------------------------------------------------
Ratio of operating expenses, net, to average
daily net assets (%) 2.22* 2.12 2.12*
- ------------------------------------------------------------------------------
Ratio of operating expenses before expense
reductions, to average daily net assets (%) 2.47* 2.51 2.52*
- ------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets (%) (1.38)* (1.04) (.79)*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 58* 68 49
- ------------------------------------------------------------------------------
(a) For the period ended October 31, 1999.
(b) For the period April 16, 1998 (commencement of sale of Class A, B and C
shares) to August 31, 1998.
(c) Based on monthly average shares outstanding during the period.
(d) Total return would have been lower had certain expenses not been reduced.
(e) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
57
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended August 31, 1999(a) 1999 1998(b)
- ------------------------------------------------------------------------------
Net asset value, beginning of period $22.38 $16.57 $20.30
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) (c) (.07) (.22) (.05)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.66 6.84 (3.68)
- ------------------------------------------------------------------------------
Total from investment operations 1.59 6.62 (3.73)
- ------------------------------------------------------------------------------
Less distributions from net realized gains on
investment transactions -- (.81) --
- ------------------------------------------------------------------------------
Net asset value, end of period $23.97 $22.38 $16.57
- ------------------------------------------------------------------------------
Total return (%) (c)(d) 7.10** 40.42** (18.37)**
- ------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period ($ millions) 7.1 5.6 .9
- ------------------------------------------------------------------------------
Ratio of operating expenses, net, to average
daily net assets (%) 2.69* 2.09 2.09*
- ------------------------------------------------------------------------------
Ratio of operating expenses before expense
reductions, to average daily net assets (%) 2.94* 2.88 3.00*
- ------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets (%) (1.86)** (1.02) (.73)*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 58* 68 49
- ------------------------------------------------------------------------------
(a) For the period ended October 31, 1999.
(b) For the period April 16, 1998 (commencement of sale of Class A, B and C
shares) to August 31, 1998.
(c) Based on monthly average shares outstanding during the period.
(d) Total return would have been lower had certain expenses not been reduced.
(e) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
58
<PAGE>
Kemper Growth Fund
Class A
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning
of year $11.72 $15.47 $17.21 $16.07 $12.93
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment income (loss) (.05)(a) (.01)(a) -- .12 .05
- --------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 4.18 (1.65) 2.61 2.74 3.27
- --------------------------------------------------------------------------------
Total from investment
operations 4.13 (1.66) 2.61 2.86 3.32
- --------------------------------------------------------------------------------
Less dividends:
- --------------------------------------------------------------------------------
Distribution from net
investment income -- -- -- .04 --
- --------------------------------------------------------------------------------
Distribution from net
realized gain .06 2.09 4.35 1.68 .18
- --------------------------------------------------------------------------------
Total dividends .06 2.09 4.35 1.72 .18
- --------------------------------------------------------------------------------
Net asset value, end of year $15.79 $11.72 $15.47 $17.21 $16.07
- --------------------------------------------------------------------------------
Total return (%) 35.29 (11.78) 19.97 19.62 26.07
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses (%) 1.05 1.04 1.06 1.07 1.17
- --------------------------------------------------------------------------------
Net investment income (loss) (%) (.36) (.09) .07 .65 .43
- --------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning
of year $11.03 $14.83 $16.82 $15.85 $12.88
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment loss (.21)(a) (.16)(a) (.16) (.09) (.08)
- --------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 3.93 (1.55) 2.52 2.74 3.23
- --------------------------------------------------------------------------------
Total from investment
operations 3.72 (1.71) 2.36 2.65 3.15
- --------------------------------------------------------------------------------
Less distribution from net
realized gain .06 2.09 4.35 1.68 .18
- --------------------------------------------------------------------------------
Net asset value, end of year $14.69 $11.03 $14.83 $16.82 $15.85
- --------------------------------------------------------------------------------
Total return (%) 33.77 (12.73) 18.68 18.47 24.83
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses (%) 2.17 2.14 2.13 2.05 2.17
- --------------------------------------------------------------------------------
Net investment loss (%) (1.48) (1.19) (1.00) (.33) (.57)
- --------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
59
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning
of year $11.13 $14.91 $16.87 $15.87 $12.88
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment loss (.18)(a) (.14)(a) (.13) (.06) (.07)
- --------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 3.98 (1.55) 2.52 2.74 3.24
- --------------------------------------------------------------------------------
Total from investment
operations 3.80 (1.69) 2.39 2.68 3.17
- --------------------------------------------------------------------------------
Less distribution from net
realized gain .06 2.09 4.35 1.68 .18
- --------------------------------------------------------------------------------
Net asset value, end of year $14.87 $11.13 $14.91 $16.87 $15.87
- --------------------------------------------------------------------------------
Total return (%) 34.19 (12.50) 18.87 18.65 24.99
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses (%) 1.90 1.98 1.99 1.95 2.03
- --------------------------------------------------------------------------------
Net investment loss (%) (1.21) (1.03) (.86) (.23) (.43)
- --------------------------------------------------------------------------------
Supplemental data for all classes
Years ended September 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $2,578,244 2,209,521 2,827,565 2,738,303 2,503,301
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) 97 122 201 150 67
- --------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
Notes: Total return does not reflect the effect of any sales charges. Per share
data for years ended September 30, 1999 and September 30, 1998 were determined
based on average shares outstanding.
60
<PAGE>
Kemper Small Capitalization Equity Fund
Class A
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning
of year $5.30 $7.98 $7.01 $7.14 $5.81
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment income (loss) (.04)(a) (.03) (.01) (.02)(a) (.01)
- --------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 1.27 (1.84) 1.55 .94 1.68
- --------------------------------------------------------------------------------
Total from investment
operations 1.23 (1.87) 1.54 .92 1.67
- --------------------------------------------------------------------------------
Less distributions from net
realized gain .41 .81 .57 1.05 .34
- --------------------------------------------------------------------------------
Net asset value, end of year $6.12 $5.30 $7.98 $7.01 $7.14
- --------------------------------------------------------------------------------
Total return (%) 23.91 (25.13) 24.29 16.33 30.88
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses (%) 1.01 .90 .90 1.08 1.14
- --------------------------------------------------------------------------------
Net investment income (loss) (%) (.64) (.38) (.20) (.26) (.18)
- --------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning
of year $4.98 $7.64 $6.81 $7.03 $5.78
- --------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------
Net investment income (loss) (.10)(a) (.11) (.10) (.09)(a) (.07)
- --------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 1.20 (1.74) 1.50 .92 1.66
- --------------------------------------------------------------------------------
Total from investment
operations 1.10 (1.85) 1.40 .83 1.59
- --------------------------------------------------------------------------------
Less distributions from net
realized gain .41 .81 .57 1.05 .34
- --------------------------------------------------------------------------------
Net asset value, end of year $5.67 $4.98 $7.64 $6.81 $7.03
- --------------------------------------------------------------------------------
Total return (%) 22.78 (26.06) 22.83 15.13 29.59
- --------------------------------------------------------------------------------
Ratios to average net assets
- --------------------------------------------------------------------------------
Expenses (%) 2.28 2.14 2.14 2.15 2.17
- --------------------------------------------------------------------------------
Net investment income (loss) (%) (1.91) (1.62) (1.44) (1.33) (1.21)
- --------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
61
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
Net asset value, beginning
of year $5.00 $7.63 $6.80 $7.02 $5.77
- -------------------------------------------------------------------------------
Income from investment operations:
- -------------------------------------------------------------------------------
Net investment income (loss) (.08)(a) (.14) (.09) (.09)(a) (.07)
- -------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 1.20 (1.68) 1.49 .92 1.66
- -------------------------------------------------------------------------------
Total from investment
operations 1.12 (1.82) 1.40 .83 1.59
- -------------------------------------------------------------------------------
Less distributions from net
realized gain .41 .81 .57 1.05 .34
- -------------------------------------------------------------------------------
Net asset value, end of year $5.71 $5.00 $7.63 $6.80 $7.02
- -------------------------------------------------------------------------------
Total return (%) 23.10 (25.65) 22.87 15.16 29.65
- -------------------------------------------------------------------------------
Ratios to average net assets
- -------------------------------------------------------------------------------
Expenses (%) 1.93 2.06 1.95 2.15 2.10
- -------------------------------------------------------------------------------
Net investment income (loss) (%) (1.56) (1.54) (1.25) (1.33) (1.14)
- -------------------------------------------------------------------------------
Supplemental data for all classes
- --------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $721,926 718,349 1,095,478934,075 839,905
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) 133 86 102 85 102
- --------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
Notes: Total return does not reflect the effect of any sales charges. Per share
data for the years ended September 30, 1999, and September 30, 1996 were
determined based on average shares outstanding.
62
<PAGE>
Kemper Technology Fund
Class A
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of year $11.77 $13.13 $13.16 $14.63 $11.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment gain (loss) (a) (.06) (.04) (.06) (.08) (.03)
- ------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 10.65 .82 2.14 .74 4.66
- ------------------------------------------------------------------------------
Total from investment operations 10.59 .78 2.08 .66 4.63
- ------------------------------------------------------------------------------
Less distribution from net
realized gain 1.07 2.14 2.11 2.13 1.50
- ------------------------------------------------------------------------------
Net asset value, end of year $21.29 $11.77 $13.13 $13.16 $14.63
- ------------------------------------------------------------------------------
Total return (%) 94.71 8.21 17.11 7.83 47.30
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense reductions
(%) .93 .92 .89 .89 .88
- ------------------------------------------------------------------------------
Expenses, net (%) .93 .92 .89 .89 .88
- ------------------------------------------------------------------------------
Net investment loss (%) (.38) (.37) (.42) (.62) (.23)
- ------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of year $11.03 $12.54 $12.77 $14.39 $11.45
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment loss (a) (.22) (.14) (.18) (.19) (.15)
- ------------------------------------------------------------------------------
Net realized and unrealized gain 9.88 .77 2.06 .70 4.59
- ------------------------------------------------------------------------------
Total from investment operations 9.66 .63 1.88 .51 4.44
- ------------------------------------------------------------------------------
Less distribution from net
realized gain 1.07 2.14 2.11 2.13 1.50
- ------------------------------------------------------------------------------
Net asset value, end of year $19.62 $11.03 $12.54 $12.77 $14.39
- ------------------------------------------------------------------------------
Total return (%) 92.59 7.24 15.91 6.76 45.65
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense reductions
(%) 1.92 1.85 1.85 1.87 1.82
- ------------------------------------------------------------------------------
Expenses, net (%) 1.92 1.85 1.85 1.87 1.82
- ------------------------------------------------------------------------------
Net investment loss (%) (1.37) (1.30) (1.38) (1.60) (1.17)
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
63
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of year $11.17 $12.64 $12.85 $14.45 $11.45
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment loss (a) (.21) (.14) (.17) (.18) (.15)
- ------------------------------------------------------------------------------
Net realized and unrealized gain 10.02 .81 2.07 .71 4.65
- ------------------------------------------------------------------------------
Total from investment operations 9.81 .67 1.90 .53 4.50
- ------------------------------------------------------------------------------
Less distribution from net
realized gain 1.07 2.14 2.11 2.13 1.50
- ------------------------------------------------------------------------------
Net asset value, end of year $19.91 $11.17 $12.64 $12.85 $14.45
- ------------------------------------------------------------------------------
Total return (%) 92.68 7.57 15.98 6.88 46.23
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense reductions
(%) 1.82 1.81 1.82 1.82 1.76
- ------------------------------------------------------------------------------
Expenses, net (%) 1.82 1.81 1.82 1.82 1.76
- ------------------------------------------------------------------------------
Net investment loss (%) (1.27) (1.26) (1.35) (1.55) (1.11)
- ------------------------------------------------------------------------------
Supplemental data for all classes
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $2,805,651 1,247,991 1,209,723 1,062,8131,017,955
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 59 146 192 121 105
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
Note: Total return does not reflect the effect of any sales charges. Per share
data for 1995 through 1999 was determined based on average shares outstanding.
64
<PAGE>
Kemper Total Return Fund
Class A
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of year $10.54 $11.34 $11.28 $10.60 $9.10
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .30(a) .29 .31 .28 .29
- ------------------------------------------------------------------------------
Net realized and unrealized
gain 1.50 .77 1.57 1.24 1.46
- ------------------------------------------------------------------------------
Total from investment
operations 1.80 1.06 1.88 1.52 1.75
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .31 .31 .33 .34 .25
- ------------------------------------------------------------------------------
Distribution from net
realized gain .68 1.55 1.49 .50 --
- ------------------------------------------------------------------------------
Total dividends .99 1.86 1.82 .84 .25
- ------------------------------------------------------------------------------
Net asset value, end of year $11.35 $10.54 $11.34 $11.28 $10.60
- ------------------------------------------------------------------------------
Total return (%) 17.91 10.47 18.95 15.34 19.46
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense
reductions (%) 1.02 1.01 1.01 1.05 1.12
- ------------------------------------------------------------------------------
Expenses, net (%) 1.02 1.01 1.01 1.05 1.12
- ------------------------------------------------------------------------------
Net investment income (%) 2.71 2.75 2.92 2.76 3.00
- ------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of year $10.52 $11.33 $11.27 $10.59 $9.09
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .19(a) .19 .22 .19 .20
- ------------------------------------------------------------------------------
Net realized and unrealized
gain 1.50 .75 1.55 1.23 1.46
- ------------------------------------------------------------------------------
Total from investment
operations 1.69 .94 1.77 1.42 1.66
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .19 .20 .22 .24 .16
- ------------------------------------------------------------------------------
Distribution from net
realized gain .68 1.55 1.49 .50 --
- ------------------------------------------------------------------------------
Total dividends .87 1.75 1.71 .74 .16
- ------------------------------------------------------------------------------
Net asset value, end of year $11.34 $10.52 $11.33 $11.27 $10.59
- ------------------------------------------------------------------------------
Total return (%) 16.76 9.30 17.86 14.28 18.42
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense
reductions (%) 2.03 2.01 1.95 1.99 2.05
- ------------------------------------------------------------------------------
Expenses, net (%) 2.03 2.01 1.95 1.99 2.05
- ------------------------------------------------------------------------------
Net investment income (%) 1.70 1.75 1.98 1.82 2.07
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
65
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of year $10.54 $11.34 $11.28 $10.61 $9.09
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .20(a) .20 .22 .20 .21
- ------------------------------------------------------------------------------
Net realized and
unrealized gain 1.48 .77 1.56 1.22 1.48
- ------------------------------------------------------------------------------
Total from investment
operations 1.68 .97 1.78 1.42 1.69
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .22 .22 .23 .25 .17
- ------------------------------------------------------------------------------
Distribution from net
realized gain .68 1.55 1.49 .50 --
- ------------------------------------------------------------------------------
Total dividends .90 1.77 1.72 .75 .17
- ------------------------------------------------------------------------------
Net asset value, end of year $11.32 $10.54 $11.34 $11.28 $10.61
- ------------------------------------------------------------------------------
Total return (%) 16.64 9.50 17.92 14.31 18.76
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses, before expense
reductions (%) 1.89 1.90 1.90 1.89 1.86
- ------------------------------------------------------------------------------
Expenses, net (%) 1.89 1.90 1.90 1.89 1.86
- ------------------------------------------------------------------------------
Net investment income (%) 1.84 1.86 2.03 1.92 2.26
- ------------------------------------------------------------------------------
Supplemental data for all classes
- --------------------------------------------------------------------------------
Years ended October 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $3,682,023 3,321,254 3,241,383 3,020,7982,926,542
- ------------------------------------------------------------------------------
Portfolio turnover rate
(annualized) (%) 64 80 122 85 142
- ------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
Note: Total return does not reflect the effect of any sales charges.
66
<PAGE>
Kemper Value+Growth Fund
Class A
- --------------------------------------------------------------------------------
Years ended November 30, 1999 1998 1997 1996 1995(a)
- -------------------------------------------------------------------------------
Net asset value, beginning
of period $15.82 $14.62 $12.95 $10.02 $9.50
- -------------------------------------------------------------------------------
Income from investment operations:
- -------------------------------------------------------------------------------
Net investment income
(loss) .03(b) .01 .02 .05 .02
- -------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) on
investment transactions 2.68 1.69 2.48 2.88 .50
- -------------------------------------------------------------------------------
Total from investment
operations 2.71 1.70 2.50 2.93 .52
- -------------------------------------------------------------------------------
Less distributions from:
net realized gains on
investment transactions (.23) (.50) (.83) -- --
- -------------------------------------------------------------------------------
Total distributions (.23) (.50) (.83) -- --
- -------------------------------------------------------------------------------
Net asset value, end of
period $18.30 $15.82 $14.62 $12.95 $10.02
- -------------------------------------------------------------------------------
Total return (%) (d) 17.42(c) 12.06 20.83 29.24(c) 5.47**
- -------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- -------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $89,662 $76,705 $52,059 $20,432 $2,695
- -------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 1.42 1.42 1.41 1.59 1.35*
- -------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 1.41 1.42 1.41 1.47 1.35*
- -------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) (.15) .22 .35 .43 2.25*
- -------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 92 56 82 --*
- -------------------------------------------------------------------------------
(a) October 16 to November 30, 1995.
(b) Based on monthly average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been reduced.
(d) Total return does not reflect the effect of sales charges.
* Annualized
** Not annualized
67
<PAGE>
Class B
- --------------------------------------------------------------------------------
Years ended November 30, 1999 1998 1997 1996 1995(a)
- -------------------------------------------------------------------------------
Net asset value, beginning
of period $15.40 $14.37 $12.83 $10.02 $9.50
- -------------------------------------------------------------------------------
Income from investment operations:
- -------------------------------------------------------------------------------
Net investment income
(loss) (.10)(b) (.07) (.07) (.04) .02
- -------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) on
investment transactions 2.61 1.60 2.44 2.85 .50
- -------------------------------------------------------------------------------
Total from investment
operations 2.51 1.53 2.37 2.81 .52
- -------------------------------------------------------------------------------
Less distributions from:
net realized gains on
investment transactions (.23) (.50) (.83) -- --
- -------------------------------------------------------------------------------
Total distributions (.23) (.50) (.83) -- --
- -------------------------------------------------------------------------------
Net asset value, end of
period $17.68 $15.40 $14.37 $12.83 $10.02
- -------------------------------------------------------------------------------
Total return (%)(d) 16.58(c) 11.06(c) 19.96(c) 28.04(c) 5.47**
- -------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- -------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $74,352 $62,287 $42,888 $17,617 $2,720
- -------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 2.31 2.38 2.32 2.44 2.10*
- -------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 2.19 2.27 2.27 2.27 2.10*
- -------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) (.93) (.63) (.51) (.37) 1.50*
- -------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 92 56 82 --*
- -------------------------------------------------------------------------------
(a) October 16 to November 30, 1995.
(b) Based on monthly average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been reduced.
(d) Total return does not reflect the effect of sales charges.
* Annualized
** Not annualized
68
<PAGE>
Class C
- --------------------------------------------------------------------------------
Years ended November 30, 1999 1998 1997 1996 1995(a)
- ------------------------------------------------------------------------------
Net asset value, beginning
of period $15.40 $14.37 $12.84 $10.01 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income
(loss) (.11)(b) (.04) (.05) (.04) .01
- ------------------------------------------------------------------------------
Net realized and
unrealized gain on
investment transactions 2.62 1.57 2.41 2.87 .50
- ------------------------------------------------------------------------------
Total from investment
operations 2.51 1.53 2.36 2.83 .51
- ------------------------------------------------------------------------------
Less distributions from: net
realized gains on investment
transactions (.23) (.50) (.83) -- --
- ------------------------------------------------------------------------------
Total distributions (.23) (.50) (.83) -- --
- ------------------------------------------------------------------------------
Net asset value, end of
period $17.68 $15.40 $14.37 $12.84 $10.01
- ------------------------------------------------------------------------------
Total return (%)(d) 16.58(c) 11.06(c) 19.86(c) 28.27(c) 5.37**
- ------------------------------------------------------------------------------
Ratios to average net assets and supplemental data
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $9,379 $5,799 $2,794 $1,043 $436
- ------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 2.68 2.16 2.15 2.22 2.07*
- ------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 2.14 2.16 2.15 2.22 2.07*
- ------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) (.88) (.52) (.39) (.32) 1.53*
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 92 56 82 --*
- ------------------------------------------------------------------------------
(a) October 16 to November 30, 1995.
(b) Based on monthly average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been reduced.
(d) Total return does not reflect the effect of sales charges.
* Annualized
** Not annualized
69
<PAGE>
Investing In The Funds
The following pages tell you about many of the services, choices and benefits of
being a Kemper Funds shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.
You can find out more about the topics covered here by speaking with your
financial representative or a representative of your workplace retirement plan
or other investment provider.
<PAGE>
Choosing A Share Class
In this prospectus, there are three share classes for each fund. The Kemper
Classic Growth Fund offers a fourth class of shares separately. Each class has
its own fees and expenses, offering you a choice of cost structures.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
- --------------------------------------------------------------------------------
Classes and features Points to help you compare
- --------------------------------------------------------------------------------
Class A
o Sales charges of up to 5.75%, o Some investors may be able to
charged when you buy shares reduce or eliminate their sales
charges; see next page
o In most cases, no charges when you
sell shares o Total annual expenses are lower
than those for Class B or Class C
o No distribution fee
- ------------------------------------------------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate
falls to zero after six years
o Deferred sales charge of up to
4.00%, charged when you sell shares o Shares automatically convert to
you bought within the last six years Class A after six years after
purchase, which means lower annual
o 0.75% distribution fee expenses going forward
- ------------------------------------------------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is
lower, but your shares never convert
o Deferred sales charge of 1.00%, to Class A, so annual expenses
charged when you sell shares you remain higher
bought within the last year
o 0.75% distribution fee
- ------------------------------------------------------------------------------
71
<PAGE>
<PAGE>
Class A shares
Class A shares have a sales charge that varies with the amount you invest:
Your investment Sales charge Sales charge
as a % of as a % of your
offering price net investment
- ---------------------------------------------------------
Up to $50,000 5.75% 6.10%
- ---------------------------------------------------------
$50,000-$99,999 4.50 4.71
- ---------------------------------------------------------
$100,000-$249,999 3.50 3.63
- ---------------------------------------------------------
$250,000-$499,999 2.60 2.67
- ---------------------------------------------------------
$500,000-$999,999 2.00 2.04
- ---------------------------------------------------------
$1 million or more See below and next page
- ---------------------------------------------------------
The offering price includes the sales charge.
You may be able to lower your Class A sales charges if:
o you plan to invest at least $50,000 over the next 24 months ("letter of
intent")
o the amount of Kemper shares you already own (including shares in certain
other Kemper funds) plus the amount you're investing now is at least
$50,000 ("cumulative discount")
o you are investing a total of $50,000 or more in several Kemper funds at
once ("combined purchases")
The point of these three features is to let you count investments made at other
times for purposes of calculating your present sales charge. Any time you can
use the privileges to "move" your investment into a lower sales charge category
in the table above, it's generally beneficial for you to do so. You can take
advantage of these methods by filling in the appropriate sections of your
application or by speaking with your financial representative.
72
<PAGE>
You may be able to buy Class A shares without sales charges when you are:
o reinvesting dividends or distributions
o investing through certain workplace retirement plans
o participating in an investment advisory program under which you pay a fee
to an investment advisor or other firm for portfolio management services
There are a number of additional provisions that apply in order to be eligible
for a sales charge waiver. The fund may waive the sales charges for investors in
other situations as well. Your financial representative or Kemper can answer
your questions and help you determine if you are eligible.
If you're investing $1 million or more, either as a lump sum or through one of
the sales charge reduction features described on the previous page, you may be
eligible to buy Class A shares without sales charges. However, you may be
charged a contingent deferred sales charge (CDSC) of 1.00% on any shares you
sell within the first year of owning them, and a similar charge of 0.50% on
shares you sell within the second year of owning them. This CDSC is waived under
certain circumstances (see "Policies You Should Know About"). Your financial
representative or Kemper can answer your questions and help you determine if
you're eligible.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class A shares may make sense for long-term investors, especially those
who are eligible for reduced or eliminated sales charges.
73
<PAGE>
Class B shares
With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% is deducted
from fund assets each year. This means the annual expenses for Class B shares
are somewhat higher (and their performance correspondingly lower) compared to
Class A shares, which don't have a 12b-1 fee. After six years, Class B shares
automatically convert to Class A, which has the net effect of lowering the
annual expenses from the seventh year on.
Class B shares have a contingent deferred sales charge (CDSC). This charge
declines over the years you own shares, and disappears completely after six
years of ownership. But for any shares you sell within those six years, you may
be charged as follows:
Year after you bought shares CDSC on shares you sell
- -----------------------------------------------------------
First year 4.00%
- -----------------------------------------------------------
Second or third year 3.00
- -----------------------------------------------------------
Fourth or fifth year 2.00
- -----------------------------------------------------------
Sixth year 1.00
- -----------------------------------------------------------
Seventh year and later None
(automatic conversion to
Class A)
- -----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class B shares can be a logical choice for long-term investors who would prefer
to see all of their investment go to work right away, and can accept somewhat
higher annual expenses in exchange.
74
<PAGE>
Class C shares
Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan under which a distribution fee of 0.75% is deducted from fund assets
each year. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a contingent deferred sales charge (CDSC), but only on
shares you sell within one year of buying them:
Year after you bought shares CDSC on shares you sell
- ----------------------------------------------------------
First year 1.00%
- ----------------------------------------------------------
Second year and later None
- ----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.
75
<PAGE>
How to Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
- --------------------------------------------------------------------------------
First investment Additional investments
- --------------------------------------------------------------------------------
$1,000 or more for regular accounts $100 or more for regular accounts
$250 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic
Investment Plan
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative using o Contact your representative using
the method that's most convenient for the method that's most convenient
you for you
- ------------------------------------------------------------------------------
By mail or express mail (see below)
o Fill out and sign an application o Send a check and a Kemper
investment slip to us at the
o Send it to us at the appropriate appropriate address below
address, along with an investment
check o If you don't have an investment
slip, simply include a letter with
your name, account number, the full
name of the fund and the share class
and your investment instructions
- ------------------------------------------------------------------------------
By wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By phone
- -- o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
With an automatic investment plan
- -- o To set up regular investments,
call (800) 621-1048
- ------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9415
Express, registered or certified mail:
Kemper Service Company, 811 Main Street, Kansas City, MO 64105-2005
Fax number: (800) 818-7526 (for exchanging and selling only)
76
<PAGE>
How to Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
- --------------------------------------------------------------------------------
Exchanging into another fund Selling shares
- --------------------------------------------------------------------------------
$1,000 or more to open a new account Some transactions, including most
for over $50,000, can only be
$100 or more for exchanges between ordered in writing with a signature
existing accounts guarantee; if you're in doubt, see
page 80
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by
method that's most convenient for you the method that's most convenient
for you
- ------------------------------------------------------------------------------
By phone or wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By mail, express mail or fax
(see previous page)
Write a letter that includes: Write a letter that includes:
o the fund, class and account number o the fund, class and account
you're exchanging out of number from which you want to sell
shares
o the dollar amount or number of
shares you want to exchange o the dollar amount or number of
shares you want to sell
o the name and class of the fund you
want to exchange into o your name(s), signature(s) and
address, as they appear on your
o your name(s), signature(s) and account
address, as they appear on your
account o a daytime telephone number
o a daytime telephone number
- ------------------------------------------------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from a o To set up regular cash payments
Kemper fund account, call from a Kemper fund account, call
(800) 621-1048 (800) 621-1048
- ------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
77
<PAGE>
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you
received from them. As a general rule, you should follow the information in
those materials wherever it contradicts the information given here. Please note
that an investment provider may charge its own fees.
Policies about transactions
The funds are open for business each day the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange (typically 3 p.m. Central time, but sometimes
earlier, as in the case of scheduled half-day trading or unscheduled suspensions
of trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
78
<PAGE>
EXPRESS-Transfer lets you set up a link between a Kemper account and a bank
account. Once this link is in place, you can move money between the two with a
phone call. You'll need to make sure your bank has Automated Clearing House
(ACH) services. Transactions take two to three days to be completed, and there
is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the account
application; to add it to an existing account, call (800) 621-1048.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because your shares can only
be sold by mailing them in, and if they're ever lost they're difficult and
expensive to replace.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that, with respect to certain pre-authorized privileges,
as long as we take reasonable steps to ensure that an order appears genuine, we
are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are normally completed within 24 hours. The funds can only
send or accept wires of $1,000 or more.
Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www. kemper.com to get up-to-date information, review balances or
even place orders for exchanges.
79
<PAGE>
When you want to sell more than $50,000 worth of shares or send the proceeds to
a third party or to a new address you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a contingent deferred sales charge (CDSC), we
calculate the CDSC as a percentage of what you paid for the shares or what you
are selling them for -- whichever results in the lowest charge to you. In
processing orders to sell shares, we turn to the shares with the lowest CDSC
first. Exchanges from one Kemper fund into another don't affect CDSCs: for each
investment you make, the date you first bought Kemper shares is the date we use
to calculate a CDSC on that particular investment.
There are certain cases in which you may be exempt from a CDSC. These include:
o the death or disability of an account owner (including a joint owner)
o withdrawals made through a systematic withdrawal plan
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns of
excess contributions from retirement plans
o for Class A shares purchased through the Large Order NAV Purchase
Privilege, redemption of shares whose dealer of record at the time of the
investment notifies Kemper Distributors that the dealer is waiving the
applicable commission
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.
80
<PAGE>
In each of these cases, there are a number of additional provisions that apply
in order to be eligible for a CDSC waiver. Your financial representative or
Kemper can answer your questions and help you determine if you are eligible.
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take advantage of the "reinstatement feature." With
this feature, you can put your money back into the same class of a Kemper fund
at its current NAV and for purposes of sales charges it will be treated as if it
had never left Kemper. You'll also be reimbursed (in the form of fund shares)
for any CDSC you paid when you sold your shares. Future CDSC calculations will
be based on your original investment date, rather than your reinstatement date.
There is also an option that lets investors who sold Class B shares buy Class A
shares with no sales charge, although they won't be reimbursed for any CDSC they
paid. You can only use the reinstatement feature once for any given group of
shares. To take advantage of this feature, contact Kemper or your financial
representative.
Money from shares you sell is normally sent out within one business day of when
your order is received in proper form, although it could be delayed for up to
seven days. There are also two circumstances when it could be longer: when you
are selling shares you bought recently by check and that check hasn't cleared
yet (maximum delay: 10 days) or when unusual circumstances prompt the SEC to
allow further delays. Certain expedited redemption processes may also be delayed
when you are selling recently purchased shares.
81
<PAGE>
How the funds calculate share price
For each fund in this prospectus, the price at which you buy shares is as
follows:
Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")
Class B and Class C shares -- net asset value per share, or NAV
To calculate NAV, each share class of each fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
------------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
For each fund and share class in this prospectus, the price at which you sell
shares is also the NAV, although for Class B and Class C investors a contingent
deferred sales charge may be taken out of the proceeds (see "Choosing A Share
Class").
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
82
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if we have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o charge you $9 each calendar quarter if your account balance is below $1,000
for the entire quarter; this policy doesn't apply to most retirement
accounts or if you have an automatic investment plan
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash
o change, add or withdraw various services, fees and account policies (for
example, we may change or terminate the exchange privilege at any time)
83
<PAGE>
Understanding Distributions And Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The fund intends to pay dividends and distributions to its shareholders in
November or December, and if necessary may do so at other times as well.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Because each shareholder's tax situation is unique, ask your tax professional
about the tax consequences of your investments, including any state and local
tax consequences.
84
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:
Generally taxed at ordinary income rates
- -------------------------------------------------------
o short-term capital gains from selling fund shares
- -------------------------------------------------------
o income dividends you receive from a fund
- -------------------------------------------------------
o short-term capital gains distributions received from a
fund
Generally taxed at capital gains rates
- -------------------------------------------------------
o long-term capital gains from selling fund shares
- -------------------------------------------------------
o long-term capital gains distributions received from a
fund
- -------------------------------------------------------
You may be able to claim a tax credit or deduction for your share of any foreign
taxes your fund pays.
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
If you invest right before the fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.
Corporations may be able to take a dividends- received deduction for a portion
of income dividends they receive.
85
<PAGE>
To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we may mail one copy per
household. For more copies, call (800) 621-1048.
Statements of Additional Information (SAIs) -- These tell you more about each
fund's features and policies, including additional risk information. The SAIs
are incorporated by reference into this document (meaning that they're legally
part of this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-6009
www.sec.gov
Tel (800) SEC-0330
Kemper Funds
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
Tel (800) 621-1048
SEC File Numbers
Kemper Aggressive Growth Fund 811-07855
Kemper Blue Chip Fund 811-5357
Classic Growth Fund 811-43
Kemper Growth Fund 811-1365
Kemper Small Capitalization Equity Fund 811-1702
Kemper Technology Fund 811-0547
Kemper Total Return Fund 811-1236
Kemper Value+Growth Fund 811-7331
Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com E-mail [email protected]
Tel (800) 621-1048
[LOGO] KEMPER FUNDS
Long-term investing in a short-term world (SM)
<PAGE>
Kemper Equity Funds -- Growth Style
Kemper Aggressive Growth Fund
Kemper Blue Chip Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Technology Fund
Kemper Total Return Fund
Kemper Value+Growth Fund
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 1, 2000
CLASS I SHARES
- --------------------------------------------------------------------------------
The above funds currently offer four classes of shares to provide investors with
different purchasing options. These are Class A, Class B and Class C shares,
which are described in the funds' prospectus, and Class I shares, which are
described in the prospectus as supplemented hereby. When placing purchase
orders, investors must specify whether the order is for Class A, Class B, Class
C or Class I shares.
Class I shares are available for purchase exclusively by the following
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of Scudder
Kemper Investments, Inc. ("Scudder Kemper") and its affiliates and rollover
accounts from those plans; (2) the following investment advisory clients of
Scudder Kemper and its investment advisory affiliates that invest at least $1
million in a Fund: unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and self-directed retirement
plans); unaffiliated banks and insurance companies purchasing for their own
accounts; and endowment funds of unaffiliated non-profit organizations; (3)
investment-only accounts for large qualified plans, with at least $50 million in
total plan assets or at least 1000 participants; (4) trust and fiduciary
accounts of trust companies and bank trust departments providing fee-based
advisory services that invest at least $1 million in a Fund on behalf of each
trust; and (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a Fund; and (6) investment
companies managed by Scudder Kemper that invest primarily in other investment
companies.
Class I shares currently are available for purchase only from Kemper
Distributors, Inc. ("KDI"), principal underwriter for the Funds, and, in the
case of category 4 above, selected dealers authorized by KDI. Share certificates
are not available for Class I shares.
<PAGE>
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge schedules and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services fee
charged to Class I shares. As a result of the relatively lower expenses for
Class I shares, the level of income dividends per share (as a percentage of net
asset value) and, therefore, the overall investment return, typically will be
higher for Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
Performance
The table shows how the funds' returns over different periods average out. For
context, the table has market indices (which, unlike the fund, have no fees or
expenses). All figures on this page assume reinvestment of dividends and
distributions. As always, past performance is no guarantee of future results. No
performance data are available for Kemper Aggressive Growth Fund and Kemper
Value+Growth Fund.
Average Annual Total Returns (as of 12/31/1999)
Since 12/31/98 Since 7/3/95 Since 11/22/95
1 Year Life of Class Life of Class
- ----------------------------------------------------------------------------
Kemper Blue Chip Fund 26.37% -- 24.00%
Index 1 21.04 -- 26.40*
Index 2 20.91 -- 25.63*
Kemper Growth Fund 37.44 22.01% --
Index 1 21.04 26.90** --
Index 3 33.16 31.12** --
Kemper Small Capitalization 34.26 17.42 --
Equity Fund
Index 1 21.04 26.90** --
Index 4 21.26 15.21** --
Index 5 43.09 17.39** --
Kemper Technology Fund 115.09 39.09 --
Index 1 21.04 26.90** --
Index 3 33.16 31.12** --
Index 7 123.33 45.57** --
2
<PAGE>
Kemper Total Return Fund 15.08 17.23 --
Index 1 21.04 26.90** --
Index 3 33.16 31.12** --
Index 6 -2.15 5.83** --
* Index comparison begins November 30, 1995
** Index comparison begins June 30, 1995
Index 1: Standard & Poor's 500 Composite Stock Price Index (S&P 500), an
unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks.
Index 2: Russell 1000 Index, an unmanaged price-only index of the 1,000 largest
capitalized companies that are domiciled in the United States and whose common
stocks are traded there.
Index 3: Russell 1000 Growth Index, an unmanaged capitalization-weighted index
containing the growth stocks in the Russell 1000 Index.
Index 4: Russell 2000 Index, an unmanaged capitalization-weighted measure
of approximately 2,000 small U.S. stocks.
Index 5: Russell 2000 Growth Index, an unmanaged capitalization-weighted index
containing the growth stocks in the Russell 2000 Index.
Index 6: Lehman Brothers Government/Corporate Bond Index, an unmanaged index of
government and investment-grade corporate debt securities of intermediate- and
long-term maturities.
Index 7: Hambrecht & Quist Index, an unmanaged index composed of approximately
275 technology stocks, including companies from five technology groups: computer
hardware, computer software, communications, semiconductors and information
services.
The table includes the effects of maximum sales load.
3
<PAGE>
How much investors pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of a fund.
Shareholder fees: Fees paid directly from your investment.
Maximum
Sales Maximum
Charge Deferred Maximum
(Load) Sales Sales
Imposed on Charge Charge on Redemption
Purchases (Load) (as Reinvested Fee (as %
(as % of % of Dividends/ of amount
Offering Redemption Distribu- redeemed, if Exchange
Price) Proceeds) tions applicable) Fee
- ----------------------------------------------------------------------------
Kemper
Aggressive
Growth Fund None None None None None
- ----------------------------------------------------------------------------
Kemper Blue
Chip Fund None None None None None
- ----------------------------------------------------------------------------
Kemper Growth
Fund None None None None None
- ----------------------------------------------------------------------------
Kemper Small
Capitalization
Equity Fund None None None None None
- ----------------------------------------------------------------------------
Kemper
Technology Fund None None None None None
- ----------------------------------------------------------------------------
Kemper Total
Return Fund None None None None None
- ----------------------------------------------------------------------------
Kemper
Value+Growth
Fund None None None None None
- ----------------------------------------------------------------------------
4
<PAGE>
Annual fund operating expenses: Expenses that are deducted from fund assets.
Total
Annual
Investment Distribution Fund
management (12b-1) Other Operating
Fee Fees Expenses Expenses
- ----------------------------------------------------------------------------
Kemper Aggressive Growth Fund 0.41% None 0.45% 0.86%
- ----------------------------------------------------------------------------
Kemper Blue Chip Fund 0.56% None 0.24% 0.80%
- ----------------------------------------------------------------------------
Kemper Growth Fund 0.54% None 0.21% 0.75%
- ----------------------------------------------------------------------------
Kemper Small Capitalization
Equity Fund 0.65% None 0.03% 0.68%
- ----------------------------------------------------------------------------
Kemper Technology Fund 0.53% None 0.08% 0.61%
- ----------------------------------------------------------------------------
Kemper Total Return Fund 0.53% None 0.21% 0.74%
- ----------------------------------------------------------------------------
Kemper Value+Growth Fund % None % %
- ----------------------------------------------------------------------------
Example
Based on the figures above, this example is designed to help you compare the
expenses of a fund to those of other funds. The example assumes operating
expenses remain the same and that you invested $10,000, earned 5% annual returns
and reinvested all dividends and distributions. This is only an example; actual
expenses will be different.
Fees and expenses if you sold shares after:
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------
Kemper Aggressive Growth Fund $88 $274 $477 $1,061
---------------------------------------------------------------------------
Kemper Blue Chip Fund $82 $255 $444 $990
---------------------------------------------------------------------------
Kemper Growth Fund $77 $240 $417 $930
---------------------------------------------------------------------------
Kemper Small Capitalization
Equity Fund $69 $218 $379 $847
---------------------------------------------------------------------------
Kemper Technology Fund $62 $195 $340 $762
---------------------------------------------------------------------------
Kemper Total Return Fund $76 $237 $411 $918
---------------------------------------------------------------------------
Kemper Value+Growth Fund $ $ $ $
---------------------------------------------------------------------------
5
<PAGE>
Financial Highlights
Kemper Blue Chip Fund
November
22, 1995 to
Year ended October 31, October 31,
CLASS I 1999 1998 1997 1996
- ----------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of
period $16.68 17.72 17.18 15.30
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment income .13 .21 .32 .36
- ----------------------------------------------------------------------------
Net realized and
unrealized gain 4.60 1.19 3.58 2.96
- ----------------------------------------------------------------------------
Total from investment
operations 4.73 1.40 3.90 3.32
- ----------------------------------------------------------------------------
Less distributions from:
Net investment income -- .25 .23 .24
- ----------------------------------------------------------------------------
Net realized gain .42 2.19 3.13 1.20
- ----------------------------------------------------------------------------
Total dividends .42 2.44 3.36 1.44
- ----------------------------------------------------------------------------
Net asset value, end of period $20.99 16.68 17.72 17.18
- ----------------------------------------------------------------------------
Total return (not annualized) 28.81% 8.53 26.89 21.89
- ----------------------------------------------------------------------------
Ratios to average net assets
- ----------------------------------------------------------------------------
Expenses, before expense
reductions .72% .68 .70 1.31
- ----------------------------------------------------------------------------
Expenses, net .72% .68 .70 1.31
- ----------------------------------------------------------------------------
Net investment income (loss) .60% 1.23 1.56 1.33
- ----------------------------------------------------------------------------
Year ended October 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Supplemental data for all classes
Net assets at end of
period (in thousands) $915,008 581,770 446,891 256,172 168,266
- ----------------------------------------------------------------------------
Portfolio turnover rate
(annualized) 75% 157 183 166 117
- ----------------------------------------------------------------------------
Note: Total return does not reflect the effect of any sales charges. Per share
data for the year ended October 31, 1999 was determined based on average shares
outstanding.
6
<PAGE>
Kemper Growth Fund
July 3
to
September
Year ended September 30, 30,
CLASS I 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning
of period $11.88 15.60 17.26 16.09 14.80
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment income -- .05 .08 .19 .03
- ----------------------------------------------------------------------------
Net realized and
unrealized gain (loss) 4.25 (1.68) 2.61 2.74 1.26
- ----------------------------------------------------------------------------
Total from investment
operations 4.25 (1.63) 2.69 2.93 1.29
- ----------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income -- -- -- .08 --
- ----------------------------------------------------------------------------
Distribution from net
realized gain .06 2.09 4.35 1.68 --
- ----------------------------------------------------------------------------
Total dividends .06 2.09 4.35 1.76 --
- ----------------------------------------------------------------------------
Net asset value, end
of period $16.07 11.88 15.60 17.26 16.09
- ----------------------------------------------------------------------------
Total return
(not annualized) 35.82% (11.45) 20.51 20.19 8.72
- ----------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ----------------------------------------------------------------------------
Expenses .71% .65 .70 .64 .59
- ----------------------------------------------------------------------------
Net investment income (loss) (.02)% .30 .43 1.08 .92
- ----------------------------------------------------------------------------
Year ended September 30,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Supplemental data for all classes
Net assets at end of
year (in thousands) $2,578,244 2,209,521 2,827,565 2,738,303 2,503,301
- ----------------------------------------------------------------------------
Portfolio turnover rate 97% 122 201 150 67
- ----------------------------------------------------------------------------
Note: Total return does not reflect the effect of any sales charges. Per share
data for years ended September 30, 1999 and September 30, 1998 were determined
based on average shares outstanding.
7
<PAGE>
Kemper Small Capitalization Equity Fund
July 3
to
September
Year ended September 30, 30,
CLASS I 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning
of year $5.39 8.07 7.05 7.15 6.27
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment
income (loss) (.01) -- .01 .01 --
- ----------------------------------------------------------------------------
Net realized and
unrealized gain (loss) 1.30 (1.87) 1.58 .94 .88
- ----------------------------------------------------------------------------
Total from investment
operations 1.29 (1.87) 1.59 .95 .88
- ----------------------------------------------------------------------------
Less distributions from net
realized gain .41 .81 .57 1.05 --
- ----------------------------------------------------------------------------
Net asset value, end of year $6.27 5.39 8.07 7.05 7.15
- ----------------------------------------------------------------------------
Total return 24.66% (24.82) 24.89 16.76 14.04
- ----------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ----------------------------------------------------------------------------
Expenses .58% .48 .53 .66 .79
- ----------------------------------------------------------------------------
Net investment income (loss) (.21)% .04 .17 .16 (.14)
- ----------------------------------------------------------------------------
Year ended September 30,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Supplemental data for all classes
Net assets at end of year
(in thousands) $721,926 718,349 1,095,478 934,075 839,905
- ----------------------------------------------------------------------------
Portfolio turnover rate 133% 86 102 85 102
- ----------------------------------------------------------------------------
Note: Total return does not reflect the effect of any sales charges. Per share
data for the years ended September 30, 1999, and September 30, 1996 were
determined based on average shares outstanding.
8
<PAGE>
Kemper Technology Fund
July 3
to
October
Year ended October 31, 31,
CLASS I 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning
of period $11.86 13.19 13.20 14.64 12.72
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.02) (.02) (.04) (.07) (.02)
- ----------------------------------------------------------------------------
Net realized and
unrealized gain 10.77 .83 2.14 .76 1.94
- ----------------------------------------------------------------------------
Total from investment
operations 10.75 .81 2.10 .69 1.92
- ----------------------------------------------------------------------------
Less distribution from net
realized gain 1.07 2.14 2.11 2.13 --
- ----------------------------------------------------------------------------
Net asset value, end
of period $21.54 11.86 13.19 13.20 14.64
- ----------------------------------------------------------------------------
Total return (not
annualized) 95.39% 8.44 17.23 8.06 15.09
- ----------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ----------------------------------------------------------------------------
Expenses, before expense
reductions .65% .67 .74 .76 .65
- ----------------------------------------------------------------------------
Expenses, net .64% .67 .74 .76 .65
- ----------------------------------------------------------------------------
Net investment loss (.09)% (.12) (.27) (.49) (.33)
- ----------------------------------------------------------------------------
Year ended October 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Supplemental data for all classes
Net assets at end of
year (in thousands) $2,805,651 1,247,991 1,209,723 1,062,813 1,017,955
- ----------------------------------------------------------------------------
Portfolio turnover rate 59% 146 192 121 105
- ----------------------------------------------------------------------------
Note: Total return does not reflect the effect of any sales charges. Per share
data for 1995 through 1999 was determined based on average shares outstanding.
9
<PAGE>
Kemper Total Return Fund
July 3
to
October
Year ended October 31, 31,
CLASS I 1999(a) 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning
of period $10.54 11.33 11.27 10.61 10.07
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment income .34 .34 .36 .32 .10
- ----------------------------------------------------------------------------
Net realized and
unrealized gain 1.53 .77 1.55 1.23 .52
- ----------------------------------------------------------------------------
Total from investment
operations 1.87 1.11 1.91 1.55 .62
- ----------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income .35 .35 .36 .39 .08
- ----------------------------------------------------------------------------
Distribution from net
realized gain .68 1.55 1.49 .50 --
- ----------------------------------------------------------------------------
Total dividends 1.03 1.90 1.85 .89 .08
- ----------------------------------------------------------------------------
Net asset value, end
of period $11.38 10.54 11.33 11.27 10.61
- ----------------------------------------------------------------------------
Total return (not
annualized) 18.65% 10.98 19.40 15.64 6.21
- ----------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ----------------------------------------------------------------------------
Expenses, before expense
reductions .67% .64 .71 .72 .61
- ----------------------------------------------------------------------------
Expenses, net .67% .64 .71 .72 .61
- ----------------------------------------------------------------------------
Net investment income 3.06% 3.12 3.22 3.09 2.97
- ----------------------------------------------------------------------------
Year ended October 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------
Supplemental data for all classes
Net assets at end of
year (in thousands) $3,682,023 3,321,254 3,241,383 3,020,798 2,926,542
- ----------------------------------------------------------------------------
Portfolio turnover
rate (annualized) 64% 80 122 85 142
- ----------------------------------------------------------------------------
(a) Per share data was determined based on monthly average shares outstanding
during the period.
Note: Total return does not reflect the effect of any sales charges.
10
<PAGE>
Special Features
Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Zurich Money Funds -- Zurich Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper and its affiliates and (ii) Class I shares of
any other "Kemper Mutual Fund" listed in the prospectus. Conversely,
shareholders of Zurich Money Funds -- Zurich Money Market Fund who have
purchased shares because they are participants in tax-exempt retirement plans of
Scudder Kemper and its affiliates may exchange their shares for Class I shares
of "Kemper Mutual Funds" to the extent that they are available through their
plan. Exchanges will be made at the relative net asset values of the shares.
Exchanges are subject to the limitations set forth in the prospectus.
11
<PAGE>
February 1, 2000
<PAGE>
KEMPER EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
Kemper Aggressive Growth Fund ("Aggressive Growth Fund")
Kemper Blue Chip Fund ("Blue Chip Fund")
Kemper Growth Fund ("Growth Fund")
Kemper Small Capitalization Equity Fund ("Small Cap Fund")
Kemper Technology Fund ("Technology Fund")
Kemper Total Return Fund ("Total Return Fund")
Kemper Value Plus Growth Fund ("Value+Growth Fund")
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
combined Statement of Additional Information for each of the funds (the "Funds")
listed above. It should be read in conjunction with the combined prospectus of
the Funds dated February 1, 2000. The prospectus may be obtained without charge
from the Funds and is also available along with other related materials on the
SEC's Internet web site (http://www.sec.gov).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS.......................................................2
INVESTMENT POLICIES AND TECHNIQUES............................................6
PORTFOLIO TRANSACTIONS........................................................22
INVESTMENT MANAGER AND UNDERWRITER............................................23
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES.................................33
DIVIDENDS AND TAXES...........................................................44
PERFORMANCE...................................................................49
OFFICERS AND BOARD MEMBERS....................................................53
SHAREHOLDER RIGHTS............................................................58
APPENDIX--RATINGS OF FIXED INCOME INVESTMENTS.................................61
The financial statements appearing in each Fund's October 31, 1999 Annual Report
to Shareholders are incorporated herein by reference. The Annual Reports for
each of the Funds accompanies this document.
printed on recycled paper
<PAGE>
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions which cannot
be changed without approval of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, (the "1940 Act") this means the
lesser of the vote of (a) 67% of the shares of the Fund present at a meeting
where more than 50% of the outstanding shares are present in person or by proxy
or (b) more than 50% of the outstanding shares of the Fund.
The Aggressive Growth Fund has elected to be classified as a non-diversified
open-end investment fund. The Blue Chip Fund, Growth Fund, Small Cap Fund,
Technology Fund, Total Return Fund and Value+Growth Fund have elected to be
classified as diversified open-end investment funds.
Each Fund may not, as a fundamental policy:
1. Make loans except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time.
2. Borrow money, except as permitted under the 1940 Act, as amended, and
as interpreted or modified by regulatory authority having jurisdiction,
from time to time.
3. Concentrate its investments in a particular industry, as that term is
used in the 1940 Act, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
4. Purchase physical commodities or contracts relating to physical
commodities.
5. Engage in the business of underwriting securities issued by others,
except to the extent that a Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities.
6. Issue senior securities except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
7. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured
by real estate or interests therein, except that the Fund reserves
freedom of action to hold and to sell real estate acquired as a result
of the Fund's ownership of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond that specified limit resulting from a
change in values or net assets will not be considered a violation. None of the
Funds borrowed money as permitted by fundamental investment restriction number 2
in the latest fiscal year and none intend to borrow money during the current
year.
Each Fund has adopted the following non-fundamental restrictions, which may be
changed by the Board without shareholder approval.
The Aggressive Growth Fund may not, as a non-fundamental policy:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. With respect to 50% of its total assets, purchase securities of any
issuer (other than obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities) if, as a result, more
than 5% of the total value of the Fund's assets would be invested in
securities of that issuer, except that all or substantially all of the
assets of the Fund may be invested in another registered investment
company having the same investment objective and substantially similar
investment policies as the Fund.
iv. Invest more than 25% of its total assets in a single issuer (other than
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities), except that all or substantially all of the assets
of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund.
v. 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
2
<PAGE>
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.
vi. Pledge, hypothecate, mortgage or otherwise encumber its assets except
to secure borrowings permitted by restriction number 2 above. (The
collateral arrangements with respect to options, financial futures,
foreign currency transactions and delayed delivery transactions and any
margin payments in connection therewith are not deemed to be pledges or
other encumbrances.)
vii. Purchase more than 10% of any class of voting securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund. viii. Purchase securities on margin, except to obtain such
short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection
with options and financial futures transactions.
ix. purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of its total
assets.
x. enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf of
the Fund and the premiums paid for such options on futures contracts
does not exceed 5% of the fair-market value of the Fund's total assets;
provided that the in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in computing
the 5% limit.
The Blue Chip Fund may not, as a non-fundamental policy:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. 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.
iv. Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by
restriction number (2) 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.)
v. Purchase more than 10% of any class of voting securities of any issuer,
except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund.
vi. 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.
vii. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if, as a result, more than 5% of the total value of the Fund's assets
would be invested in securities of that issuer, except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
viii. purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of its total
assets.
ix. enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf of
the Fund and the premiums paid for such options on futures contracts
does not exceed 5% of the fair-market value of the Fund's
3
<PAGE>
total assets; provided that the in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be
excluded in computing the 5% limit.
The Growth Fund and the Value+Growth Fund may not, as a non-fundamental policy:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. 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.
iv. Purchase more than 10% of any class of securities of any issuer, except
that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
All debt securities and all preferred stocks are each considered as one
class.
v. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that all
or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
vi. purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of its total
assets.
vii. enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf of
the Fund and the premiums paid for such options on futures contracts
does not exceed 5% of the fair-market value of the Fund's total assets;
provided that the in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in computing
the 5% limit.
The Small Cap Fund may not, as a non-fundamental policy:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. 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.
iv. Purchase more than 10% of the outstanding voting securities of any
issuer except that up to 25% of the Fund's assets may be invested
without regard to this limitation and except that all or substantially
all of the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund. All debt
securities and all preferred stocks are each considered as one class.
v. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that up
to 25% of the Fund's assets may be invested without regard to this
limitation and, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund.
vi. purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of its total
assets.
vii. enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf of
the Fund and the premiums paid for such options on futures contracts
does not exceed 5% of the fair-market value of the Fund's
4
<PAGE>
total assets; provided that the in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be
excluded in computing the 5% limit.
The Technology Fund may not, as a non-fundamental policy:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. 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.
iv. Purchase more than 10% of any class of securities of any issuer, except
that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
All debt securities and all preferred stocks are each considered as one
class.
v. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that all
or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
vi. purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of its total
assets.
vii. enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf of
the Fund and the premiums paid for such options on futures contracts
does not exceed 5% of the fair-market value of the Fund's total assets;
provided that the in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in computing
the 5% limit.
The Total Return Fund may not, as a non-fundamental policy:
i. Invest for the purpose of exercising control or management of another
issuer.
ii. Invest more than 15% of its net assets in illiquid securities.
iii. 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.
iv. Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by
restriction number (2) 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.)
v. Purchase more than 10% of any class of securities of any issuer, except
that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
All debt securities and all preferred stocks are each considered as one
class.
vi. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of that issuer, except that all
or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
vii. purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of its total
assets.
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viii. enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf of
the Fund and the premiums paid for such options on futures contracts
does not exceed 5% of the fair-market value of the Fund's total assets;
provided that the in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in computing
the 5% limit.
Master/feeder fund structure. The Board of Trustees of each Fund has the
discretion to retain the current distribution arrangement for a Fund while
investing in a master fund in a master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder
fund"), instead of investing directly in a portfolio of securities,
invests most or all of its investment assets in a separate registered
investment company (the "master fund") with substantially the same
investment objective and policies as the feeder fund. Such a structure
permits the pooling of assets of two or more feeder funds, preserving
separate identities or distribution channels at the feeder fund level.
Based on the premise that certain of the expenses of operating an
investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to
average net assets. An existing investment company is able to convert
to a feeder fund by selling all of its investments, which involves
brokerage and other transaction costs and realization of a taxable gain
or loss, or by contributing its assets to the master fund and avoiding
transaction costs and, if proper procedures are followed, the
realization of taxable gain or loss.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. Descriptions in this Statement of Additional Information of a
particular investment practice or technique in which the Fund may engage (such
as hedging, etc.) or a financial instrument which the Fund may purchase (such as
options, forward foreign currency contracts, etc.) are meant to describe the
spectrum of investments that Scudder Kemper Investments, Inc. (the "Adviser"),
in its discretion, might, but is not required to, use in managing the Fund's
portfolio assets. The Adviser may, in its discretion, at any time employ such
practice, technique, or instrument for one or more funds but not for all funds
advised by it. Furthermore, it is possible that certain types of financial
instruments or investment techniques described herein may not be available,
permissible, economically feasible or effective for their intended purposes in
all markets. Certain practices, techniques, or instruments may not be principal
activities of the Fund, but to the extent employed, could from time to time have
a material impact on the Fund's performance.
When a defensive position is deemed advisable, all or a significant portion of
each Fund's assets may be held temporarily in cash or defensive type securities,
such as high-grade debt securities, securities of the U.S. Government or its
agencies and high quality money market instruments, including repurchase
agreements. It is impossible to predict for how long such alternative strategies
may be utilized.
AGGRESSIVE GROWTH FUND. The Aggressive Growth Fund is a non-diversified
investment company that seeks capital appreciation through the use of aggressive
investment techniques. In seeking to achieve its objective, the Fund invests
primarily in equity securities of U.S. companies that the investment manager
believes offer the best opportunities for capital appreciation at any given
time. The investment manager pursues a flexible investment strategy in the
selection of securities, not limited to any particular investment sector,
industry or company size; and it may, depending upon market circumstances,
emphasize the securities of small, medium or large-sized companies from time to
time. The Fund may invest a portion of its assets in initial public offerings
("IPOs"), which are typically securities of small, unseasoned issuers. In
addition, since the Fund is a non-diversified investment company, when
attractive investments are identified, the investment manager may establish
relatively large individual positions, sometimes representing more than 5% of
total assets. Therefore, the Fund has broader latitude in its selection of
securities than a typical equity mutual fund. There is no assurance that the
management strategy for the Fund will be successful or that the Fund will
achieve its objective.
The investment manager uses a disciplined approach to stock selection and
fundamental research to help it identify quality "growth" companies . Growth
stocks are stocks of companies whose earnings per share are expected by the
investment manager to grow faster than the market average. Growth stocks tend to
trade at higher price to earnings (P/E) ratios than the general market, but the
investment manager believes that the potential of such stocks for above average
earnings more than justifies their price. The investment manager relies heavily
upon the fundamental analysis and research of its large research staff, and will
generally seek to invest in growth companies not fully recognized by the market
at large. Such companies may be:
o Expected to achieve accelerating earnings growth, perhaps due to strong
demand for their products or services;
o Undergoing financial restructuring;
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o Involved in takeover or arbitrage situations;
o Expected to benefit from evolving market cycles or changing economic
conditions; or
o Representing special situations, such as changes in management or
favorable regulatory developments.
Because of the flexible nature of the Fund's investment policies, the Fund may
have a higher portfolio turnover than a typical equity mutual fund. To some
extent, the Fund may trade in securities for the short term. In addition, the
investment manager may use market volatility in an attempt to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
undervalued positions and to sell or reduce overvalued holdings. For example,
during market declines, the Fund may add to positions in favored securities,
while becoming more aggressive as it gradually reduces the number of companies
represented in its portfolio. Conversely, in rising markets, the Fund may reduce
or eliminate fully valued positions, while becoming more conservative as it
gradually increases the number of companies in its portfolio.
Although the Fund will not invest 25% or more of its total assets in any one
industry, it may, from time to time, invest 25% or more of its total assets in
one or more market sectors, such as the technology sector. A sector is made up
of numerous industries. If the Fund focuses its investments in a market sector,
financial, economic, business and other developments affecting issuers in that
sector may have a greater effect on the Fund than if it had not focuses its
assets in that sector.
Under normal conditions, the Fund will invest at least 65%, and may invest up to
100%, of its total assets in equity securities. Equity securities include common
stocks, preferred stocks, securities convertible into or exchangeable for common
or preferred stocks, equity investments in partnerships, joint ventures and
other forms of non-corporate investment and warrants and rights exercisable for
equity securities.
The Fund may also engage in strategic transactions, purchase foreign securities
and lend its portfolio securities. The Fund may engage in short sales
against-the-box, although it is the Fund's current intention that no more than
5% of its net assets will be at risk. When a defensive position is deemed
advisable, all or a significant portion of the Fund's assets may be held
temporarily in cash or defensive type securities, such as high-grade debt
securities, securities of the U.S. Government or its agencies and high quality
money market instruments, including repurchase agreements.
BLUE CHIP FUND. The Blue Chip Fund seeks growth of capital and of income. In
seeking to achieve its objective, the Fund will invest primarily in common
stocks of well capitalized, established companies that the Fund's investment
manager believes to have the potential for growth of capital, earnings and
dividends. Under normal market conditions, the Fund will 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.
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 engage in strategic transactions, purchase foreign securities and lend
its portfolio securities. 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.
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The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
There are risks inherent in the investment in any security, including shares of
the Fund. The investment manager attempts to reduce risk through diversification
of the Fund's portfolio and fundamental research; however, there is no guarantee
that such efforts will be successful. The investment manager believes that there
are opportunities for growth of capital and growth of dividends from investments
in Blue Chip companies over time. The Fund's shares are intended for long-term
investment.
GROWTH FUND. The Growth Fund seeks growth of capital through professional
management and diversification of investments in securities it believes to have
potential for capital appreciation.
In seeking to 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 engage in strategic transactions, purchase foreign securities and lend
its portfolio securities. There may also be times when a significant portion of
the Fund's assets may be held temporarily in cash or defensive type securities,
such as high-grade debt securities, securities of the U.S. Government or its
agencies and high quality money market instruments, including repurchase
agreements, depending upon the investment manager's analysis of business and
economic conditions and the outlook for security prices.
Some of the factors the Fund's management will consider in making its
investments are patterns of increasing growth in sales and earnings, the
development of new or improved products or services, favorable outlooks for
growth in the industry, the probability of increased operating efficiencies,
emphasis on research and development, cyclical conditions, or other signs that a
company is expected to show greater than average capital appreciation and
earnings growth.
SMALL CAP FUND. The Small Cap Fund seeks maximum appreciation of investors'
capital. Current income will not be a significant factor.
The Fund 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.
At least 65% of the Fund's total assets normally will be invested in small
capitalization stocks similar in size to those comprising the Russell 2000
Index. The investment manager currently believes that investment in such
companies may offer greater opportunities for growth of capital than larger,
more established companies, but also involves certain special risks. Smaller
companies often have limited product lines, markets, or financial resources, and
they may be dependent upon one or a few key people for management. The
securities of such companies generally are subject to more abrupt or erratic
market movements and may be less liquid than securities of larger, more
established companies or the market averages in general.
The Fund's investment portfolio will normally consist primarily of common stocks
and securities convertible into or exchangeable for common stocks, including
warrants and rights. The Fund may also invest to a limited degree in preferred
stocks and debt securities when they are believed by the investment manager to
offer opportunities for capital growth. The Fund may engage in strategic
transactions, purchase foreign securities and lend its portfolio securities.
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
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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 investment manager currently believes that investments in smaller emerging
growth technology companies may offer greater opportunities for growth of
capital than investments in larger, more established technology companies.
However, such investments also involve certain special risks. Smaller companies
often have limited product lines, markets, or financial resources; and they may
be dependent upon one or a few persons for management. The securities of such
companies generally are subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. Thus, investment by the Fund in smaller emerging growth technology
companies may expose investors to greater than average financial and market
risk. There is no assurance that the Fund's objective will be achieved.
The Fund's investment portfolio will normally consist primarily of common stocks
and securities convertible into or exchangeable for common stocks, including
warrants and rights. The Fund may also invest to a limited degree in preferred
stocks and debt securities when they are believed to offer opportunities for
capital growth. The Fund may also engage in strategic transactions, purchase
foreign securities and lend its portfolio securities. 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 engage in strategic transactions and lend its portfolio securities.
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
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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.
The Fund does not make investments for short-term profits, but it is not
restricted in policy with regard to portfolio turnover and will make changes in
its investment portfolio from time to time as business and economic conditions
and market prices may dictate and as its investment policy may require.
VALUE+GROWTH FUND. The Value+Growth Fund seeks growth of capital through
professional management of a portfolio of growth and value stocks. These stocks
include stocks of large established companies, as well as stocks of small
companies. A secondary objective is the reduction of risk over a full market
cycle compared to a portfolio of only growth stocks or only value stocks.
Growth stocks are stocks of companies whose earnings per share are expected by
the investment manager to grow faster than the market average. Growth stocks
tend to trade at higher price to earnings (P/E) ratios than the general market,
but the investment manager believes that the potential of such stocks for above
average earnings more than justifies their price. Value stocks are considered
"bargain stocks" because they are perceived as undervalued, i.e., attractively
priced in relation to their earnings potential (low P/E ratios). Value stocks
typically have dividend yields higher than the average of the companies
represented in the Standard & Poor's 500 Stock Index.
The allocation between growth and value stocks in the Fund's portfolio will be
made by the investment manager's Quantitative Research Department with the help
of a proprietary model that evaluates macro-economic factors such as the
strength of the economy, interest rates and special factors concerning growth
and value stocks. Historically, the performance of growth and value stocks has
tended to be counter-cyclical, i.e., when one was in favor, the other was out of
favor relative to the equity market in general. Through the allocation process,
the investment manager will seek to weight the portfolio more heavily in the
type of stocks that are believed to present greater return opportunities at the
time. The neutral allocation between growth and value stocks would be 50%/50%.
The allocation to growth or value may be up to 75% at any time. Allocation
decisions are normally based upon long-term considerations and changes would
normally be expected to be gradual. There is no assurance that the allocation
process will improve investment results.
In managing the growth portion of the portfolio, the investment manager
emphasizes stock selection and fundamental research in seeking to enhance
long-term performance potential. The investment manager considers a number of
quantitative factors in considering whether to invest in a stock including
historical earnings growth, projected earnings growth, return on equity, debt to
capital and other balance sheet data. In managing the value portion of the
portfolio, the investment manager seeks stocks it believes to be undervalued.
The factors considered include price-to-earnings ratios, price-to-book ratios,
price-to-cash-flow, dividend growth rates, earnings estimates and growth rates,
return on equity and other balance sheet data.
Although 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
engage in strategic transactions and lend its portfolio securities. When a
defensive position is deemed advisable, all or a significant portion of the
Fund's assets may be held temporarily in cash or defensive type securities, such
as high-grade debt securities, securities of the U.S. Government or its agencies
and high quality money market instruments, including repurchase agreements.
The Fund does not generally make investments for short-term profits, but it is
not restricted in policy with regard to portfolio turnover and will make changes
in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
COMMON STOCKS. Under normal circumstances, the Funds invest primarily in common
stocks. Common stock is issued by companies to raise cash for business purposes
and represents a proportionate interest in the issuing companies. Therefore, the
Funds participate in the success or failure of any company in which it holds
stock. The market values of common stock can fluctuate significantly, reflecting
the business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
NON-DIVERSIFIED. The 1940 Act classifies investment companies as either
"diversified" or "non-diversified." All of the Funds, except the Aggressive
Growth Fund, are diversified funds under the 1940 Act. As a non-diversified
fund, the Aggressive Growth Fund may invest a greater proportion of its assets
in the obligations of a small number of issuers, and may be subject to greater
risk and substantial losses as a result of changes in the financial condition or
the market's assessment of the issuers. While not limited by the 1940 Act as to
the proportion of its assets that it may invest in obligations
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of a single issuer, the Aggressive Growth Fund will comply with the
diversification requirements imposed by the Internal Revenue Code for
qualification as a regulated investment company. Accordingly, the Aggressive
Growth Fund will not, as a non-fundamental policy: (i) purchase more than 10% of
any class of voting securities of any issuer; (ii) with respect to 50% of its
total assets, purchase securities of any issuer (other than U.S. Government
Securities) if, as a result, more than 5% of the total value of the Fund's
assets would be invested in securities of that issuer; and (iii) invest more
than 25% of its total assets in a single issuer (other than U.S. Government
Securities). The Aggressive Growth Fund does not currently expect that it would
invest more than 10% of its total assets in a single issuer (other than U.S.
Government Securities).
FOREIGN SECURITIES. The Funds invest primarily in securities that are publicly
traded in the United States; but, they have discretion to invest a portion of
their assets in foreign securities that are traded principally in securities
markets outside the United States. The Funds may also invest without limit in
U.S. Dollar denominated American Depository Receipts ("ADRs"), which are bought
and sold in the United States. In connection with their foreign securities
investments, the Funds may, to a limited extent, engage in foreign currency
exchange, options and futures transactions as a hedge and not for speculation.
Additional information concerning foreign securities and related techniques is
contained under "Additional Investment Information."
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based on the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
EMERGING MARKETS. While each Fund's investments in foreign securities will be
principally in developed countries, a Fund may make investments in developing or
"emerging" countries, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. A developing or emerging market country can be
considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most Western European countries. Currently,
investing in many emerging markets may not be desirable or feasible because of
the lack of adequate custody arrangements for a Fund's assets, overly burdensome
repatriation and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or other reasons. As
opportunities to invest in securities in emerging markets develop, a Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past, markets of developing or emerging market countries have been more
volatile than the markets of developed countries; however, such markets often
have provided higher rates of return to investors. The investment manager
believes that these characteristics can be expected to continue in the future.
Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade. Also, the securities markets of developing countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the United States and other more developed countries. Disclosure,
regulatory and accounting standards in many respects are less stringent than in
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the United States and other developed markets. There also may be a lower level
of monitoring and regulation of developing markets and the activities of
investors in such markets, and enforcement of existing regulations has been
extremely limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of a Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to a Fund due to subsequent declines in value of the
portfolio security or, if a Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Certain emerging
markets may lack clearing facilities equivalent to those in developed countries.
Accordingly, settlements can pose additional risks in such markets and
ultimately can expose the Fund to the risk of losses resulting from a Fund's
inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for a Fund's portfolio securities in such
markets may not be readily available. At such times a Fund's portfolio
securities in the affected markets will be valued at fair value determined in
good faith by or under the direction of the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of a Fund. Emerging markets may require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. A Fund's investments in the
securities of privatized enterprises may include privately negotiated
investments in a government- or state-owned or controlled company or enterprise
that has not yet conducted an initial equity offering, investments in the
initial offering of equity securities of a state enterprise or former state
enterprise and investments in the securities of a state enterprise following its
initial equity offering.
In certain jurisdictions, the ability of foreign entities, such as a Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatization will be successful or that
governments will not re-nationalize enterprises that have been privatized.
In the case of the enterprises in which a Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization of management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as the enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which a Fund may invest
enjoy the protection of and receive preferential treatment from the respective
sovereigns that own or control them. After making an initial equity offering
these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
DEPOSITORY RECEIPTS. For many foreign securities, there are U.S. Dollar
denominated ADRs, which are bought and sold in the United States and are issued
by domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in the 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
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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.
FIXED INCOME. Since most foreign fixed income securities are not rated, a Fund
(principally the Total Return Fund) will invest in foreign fixed income
securities based on the investment manager's analysis without relying on
published ratings. Since such investments will be based upon the investment
manager's analysis rather than upon published ratings, achievement of a Fund's
goals may depend more upon the abilities of the investment manager than would
otherwise be the case.
The value of the foreign fixed income securities held by a Fund, and thus the
net asset value of the Fund's shares, generally will fluctuate with (a) changes
in the perceived creditworthiness of the issuers of those securities, (b)
movements in interest rates, and (c) changes in the relative values of the
currencies in which a Fund's investments in fixed income securities are
denominated with respect to the U.S. Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of a Fund's investments
in foreign fixed income securities, and the extent to which a Fund hedges its
interest rate, credit and currency exchange rate risks. Many of the foreign
fixed income obligations in which a Fund will invest will have long maturities.
A longer average maturity generally is associated with a higher level of
volatility in the market value of such securities in response to changes in
market conditions.
Investments in sovereign debt, including Brady Bonds, involve special risks.
Brady Bonds are debt securities issued under a plan implemented to other debtor
nations to restructure their outstanding commercial bank indebtedness. Foreign
governmental issuers of debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or pay
interest when due. In the event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Political conditions, especially a sovereign entity's
willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and a Fund may be unable to
collect all or any part of its investment in a particular issue.
Foreign investment in certain sovereign debt is restricted or controlled to
varying degrees, including requiring governmental approval for the repatriation
of income, capital or proceed of sales by foreign investors. These restrictions
or controls may at times limit or preclude foreign investment in certain
sovereign debt or increase the costs and expenses of a Fund. A significant
portion of the sovereign debt in which a Fund may invest is issued as part of
debt restructuring and such debt is to be considered speculative. There is a
history of defaults with respect to commercial bank loans by public and private
entities issuing Brady Bonds. All or a portion of the interest payments and/or
principal repayment with respect to Brady Bonds may be uncollateralized.
HIGH YIELD (HIGH RISK) BONDS. The Total Return Fund may invest a portion of its
assets in fixed income securities that are in the lower rating categories of
recognized rating agencies or are non-rated. These lower rated or non-rated
fixed income securities are considered, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
The market values of such securities tend to reflect individual corporate
developments to a greater extent than do those of higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower rated securities also tend to be more sensitive to economic conditions
than are higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, regarding lower rated bonds may
depress the prices for such securities. These and other factors adversely
affecting the market value of high yield securities will adversely affect the
Fund's net asset value. Although some risk is inherent in all securities
ownership, holders of fixed income securities have a claim on the assets of the
issuer prior to the holders of common stock. Therefore, an investment in fixed
income securities generally entails less risk than an investment in common stock
of the same issuer.
High yield securities frequently are issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such high yielding
securities often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the securities of such issuers generally is greater than is the case with higher
rated securities. For example, during an economic downturn or recession, highly
leveraged issuers of high yield securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment
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obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments, or the issuer's inability
to meet specific projected business forecasts, or the unavailability of
additional financing. The risk of loss from default by the issuer is
significantly greater for the holders of high yielding securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuer.
The Fund may have difficulty disposing of certain high yield securities because
they may have a thin trading market. The lack of a liquid secondary market may
have an adverse effect on market price and the Fund's ability to dispose of
particular issues and may also make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing these assets.
Zero coupon securities and pay-in-kind bonds involve additional special
considerations. Zero coupon securities are debt obligations that do not entitle
the holder to any periodic payments of interest prior to maturity or a specified
cash payment date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from their face
amount or par value. The market prices of zero coupon securities are generally
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a greater
degree than do securities paying interest currently with similar maturities and
credit quality. Zero coupon, pay-in-kind or deferred interest bonds carry
additional risk in that unlike bonds that pay interest throughout the period to
maturity, the Fund will realize no cash until the cash payment date unless a
portion of such securities is sold and, if the issuer defaults, the Fund may
obtain no return at all on its investment.
Additional information concerning high yield securities appears under
"Appendix--Ratings of Fixed Income Investments."
REAL ESTATE INVESTMENT TRUSTS ("REITs"). The Aggressive Growth Fund may invest
in REITs. REITs are sometimes informally characterized as equity REITs, mortgage
REITs and hybrid REITs. Investment in REITs may subject the Fund to risks
associated with the direct ownership of real estate, such as decreases in real
estate values, overbuilding, increased competition and other risks related to
local or general economic conditions, increases in operating costs and property
taxes, changes in zoning laws, casualty or condemnation losses, possible
environmental liabilities, regulatory limitations on rent and fluctuations in
rental income. Equity REITs generally experience these risks directly through
fee or leasehold interests, whereas mortgage REITs generally experience these
risks indirectly through mortgage interests, unless the mortgage REIT forecloses
on the underlying real estate. Changes in interest rates may also affect the
value of the Fund's investment in REITs. For instance, during periods of
declining interest rates, certain mortgage REITs may hold mortgages that the
mortgagors elect to prepay, which prepayment may diminish the yield on
securities issued by those REITs.
Certain REITs have relatively small market capitalization, which may tend to
increase the volatility of the market price of their securities. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in operating and
financing a limited number of projects. REITs are also subject to heavy cash
flow dependency, defaults by borrowers and the possibility of failing to qualify
for tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended, and to maintain exemption from the registration requirements of the
Investment Company Act of 1940. By investing in REITs indirectly through the
Fund, a shareholder will bear not only his or her proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the REITs. In
addition, REITs depend generally on their ability to generate cash flow to make
distributions to shareholders.
STRATEGIC TRANSACTIONS AND DERIVATIVES. The Funds may, but are not required to,
utilize various other investment strategies as described below for a variety of
purposes, such as hedging various market risks, managing the effective maturity
or duration of fixed-income securities in a Fund's portfolio, or enhancing
potential gain. These strategies may be executed through the use of derivative
contracts.
In the course of pursuing these investment strategies, the Funds may purchase
and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other instruments, purchase and
sell futures contracts and options thereon, enter into various transactions such
as swaps, caps, floors, collars, currency forward contracts, currency futures
contracts, currency swaps or options on currencies, or currency futures and
various other currency transactions (collectively, all the above are called
"Strategic Transactions"). In addition, strategic transactions may also include
new techniques, instruments or strategies that are permitted as regulatory
changes occur. Strategic Transactions may be used without limit (subject to
certain limitations imposed by the 1940 Act) to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for a Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Funds' unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the
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Fund's portfolio, or to establish a position in the derivatives markets as a
substitute for purchasing or selling particular securities. Some Strategic
Transactions may also be used to enhance potential gain although no more than 5%
of the Funds' assets will be committed to Strategic Transactions entered into
for non-hedging purposes. Any or all of these investment techniques may be used
at any time and in any combination, and there is no particular strategy that
dictates the use of one technique rather than another, as use of any Strategic
Transaction is a function of numerous variables including market conditions. The
ability of the Funds to utilize these Strategic Transactions successfully will
depend on the Adviser's ability to predict pertinent market movements, which
cannot be assured. The Funds will comply with applicable regulatory requirements
when implementing these strategies, techniques and instruments. Strategic
Transactions will not be used to alter fundamental investment purposes and
characteristics of the Funds, and the Funds will segregate assets (or as
provided by applicable regulations, enter into certain offsetting positions) to
cover its obligations under options, futures and swaps to limit leveraging of
the Funds.
Strategic Transactions, including derivative contracts, have risks associated
with them including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market movements
is incorrect, the risk that the use of such Strategic Transactions could result
in losses greater than if they had not been used. Use of put and call options
may result in losses to the Funds, force the sale or purchase of portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount of appreciation the Funds can realize on its investments or
cause the Funds to hold a security it might otherwise sell. The use of currency
transactions can result in the Funds incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Funds creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Funds' position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Funds might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. For
instance, the Funds's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
the Funds the right to sell such instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. The Funds's purchase of a call option on a security, financial
future, index, currency or other instrument might be intended to protect the
Funds against an increase in the price of the underlying instrument that it
intends to purchase in the future by fixing the price at which it may purchase
such instrument. An American style put or call option may be exercised at any
time during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. The Funds
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally settle
by physical delivery of the underlying security or currency, although in the
future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying
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instrument exceeds, in the case of a call option, or is less than, in the case
of a put option, the exercise price of the option) at the time the option is
exercised. Frequently, rather than taking or making delivery of the underlying
instrument through the process of exercising the option, listed options are
closed by entering into offsetting purchase or sale transactions that do not
result in ownership of the new option.
The Funds' ability to close out its position as a purchaser or seller of an OCC
or exchange listed put or call option is dependent, in part, upon the liquidity
of the option market. Among the possible reasons for the absence of a liquid
option market on an exchange are: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or series of options or underlying securities including reaching daily
price limits; (iv) interruption of the normal operations of the OCC or an
exchange; (v) inadequacy of the facilities of an exchange or OCC to handle
current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Funds will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Funds to require the Counterparty
to sell the option back to the Funds at a formula price within seven days. The
Funds expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Funds or fails to make a cash settlement
payment due in accordance with the terms of that option, the Funds will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Funds will engage in OTC option transactions only with U.S.
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers" or broker/dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of A-1 from S&P or P-1 from
Moody's or an equivalent rating from any nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit quality by the Adviser. The staff of the
SEC currently takes the position that OTC options purchased by the Funds, and
portfolio securities "covering" the amount of the Funds' obligation pursuant to
an OTC option sold by it (the cost of the sell-back plus the in-the-money
amount, if any) are illiquid, and are subject to the Funds' limitation on
investing no more than 15% of its net assets in illiquid securities.
If the Funds sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Funds' income. The sale of put options can also provide income.
The Funds may purchase and sell call options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments that are traded on U.S. and foreign
securities exchanges and in the over-the-counter markets, and on securities
indices, currencies and futures contracts. All calls sold by the Funds must be
"covered" (i.e., the Funds must own the securities or futures contract subject
to the call) or must meet the asset segregation requirements described below as
long as the call is outstanding. Even though the Funds will receive the option
premium to help protect it against loss, a call sold by the Funds exposes the
Funds during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument and
may require the Funds to hold a security or instrument which it might otherwise
have sold.
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The Funds may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above
securities in its portfolio), and on securities indices, currencies and futures
contracts other than futures on individual corporate debt and individual equity
securities. The Funds will not sell put options if, as a result, more than 50%
of the Funds's assets would be required to be segregated to cover its potential
obligations under such put options other than those with respect to futures and
options thereon. In selling put options, there is a risk that the Funds may be
required to buy the underlying security at a disadvantageous price above the
market price.
General Characteristics of Futures. The Funds may enter into futures contracts
or purchase or sell put and call options on such futures as a hedge against
anticipated interest rate, currency or equity market changes, and for duration
management, risk management and return enhancement purposes. Futures are
generally bought and sold on the commodities exchanges where they are listed
with payment of initial and variation margin as described below. The sale of a
futures contract creates a firm obligation by the Funds, as seller, to deliver
to the buyer the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect to
index futures and Eurodollar instruments, the net cash amount). Options on
futures contracts are similar to options on securities except that 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 and obligates the seller to deliver
such position.
The Funds' use of futures and options thereon will in all cases be consistent
with applicable regulatory requirements and in particular the rules and
regulations of the Commodity Futures Trading Commission and will be entered into
for bona fide hedging, risk management (including duration management) or other
portfolio and return enhancement management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Funds to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Funds.
If the Funds exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.
The Funds will not enter into a futures contract or related option (except for
closing transactions) if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open futures contracts and options thereon would
exceed 5% of the Funds' total assets (taken at current value); however, in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
Options on Securities Indices and Other Financial Indices. The Funds also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. The Funds may engage in currency transactions with
Counterparties primarily in order to hedge, or manage the risk of the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
exchange listed currency futures, exchange listed and OTC options on currencies,
and currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) 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. A currency swap is an agreement to
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exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap, which is described
below. The Funds may enter into currency transactions with Counterparties which
have received (or the guarantors of the obligations which have received) a
credit rating of A-1 or P-1 by S&P or Moody's, respectively, or that have an
equivalent rating from a NRSRO or (except for OTC currency options) are
determined to be of equivalent credit quality by the Adviser.
The Funds' dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps generally
will be limited to hedging involving either specific transactions or portfolio
positions except as described below. Transaction hedging is entering into a
currency transaction with respect to specific assets or liabilities of the
Funds, which will generally arise in connection with the purchase or sale of its
portfolio securities or the receipt of income therefrom. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency.
The Funds generally will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
The Funds may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Funds has or in which the Funds
expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Funds may also engage in proxy
hedging. Proxy hedging is often used when the currency to which a Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of a Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of a Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Funds holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the
Funds if the currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Funds is engaging in proxy hedging. If the
Funds enter into a currency hedging transaction, the Funds will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Funds if it is unable to deliver or receive currency or funds
in settlement of obligations and could also cause hedges it has entered into to
be rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. The Funds may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Funds to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment
18
<PAGE>
that the combined strategies will reduce risk or otherwise more effectively
achieve the desired portfolio management goal, it is possible that the
combination will instead increase such risks or hinder achievement of the
portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Funds may enter are interest rate, currency, index and other swaps and the
purchase or sale of related caps, floors and collars. The Funds expect to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Funds anticipate purchasing at a later
date. The Funds will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Funds may be
obligated to pay. Interest rate swaps involve the exchange by the Funds with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Funds will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Funds receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as the Funds will
segregate assets (or enter into offsetting positions) to cover its obligations
under swaps, the Adviser and the Funds believe such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to its borrowing restrictions. The Funds will not enter
into any swap, cap, floor or collar transaction unless, at the time of entering
into such transaction, the unsecured long-term debt of the Counterparty,
combined with any credit enhancements, is rated at least A by S&P or Moody's or
has an equivalent rating from a NRSRO or is determined to be of equivalent
credit quality by the Adviser. If there is a default by the Counterparty, the
Funds may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Funds may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Funds might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Funds' ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Funds segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Funds to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid assets at least equal to
the current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by the Funds will require the Funds to hold the
securities subject to the call (or securities convertible into
19
<PAGE>
the needed securities without additional consideration) or to segregate cash or
liquid assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by the Funds on an index will require the Funds to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by the Funds requires the Funds to
segregate cash or liquid assets equal to the exercise price.
Except when the Funds enters into a forward contract for the purchase or sale of
a security denominated in a particular currency, which requires no segregation,
a currency contract which obligates the Funds to buy or sell currency will
generally require the Funds to hold an amount of that currency or liquid assets
denominated in that currency equal to a Funds' obligations or to segregate cash
or liquid assets equal to the amount of a Funds' obligation.
OTC options entered into by the Funds, including those on securities, currency,
financial instruments or indices and OCC issued and exchange listed index
options, will generally provide for cash settlement. As a result, when the Funds
sells these instruments it will only segregate an amount of cash or liquid
assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by the Funds, or the in-the-money amount
plus any sell-back formula amount in the case of a cash-settled put or call. In
addition, when the Funds sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Funds will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC issued and exchange listed options sold by the Funds other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement and the Funds will segregate an
amount of cash or liquid assets equal to the full value of the option. OTC
options settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options settling
with physical delivery.
In the case of a futures contract or an option thereon, the Funds must deposit
initial margin and possible daily variation margin in addition to segregating
cash or liquid assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such liquid assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Funds will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid assets having a value
equal to the accrued excess. Caps, floors and collars require segregation of
assets with a value equal to a Funds' net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Funds may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Funds could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Funds. Moreover, instead of segregating cash or liquid assets if the
Funds held a futures or forward contract, it could purchase a put option on the
same futures or forward contract with a strike price as high or higher than the
price of the contract held. Other Strategic Transactions may also be offset in
combinations. If the offsetting transaction terminates at the time of or after
the primary transaction no segregation is required, but if it terminates prior
to such time, cash or liquid assets equal to any remaining obligation would need
to be segregated.
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.
BORROWING. The Aggressive Growth and Blue Chip Funds each may not borrow money
except as a temporary measure for extraordinary or emergency purposes and not
for leverage purposes, and then only in an amount up to one-third of the value
of its total assets in order to meet redemption requests without immediately
selling any portfolio securities or other assets. (If, for any reason, the
current value of a Fund's total assets fall 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
20
<PAGE>
indebtedness to the extent necessary). The Blue Chip Fund and Total Return Funds
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 from temporary or emergency purposes (but not
for the purchase of investments) and then only in an amount not to exceed 5% of
its net assets, and may not pledge their assets in an amount exceeding the
amount of the borrowings secured by such pledge. The Aggressive Growth Fund may
not pledge its assets except to secure permitted borrowings.
ILLIQUID SECURITIES. 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. Each Fund may invest in securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933. This rule permits
otherwise restricted securities to be sold to certain institutional buyers, such
as the Funds. Such securities may be illiquid and subject to the Fund's
limitation on illiquid securities. A "Rule 144A" security may be treated as
liquid, however, if so determined pursuant to procedures adopted by the Board of
Trustees. Investing in Rule 144A securities could have the effect of increasing
the level of illiquidity in the Fund to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A securities.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Funds may lend securities (principally to broker-dealers)
without limit where such loans are callable at any time and are continuously
secured by segregated collateral (cash or U.S. Government securities) equal to
no less than the market value, determined daily, of the securities loaned. The
Funds will receive amounts equal to dividends or interest on the securities
loaned. The Funds will also earn income for having made the loan. Any cash
collateral pursuant to these loans will be invested in short-term money market
instruments. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the investment manager to be of good standing, and when the investment
manager believes the potential earnings justify the attendant risk. Management
will limit such lending to not more than one-third of the value of a Fund's
total assets.
INVESTMENT COMPANY SECURITIES. A Fund may acquire securities of other investment
companies to the extent consistent with its investment objective and subject to
the limitations of the 1940 Act. The Funds will indirectly bear its
proportionate share of any management fees and other expenses paid by such other
investment companies.
For example, the Fund may invest in a variety of investment companies that seek
to track the composition and performance of a specific index. These index-based
investments hold substantially all of their assets in securities representing
their specific index, or a specific portion of an index. Accordingly, the main
risk of investing in index-based investments is the same as investing in a
portfolio of equity securities comprising the index. The market prices of
index-based investments will fluctuate in accordance with both changes in the
market value of their underlying portfolio securities and due to supply and
demand for the instruments on the exchanges on which they are traded (which may
result in their trading at a discount or premium to their NAV). Index-based
investments may no replicate exactly the performance of their specified index
because of transaction costs and because of the temporary unavailability of
certain component securities of the index:
Examples of index-based investments include:
SPDRs: SPDRs, an acronym for "Standard & Poor's Depositary Receipts," are based
on the Standard & Poor's 500 Composite Stock Price Index. They are issued by the
SPDR Trust, a unit investment trust that holds shares of substantially all the
companies in the S&P 500 in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.
MidCap SPDRs: MidCap SPDRs are based on the S&P MidCap 400 Index. They are
issued by the MidCap SPDR Trust, a unit investment trust that holds a portfolio
of securities consisting of substantially all of the common stocks in the S&P
MidCap 400 Index in substantially the same weighting and seeks to closely track
the price performance and dividend yield of the Index.
Select Sector SPDRs: Select Sector SPDRs are based on a particular sector or
group of industries that are represented by a specified Select Sector Index
within the Standard & Poor's 500 Composite Stock Price Index. They are issued by
The Select Sector SPDR Trust, an open-end management investment company with
nine portfolios that each seeks to closely track the price performance and
dividend yield of a particular Select Sector Index.
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<PAGE>
DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM). They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.
Nasdaq - 100 Shares: Nasdaq - 100 Shares are based on the Nasdaq 100 Index. They
are issued by the Nasdaq - 100 Trust, a unit investment trust that holds a
portfolio consisting of substantially all of the securities, in substantially
the same weighting, as the component stocks of the Nasdaq - 100 Index and seeks
to closely track the price performance and dividend yield of the Index.
WEBs: WEBs, an acronym for "World Equity Benchmark Shares," are based on 17
country-specific Morgan Stanley Capital International Indexes. They are issued
by the WEBs Index Fund, Inc. that seeks to generally correspond to the price and
yield performance of a specific Morgan Stanley Capital International Index.
PORTFOLIO TRANSACTIONS
Brokerage
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund is to obtain the most favorable net results, taking
into account such factors as price, commission where applicable, size of order,
difficulty of execution and skill required of the executing broker/dealer. The
Adviser seeks to evaluate the overall reasonableness of brokerage commissions
paid (to the extent applicable) through the familiarity of Scudder Investor
Services, Inc. ("SIS") with commissions charged on comparable transactions, as
well as by comparing commissions paid by a Fund to reported commissions paid by
others. The Adviser routinely reviews on a routine basis commission rates,
execution and settlement services performed and makes internal and external
comparisons.
The Funds' purchases and sales of fixed-income securities are generally placed
by the Adviser with primary market makers for these securities on a net basis,
without any brokerage commission being paid by a Fund. Trading does, however,
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or a
Fund. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions, if applicable, for a
Fund to pay a brokerage commission in excess of that which another broker might
charge for executing the same transaction on account of execution of services
and the receipt of research services. services. The Adviser has negotiated
arrangements, which are not applicable to most fixed-income transactions, with
certain broker/dealers pursuant to which a broker/dealer will provide research
services, to the Adviser or the Fund in exchange for the direction by the
Adviser of brokerage transactions to the broker/dealer. These arrangements
regarding receipt of research services generally apply to equity security
transactions. The Adviser may place orders with broker/dealers on the basis that
the broker/dealer has or has not sold shares of a Fund. In effecting
transactions in over-the-counter securities, orders are placed with the
principal market makers for the security being traded unless, after exercising
care, it appears that more favorable results are available elsewhere.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through SIS, which is a corporation registered
as a broker-dealer and a subsidiary of the Adviser; SIS will place orders on
behalf of the Funds with issuers, underwriters or other brokers and dealers. SIS
will not receive any commission, fee or other remuneration from the Funds for
this service.
Although certain research services from broker/dealers may be useful to a Fund
and to the Adviser, it is the opinion of the Adviser that such information only
supplements the Adviser's own research effort since the information must still
be analyzed, weighed and reviewed by the Adviser's staff. Such information may
be useful to the Adviser in providing services to clients other than a Fund, and
not all such information is used by the Adviser in connection with a Fund.
Conversely, such information provided to the Adviser by broker/dealers through
whom other clients of the Adviser effect securities transactions may be useful
to the Adviser in providing services to a Fund.
Each Fund's Board members review from time to time whether the recapture for the
benefit of a Fund of some portion of the brokerage commissions or similar fees
paid by a Fund on portfolio transactions is legally permissible and advisable.
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<PAGE>
Each Fund's average portfolio turnover rate is the ratio of the lesser of sales
or purchases to the monthly average value of the portfolio securities owned
during the year, excluding all securities with maturities or expiration dates at
the time of acquisition of one year or less. A higher rate involves greater
brokerage transaction expenses to a Fund and may result in the realization of
net capital gains, which would be taxable to shareholders when distributed.
Purchases and sales are made for a Fund's portfolio whenever necessary, in
management's opinion, to meet a Fund's objective.
Brokerage Commissions
The table below shows total brokerage commissions paid by each Fund for the last
three fiscal years and, for the most recent fiscal year, the percentage thereof
that was allocated to firms based upon research information provided.
<TABLE>
<CAPTION>
Allocated to Firms Based on
Fund Fiscal 1999 Research in Fiscal 1999 Fiscal 1998 Fiscal 1997
- ---- ----------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C>
Aggressive $88,561 86.49% $338,000 $ 27,000*
Blue Chip $1,099,639 85.17% $2,371,000 $ 2,664,000
Growth $4,044,421 79.67% $7,022,000 $ 11,676,000
Small Cap $2,706,173 93.53% $4,592,000 $ 6,618,000
Technology $1,173,163 90.36% $2,613,000 $ 3,329,000
Total Return $3,235,979 89.55% $5,321,000 $ 7,170,000
Value+Growth $257,259 86.65% $282,000 $ 142,000
</TABLE>
* For the period December 31, 1996 to September 30, 1997.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper" or "the
Adviser"), 345 Park Avenue, New York, New York, is each Fund's investment
manager. Scudder Kemper is approximately 70% owned by Zurich Financial Services,
a newly formed global insurance and financial services company. The balance of
the Adviser is owned by its officers and employees. Pursuant to investment
management agreements, Scudder Kemper acts as each Fund's investment Adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of a Fund if elected to such positions. Each investment
management agreement provides that each Fund pays the charges and expenses of
its operations, including the fees and expenses of the trustees (except those
who are affiliated with officers or employees of Scudder Kemper), independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, brokerage commissions or
transaction costs, costs of calculating net asset value and maintaining all
accounting records related thereto, taxes and membership dues. Each Fund bears
the expenses of registration of its shares with the SEC, while Kemper
Distributors, Inc. ("KDI"), as principal underwriter, pays the cost of
qualifying and maintaining the qualification of each Fund's shares for sale
under the securities laws of the various states.
The investment management agreements provide that Scudder Kemper shall not be
liable for any error of judgment or of law, or for any loss suffered by a Fund
in connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Scudder Kemper in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under each agreement.
Each Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually by a majority of
the trustees who are not parties to such agreement or interested persons of any
such party except in their capacity as trustees of the Fund and by the
shareholders of the Fund subject thereto or the Board of Trustees. Each Fund's
investment management agreement may be terminated at any time upon 60 days
notice by either party, or by a majority vote of the outstanding shares of the
Fund subject thereto, and will terminate automatically upon assignment. If
additional Funds become subject to an investment management agreement, the
provisions concerning continuation, amendment and termination shall be on a Fund
by Fund basis. Additional Funds may be subject to a different agreement.
Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by
Scudder Kemper. The investment management agreements provide that Scudder Kemper
shall act as each Fund's investment Adviser, manage its investments and provide
it with various services and facilities.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to
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Scudder Kemper Investments, Inc. As a result of the transaction, Zurich owned
approximately 70% of the Adviser, with the balance owned by the Adviser's
officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) and the financial services businesses of B.A.T Industries
p.l.c. ("B.A.T") were combined to form a new global insurance and financial
services company known as Zurich Financial Services, Inc. By way of a dual
holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
Upon consummation of this transaction, each Fund's existing investment
management agreement with Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the current
investment management agreement, except for the date of execution and
termination. This agreement became effective upon the termination of the then
current investment management agreement and was approved by shareholders at a
special meeting.
The Funds (other than the Aggressive Growth Fund and the Small Cap Fund) pay
Scudder Kemper investment management fees, payable monthly, at 1/12 of the
annual rates shown below. The Aggressive Growth Fund and the Small Cap Fund each
pay a base annual management fee, payable monthly, at the annual rate of 0.65%
of the average daily net assets of the Fund. This base fee is subject to upward
or downward adjustment on the basis of the investment performance of the Class A
shares of the Fund compared with the performance of the Standard & Poor's 500
Stock Index as described herein. After the effect of the adjustment, the
management fee rate for the Aggressive Growth Fund may range between 0.45% and
0.85% and the management fee rate for the Small Cap Fund may range between 0.35%
and 0.95%.
Blue Chip,
Growth,
Technology
and Total Value+
Return Growth
Average Daily Net Assets Funds Fund
- ------------------------ ----- ----
$0 - $250 million 0.58% 0.72%
$250 million - $1 billion 0.55 0.69
$1 billion - $2.5 billion 0.53 0.66
$2.5 billion - $5 billion 0.51 0.64
$5 billion - $7.5 billion 0.48 0.60
$7.5 billion - $10 billion 0.46 0.58
$10 billion - $12.5 billion 0.44 0.56
Over $12.5 billion 0.42 0.54
The Small Cap Fund pays a base annual investment management fee, payable
monthly, at the rate of 0.65% of the average daily net assets of the Fund. This
base fee is subject to upward or downward adjustment on the basis of the
investment performance of the Class A shares of the Fund as compared with the
performance of the Standard & Poor's 500 Stock Index (the "Index"). The Small
Cap Fund will pay an additional monthly fee at an annual rate of 0.05% of such
average daily net assets for each percentage point (fractions to be prorated) by
which the performance of the Class A shares of the Fund exceeds that of the
Index for the immediately preceding twelve months; provided that such additional
monthly fee shall not exceed 1/12 of 0.30% of the average daily net assets.
Conversely, the compensation payable by the Small Cap Fund will be reduced by an
annual rate of 0.05% of such average daily net assets for each percentage point
(fractions to be prorated) by which the performance of the Class A shares of the
Fund falls below that of the Index, provided that such reduction in the monthly
fee shall not exceed 1/12 of 0.30% of the average net assets. The total fee on
an annual basis can range from 0.35% to 0.95% of average daily net assets. The
Small Cap Fund's investment performance during any twelve month period is
measured by the percentage difference between (a) the opening net asset value of
one Class A share of the Fund and (b) the sum of the closing net asset value of
one Class A share of the Fund plus the value of any income and capital gain
dividends on such share during the period treated as if reinvested in Class A
shares of the Fund at the time of distribution. The performance of the Index is
measured by the percentage change in the Index between the beginning and the end
of the twelve month period with cash distributions on the securities which
comprise the Index being treated as reinvested in the Index at the end of each
month following the payment of the dividend. Each monthly calculation of the
incentive portion of the fee may be illustrated as follows: if over the
preceding twelve month period the Small Cap Fund's adjusted net asset value
applicable to one Class A share went from $10.00 to $11.00 (10% appreciation),
and the Index, after adjustment, went from 100 to 104 (or only 4%), the entire
incentive compensation would have been earned by Scudder Kemper. On the other
hand, if the Index rose from 100 to 110 (10%), no incentive fee would have been
payable. A rise in the Index from 100 to 116 (16%) would
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<PAGE>
have resulted in the minimum monthly fee of 1/12 of 0.35%. Since the computation
is not cumulative from year to year, an additional management fee may be payable
with respect to a particular year, although the Small Cap Fund's performance
over some longer period of time may be less favorable than that of the Index.
Conversely, a lower management fee may be payable in a year in which the
performance of the Fund's Class A shares' is less favorable than that of the
Index, although the performance of the Fund's Class A shares over a longer
period of time might be better than that of the Index.
The Aggressive Growth Fund pays a base annual investment management fee, payable
monthly, at the rate of 0.65 of 1% of the average daily net assets of the Fund.
This base fee is subject to upward or downward adjustment on the basis of the
investment performance of the Class A shares of the Fund as compared with the
performance of the Standard & Poor's 500 Stock Index (the "Index"). The
Aggressive Growth Fund will pay an additional monthly fee at an annual rate of
0.02% of such average daily net assets for each percentage point (fractions to
be prorated) by which the performance of the Class A shares of the Fund exceeds
that of the Index for the immediately preceding twelve months; provided that
such additional monthly fee shall not exceed 1/12 of 0.20% of the average daily
net assets. Conversely, the compensation payable by the Aggressive Growth Fund
will be reduced by an annual rate of 0.02% of such average daily net assets for
each percentage point (fractions to be prorated) by which the performance of the
Class A shares of the Fund falls below that of the Index, provided that such
reduction in the monthly fee shall not exceed 1/12 of 0.20% of the average net
assets. The total fee on an annual basis can range from 0.45% to 0.85% of
average daily net assets. The Aggressive Growth Fund's investment performance
during any twelve month period is measured by the percentage difference between
(a) the opening net asset value of one Class A share of the Fund and (b) the sum
of the closing net asset value of one Class A share of the Fund plus the value
of any income and capital gain dividends on such share during the period treated
as if reinvested in Class A shares of the Fund at the time of distribution. The
performance of the Index is measured by the percentage change in the Index
between the beginning and the end of the twelve month period with cash
distributions on the securities which comprise the Index being treated as
reinvested in the Index at the end of each month following the payment of the
dividend. Each monthly calculation of the incentive portion of the fee may be
illustrated as follows: if over the preceding twelve month period the Aggressive
Growth Fund's adjusted net asset value applicable to one Class A share went from
$10.00 to $11.50 (15% appreciation), and the Index, after adjustment, went from
100 to 104 (or only 4%), the entire incentive compensation would have been
earned by Scudder Kemper. On the other hand, if the Index rose from 100 to 115
(15%), no incentive fee would have been payable. A rise in the Index from 100 to
125 (25%) would have resulted in the minimum monthly fee of 1/12 of 0.45%. Since
the computation is not cumulative from year to year, an additional management
fee may be payable with respect to a particular year, although the Aggressive
Growth Fund's performance over some longer period of time may be less favorable
than that of the Index. Conversely, a lower management fee may be payable in a
year in which the performance of the Fund's Class A shares is less favorable
than that of the Index, although the performance of the Fund's Class A shares
over a longer period of time might be better than that of the Index.
25
<PAGE>
The investment management fees paid by each Fund for its last three fiscal years
are shown in the table below.
Fund Fiscal 1999 Fiscal 1998 Fiscal 1997
- ---- ----------- ----------- -----------
Aggressive $241,000 98,000(3) $37,000(1)
Blue Chip $4,172,000 3,104,000 $2,018,000
Growth $14,408,000 14,891,000 $14,576,000
Small Cap $2,966,000 3,519,000(4) $3,193,000(2)
Technology $10,608,000 6,842,000 $6,532,000
Total Return 18,088,000 $17,084,000
Value+Growth 906,000 $474,000
(1) Fee was increased $1,000 from $36,000 base fee; for the period December
31, 1996 (commencement of operations) to September 30, 1997.
(2) Fee was decreased $2,617,000 from $5,810,000 base fee.
(3) Fee was decreased $9,000 from $107,000 base fee.
(4) Fee was decreased $2,791,000 from $6,310,000 base fee.
FUND ACCOUNTING AGENT. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of Scudder
Kemper, is responsible for determining the daily net asset value per share of
the Funds and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to the Funds; however, subject to Board
approval, some time in the future, SFAC may seek payment for its services under
this agreement.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606, an affiliate of
Scudder Kemper, is the principal underwriter and distributor for the shares of
each Fund and acts as agent of each Fund in the continuous offering of its
shares. KDI bears all its expenses of providing services pursuant to the
distribution agreements, including the payment of any commissions. Each Fund
pays the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI, as principal underwriter, pays for
the printing and distribution of copies thereof used in connection with the
offering of shares to prospective investors. KDI also pays for supplementary
sales literature and advertising costs.
Class A Shares. KDI receives no compensation from the Funds as principal
underwriter for Class A shares and pays all expenses of distribution of each
Fund's Class A shares under the distribution agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of each Fund's shares. The
following information concerns the underwriting commissions paid in connection
with the distribution of each Fund's Class A shares for the fiscal years noted.
<TABLE>
<CAPTION>
Commissions Retained by Commissions Underwriter Commissions Paid to Kemper
Fund Fiscal Year Underwriter Paid to All Firms Affiliated Firms
- ---- ----------- ----------- ----------------- ----------------
<S> <C> <C> <C> <C>
Aggressive 1999 $31,000 $146,000 $0
1998 $32,000 $323,000 $5,000
1997+ $7,000 $111,000 $5,000
Blue Chip 1999 $159,000 $930,000 $0
1998 $183,000 $1,286,000 $6,000
1997 $124,000 $1,101,000 $7,000
Growth 1999 $238,000 $1,220,000 $6,000
1998 $326,000 $1,998,000 $5,000
1997 $296,000 $1,523,000 $9,000
Small Cap 1999 $65,000 $384,000 $0
1998 $154,000 $875,000 $0
1997 $104,000 $705,000 $0
Technology 1999 $393,000 $1,170,000 $0
1998 $163,000 $824,000 $7,000
26
<PAGE>
1997 $181,000 $853,000 $7,000
Total Return 1999 $257,000 $1,241,000 $0
1998 $233,000 $2,219,000 $6,000
1997 $191,000 $1,591,000 $0
Value+Growth 1999 $38,000 $ $0
1998 $61,000 $462,000 $0
1997 $40,000 $538,000 $0
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to
September 30, 1997.
Class B Shares and Class C Shares. Each Fund has adopted a plan under Rule 12b-1
(the "Rule 12b-1 Plan") that provides for fees payable as an expense of the
Class B shares and Class C shares that are used by KDI to pay for distribution
and services for those classes. Because 12b-1 fees are paid out of fund assets
on an ongoing basis, they will, over time, increase the cost of an investment
and cost more than other types of sales charges.
For its services under the distribution agreement, KDI receives a fee from each
Fund under a Rule 12b-1 Plan, payable monthly, at the annual rate of 0.75% of
average daily net assets of each Fund attributable to Class B shares. This fee,
pursuant to the 12b-1 Plan, 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%.
For its services under the distribution agreement, KDI receives a fee from each
Fund under a Rule 12b-1 Plan, payable monthly, at the annual rate of 0.75% of
average daily net assets of each Fund attributable to Class C shares. This fee,
pursuant to the Rule 12b-1 Plan, is accrued daily as an expense of Class C
shares. KDI currently advances to firms the first year distribution fee at a
rate of 0.75% of the purchase price of Class C shares. For periods after the
first year, KDI currently pays firms for sales of Class C shares a distribution
fee, payable quarterly, at an annual rate of 0.75% of net assets attributable to
Class C shares maintained and serviced by the firm and the fee continues until
terminated by KDI or a Fund. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charges--Class C Shares".
Expenses of the Funds and of KDI in connection with the Rule 12b-1 Plans for the
Class B and Class C Shares are set forth below. A portion of the marketing sales
and operating expenses shown below could be considered overhead expense.
27
<PAGE>
<TABLE>
<CAPTION>
Distribution Contingent Total Commissions
Fees Paid by Deferred Commissions Paid Paid by
Fund Class Fund to Sales Charges by Underwriter Underwriter to
B Shares Fiscal Underwriter to Underwriter to Firms Affiliated Firms
- -------- ------ ----------- -------------- -------- ----------------
Year
----
<S> <C> <C> <C> <C> <C>
Aggressive 1999 $ 100,000(a) $ 89,000 $ 283,000 $0
1998 $ 28,000 $ 28,000 $ 337,000 $0
1997+ $ 13,000 $ 11,000 $ 122,000 $0
Blue Chip 1999 $1,173,000 $ 643,000 $2,051,000 $0
1998 $1,198,000 $ 293,000 $2,266,000 $0
1997 $ 659,000 $ 128,000 $1,885,000 $0
Growth 1999 $4,238,000 $1,428,000 $2,138,000 $0
1998 $5,791,000 $1,180,000 $2,647,000 $0
1997 $6,426,000 $1,183,000 $3,193,000 $0
Small Cap 1999 $1,225,000 $ 481,000 $ 721,000 $0
1998 $1,938,000 $ 438,000 $1,229,000 $0
1997 $1,930,000 $ 417,000 $1,308,000 $0
Technology 1999 $1,930,000 $ 555,000 $3,383,000 $0
1998 $ 884,000 $ 273,000 $1,248,000 $0
1997 $ 698,000 $ 179,000 $1,272,000 $0
Total Return 1999 $6,179,000 $1,406,000 $3,461,000 $0
1998 $7,774,000 $1,259,000 $3,718,000 $0
1997 $8,705,000 $1,382,000 $3,769,000 $0
Value+Growth 1999 $ 448,000(a) $ 173,000 $ 386,000 $0
1998 $ 345,000 $ 86,000 $ 697,000 $0
1997 $ 195,000(a) $ 28,000 $ 656,000 $0
Other Distribution Expenses Paid by Underwriter
-----------------------------------------------
Misc.
Fund Class Advertising Prospectus Marketing and Operating Interest
B Shares Fiscal and Literature Printing Sales Expenses Expenses Expenses
- -------- ------ -------------- -------- -------------- -------- --------
Year
----
Aggressive 1999
1998 $31,000 $3,000 $65,000 $29,000 $31,000
1997+ $12,000 $1,000 $3,000 $1,000 $4,000
Blue Chip 1999
1998 $289,000 $34,000 $598,000 $113,000 $482,000
1997 $189,000 $13,000 $530,000 $97,000 $238,000
Growth 1999
1998 $355,000 $31,000 $731,000 $124,000 ($318,000)
1997 $563,000 $39,000 $1,424,000 $199,000 $48,000
Small Cap 1999
1998 $165,000 $14,000 $334,000 $66,000 $397,000
1997 $222,000 $15,000 $564,000 $97,000 $426,000
Technology 1999
1998 $167,000 $19,000 $340,000 $68,000 $404,000
1997 $162,000 $11,000 $442,000 $77,000 $295,000
Total Return 1999
1998 $484,000 $57,000 $1,008,000 $171,000 ($373,000)
1997 $517,000 $36,000 $1,391,000 $193,000 $44,000
Value+Growth 1999
1998 $96,000 $10,000 $183,000 $40,000 $1,213,000
1997 $65,000 $5,000 $184,000 $30,000 $104,000
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to
September 30, 1997.
(a) Amounts shown after expense waiver.
28
<PAGE>
<TABLE>
<CAPTION>
Total Distribution
Distribution Contingent Distribution Fees Paid by
Fees Paid by Deferred Fees Paid by Underwriter
Fund Class Fund to Sales Charges Underwriter to Affiliated
C Shares Fiscal Underwriter to Underwriter to Firms Firms
- -------- ------ ----------- -------------- -------- -----
Year
----
<S> <C> <C> <C> <C> <C>
Aggressive 1999 $20,000(a) $3,000 $43,000 $0
1998 $6,000 $1,000 $21,000 $0
1997+ $6,000 $5,000 $16,000 $0
Blue Chip 1999 $220,000 $6,000 $240,000 $0
1998 $134,000 $6,000 $140,000 $0
1997 $49,000 $3,000 $72,000 $0
Growth 1999 $185,000 $3,000 $181,000 $0
1998 $148,000 $3,000 $148,000 $0
1997 $110,000 $1,000 $123,000 $0
Small Cap 1999 $90,000 $3,000 $87,000 $0
1998 $106,000 $4,000 $97,000 $0
1997 $62,000 $2,000 $63,000 $0
Technology 1999 $288,000 $7,000 $366,000 $0
1998 $108,000 $2,000 $104,000 $0
1997 $51,000 $3,000 $66,000 $0
Total Return 1999 $269,000 $22,000 $289,000 $0
1998 $167,000 $5,000 $173,000 $0
1997 $109,000 $2,000 $123,000 $0
Value+Growth 1999 $16,000(a) $3,000 $0 $0
1998 $9,000 $3,000 $31,000 $0
1997 $ 8,000(a) $1,000 $20,000 $0
Other Distribution Expenses Paid by Underwriter
-----------------------------------------------
Misc.
Fund Class Advertising Prospectus Marketing and Operating Interest
C Shares Fiscal and Literature Printing Sales Expenses Expenses Expenses
- -------- ------ -------------- -------- -------------- -------- --------
Year
----
Aggressive 1999
1998 $6,000 $1,000 $12,000 $3,000 $4,000
1997+ $7,000 $1,000 $20,000 $0 $1,000
Blue Chip 1999
1998 $56,000 $7,000 $111,000 $30,000 $27,000
1997 $26,000 $2,000 $52,000 $18,000 $12,000
Growth 1999
1998 $29,000 $3,000 $59,000 $19,000 $51,000
1997 $44,000 $3,000 $110,000 $8,000 $36,000
Small Cap 1999
1998 $24,000 $2,000 $48,000 $19,000 $29,000
1997 $21,000 $1,000 $53,000 $9,000 $21,000
Technology 1999
1998 $33,000 $4,000 $67,000 $22,000 $31,000
1997 $24,000 $2,000 $66,000 $2,000 $19,000
Total Return 1999
1998 $42,000 $5,000 $90,000 $24,000 $53,000
1997 $35,000 $2,000 $94,000 $2,000 $36,000
Value+Growth 1999
1998 $12,000 $1,000 $24,000 $9,000 $11,000
1997 $7,000 $1,000 $20,000 $2,000 $7,000
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to
September 30, 1997.
* For the period February 15, 1996 to November 30, 1996.
(a) Amount shown after expense waiver.
29
<PAGE>
<PAGE>
Rule 12b-1 Plan. If a Rule 12b-1 Plan (the "Plan") is terminated in accordance
with its terms, the obligation of a Fund to make payments to KDI pursuant to the
Plan will cease and the Fund will not be required to make any payments past the
termination date. Thus, there is no legal obligation for the Fund to pay any
expenses incurred by KDI in excess of its fees under a Plan, if for any reason
the Plan is terminated in accordance with its terms. Future fees under a Plan
may or may not be sufficient to reimburse KDI for its expenses incurred.
Each distribution agreement and Rule 12b-1 Plan continues in effect from year to
year so long as such continuance is approved for each class at least annually by
a vote of the Board of Trustees of the Fund, including the Trustees who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the agreement. Each agreement automatically terminates in the event
of its assignment and may be terminated for a class at any time without penalty
by a Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to
a class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
1940 Act. The agreement may not be amended for a class to increase the fee to be
paid by a Fund with respect to such class without approval by a majority of the
outstanding voting securities of such class of the Fund and all material
amendments must in any event be approved by the Board of Trustees in the manner
described above with respect to the continuation of the agreement. The
provisions concerning the continuation, amendment and termination of the
distribution agreement are on a Fund by Fund basis and for each Fund on a class
by class basis.
ADMINISTRATIVE SERVICES. Administrative services are provided to each Fund under
an administrative services agreement ("administrative agreement") with KDI. KDI
bears all its expenses of providing services pursuant to the administrative
agreement between KDI and each Fund, including the payment of service fees. Each
Fund pays KDI an administrative services fee, payable monthly, at an annual rate
of up to 0.25% of average daily net assets of Class A, B and C shares of each
Fund.
KDI enters into related arrangements with various broker-dealer firms and other
service or administrative firms ("firms"), that provide services and facilities
for their customers or clients who are shareholders of a Fund. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding the Fund, assistance to
clients in changing dividend and investment options, account designations and
addresses and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. For Class A shares, KDI
pays each firm a service fee, normally payable quarterly, at an annual rate of
up to 0.25% of the net assets in Fund accounts that it maintains and services
attributable to Class A shares commencing with the month after investment. With
respect to Class B and Class C shares, KDI currently advances to firms the
first-year service fee at a rate of up to 0.25% of the purchase price of such
shares. For periods after the first year, KDI currently intends to pay firms a
service fee at an annual rate of up to 0.25% (calculated monthly and normally
paid quarterly) of the net assets attributable to Class B and Class C shares
maintained and serviced by the firm and the fee continues until terminated by
KDI or the Fund. Firms to which service fees may be paid include broker-dealers
affiliated with KDI.
The following information concerns the administrative services fee paid by each
Fund for the last three fiscal years.
<TABLE>
<CAPTION>
Administrative Service Fees Paid by Fund
Service Fees Paid Service Fees Paid
by Administrator by Administrator
Fund Fiscal Year Class A Class B Class C to Firms to Affiliated firms
- ---- ----------- ------- ------- ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive 1999* $0 $0 $0 $139,000 $0
1998* $2,000 $1,000 $0 $80,000 $0
1997+ $7,000 $4,000 $2,000 $24,000 $0
Blue Chip 1999 $1,166,000 $581,000 $83,000 $1,629,000 $0
1998 $879,000 $394,000 $44,000 $1,311,000 $5,000
1997 $598,000 $220,000 $16,000 $886,000 $0
31
<PAGE>
Administrative Service Fees Paid by Fund
Service Fees Paid Service Fees Paid
by Administrator by Administrator
Fund Fiscal Year Class A Class B Class C to Firms to Affiliated firms
- ---- ----------- ------- ------- ------- -------- ----------------
Growth 1999 $4,587,000 $1,333,000 $58,000 $6,146,000 $26,000
1998 $4,274,000 $1,829,000 $47,000 $6,179,000 $37,000
1997 $4,000,000 $2,093,000 $36,000 $6,149,000 $41,000
Small Cap 1999 $1,207,000 $396,000 $26,000 $1,664,000 $0
1998 $1,407,000 $614,000 $33,000 $2,071,000 $5,000
1997 $1,376,000 $632,000 $21,000 $2,027,000 $7,000
Technology 1999 $2,834,000 $633,000 $92,000 $3,738,000 $6,000
1998 $1,763,000 $284,000 $32,000 $2,114,000 $5,000
1997 $1,682,000 $228,000 $17,000 $1,955,000 $0
Total Return 1999 $6,635,000 $2,043,000 $87,000 $8,476,000 $11,000
1998 $5,353,000 $2,504,000 $56,000 $7,976,000 $17,000
1997 $4,683,000 $2,813,000 $36,000 $7,603,000 $22,000
Value+Growth 1999 $200,000 $174,000 $19,000 $391,000 $0
1998 $152,000 $130,000 $10,000 $299,000 $0
1997* $71,000 $73,000 $4,000 $169,000 $0
</TABLE>
+ For the period December 31, 1996 (commencement of operations) to
September 30, 1997.
* Amounts shown after expense waiver.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fee that it receives
from a Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of a Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record. The Board of Trustees of a Fund,
in its discretion, may approve basing the fee to KDI on all Fund assets in the
future.
Certain trustees or officers of a Fund are also directors or officers of Scudder
Kemper or KDI as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of each Fund. It attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by each Fund. Investors Fiduciary Trust Company,
801 Pennsylvania Avenue, Kansas City, Missouri, 64105 ("IFTC") is each Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of Scudder Kemper, serves as
"Shareholder Service Agent" of each Fund and, as such, performs all of IFTC's
duties as transfer agent and dividend paying agent. IFTC receives as transfer
agent, and pays to KSvC as follows: prior to January 1, 1999, annual account
fees at a maximum rate 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 and effective
January 1, 1999, annual account fees of $10.00 ($18.00 for retirement accounts)
plus set up charges, annual fees associated with the contingent deferred sales
charges (Class B only), an asset-based fee of 0.08% and out-of-pocket
reimbursement. The following shows for each Fund's 1999 fiscal year the
shareholder service fees IFTC remitted to KSvC.
Fund Fees IFTC Paid to KSvC
- ---- ----------------------
Aggressive $ 387,000
Blue Chip $2,067,000
Growth $6,283,000
Small Cap $2,309,000
Technology $3,357,000
Total Return $7,110,000
Value+Growth $
32
<PAGE>
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Funds' independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Funds' annual financial statements, review certain
regulatory reports and the Funds' federal income tax returns, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Funds .
PURCHASE, REPURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
Alternative Purchase Arrangements. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase, and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
<TABLE>
<CAPTION>
Annual
12b-1 Fees
(as a % of
average daily
Sales Charge net assets) Other Information
------------ ----------- -----------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of 5.75% None Initial sales charge waived
of the public offering price or reduced for certain
purchases
Class B Maximum contingent deferred sales 0.75% Shares convert to Class A
charge of 4% of redemption proceeds; shares six years after
declines to zero after six years issuance
Class C Contingent deferred sales charge of 1% 0.75% No conversion feature
of redemption proceeds for
redemptions made during first year
after purchase
</TABLE>
The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing and may not be
available for certain types of account registrations. It is recommended that
investors not request share certificates unless needed for a specific purpose.
You cannot redeem shares by telephone or wire transfer or use the telephone
exchange privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond worth 2% or more of the certificate value is normally required).
Initial Sales Charge Alternative--Class A Shares. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
Sales Charge
------------
33
<PAGE>
Allowed
to Dealers
As a As a as a
Percentage Percentage Percentage of
of of Net Offering
Amount of Purchase Offering Price Asset Value* Price
------------------ -------------- ------------ -----
<S> <C> <C> <C> <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 0.00** 0.00** ***
</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 by: (a) any
purchaser provided that the amount invested in such Fund or other Kemper Mutual
Funds listed under "Special Features--Class A Shares--Combined Purchases" totals
at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a), a participant-directed
non-qualified deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district, provided in each
case that such plan has not less than 200 eligible employees (the "Large Order
NAV Purchase Privilege"). Redemption within two years of shares purchased under
the Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charge--Large Order NAV Purchase Privilege."
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of a Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer sponsored
employee benefit plans using the subaccount recordkeeping system made available
through KSvC. For purposes of determining the appropriate commission percentage
to be applied to a particular sale, KDI will consider the cumulative amount
invested by the purchaser in a Fund and other Kemper Mutual Funds listed under
"Special Features--Class A Shares--Combined Purchases," including purchases
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features referred to above. The privilege of purchasing Class A shares
of a Fund at net asset value under the Large Order NAV Purchase Privilege is not
available if another net asset value purchase privilege also applies.
Effective on February 1, 1996, Class A shares of a Fund or any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be purchased at net asset value in any amount by members of the plaintiff
class in the proceeding known as Howard and Audrey Tabankin, et al. v. Kemper
Short-Term Global Income Fund, et al., Case No. 93 C 5231 (N.D. IL). This
privilege is generally non-transferable 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
34
<PAGE>
discretion pay investment dealers and other financial services firms a
concession, payable quarterly, at an annual rate of up to 0.25% of net assets
attributable to such shares maintained and serviced by the firm. A firm becomes
eligible for the concession based upon assets in accounts attributable to shares
purchased under this privilege in the month after the month of purchase and the
concession continues until terminated by KDI. The privilege of purchasing Class
A shares of a Fund at net asset value under this privilege is not available if
another net asset value purchase privilege also applies.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.
Class A shares of a Fund may be purchased at net asset value in any amount by
certain professionals who assist in the promotion of Kemper Funds pursuant to
personal services contracts with KDI, for themselves or members of their
families. KDI in its discretion may compensate financial services firms for
sales of Class A shares under this privilege at a commission rate of 0.50% of
the amount of Class A shares purchased.
Class A shares of a Fund may be purchased at net asset value by persons who
purchase shares of the Fund through KDI as part of an automated billing and wage
deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.
Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
a Fund, its investment manager, its principal underwriter or certain affiliated
companies, for themselves or members of their families; (b) registered
representatives and employees of broker-dealers having selling group agreements
with KDI and officers, directors and employees of service agents of the Funds,
for themselves or their spouses or dependent children; (c) shareholders who
owned shares of Kemper Value Series, Inc. ("KVS") on September 8, 1995, and have
continuously owned shares of KVS (or a Kemper Fund acquired by exchange of KVS
shares) since that date, for themselves or members of their families; and (d)
any trust, pension, profit-sharing or other benefit plan for only such persons.
Class A shares may be sold at net asset value in any amount to selected
employees (including their spouses and dependent children) of banks and other
financial services firms that provide administrative services related to order
placement and payment to facilitate transactions in shares of the Funds for
their clients pursuant to an agreement with KDI or one of its affiliates. Only
those employees of such banks and other firms who as part of their usual duties
provide services related to transactions in Fund shares may purchase Fund Class
A shares at net asset value hereunder. Class A shares may be sold at net asset
value in any amount to unit investment trusts sponsored by Ranson & Associates,
Inc. In addition, unitholders of unit investment trusts sponsored by Ranson &
Associates, Inc. or its predecessors may purchase a Fund's Class A shares at net
asset value through reinvestment programs described in the prospectuses of such
trusts that have such programs. Class A shares of a Fund may be sold at net
asset value through certain investment advisors registered under the Investment
Advisors Act of 1940 and other financial services firms acting solely as agent
for their clients that adhere to certain standards established by KDI, including
a requirement that such shares be sold for the benefit of their clients
participating in an investment advisory program or agency commissions program
under which such clients pay a fee to the Adviser or other firm for portfolio
management and brokerage services. Such shares are sold for investment purposes
and on the condition that they will not be resold except through redemption or
repurchase by the Funds. The Funds may also issue Class A shares at net asset
value in connection with the acquisition of the assets of or merger or
consolidation with another investment company, or to shareholders in connection
with the investment or reinvestment of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
Deferred Sales Charge Alternative--Class B Shares. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. (See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares.")
35
<PAGE>
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 . 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 . The purpose of the conversion feature
is to relieve holders of Class B shares from the distribution services fee when
they have been outstanding long enough for KDI to have been compensated for
distribution related expenses. For purposes of conversion to Class A shares,
shares purchased through the reinvestment of dividends and other distributions
paid with respect to Class B shares in a shareholder's Fund account will be
converted to Class A shares on a pro rata basis.
Purchase of Class C Shares. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full amount
of the investor's purchase payment will be invested in Class C shares for his or
her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at a
rate of 0.75% of the purchase price of such shares. For periods after the first
year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."
Which Arrangement is Better for You? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in a Fund or other Kemper Mutual Funds
listed under "Special Features -- Class A Shares -- Combined Purchases" is in
excess of $5 million including purchases pursuant to the "Combined Purchases,"
"Letter of 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 or other financial services firms may be subject to
various federal and state laws regarding the services described above and may be
required to register as dealers pursuant to state law. If banking firms were
prohibited from acting in any capacity or providing any of the described
services, management would consider what action, if any, would be appropriate.
KDI does not believe that termination of a relationship with a bank would result
in any material adverse consequences to a Fund.
KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of the Fund sold under the following conditions: (i) the purchased
shares are held in a Kemper IRA account, (ii) the shares are purchased as a
direct "roll over" of a distribution from a qualified retirement plan account
maintained on a participant subaccount record keeping system provided by KSvC,
(iii) the registered representative placing the trade is a member of ProStar, a
group of persons designated by KDI in acknowledgment of their dedication to the
employee benefit plan area; and (iv) the purchase is not otherwise subject to a
commission.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash , to firms that sell shares of the Funds. 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
36
<PAGE>
financial services firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of its business day will be
confirmed at a price based on the net asset value effective on that day ("trade
date"). The Funds reserve the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may take
significantly longer for a check drawn on a foreign bank than for a check drawn
on a domestic bank. Therefore, if an order is accompanied by a check drawn on a
foreign bank, funds must normally be collected before shares will be purchased.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Funds' shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Funds' shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Funds through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Funds through the Shareholder Service Agent for
these services. This statement of additional information should be read in
connection with such firms' material regarding their fees and services.
The Funds reserve the right to withdraw all or any part of the offering made by
this statement of additional information and to reject purchase orders. Also,
from time to time, each Fund may temporarily suspend the offering of any class
of its shares to new investors. During the period of such suspension, persons
who are already shareholders of such class of such Fund normally are permitted
to continue to purchase additional shares of such class and to have dividends
reinvested.
Shareholders should direct their inquiries to KSvC, 811 Main Street, Kansas
City, Missouri 64105-2005 or to the firm from which they received this statement
of additional information.
As described herein, shares of a Fund are sold at their public offering price,
which is the net asset value per share of the Fund next determined after an
order is received in proper form plus, with respect to Class A shares, an
initial sales charge. The minimum initial investment is $1,000 and the minimum
subsequent investment is $100 but such minimum amounts may be changed at any
time. An order for the purchase of shares that is accompanied by a check drawn
on a foreign bank (other than a check drawn on a Canadian bank in U.S. Dollars)
will not be considered in proper form and will not be processed unless and until
the Fund determines that it has received payment of the proceeds of the check.
The time required for such a determination will vary and cannot be determined in
advance. The amount received by a shareholder upon redemption or repurchase may
be more or less than the amount paid for such shares depending on the market
value of the Fund's portfolio securities at the time.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by the Fund at the applicable net asset value
per share of such Fund as described herein.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B or Class C shares, by certain classes of persons or
through certain types of transactions, are provided because of anticipated
economies in sales and sales related efforts.
A Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the SEC may by order permit for the protection of a Fund's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares
37
<PAGE>
would occur, and shares might continue to be subject to the distribution
services fee for an indefinite period that may extend beyond the proposed
conversion date as described herein.
The Funds have authorized certain members of the National Association of
Securities Dealers, Inc. ("NASD"), other than Kemper Distributors, Inc. ("KDI")
to accept purchase and redemption orders for the Fund's shares. Those brokers
may also designate other parties to accept purchase and redemption orders on the
Fund's behalf. Orders for purchase or redemption will be deemed to have been
received by the Fund when such brokers or their authorized designees accept the
orders. Subject to the terms of the contract between the Fund and the broker,
ordinarily orders will be priced as the Fund's net asset value next computed
after acceptance by such brokers or their authorized designees. Further, if
purchases or redemptions of the Fund's shares are arranged and settlement is
made at an investor's election through any other authorized NASD member, that
member may, at its discretion, charge a fee for that service. The Board of
Trustees or Directors as the case may be ("Board") of the Fund and KDI each has
the right to limit the amount of purchases by, and to refuse to sell to, any
person. The Board and KDI may suspend or terminate the offering of shares of the
Fund at any time for any reason.
REDEMPTION OR REPURCHASE OF SHARES
General. Any shareholder may require a Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Funds' transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When a Fund is asked to redeem shares for which it may not have yet received
good payment (i.e., purchases by check, Express-Transfer or Bank Direct
Deposit), it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 10 days from receipt by a Fund of the purchase
amount. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares"), the redemption of Class B shares within six years
may be subject to a contingent deferred sales charge (see "Contingent Deferred
Sales Charge--Class B Shares" below), and the redemption of Class C shares
within the first year following purchase may be subject to a contingent deferred
sales charge (see "Contingent Deferred Sales Charge--Class C Shares" below).
Because of the high cost of maintaining small accounts the Funds may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. A Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The shareholder will bear the risk of loss,
including loss resulting from fraudulent or unauthorized transactions, so long
as reasonable verification procedures are followed. Verification procedures
include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.
Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone
38
<PAGE>
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, guardian or custodian account holders, provided the
trustee, executor, guardian or custodian is named in the account registration.
Other institutional account holders may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. The Funds reserve the right to terminate or modify
this privilege at any time.
Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which each Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the Fund next determined after receipt of a
request by KDI. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of KDI's business day will be confirmed at
the net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of the Fund
effective on that day and normally the proceeds will be sent to the designated
account the following business day. Delivery of the proceeds of a wire
redemption of $250,000 or more may be delayed by the Fund for up to seven days
if Scudder Kemper deems it appropriate under then current market conditions.
Once authorization is on file, the Shareholder Service Agent will honor requests
by telephone at 1-800-621-1048 or in writing, subject to the limitations on
liability described under "General" above. The Funds are not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. The Funds currently do not charge the account holder for wire
transfers. The account holder is responsible for any charges imposed by the
account holder's firm or bank. There is a $1,000 wire redemption minimum
(including any contingent deferred sales charge). To change the designated
account to receive wire redemption proceeds, send a written request to the
Shareholder Service Agent with signatures guaranteed as described above or
contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed by wire transfer until such shares have been owned for at least 10
days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
wire transfer redemption privilege. The Funds reserve the right to terminate or
modify this privilege at any time.
Contingent Deferred Sales Charge--Large Order NAV Purchase Privilege. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if they
are redeemed during the second year after purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a), a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the
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<PAGE>
account; and (f) redemptions of shares whose dealer of record at the time of the
investment notifies KDI that the dealer waives the discretionary commission
applicable to such Large Order NAV Purchase.
Contingent Deferred Sales Charge--Class B Shares. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed excluding amounts not subject to the charge.
Contingent
Deferred
Year of Redemption Sales
After Purchase Charge
- -------------- ------
First 4%
Second 3%
Third 3%
Fourth 2%
Fifth 2%
Sixth 1%
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to satisfy required minimum distributions after age 70 1/2 from an
IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent: (a) redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent deferred
sales charge and the conversion privilege), (b) redemptions in connection with
retirement distributions (limited at any one time to 10% of the total value of
plan assets invested in a Fund), (c) redemptions in connection with
distributions qualifying under the hardship provisions of the Internal Revenue
Code and (d) redemptions representing returns of excess contributions to such
plans.
Contingent Deferred Sales Charge--Class C Shares. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (limited to 10% of the
net asset value of the account during the first year, see "Special
Features--Systematic Withdrawal Plan"), (d) for redemptions made pursuant to any
IRA systematic withdrawal based on the shareholder's life expectancy including,
but not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts), (f) for any participant-directed redemption
of shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service Agent
and (g) redemption of shares by an employer sponsored employee benefit plan that
offers funds in addition to Kemper Funds and whose dealer of record has waived
the advance of the first year administrative service and distribution fees
applicable to such shares and agrees to receive such fees quarterly.
Contingent Deferred Sales Charge--General. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of a Fund's Class B shares and that 16 months
later the value of the shares has grown by $1,000 through reinvested dividends
and by an additional $1,000 of share appreciation to a total of $12,000. If the
investor were then to redeem the entire $12,000 in share value, the contingent
deferred sales charge would be payable only with respect to $10,000 because
neither the $1,000 of reinvested dividends nor
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the $1,000 of share appreciation is subject to the charge. The charge would be
at the rate of 3% ($300) because it was in the second year after the purchase
was made.
The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in
December, 1996 will be eligible for the second year's charge if redeemed on or
after December 1, 1997. In the event no specific order is requested when
redeeming shares subject to a contingent deferred sales charge, the redemption
will be made first from shares representing reinvested dividends and then from
the earliest purchase of shares. KDI receives any contingent deferred sales
charge directly.
Reinvestment Privilege. A shareholder who has redeemed Class A shares of a Fund
or any other Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of the Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
a Fund or of the other listed Kemper Mutual Funds. A shareholder of a Fund or
other Kemper Mutual Fund who redeems Class A shares purchased under the Large
Order NAV Purchase Privilege (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares") or Class B shares or Class C shares and incurs a
contingent deferred sales charge may reinvest up to the full amount redeemed at
net asset value at the time of the reinvestment, in Class A shares, Class B
shares or Class C shares, as the case may be, of a Fund or of other Kemper
Mutual Funds. The amount of any contingent deferred sales charge also will be
reinvested. These reinvested shares will retain their original cost and purchase
date for purposes of the contingent deferred sales charge. Also, a holder of
Class B shares who has redeemed shares may reinvest up to the full amount
redeemed, less any applicable contingent deferred sales charge that may have
been imposed upon the redemption of such shares, at net asset value in Class A
shares of a Fund or of the other Kemper Mutual Funds listed under "Special
Features--Class A Shares--Combined Purchases." Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Mutual
Funds available for sale in the shareholder's state of residence as listed under
"Special Features--Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of shares of a
Fund, the reinvestment in shares of a Fund may be subject to the "wash sale"
rules if made within 30 days of the redemption, resulting in a postponement of
the recognition of such loss for federal income tax purposes. The reinvestment
privilege may be terminated or modified at any time.
SPECIAL FEATURES
Class A Shares--Combined Purchases. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following funds: Kemper Classic Growth Fund, Kemper U.S. Growth and Income Fund,
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 Strategic Income Fund, Kemper High Yield
Series, Kemper U.S. Government Securities Fund, Kemper International Fund,
Kemper State Tax-Free Income Series, Kemper Blue Chip Fund, Kemper Global Income
Fund, Kemper Target Equity Fund (series are subject to a limited offering
period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund,
Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper
Value+Growth Fund, Kemper Value Series, Inc., Kemper Horizon Fund, Kemper New
Europe Fund, Inc., Kemper Asian Growth Fund, Kemper Funds Trust (certain series
available only to employees of Scudder Kemper and its affiliates and only in
certain states), Kemper Income Trust, Kemper Small Cap Relative Value Fund,
Kemper-Dreman Financial Services Fund, Kemper Aggressive Growth Fund and Kemper
Global/International Series, Inc. ("Kemper Mutual Funds"). Except as noted
below, there is no combined purchase credit for direct purchases of shares of
Zurich Money Funds, Cash Equivalent Fund, Tax-Exempt California Money Market
Fund, Cash Account Trust, Investors Municipal Cash Fund or Investors Cash Trust
("Money Market Funds"), which are not considered "Kemper Mutual Funds" for
purposes hereof. For purposes of the Combined Purchases feature described above
as well as for the Letter of Intent and Cumulative Discount features described
below, employer sponsored employee benefit plans using the subaccount record
keeping system made available through the Shareholder Service Agent may include:
(a) Money Market Funds as "Kemper Mutual Funds", (b) all classes of shares of
any Kemper Mutual Fund and (c) the value of any other plan investment, such as
guaranteed investment contracts and employer stock, maintained on such
subaccount record keeping system.
Class A Shares--Letter of Intent. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus or herein, 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
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5% of the amount of the intended purchase, and that 5% of the amount of the
intended purchase normally will be held in escrow in the form of shares pending
completion of the intended purchase. If the total investments under the Letter
are less than the intended amount and thereby qualify only for a higher sales
charge than actually paid, the appropriate number of escrowed shares are
redeemed and the proceeds used toward satisfaction of the obligation to pay the
increased sales charge. The Letter for an employer sponsored employee benefit
plan maintained on the subaccount record keeping system available through the
Shareholder Service Agent may have special provisions regarding payment of any
increased sales charge resulting from a failure to complete the intended
purchase under the Letter. A shareholder may include the value (at the maximum
offering price) of all shares of such Kemper Mutual Funds held of record as of
the initial purchase date under the Letter as an "accumulation credit" toward
the completion of the Letter, but no price adjustment will be made on such
shares. Only investments in Class A shares are included in this privilege.
Class A Shares--Cumulative Discount. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the above mentioned Kemper Mutual Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already owned
by the investor.
Class A Shares--Availability of Quantity Discounts. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
Exchange Privilege. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds and the Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the Offering Period for such
series as described in the applicable prospectus or statement of additional
information. Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account Trust, Investors Municipal Cash Fund and Investors Cash Trust are
available on exchange but only through a financial services firm having a
services agreement with KDI.
Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of another Kemper Mutual Fund or a Money
Market Fund under the exchange privilege described above without paying any
contingent deferred sales charge at the time of exchange. If the Class A shares
received on exchange are redeemed thereafter, a contingent deferred sales charge
may be imposed in accordance with the foregoing requirements provided that the
shares redeemed will retain their original cost and purchase date for purposes
of the contingent deferred sales charge.
Class B Shares. Class B shares of a Fund and Class B shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class B
shares may be exchanged without a contingent deferred sales charge being imposed
at the time of exchange. For purposes of the contingent deferred sales charge
that may be imposed upon the redemption of the Class B shares received on
exchange, amounts exchanged retain their original cost and purchase date.
Class C Shares. Class C shares of a Fund and Class C shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class C
shares may be exchanged without a contingent deferred sales charge being imposed
at the time of exchange. For determining whether there is a contingent deferred
sales charge that may be imposed upon the redemption of the Class C shares
received by exchange, they retain the cost and purchase date of the shares that
were originally purchased and exchanged.
General. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged thereafter until
they have been owned for 15 days (the "15-Day Hold Policy"). Effective June 1,
1999, in addition to the current limits on exchanges of shares with a value over
$1,000,000, shares of a Kemper Fund with a value of $1,000,000 or less (except
Kemper Cash Reserves Fund) acquired by exchange from another Kemper Fund, or
from a Money Market Fund, may not be exchanged thereafter until they have been
owned for 15 days if, in the investment manager's judgement, the exchange
activity may have an adverse effect on the fund. In, particular, a pattern of
exchanges that coincides a "market timing" strategy may be disruptive to the
Fund and therefore may be subject to the 15-Day Hold Policy. For purposes of
determining whether the 15-Day Hold Policy applies to a particular exchange, the
value of the shares to be exchanged shall be computed
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by aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. The total value of shares being exchanged must
at least equal the minimum investment requirement of the Kemper Fund into which
they are being exchanged. Exchanges are made based on relative dollar values of
the shares involved in the exchange. There is no service fee for an exchange;
however, dealers or other firms may charge for their services in effecting
exchange transactions. Exchanges will be effected by redemption of shares of the
fund held and purchase of shares of the other fund. For federal income tax
purposes, any such exchange constitutes a sale upon which a gain or loss may be
realized, depending upon whether the value of the shares being exchanged is more
or less than the shareholder's adjusted cost basis of such shares. Shareholders
interested in exercising the exchange privilege may obtain prospectuses of the
other funds from dealers, other firms or KDI. Exchanges may be accomplished by a
written request to KSvC, Attention: Exchange Department, P.O. Box 419557, Kansas
City, Missouri 64141-6557, or by telephone if the shareholder has given
authorization. Once the authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-621-1048, subject to the limitations
on liability under "Redemption or Repurchase of Shares--General." Any share
certificates must be deposited prior to any exchange of such shares. During
periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the telephone exchange privilege. The
exchange privilege is not a right and may be suspended, terminated or modified
at any time. Exchanges may only be made for funds that are available for sale in
the shareholder's state of residence. Currently, Tax-Exempt California Money
Market Fund is available for sale only in California and the portfolios of
Investors Municipal Cash Fund are available for sale only in certain states.
Systematic Exchange Privilege. The owner of $1,000 or more of any class of the
shares of a Kemper Mutual Fund or Money Market Fund may authorize the automatic
exchange of a specified amount ($100 minimum) of such shares for shares of the
same class of another such Kemper Fund. If selected, exchanges will be made
automatically until the privilege is terminated by the shareholder or the Kemper
Fund. Exchanges are subject to the terms and conditions described above under
"Exchange Privilege," except that the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange is not applicable. This privilege may not
be used for the exchange of shares held in certificated form.
EXPRESS-Transfer. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in a Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from any person to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares--General." Once enrolled in
EXPRESS-Transfer, a shareholder can initiate a transaction by calling Kemper
Shareholder Services toll free at 1-800-621-1048 Monday through Friday, 8:00
a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege by
sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").
Bank Direct Deposit. A shareholder may purchase additional shares of a Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, investments are made automatically (maximum $50,000) from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account. By enrolling in Bank Direct Deposit, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
Clearing House debits against the designated account at a bank or other
financial institution. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting the Shareholder
Service Agent for appropriate forms. A shareholder may terminate his or her Plan
by sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination by a shareholder will become effective within thirty
days after the Shareholder Service Agent has received the request. A Fund may
immediately terminate a shareholder's Plan in the event that any item is unpaid
by the shareholder's financial institution. The Funds may terminate or modify
this privilege at any time.
Payroll Direct Deposit and Government Direct Deposit. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) A Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.
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Systematic Withdrawal Plan. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. The minimum periodic
payment is $100. The maximum annual rate at which Class B shares may be redeemed
(and Class A shares purchased under the Large Order NAV Purchase Privilege and
Class C shares in their first year following the purchase) under a systematic
withdrawal plan is 10% of the net asset value of the account. Shares are
redeemed so that the payee will receive payment approximately the first of the
month. Any income and capital gain dividends will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested and fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, a Fund will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.
KDI will waive the contingent deferred sales charge on redemptions of Class A
shares purchased under the Large Order NAV Purchase Privilege, Class B shares
and Class C shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or the Funds.
Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
Individual Retirement Accounts ("IRAs") with State Street as custodian.
This includes Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE"), IRA accounts and Simplified Employee Pension Plan ("SEP") IRA
accounts and prototype documents.
403(b)(7) Custodial Accounts also with State Street as custodian. This
type of plan is available to employees of most non-profit organizations.
Prototype money purchase pension and profit-sharing plans may be
adopted by employers. The maximum annual contribution per participant is the
lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and materials
for establishing them are available from the Shareholder Service Agent upon
request. The brochures for plans with State Street as custodian describe the
current fees payable to State Street for its services as custodian. Investors
should consult with their own tax Advisors before establishing a retirement
plan.
DIVIDENDS AND TAXES
Dividends. Each Fund normally distributes dividends of net investment income as
follows: annually for the Aggressive Growth, Growth, Small Cap, Technology and
Value+Growth Funds; semi-annually for the Blue Chip Fund; and quarterly for the
Total Return Fund. Each Fund distributes any net realized short-term and
long-term capital gains at least annually. The quarterly distribution to
shareholders of the Total Return Fund may include short-term capital gains.
Dividends paid by a Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
A Fund may at any time vary its foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and
long-term capital gains as the Board of Trustees of the Fund determines
appropriate under the then current circumstances. In particular, and without
limiting the foregoing, a Fund may make additional distributions of net
investment income or capital gain net income in order to satisfy the minimum
distribution requirements contained in the Internal Revenue Code (the "Code").
Dividends will be reinvested in shares of the Fund paying such dividends unless
shareholders indicate in writing that they wish to receive them in cash or in
shares of other Kemper Funds as described herein.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
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Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
Fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset value;
or
(2) To receive income and capital gain dividends in cash.
Any dividends of a Fund that are reinvested normally will be reinvested in
shares of the same class of that same Fund. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have dividends of a Fund
invested in shares of the same class of another Kemper Fund at the net asset
value of such class of such other fund. See "Special Features--Class A
Shares--Combined Purchases" for a list of such other Kemper Funds. To use this
privilege of investing dividends of a Fund in shares of another Kemper Fund,
shareholders must maintain a minimum account value of $1,000 in the Fund
distributing the dividends. The Funds will reinvest dividend checks (and future
dividends) in shares of that same Fund and class if checks are returned as
undeliverable. Dividends and other distributions of a Fund in the aggregate
amount of $10 or less are automatically reinvested in shares of the Fund unless
the shareholder requests that such policy not be applied to the shareholder's
account.
Taxes. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, will not be liable
for federal income taxes to the extent its earnings are distributed. Such
qualification does not involve governmental supervision or management of
investment practices or policy.
A regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including net short-term capital gain) and generally is
not subject to federal income tax to the extent that it distributes annually its
investment company taxable income and net realized capital gains in the manner
required under the Code. Long-term capital gain dividends received by individual
shareholders are taxed at a maximum rate of 20% on gains realized by a Fund from
securities held more than 12 months.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of a Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 of the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. Each Fund intends to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax. If any net realized long-term
capital gains in excess of net realized short-term capital losses are retained
by a Fund for reinvestment, requiring federal income taxes to be paid thereon by
a Fund, the Fund intends to elect to treat such capital gains as having been
distributed to shareholders. As a result, each shareholder will report such
capital gains as long-term capital gains, will be able to claim a relative share
of federal income taxes paid by the Fund on such gains as a credit against
personal federal income tax liability, and will be entitled to increase the
adjusted tax basis on Fund shares by the difference between a pro rata share of
such gains owned and the individual tax credit.
A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of a Fund or other Kemper Mutual Fund listed above under
"Special Features--Class A Shares--Combined Purchases" (other than shares of
Kemper Cash Reserves Fund not acquired by exchange from another Kemper Mutual
Fund) may reinvest the amount redeemed at net asset value at the time of the
reinvestment in shares of any Fund or in shares of a Kemper Mutual Fund within
six months of the redemption as described above under "Redemption or Repurchase
of Shares--Reinvestment Privilege." If redeemed shares were purchased after
October 3, 1989 and were held less than 91 days, then the lesser of (a) the
sales charge waived on the reinvested shares, or (b) the sales charge incurred
on the redeemed shares, is included in the basis of the reinvested shares and is
not included in the basis of the redeemed shares. If a shareholder realized a
loss on the redemption or exchange of a Fund's shares and reinvests in shares of
the same Fund 30 days before or after the redemption or exchange, the
transactions may be subject to the wash sale rules resulting in a postponement
of the recognition of such loss for federal income tax purposes. An exchange of
a Fund's shares for shares of another fund is treated as a redemption and
reinvestment for federal income tax purposes upon which gain or loss may be
recognized.
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A Fund may invest in shares of certain foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). If
a Fund receives a so-called "excess distribution" with respect to PFIC stock,
the Fund itself may be subject to a tax on a portion of the excess distribution.
Certain distributions from a PFIC as well as gains from the sale of the PFIC
shares are treated as "excess distributions." In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The Fund will be subject to
tax on the portion, if any, of an excess distribution that is allocated to prior
Fund taxable years and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Excess distributions allocated
to the current taxable year are characterized as ordinary income even though,
absent application of the PFIC rules, certain excess distributions might have
been classified as capital gain.
A Fund may make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U.S. federal income taxation.
At the end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign company's stock exceeds the Fund's adjusted basis in these shares; any
mark to market losses and any loss from an actual disposition of shares would be
deductible as ordinary loss to the extent of any net mark to market gains
included in income in prior years. The effect of the election would be to treat
excess distributions and gain on dispositions as ordinary income which is not
subject to a fund level tax when distributed to shareholders as a dividend.
Alternatively, a Fund may elect to include as income and gain its share of the
ordinary earnings and net capital gain of certain foreign investment companies
in lieu of being taxed in the manner described above.
Equity options (including covered call options on portfolio stock) and
over-the-counter options on debt securities written or purchased by a Fund will
be subject to tax under Section 1234 of the Code. In general, no loss is
recognized by a Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a lapse or sale
of the option, on the Fund's holding period for the option, and in the case of
an exercise of a put option, on the Fund's holding period for the underlying
stock. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock or substantially identical stock in the Fund's portfolio. If a
Fund writes a put or call option, no gain is recognized upon its receipt of a
premium. If the option lapses or is closed out, any gain or loss is treated as a
short-term capital gain or loss. If a call option is exercised, any resulting
gain or loss is a short-term or long-term capital gain or loss depending on the
holding period of the underlying stock. The exercise of a put option written by
a Fund is not a taxable transaction for the Fund.
Many futures contracts and certain foreign currency forward contracts entered
into by a Fund and all listed non-equity options written or purchased by a Fund
(including options on futures contracts and options on broad-based stock
indices) will be governed by Section 1256 of the Code. Absent a tax election to
the contrary, gain or loss attributable to the lapse, exercise or closing out of
any such position generally will be treated as 60% long-term and 40% short-term
capital gain or loss, and on the last trading day of the Fund's fiscal year, all
outstanding Section 1256 positions will be marked to market (i.e. treated as if
such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term. Under
Section 988 of the Code, discussed below, foreign currency gain or loss from
foreign currency-related forward contracts and similar financial instruments
entered into or acquired by a Fund will be treated as ordinary income. Under
certain circumstances, entry into a futures contract to sell a security may
constitute a short sale for federal income tax purposes, causing an adjustment
in the holding period of the underlying security or a substantially identical
security in the Fund's portfolio.
Positions of a Fund which consist of at least one stock and at least one other
position with respect to a related security which substantially diminishes a
Fund's risk of loss with respect to such stock could be treated as a "straddle"
which is governed by Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in the holding periods of stock or securities
and conversion of short-term capital losses into long-term capital losses. An
exception to these straddle rules exists for certain "qualified covered call
options" on stock written by the Fund.
Positions of a Fund which consist of at least one position not governed by
Section 1256 and at least one futures or forward contract or non-equity option
governed by Section 1256 which substantially diminishes a Fund's risk of loss
with respect to such other position will be treated as a "mixed straddle."
Although mixed straddles are subject to the straddle rules of Section 1092 of
the Code, certain tax elections exist for them which reduce or eliminate the
operation of these rules. The Fund intends to monitor its transactions in
options and futures and may make certain tax elections in connection with these
investments.
Notwithstanding any of the foregoing, recent tax law changes may require a Fund
to recognize gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if a Fund enters into a short sale, offsetting
notional principal contract, futures or forward contract transaction with
respect to the appreciated position or substantially identical property.
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Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.
Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, and on disposition of certain options, futures contracts and
forward contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income.
Dividends from domestic corporations are expected to comprise a substantial part
of each Fund's gross income. To the extent that such dividends constitute a
portion of a Fund's gross income, a portion of the income distributions of the
Fund may be eligible for the deduction for dividends received by corporations.
Shareholders will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent the shares of a Fund with
respect to which the dividends are received are treated as debt-financed under
federal income tax law, and is eliminated if either those shares or the shares
of the Fund are deemed to have been held by a Fund or the shareholder, as the
case may be, for less than 46 days during the 90-day period beginning 45 days
before the shares become ex-dividend.
Properly designated distributions of the excess of net long-term capital gain
over net short-term capital loss are taxable to shareholders as long-term
capital gain, regardless of the length of time the shares of the Fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
The Funds will be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of a Fund may be subject to state and local taxes on distributions
received from a Fund and on redemptions of the Fund's shares. Each distribution
is accompanied by a brief explanation of the form and character of the
distribution. In January of each year the Fund issues to each shareholder a
statement of the federal income tax status of all distributions.
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Each Fund is organized as a Massachusetts business trust and is not liable for
any income or franchise tax in the Commonwealth of Massachusetts, provided that
it qualifies as a regulated investment company for federal income tax purposes.
An individual may make a deductible IRA contribution for any taxable year only
if (i) the individual is not an active participant in an employer's retirement
plan, or (ii) the individual has an adjusted gross income below a certain level
($52,000 for married individuals filing a joint return, with a phase-out of the
deduction for adjusted gross income between $52,000 and $62,000; $32,000 for a
single individual, with a phase-out for adjusted gross income between $32,000
and $42,000). An individual is not considered an active participant in an
employer's retirement plan if the individual's spouse is an active participant
in such a plan. However, in the case of a joint return, the amount of the
deductible contribution by the individual who is not an active participant (but
whose spouse is) is phased out for adjusted gross income between $150,000 and
$160,000. However, an individual not permitted to make a deductible contribution
to an IRA for any such taxable year may nonetheless make nondeductible
contributions up to $2,000 to an IRA (up to $2,000 per individual for married
couples if only one spouse has earned income) for that year. There are special
rules for determining how withdrawals are to be taxed if an IRA contains both
deductible and nondeductible amounts. In general, a proportionate amount of each
withdrawal will be deemed to be made from nondeductible contributions; amounts
treated as a return of nondeductible contributions will not be taxable. Also,
annual contributions may be made to a spousal IRA even if the spouse has
earnings in a given year if the spouse elects to be treated as having no
earnings (for IRA contribution purposes) for the year.
Distributions by a Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty. Trustees of
qualified retirement plans and 403(b)(7) accounts are required by law to
withhold 20% of the taxable portion of any distribution that is eligible to be
"rolled over". The 20% withholding requirement does not apply to distributions
from Individual Retirement Accounts (IRAs) or any part of a distribution that is
transferred directly to another qualified retirement plan, 403(b)(7) account, or
IRA. Shareholders should consult with their tax Advisors regarding the 20%
withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends and periodic
investment and redemption programs. Information for income tax purposes,
including, when appropriate, information regarding any foreign taxes and
credits, will be provided after the end of the calendar year. Shareholders are
encouraged to retain copies of their account confirmation statements or year-end
statements for tax reporting purposes. However, those who have incomplete
records may obtain historical account transaction information at a reasonable
fee.
When more than one shareholder resides at the same address, certain reports and
communications to be delivered to such shareholders may be combined in the same
mailing package, and certain duplicate reports and communications may be
eliminated. Similarly, account statements to be sent to such shareholders may be
combined in the same mailing package or consolidated into a single statement.
However, a shareholder may request that the foregoing policies not be applied to
the shareholder's account.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on amounts constituting ordinary income received
by him or her, where such amounts are treated as income from U.S. sources under
the Code.
Dividend and interest income received by a Fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Shareholders should consult their tax advisors about the application of the
provisions of tax law described in this Statement of Additional Information in
light of their particular tax situations.
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NET ASSET VALUE
The net asset value per share of a Fund is the value of one share and is
determined separately for each class by dividing the value of a Fund's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will generally be lower than that of the Class A shares of a Fund
because of the higher expenses borne by the Class B and Class C shares. The net
asset value of shares of a Fund is computed as of the close of regular trading
(the "value time") on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
Portfolio securities for which market quotations are readily available are
generally valued at market value as of the value time in the manner described
below. All other securities may be valued at fair value as determined in good
faith by or under the direction of the Board.
With respect to the Funds with securities listed primarily on foreign exchanges,
such securities may trade on days when the Fund's net asset value is not
computed; and therefore, the net asset value of a Fund may be significantly
affected on days when the investor has no access to the Fund.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Stock Market Inc.
("Nasdaq") is valued at its most recent sale price. Lacking any sales, the
security is valued at the most recent bid quotation. The value of an equity
security not quoted on Nasdaq, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities are valued at prices supplied by a pricing agent(s) which
reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board believes approximates market value. If it is not possible to value a
particular debt security pursuant to these valuation methods, the value of such
security is the most recent bid quotation supplied by a bona fide marketmaker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment manager of the particular fund may calculate the price
of that debt security, subject to limitations established by the Board.
An exchange-traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such exchange.
Lacking any sales, the options contract is valued at the Calculated Mean.
Lacking any Calculated Mean, the options contract is valued at the most recent
bid quotation in the case of a purchased options contract, or the most recent
asked quotation in the case of a written options contract. An options contract
on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate on the
valuation date.
If a security is traded on more than one exchange, or upon one or more exchanges
and in the over-the-counter market, quotations are taken from the market in
which the security is traded most extensively.
If, in the opinion of the Valuation Committee of the Board of Trustees, the
value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which, in the discretion of the Valuation Committee, most fairly
reflects market value of the property on the valuation date.
Following the valuations of securities or other portfolios assets in terms of
the currency in which the market quotation used is expressed ("Local Currency"),
the value of these portfolio assets in terms of U.S. dollars is calculated by
converting the Local Currency into U.S. dollars at the prevailing currency
exchange rate on the valuation date.
PERFORMANCE
A Fund may advertise several types of performance information for a class of
shares, including "yield" and "average annual total return" and "total return."
Performance information will be computed separately for each class. Each of
these figures is
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<PAGE>
based upon historical results and is not representative of the future
performance of any class of a Fund. A Fund with fees or expenses being waived or
absorbed by Scudder Kemper may also advertise performance information before and
after the effect of the fee waiver or expense absorption.
A Fund's historical performance or return for a class of shares may be shown in
the form of "average annual total return" and "total return" figures. These
various measures of performance are described below. Performance information
will be computed separately for each class.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the SEC. The average annual total
return for a Fund for a specific period is found by first taking a hypothetical
$1,000 investment ("initial investment") in the Fund's shares on the first day
of the period, adjusting to deduct the maximum sales charge (in the case of
Class A shares), and computing the "redeemable value" of that investment at the
end of the period. The redeemable value in the case of Class B or Class C shares
includes the effect of the applicable contingent deferred sales charge that may
be imposed at the end of the period. The redeemable value is then divided by the
initial investment, and this quotient is taken to the Nth root (N representing
the number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total return may
also be calculated without deducting the maximum sales charge.
Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for purposes of the Fund's "Financial Highlights" table
in the Fund's financial statements and prospectus. Total return performance for
a specific period is calculated by first taking an investment (assumed below to
be $10,000) ("initial investment") in a Fund's shares on the first day of the
period, either adjusting or not adjusting to deduct the maximum sales charge (in
the case of Class A shares), and computing the "ending value" of that investment
at the end of the period. The total return percentage is then determined by
subtracting the initial investment from the ending value and dividing the
remainder by the initial investment and expressing the result as a percentage.
The ending value in the case of Class B and Class C shares may or may not
include the effect of the applicable contingent deferred sales charge that may
be imposed at the end of the period. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Total return may also be shown as
the increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B and Class C shares
would be reduced if such charge were included. Total return figures for Class A
shares for various periods are set forth in the tables below.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one-, five- and ten-year periods ending on a recent calendar quarter
(or if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
A Fund's performance figures are based upon historical results and are not
representative of future performance. Each Fund's Class A shares are sold at net
asset value plus a maximum sales charge of 5.75% of the offering price. Class B
shares and Class C shares are sold at net asset value. Redemptions of Class B
shares may be subject to a contingent deferred sales charge that is 4% in the
first year following the purchase, declines by a specified percentage thereafter
and becomes zero after six years. Redemption of Class C shares may be subject to
a 1% contingent deferred sales charge in the first year following purchase.
Average annual total return figures do, and total return figures may, include
the effect of the contingent deferred sales charge for the Class B shares and
Class C shares that may be imposed at the end of the period in question.
Performance figures for the Class B shares and Class C shares not including the
effect of the applicable contingent deferred sales charge would be reduced if it
were included. Returns and net asset value will fluctuate. Factors affecting
each Fund's performance include general market conditions, operating expenses
and investment management. Any additional fees charged by a dealer or other
financial services firm would reduce the returns described in this section.
Shares of each Fund are redeemable at the then current net asset value, which
may be more or less than original cost.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged bond indexes including, but not limited to, the Salomon
Brothers High Grade Corporate Bond Index, the Lehman Brothers Adjustable Rate
Index, the Lehman Brothers Aggregate Bond Index, the Lehman Brothers Government/
Corporate Bond Index, the Salomon Brothers Long-Term High Yield Index, the
Salomon Brothers 30 Year GNMA Index and the Merrill Lynch Market Weighted Index
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and may also be compared to the performance of other mutual funds or mutual fund
indexes with similar objectives and policies as reported by independent mutual
fund reporting services such as Lipper Analytical Services, Inc. (""Lipper").
Lipper performance calculations are based upon changes in net asset value with
all dividends reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit and other bank products, money market
funds and U.S. Treasury obligations. Bank product performance may be based upon,
among other things, the BANK RATE MONITOR National Index(TM) or various
certificate of deposit indexes. Money market fund performance may be based upon,
among other things, the IBC/Donoghue's Money Fund Report(R) or Money Market
Insight(R), reporting services on money market funds. Performance of U.S.
Treasury obligations may be based upon, among other things, various U.S.
Treasury bill indexes. Certain of these alternative investments may offer fixed
rates of return and guaranteed principal and may be insured. Economic indicators
may include, without limitation, indicators of market rate trends and cost of
funds, such as Federal Home Loan Bank Board 11th District Cost of Funds Index
("COFI").
A Fund may depict the historical performance of the securities in which the Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. A Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.
Each Fund's returns and net asset value will fluctuate and shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above. Additional
information about each Fund's performance also appears in its Annual Report to
Shareholders, which is available without charge from the applicable Fund.
The figures below show performance information for various periods. The net
asset values and returns of each class of shares of the Funds will fluctuate. No
adjustment has been made for taxes payable on dividends. The periods indicated
were ones of fluctuating securities prices and interest rates.
Aggressive Growth Fund -- September 30, 1999
AVERAGE ANNUAL TOTAL Fund Class Fund Class Fund Class
RETURN TABLE A Shares B Shares C Shares
- ------------ -------- -------- --------
Life of Class(+) % % %
One Year % % %
(+) Since December 31, 1996 for Class A, B and C shares.
BLUE CHIP FUND -- OCTOBER 31, 1999
AVERAGE ANNUAL TOTAL Fund Class Fund Class Fund Class
RETURN TABLE A Shares B Shares C Shares
- ------------ -------- -------- --------
Life of Class(+) % % %
Ten Years % N/A N/A
Five Years % N/A N/A
One Year % % %
(+) Since November 23, 1987 for Class A shares. Since May 31, 1994 for
Class B and Class C shares.
GROWTH FUND -- SEPTEMBER 30, 1999
AVERAGE ANNUAL TOTAL Fund Class Fund Class Fund Class C
RETURN TABLE A Shares B Shares Shares
- ------------ -------- -------- ------
Life of Class(+) % % %
Ten Years % N/A N/A
Five Years % N/A N/A
One Year % % %
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(+) Since April 4, 1966 for Class A shares. Since May 31, 1994 for Class B
and Class C shares.
SMALL CAP FUND -- SEPTEMBER 30, 1999
AVERAGE ANNUAL TOTAL Fund Class Fund Class Fund Class C
RETURN TABLE A Shares B Shares Shares
- ------------ -------- -------- ------
Life of Class(+) % % %
Ten Years % N/A N/A
Five Years N/A N/A
%
One Year % % %
(+) Since February 20, 1969 for Class A shares. Since May 31, 1994 for
Class B and Class C shares.
NA -- Not Available.
TECHNOLOGY FUND -- OCTOBER 31, 1999
AVERAGE ANNUAL TOTAL Fund Class Fund Class Fund Class
RETURN TABLE A Shares B Shares C Shares
- ------------ -------- -------- --------
Life of Class(+) % % %
Ten Years % N/A N/A
Five Years % N/A N/A
One Year % % %
(+) Since September 7, 1948 for Class A shares. Since May 31, 1994 for
Class B and Class C shares.
NA--Not Available.
TOTAL RETURN FUND -- OCTOBER 31, 1999
ANNUAL TOTAL RETURN Fund Class A Fund Class Fund Class C
TABLE Shares B Shares Shares
- ----- ------ -------- ------
Life of Class(+) % % %
Ten Years % N/A N/A
Five Years % N/A N/A
One Year % % %
(+) Since March 2, 1964 for Class A shares. Since May 31, 1994 for Class B
and Class C shares.
VALUE+GROWTH FUND -- NOVEMBER 30, 1999
ANNUAL TOTAL Fund Class Fund Class Fund Class
RETURN TABLE A Shares B Shares C Shares
- ------------ -------- -------- --------
Life of Class(+) % % %
Three Years % % %
One Year % % %
(+) Since October 16, 1995 for Class A, B and C shares.
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75%. The Initial Investment for Class B and Class C
shares was not adjusted. Amounts were adjusted for Class B shares for the
contingent deferred sales charge that may be imposed at the end of the
period based upon the schedule for shares sold currently, see "Redemption
or Repurchase of Shares" in the prospectus. No adjustments were made to
Class C shares. Amounts were adjusted for Class C shares for the contingent
deferred sales charge that may be imposed for periods less than one year.
(2) Includes short-term capital gain dividends, if any.
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 Index(TM) for certificates of deposit, which is an
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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 (All
Taxable). As reported by IBC/Donoghue's, all investment results represent total
return (annualized results for the period net of management fees and expenses)
and one year investment results are effective annual yields assuming
reinvestment of dividends.
The following tables 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.
OFFICERS AND BOARD MEMBERS
The officers and trustees of the Funds, their birth dates, their principal
occupations and their affiliations, if any, with the Advisor and KDI are listed
below. All persons named as trustees also serve in similar capacities for other
funds advised by the Adviser.
All Funds:
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with Scudder Kemper and KDI, are
listed below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Adviser.
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
LINDA C. COUGHLIN (1/1/52), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A.O. Smith Corporation
(diversified manufacturer).
53
<PAGE>
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); formerly, Vice
President, Head of International Operations, FMC Corporation (manufacturer of
machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Scudder Kemper; formerly, Head
of Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI International (research and
development); prior thereto, President and Chief Executive Officer, SRI
International; 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); Director, PSI Inc., Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Assistant Secretary, Scudder
Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
BRENDA LYONS, (2/21/63) Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper; formerly,
Associate, Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
Aggressive Growth Fund:
WILLIAM F. TRUSCOTT ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
SEWALL HODGES ( / / ), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Scudder Kemper .
Blue Chip Fund:
WILLIAM F. TRUSCOTT ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
TRACY MCCORMICK ( / / ), Vice President*, 222 South Riverside Plaza, Chicago,
Illinois; Managing Director, Scudder Kemper.
54
<PAGE>
Growth Fund:
WILLIAM F. TRUSCOTT ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
VALERIE MALTER ( / / ), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
GEORGE P. FRAISE ( / / ), Vice President*, 222 South Riverside Plaza, Chicago,
Illinois; Senior Vice President, Scudder Kemper.
Small Capitalization Equity Fund
WILLIAM F. TRUSCOTT ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
JESUS A. CABRERA ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Vice President, Scudder Kemper.
Technology Fund:
WILLIAM F. TRUSCOTT ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
JAMES BURKART ( / / ), Vice President*, 222 South Riverside Plaza, Chicago,
Illinois; Vice President, Scudder Kemper.
Total Return Fund:
WILLIAM F. TRUSCOTT ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
GARY A. LANGBAUM (12/16/48), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper.
Value+Growth Fund:
WILLIAM F. TRUSCOTT ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
DONALD E. HALL ( / / ), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
*Interested persons of the Fund as defined in the 1940 Act.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during
each Fund's 1999 fiscal year except that the information in the last column is
for calendar year 1999.
Aggregate Compensation From Fund [TO BE UPDATED]
<TABLE>
<CAPTION>
Total
Compensation
From Fund
and
Kemper Fund
Complex
Value+ Paid
Name of Trustee Aggressive Blue Chip Growth Small Cap Tech Total Growth Trustees**
- --------------- ---------- --------- ------ --------- ---- ----- ------ ----------
Return
------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lewis A. Burnham $ $ $ $ $ $ $ $
Donald L. Dunaway* $ $ $ $ $ $ $ $
Robert B. Hoffman $ $ $ $ $ $ $ $
Donald R. Jones $ $ $ $ $ $ $ $
Shirley D. Peterson $ $ $ $ $ $ $ $
William P. Sommers $ $ $ $ $ $ $ $
</TABLE>
* Includes deferred fees. Pursuant to deferred compensation agreements with
Kemper funds deferred amounts accrue interest monthly at a rate equal to
the yield of Zurich Money Funds -- Zurich Money Market Fund. Total deferred
amounts (including interest thereon) payable from the Funds through each
Fund's fiscal year are $______, $_______, $_______, $_______, $______,
$______ and $_____ for Mr. Dunaway for the Aggressive, Blue Chip, Growth,
Small Cap, Technology, Total Return and Value+Growth Funds, respectively.
55
<PAGE>
** Includes compensation for service on the boards of 26 Kemper funds with 48
fund portfolios. Each trustee currently serves as a trustee of 26 Kemper funds
with 45 fund portfolios.
As of December 31, 1999, the officers and trustees of the Funds, as a group,
owned less than 1% of the then outstanding shares of each Fund and no person
owned of record 5% or more of the outstanding shares of any class of any Fund,
except the persons indicated in the charts below.
Kemper Aggressive Growth Fund
- -----------------------------
- ------------------------------------- ----------------- ------------------------
NAME CLASS PERCENTAGE
- ------------------------------------- ----------------- ------------------------
National Financial Services Corp. A 5.51
FBO Mark Hughes
200 Liberty Street
New York, NY 10281
- ------------------------------------- ----------------- ------------------------
National Financial Services Corp. C 8.25
FBO
200 Liberty Street
New York, NY 10281
- ------------------------------------- ----------------- ------------------------
Kemper Growth Fund
- ------------------
- ------------------------------------- ----------------- ------------------------
NAME CLASS PERCENTAGE
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 12.88
Money Purchase Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 74.68
Profit Sharing Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
Kemper Small Capitalization Equity Fund
- ----------------------------------------
- ------------------------------------- ----------------- ------------------------
NAME CLASS PERCENTAGE
- ------------------------------------- ----------------- ------------------------
Chrysler 401K Plan A 5.09
FBO Trust Account
Merrill Lynch Trust, TTEE
265 Davidson Avenue
Somerset, NJ 08873
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 10.77
Money Purchase Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 70.71
Profit Sharing Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
56
<PAGE>
Kemper Total Return Fund
- ------------------------
- ------------------------------------- ----------------- ------------------------
NAME CLASS PERCENTAGE
- ------------------------------------- ----------------- ------------------------
Merrill, Lynch, Pierce, Fenner & C 6.79
Smith
For the sole benefit of customers
4800 Deer Lake Drive East
Jacksonville, FL 32246
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 10.68
Money Purchase Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 75.72
Profit Sharing Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
Kemper Value + Growth Fund
- --------------------------
- ------------------------------------- ----------------- ------------------------
NAME CLASS PERCENTAGE
- ------------------------------------- ----------------- ------------------------
First Union Securities B 5.59
Commission Accounting
77 W. Wacker Drive
Chicago, IL 60601
- ------------------------------------- ----------------- ------------------------
National Financial Services Corp. C 6.63
FBO Loren Basler
200 Liberty Street
New York, NY 10281
- ------------------------------------- ----------------- ------------------------
Merrill, Lynch, Pierce, Fenner & C 7.65
Smith
For the sole benefit of customers
4800 Deer Lake Drive East
Jacksonville, FL 32246
- ------------------------------------- ----------------- ------------------------
57
<PAGE>
Kemper Technology Fund
- ----------------------
- ------------------------------------- ----------------- ------------------------
NAME CLASS PERCENTAGE
- ------------------------------------- ----------------- ------------------------
National Financial Services Corp. B 7.45
FBO First American Nat. Bank
Custodian for IRA of Sherman
Quinton
200 Liberty Street
New York, NY 10281
- ------------------------------------- ----------------- ------------------------
Donaldson, Lufkin & Jenrette B 9.30
Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303
- ------------------------------------- ----------------- ------------------------
Donaldson, Lufkin & Jenrette C 7.10
Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303
- ------------------------------------- ----------------- ------------------------
Merrill, Lynch, Pierce, Fenner & C 5.40
Smith
For the sole benefit of customers
4800 Deer Lake Drive East
Jacksonville, FL 32246
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 15.02
Money Purchase Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
Scudder Kemper Investments I 73.18
Profit Sharing Plan
345 Park Avenue
New York, NY 10154
- ------------------------------------- ----------------- ------------------------
SHAREHOLDER RIGHTS
The Funds are open-end management investment companies, organized as separate
business trusts under the laws of Massachusetts. The Aggressive Growth Fund was
organized as a business trust under the laws of Massachusetts on October 3,
1996. The Blue Chip Fund was organized as a business trust under the laws of
Massachusetts on May 28, 1987. The Growth Fund was organized as a business trust
under the laws of Massachusetts on October 24, 1985 and, effective January 31,
1986, that Fund pursuant to a reorganization succeeded to the assets and
liabilities of Kemper Growth Fund, Inc., a Maryland corporation organized in
1965. The Small Cap Fund was organized as a business trust under the laws of
Massachusetts on October 24, 1985 and, effective January 31, 1986, that Fund
pursuant to a reorganization succeeded to the assets and liabilities of Kemper
Summit Fund, Inc., a Maryland corporation organized in 1968. Prior to February
1, 1992, the Small Cap Fund was known as "Kemper Summit Fund." The Technology
Fund was organized as a business trust under the laws of Massachusetts on
October 24, 1985 as Technology Fund and changed its name to Kemper Technology
Fund effective February 1, 1988. Effective January 31, 1986, Technology Fund
pursuant to a reorganization succeeded to the assets and liabilities of
Technology Fund, Inc., a Maryland corporation originally organized as a Delaware
corporation in 1948. Technology Fund was known as Television Fund, Inc. until
1950 and as Television-Electronics Fund, Inc. until 1968. The Total Return Fund
was organized as a business trust under the laws of Massachusetts on October 24,
1985 and, effective January 31, 1986, that Fund pursuant to a reorganization
succeeded to the assets and liabilities of Kemper Total Return Fund, Inc., a
Maryland corporation organized in 1963. The Total Return Fund was known as
Balanced Income Fund, Inc. until 1972 and as Supervised Investors Income Fund,
Inc. until 1977. The Value+Growth Fund was organized as a business trust under
the laws of Massachusetts on June 14, 1995 under the name Kemper Value Plus
Growth Fund and does business as Kemper Value+Growth Fund.
The Technology Fund may in the future seek to achieve its investment objective
by pooling its assets with assets of other mutual funds for investment in
another investment company having the same
58
<PAGE>
investment objective and substantially the same investment policies and
restrictions as such Fund. The purpose of such an arrangement is to achieve
greater operational efficiencies and to reduce costs. It is expected that any
such investment company will be managed by Scudder Kemper in substantially the
same manner as the corresponding Fund. Shareholders of a Fund will be given at
least 30 days' prior notice of any such investment, although they will not be
entitled to vote on the action. Such investment would be made only if the
Trustees determine it to be in the best interests of the respective Fund and its
shareholders.
Currently, each Fund offers four classes of shares. These are Class A, Class B
and Class C shares, as well as Class I shares, which have different expenses,
which may affect performance. Class I shares are available for purchase
exclusively by the following categories of institutional investors: (1)
tax-exempt retirement plans (Profit Sharing, 401(k), Money Purchase Pension and
Defined Benefit Plans) of Scudder Kemper Investments, Inc. ("Scudder Kemper")
and its affiliates and rollover accounts from those plans; (2) the following
investment advisory clients of Scudder Kemper and its investment advisory
affiliates that invest at least $1 million in a Fund: unaffiliated benefit
plans, such as qualified retirement plans (other than individual retirement
accounts and self-directed retirement plans); unaffiliated banks and insurance
companies purchasing for their own accounts; and endowment funds of unaffiliated
non-profit organizations; (3) investment-only accounts for large qualified
plans, with at least $50 million in total plan assets or at least 1000
participants; (4) trust and fiduciary accounts of trust companies and bank trust
departments providing fee based advisory services that invest at least $1
million in a Fund on behalf of each trust; and (5) policy holders under
Zurich-American Insurance Group's collateral investment program investing at
least $200,000 in a Fund and (6) investment companies managed by Scudder Kemper
that invest primarily in other investment companies. The Board of Trustees of a
Fund may authorize the issuance of additional classes and additional Portfolios
if deemed desirable, each with its own investment objectives, policies and
restrictions. Since the Funds may offer multiple Portfolios, each is known as a
"series company." Shares of a Fund have equal noncumulative voting rights except
that Class B and Class C shares have separate and exclusive voting rights with
respect to each Fund's Rule 12b-1 Plan. Shares of each class also have equal
rights with respect to dividends, assets and liquidation of such Fund subject to
any preferences (such as resulting from different Rule 12b-1 distribution fees),
rights or privileges of any classes of shares of the Fund. Shares of each Fund
are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Funds are not
required to hold annual shareholder meetings and do not intend to do so.
However, they will hold special meetings as required or deemed desirable for
such purposes as electing trustees, changing fundamental policies or approving
an investment management agreement. Subject to the Agreement and Declaration of
Trust of each Fund, shareholders may remove trustees. If shares of more than one
Portfolio for any Fund are outstanding, shareholders will vote by Portfolio and
not in the aggregate or by class except when voting in the aggregate is
required, under the 1940 Act, such as for the election of trustees or when
voting by class is appropriate.
The Funds generally are not required to hold meetings of their shareholders.
Under the Agreement and Declaration of Trust of each Fund ("Declaration of
Trust"), however, shareholder meetings will be held in connection with the
following matters: (a) the election or removal of trustees if a meeting is
called for such purpose; (b) the adoption of any contract for which shareholder
approval is required by the 1940 Act); (c) any termination of the Fund or a
class to the extent and as provided in the Declaration of Trust; (d) any
amendment of the Declaration of Trust (other than amendments changing the name
of the Fund, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Fund, or any registration of the Fund with the SEC or any state,
or as the trustees may consider necessary or desirable. The shareholders also
would vote upon changes in fundamental investment objectives, policies or
restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) each Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of a Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, each
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
Each Fund's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of a Fund
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
59
<PAGE>
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of a Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
Each Fund's Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Fund or any Portfolio or class by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of each Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of a Fund and each Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.
60
<PAGE>
APPENDIX--RATINGS OF FIXED INCOME INVESTMENTS
Standard & Poor's Corporation Bond Ratings
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI. The rating CI is reserved for income bonds on which no interest is
being paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Moody's Investors Service, Inc. Bond Ratings
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
61
<PAGE>
KEMPER TECHNOLOGY FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
-------- ---------
<S> <C> <C>
(a) Amended and Restated Agreement and Declaration of Trust.
(Incorporated by reference to Post-Effective Amendment No. 64 to
Registrant's Registration Statement on Form N-1A which was filed on January
30, 1996.)
(b) By-laws.
(Incorporated by reference to Post-Effective Amendment No. 64 to
Registrant's Registration Statement on Form N-1A which was filed on January
30, 1996.)
(c)(1) Text of Share Certificate.
(Incorporated by reference to Post-Effective Amendment No. 64 to the
Registrant's Registration Statement on Form N-1A which was filed on January
30, 1996)
(c)(2) Written Instrument Establishing and Designating Separate Classes of Shares.
(Incorporated by reference to Post-Effective Amendment No. 64 to the
Registrant's Registration Statement on Form N-1A which was filed on January
30, 1996)
(c)(3) Amended and Restated Written Instrument Establishing and Designating
Separate Classes of Shares.
(Incorporated by reference to Post-Effective Amendment No. 65 to the
Registrant's Registration Statement on Form N-1A which was filed on December
24, 1996)
(d)(1) Investment Management Agreement (IMA) between the Registrant, on behalf of
Kemper Technology Fund, and Scudder Kemper Investments, Inc. dated September
7, 1998 is filed herein.
(e)(1) Underwriting and Distribution Services Agreement between the Registrant, on
behalf of Kemper Technology Fund, and Kemper Distributors, Inc. dated
October 1, 1999 is filed herein.
(f) Inapplicable.
(g)(1) Custodian Agreement between the Registrant, on behalf of Kemper Technology
Fund, and State Street Bank and Trust Company is filed herein.
(g)(1)(a) Amendment to Custody Contract between the Registrant, on behalf of Kemper
Technology Fund, and State Street Bank and Trust Company is filed herein.
Foreign Custody Agreement between the Registrant, on behalf of Kemper
(g)(2) Technology Fund, and The Chase Manhattan Bank.
(Incorporated by reference to Post-Effective Amendment No. 64 to
Registrant's Registration Statement on Form N-1A which was filed on January
30, 1996.)
Part C - Page 2
<PAGE>
(h)(1) Agency Agreement.
(Incorporated by reference to Post-Effective Amendment No. 64 to
Registrant's Registration Statement on Form N-1A which was filed on January
30, 1996.)
(h)(2) Administrative Services Agreement between the Registrant and Kemper
Distributors, Inc. dated April 1, 1997.
(Incorporated by reference to Post-Effective Amendment No. 66 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
(h)(3) Supplement to Agency Agreement between Registrant and Investors Fiduciary
Trust Company dated June 1, 1997.
(Incorporated by reference to Post-Effective Amendment No. 66 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
(h)(4) Fund Accounting Agreement between Kemper Technology Fund and Scudder Fund
Accounting Corporation dated December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 66 to the
Registrant's Registration Statement on Form N-1A which was filed on January
27, 1998.)
(i) Legal Opinion is filed herein.
(j) Report and Consent of Independent Auditors is filed herein.
(k) Inapplicable.
(l) Inapplicable.
(m)(1) Rule 12b-1 Plan between Kemper Technology Fund (Class B Shares) and Kemper
Distributors, Inc. dated August 1, 1998.
(Incorporated by reference to Post-Effective Amendment No. 67 to the
Registrant's Registration Statement on Form N-1A which was filed on December
3, 1998.)
(m)(2) Rule 12b-1 Plan between Kemper Technology Fund (Class C Shares) and Kemper
Distributors, Inc. dated August 1, 1998.
(Incorporated by reference to Post-Effective Amendment No. 67 to the
Registrant's Registration Statement on Form N-1A which was filed on December
3, 1998.)
(n) Inapplicable.
(o) Rule 18f-3 Plan.
(Incorporated by reference to Post-Effective Amendment No. 65 to
Registrant's Registration Statement on Form N-1A which was filed on December
24, 1996.)
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
Item 25. Indemnification.
- -------- ----------------
Part C - Page 3
<PAGE>
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 23(a) hereto, which is incorporated herein by reference) provides in
effect that the Registrant will indemnify its officers and trustees under
certain circumstances. However, in accordance with Section 17(h) and 17(i) of
the Investment Company Act of 1940 and its own terms, said Article of the
Agreement and Declaration of Trust does not protect any person against any
liability to the Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Item 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc.##
Chairman, Zurich-American Insurance Company o
Part C - Page 4
<PAGE>
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc.##
CEO/Branch Offices, Zurich Life Insurance Company##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
Part C - Page 5
<PAGE>
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None.
Thomas W. Littauer Director, Chief Executive Officer Trustee and Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer and Vice President
James J. McGovern Chief Financial Officer and Vice None.
President
Linda J. Wondrack Vice President and Chief Compliance Vice President
Officer
Paula Gaccione Vice President None.
Michael E. Harrington Vice President None.
Robert A. Rudell Vice President None.
William M. Thomas Vice President None.
Elizabeth C. Werth Vice President Assistant Secretary.
Todd N. Gierke Assistant Treasurer None.
Philip J. Collora Assistant Secretary Vice President and Secretary.
Paul J. Elmlinger Assistant Secretary None.
Diane E. Ratekin Assistant Secretary None.
Daniel Pierce Director, Chairman Trustee
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None.
</TABLE>
Part C - Page 6
<PAGE>
(c) Not applicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, State Street
Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110
or, in the case of records concerning transfer agency functions, at the offices
of State Street and of the shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services.
- -------- --------------------
Inapplicable.
Item 30. Undertakings.
- -------- -------------
Inapplicable.
Part C - Page 7
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 26th day of January, 2000.
By /s/Mark S. Casady
-------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on January 26, 2000 on behalf of
the following persons in the capacities indicated.
SIGNATURE TITLE
/s/ Thomas W. Littauer
- --------------------------------------
Thomas W. Littauer* Chairman and Trustee
/s/ John W. Ballantine
- --------------------------------------
John W. Ballantine* Trustee
/s/ Lewis A. Burnham
- --------------------------------------
Lewis A. Burnham* Trustee
/s/Linda C. Coughlin
- --------------------------------------
Linda C. Coughlin Trustee
/s/ Donald L. Dunaway
- --------------------------------------
Donald L. Dunaway* Trustee
/s/ Robert B. Hoffman
- --------------------------------------
Robert B. Hoffman* Trustee
/s/ Donald R. Jones
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson
- --------------------------------------
Shirley D. Peterson* Trustee
/s/ William P. Sommers
- --------------------------------------
William P. Sommers* Trustee
/s/John R. Hebble
- --------------------------------------
John R. Hebble Treasurer
By: /s/Philip J. Collora
--------------------
Philip J. Collora
* Philip J. Collora signs this document pursuant to powers of
attorney filed with Post-Effective Amendment No. 66 and No. 69
to the Registrant's Registration Statement on Form N-1A filed
on January 27, 1998 and December 3, 1999, respectively.
<PAGE>
File No. 2-10668
File No. 811-0547
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 70
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 70
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
KEMPER TECHNOLOGY FUND
<PAGE>
KEMPER TECHNOLOGY FUND
EXHIBIT INDEX
Exhibit (d)(1)
Exhibit (e)(1)
Exhibit (g)(1)
Exhibit (g)(1)(a)
Exhibit (i)
Exhibit (j)
Exhibit (d)(1)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Technology Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Technology Fund
Ladies and Gentlemen:
KEMPER TECHNOLOGY FUND (the "Trust") has been established as a Massachusetts
business Trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Technology Fund (the "Fund"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as pplicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing
<PAGE>
investment management of the assets of the Fund in accordance with the
investment objectives, policies and restrictions set forth in the Prospectus and
SAI; the applicable provisions of the 1940 Act and the Internal Revenue Code of
1986, as amended, (the "Code") relating to regulated investment companies and
all rules and regulations thereunder; and all other applicable federal and state
laws and regulations of which you have knowledge; subject always to policies and
instructions adopted by the Trust's Board of Trustees. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the investment analysis
and research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make available to the
Trust promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Trust in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of
2
<PAGE>
dividends and distributions available to be paid by the Fund to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent, the
custodian, and the accounting agent with such information as is required for
such parties to effect the payment of dividends and distributions; and otherwise
assisting the Trust as it may reasonably request in the conduct of the Fund's
business, subject to the direction and control of the Trust's Board of Trustees.
Nothing in this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of the Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .58 of
1 percent of the average
3
<PAGE>
daily net assets as defined below of the Fund for such month; provided that, for
any calendar month during which the average of such values exceeds $250,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $250,000,000 shall be 1/12 of .55 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds $1,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $1,000,000,000 shall be 1/12
of .53 of 1 percent of such portion; provided that, for any calendar month
during which the average of such values exceeds $2,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$2,500,000,000 shall be 1/12 of .51 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$5,000,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $5,000,000,000 shall be 1/12 of .48 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $7,500,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $7,500,000,000
shall be 1/12 of .46 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $10,000,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $10,000,000,000 shall be 1/12 of .44 of 1 percent of such
portion; and provided that, for any calendar month during which the average of
such values exceeds $12,500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $12,500,000,000 shall be 1/12
of .42 of 1 percent of such portion; over any compensation waived by you from
time to time (as more fully described below). You shall be entitled to receive
during any month such interim payments of your fee hereunder as you shall
request, provided that no such payment shall exceed 75 percent of the amount of
your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes
4
<PAGE>
that in some cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until September 30, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Technology
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement
5
<PAGE>
may be executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER TECHNOLOGY FUND, on behalf of
Kemper Technology Fund
By: /s/Mark S. Casady
-----------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/S.R. Beckwith
----------------
Treasurer
Exhibit (e)(1)
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 1st day of October, 1999, 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 principal underwriter 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; (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; or
(c) issue shares in connection with the merger or consolidation of any other
investment company with the Fund or the Fund's acquisition, by purchase or
otherwise, of all or substantially all of the assets of any other investment
company or all or substantially all of the outstanding shares of any such
company. 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 principal underwriter and agrees to render such
services and to assume the obligations herein set forth for the compensation
herein provided. KDI shall for all purposes herein provided be deemed to be an
independent contractor and, unless expressly provided herein or otherwise
authorized, shall have no authority to act for or represent the Fund in any way.
KDI, by separate agreement with the Fund, may also serve the Fund in other
capacities. The services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar services or other
services to others so long as its services hereunder are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will, pursuant to
separate written contracts, appoint various Firms to provide advertising,
promotion and other distribution services contemplated hereunder directly to or
for the benefit of existing and potential shareholders who may be clients of
such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell such part of
the authorized shares of the Fund remaining unissued as from time to time shall
be effectively registered under the Securities Act of 1933 ("Securities Act"),
at prices determined as hereinafter provided and on
<PAGE>
terms hereinafter set forth, all subject to applicable federal and state laws
and regulations and to the Fund's organizational documents, provided, however,
that KDI may in its discretion refuse to accept orders for shares from any
particular applicant.
2. KDI shall sell shares of the Fund to or through qualified Firms in such
manner, not inconsistent with the provisions hereof and the Fund's currently
effective registration statement, including the prospectus and statement of
additional information and any supplements or amendments thereto ("Registration
Statement"), as KDI may determine from time to time, provided that no Firm or
other person shall be appointed or authorized to act as agent of the Fund
without prior consent of the Fund. In addition to sales made by it as agent of
the Fund, KDI may, in its discretion, also sell shares of the Fund as principal
to persons with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold by KDI
shall be so offered or sold at a price per share determined in accordance with
the Registration Statement. 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
Registration Statement 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 Registration Statement. KDI shall also receive any distribution services
fee payable by the Fund as provided in the Fund's Rule 12b-1 Plan, as amended
from time to time (the "Plan").
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement with respect to the public offering price or net asset
value, as applicable, of the Fund's shares, and neither KDI nor any such Firms
shall withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered under the
Securities Act for sale as herein contemplated such shares as KDI shall
reasonably request and as the Securities and Exchange Commission shall permit to
be so registered. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
2
<PAGE>
5. KDI shall issue and deliver or shall arrange for various Firms to issue and
deliver on behalf of the Fund such confirmations of sales made by it pursuant to
this Agreement as may be required. At or prior to the time of issuance of
shares, KDI will pay or cause to be paid to the Fund the amount due the Fund for
the sale of such shares. Certificates shall be issued or shares registered on
the transfer books of the Fund in such names and denominations as KDI may
specify.
6. KDI shall order shares of the Fund from the Fund only to the extent that it
shall have received purchase orders therefor. KDI will not make, or authorize
Firms or others to make (a) any short sales of shares of the Fund; or (b) any
sales of such shares to any Board member or officer of the Fund or to any
officer or Board member of KDI or of any corporation or association furnishing
investment advisory, managerial or supervisory services to the Fund, or to any
corporation or association, unless such sales are made in accordance with the
Registration Statement 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
Registration Statement. 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 Conduct Rules of the National Association of
Securities Dealers, Inc., relating to such sale or reacquisition, as the case
may be. KDI will observe and be bound by all the provisions of the Fund's
organizational documents (and of any fundamental policies adopted by the Fund
pursuant to the Investment Company Act of 1940 (the "Investment Company Act"),
notice of which shall have been given to KDI) which at the time in any way
require, limit, restrict, prohibit or otherwise regulate any action on the part
of KDI hereunder.
KDI agrees to indemnify and hold harmless the Fund and each of its Board members
and officers and each person, if any, who controls the Fund within the meaning
of Section 15 of the Securities Act, against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
the Fund or such Board members, officers, or controlling persons may become
subject under such Act, under any other statute, at common law or otherwise,
arising out of the acquisition of any shares by any person which (i) may be
based upon any wrongful act by KDI or any of KDI's employees or representatives,
or (ii) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading if such statement or
omission was made in reliance upon information furnished to the Fund by KDI, or
(iii) may be incurred or arise by reason of KDI's acting as the Fund's agent
instead of purchasing and reselling shares as principal in distributing the
shares to the public, provided, however, that in no case (i) is KDI's indemnity
in favor of a Board member or officer or any other person deemed to protect such
Board member or officer or other person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of his duties or by reason of his
reckless disregard of obligations and duties under this Agreement or (ii) is KDI
to be liable under the indemnity agreement contained in this paragraph with
respect to any claim made against the Fund or any person indemnified unless the
Fund or such person, as the case may be, shall have notified KDI in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon the Fund or
upon such
3
<PAGE>
person (or after the Fund or such person shall have received notice of such
service on any designated agent), but failure to notify KDI of any such claim
shall not relieve KDI from any liability which KDI may have to the Fund or any
person against whom such action is brought otherwise than on account of KDI's
indemnity agreement contained in this paragraph. KDI shall be entitled to
participate, at KDI's own expense, in the defense, or, if KDI so elects, to
assume the defense of any suit brought to enforce any such liability, but if KDI
elects to assume the defense, such defense shall be conducted by counsel chosen
by KDI and satisfactory to the Fund, to its officers and Board members, or to
any controlling person or persons, defendant or defendants in the suit. In the
event that KDI elects to assume the defense of any such suit and retain such
counsel, the Fund, such officers and Board members or controlling person or
persons, defendant or defendants in the suit shall bear the fees and expenses of
any additional counsel retained by them, but, in case KDI does not elect to
assume the defense of any such suit, KDI will reimburse the Fund, such officers
and Board members or controlling person or persons, defendant or defendants in
such suit for the reasonable fees and expenses of any counsel retained by them.
KDI agrees to notify the Fund promptly of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any shares. The
Fund shall not, without the prior written consent of KDI, effect any settlement
of any pending or threatened action, suit or proceeding in respect of which the
Fund is or could have been a party and indemnity has or could have been sought
hereunder by the Fund, unless such settlement includes an unconditional release
of KDI from all liability on claims that are the subject matter of such action,
suit or proceeding.
The Fund agrees to indemnify and hold harmless KDI and each of KDI's directors
and officers and each person, if any, who controls KDI within the meaning of
Section 15 of the Securities Act, against any and all losses, claims, damages,
liabilities or litigation (including legal and other expenses) to which KDI or
such directors, officers or controlling persons may become subject under such
Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any shares by any person which (i) may be based upon any wrongful
act by the Fund or any of its employees or representatives, or (ii) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was not made
in reliance upon information furnished to KDI by the Fund; provided, however,
that in no case (i) is the Fund's indemnity in favor of a director or officer or
any other person deemed to protect such director or officer or other person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of obligations and duties
under this Agreement or (ii) is the Fund to be liable under its indemnity
agreement contained in this paragraph with respect to any claims made against
KDI or any such director, officer or controlling person unless KDI or such
director, officer or controlling person, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon KDI or upon such director, officer or controlling person (or after
KDI or such director, officer or controlling person shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
4
<PAGE>
indemnity agreement contained in this paragraph. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to KDI, its directors, officers, or controlling person or
persons, defendant or defendants in the suit. In the event that the Fund elects
to assume the defense of any such suit and retain such counsel, KDI, its
directors, officers or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Fund does not elect to assume the defense of any such
suit, it will reimburse KDI or such directors, officers or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees to notify KDI promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any shares. KDI
shall not, without the prior written consent of the Fund, effect any settlement
of any pending or threatened action, suit or proceeding in respect of which
either KDI is or could have been a party and indemnity has or could have been
sought hereunder by KDI, unless such settlement includes an unconditional
release of the Fund from all liability on claims that are the subject matter of
such action, suit or proceeding.
7. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by KDI under this Agreement or
the Plan. The Fund will pay (or will enter into arrangements providing that
others will pay) all fees and expenses in connection with the registration of
the Fund and its shares under the United States securities laws and, effective
January 1, 2000, the registration and qualification of shares for sale in the
various jurisdictions in which the Fund shall determine it advisable to qualify
such shares for sale (including registering the Fund as a broker or dealer or
any officer of the Fund or other person as agent or salesman of the Fund in any
such jurisdictions) ("Blue Sky expenses"). Prior to January 1, 2000, KDI will
pay all such Blue Sky expenses. In addition, 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), and (b) expenses of advertising in connection with such
offering.
No transfer taxes, if any, which may be payable in connection with the issue or
delivery or shares sold as herein contemplated or of the certificates for such
shares shall be borne by the Fund, and KDI will bear all such transfer taxes.
8. This Agreement shall become effective on the date hereof and shall continue
until September 30, 2000; 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.
5
<PAGE>
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 indemnity
provisions contained herein shall remain operative and in full force and effect
regardless of any termination of this Agreement. The Fund may effect termination
with respect to any class of any series of the Fund by a vote of (i) a majority
of the Board members who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan, this
Agreement, or in any other agreement related to the Plan, or (ii) a majority of
the outstanding voting securities of such series or class. Without prejudice to
any other remedies of the Fund, the Fund may terminate this Agreement at any
time immediately upon KDI's failure to fulfill any of its obligations hereunder.
All material amendments to this Agreement must be approved by a vote of a
majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as set forth
in the Plan. Termination of this Agreement shall not affect the right of KDI to
receive payments on any unpaid balance of the compensation earned prior to such
termination, as set forth in the Plan.
Notwithstanding anything in this Agreement to the contrary, KDI shall be
contractually bound hereunder by the terms of any publicly announced waiver of
or cap on the compensation received for its distribution services under the Plan
or by the terms of any written document provided to the Board of the Fund
announcing a waiver or cap, as if such waiver or cap were fully set forth
herein.
9. KDI will not use or distribute, or authorize the use, distribution or
dissemination by Firms or others in connection with the sale of Fund shares any
statements other than those contained in the Registration Statement, except such
supplemental literature or advertising as shall be lawful under federal and
state securities laws and regulations. KDI will furnish the Fund with copies of
all such material.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust, and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability
6
<PAGE>
contained therein. This Agreement has been executed by and on behalf of the Fund
by its representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
officers or shareholders of the Fund individually but are binding upon only the
assets and property of the Fund. With respect to any claim by KDI for recovery
of any liability of the Fund arising hereunder allocated to a particular series
or class, whether in accordance with the express terms hereof or otherwise, KDI
shall have recourse solely against the assets of that series or class to satisfy
such claim and shall have no recourse against the assets of any other series or
class for such purpose.
13. This Agreement shall be construed in accordance with applicable federal law
and with the laws of The Commonwealth of Massachusetts.
14. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
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 ATTEST:
By: /s/Mark S. Casady /s/Maureen E. Kane
------------------------- -------------------------
Mark S. Casady Maureen E. Kane
President Assistant Secretary
KEMPER DISTRIBUTORS, INC. ATTEST:
By: /s/James L. Greenawalt /s/Philip J. Collora
------------------------- -------------------------
Title: Title: Assist. Sec.
7
Exhibit (g)(1)
CUSTODIAN CONTRACT
between
KEMPER TECHNOLOGY FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Employment of Custodian and Property to be Held By It................1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States..................2
2.1 Holding Securities..........................................2
2.2 Delivery of Securities......................................2
2.3 Registration of Securities..................................4
2.4 Bank Accounts...............................................4
2.5 Availability of Federal Funds...............................5
2.6 Collection of Income........................................5
2.7 Payment of Fund Monies......................................5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased........................................6
2.9 Appointment of Agents.......................................7
2.10 Deposit of Securities in U.S. Securities System.............7
2.11 Fund Assets Held in the Custodian's
Direct Paper System.........................................8
2.12 Segregated Account..........................................9
2.13 Ownership Certificates for Tax Purposes ....................9
2.14 Proxies.....................................................9
2.15 Communications Relating to Fund Securities.................10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside the United States.............................10
3.1 Appointment of Foreign Sub-Custodians......................10
3.2 Assets to be Held..........................................10
3.3 Foreign Securities Depositories............................10
3.4 Agreements with Foreign Banking Institutions...............11
3.5 Access of Independent Accountants of the Fund..............11
3.6 Reports by Custodian.......................................11
3.7 Transactions in Foreign Custody Account....................11
3.8 Liability of Foreign Sub-Custodians........................12
3.9 Liability of Custodian.....................................12
3.10 Reimbursement for Advances.................................12
3.11 Monitoring Responsibilities................................13
3.12 Branches of U.S. Banks.....................................13
3.13 Tax Law....................................................13
<PAGE>
TABLE OF CONTENTS
-----------------
Page
4. Payments for Sales or Repurchases or Redemptions
of Shares .........................................................13
5. Proper Instructions................................................14
6. Actions Permitted without Express Authority........................14
7. Evidence of Authority..............................................15
8. Duties of Custodian with Respect to the Books of Account
and Calculations of Net Asset Value and Net Income.................15
9. Records ...........................................................15
10. Opinion of Fund's Independent Accountants..........................16
11. Reports to Fund by Independent Public Accountants..................16
12. Compensation of Custodian..........................................16
13. Responsibility of Custodian........................................16
14. Effective Period, Termination and Amendment........................17
15. Successor Custodian................................................18
16. Interpretive and Additional Provisions............................ 20
17. Massachusetts Law to Apply.........................................20
18. Prior Contracts....................................................20
19. Shareholder Communications Election................................20
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between Kemper Technology Fund, a business trust
organized and existing under the laws of The Commonwealth of Massachusetts and
having its principal place of business at 222 South Riverside Plaza, Chicago,
Illinois 60606 (the "Fund"), and State Street Bank and Trust Company, a
Massachusetts trust company having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110 (the "Custodian"),
WITNESSETH:
THAT, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto do hereby agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of its assets,
including securities which it desires to be held in places within the United
States of America ("domestic securities") and securities it desires to be held
outside the United States of America ("foreign securities") pursuant to the
provisions of the Fund's declaration of trust (the "Declaration of Trust"). The
Fund agrees to deliver to the Custodian all securities and cash owned by it and
all payments of income, payments of principal or capital distributions received
by it with respect to all securities owned by the Fund from time to time, and
the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of the Fund held
or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in
Article 5 of this Contract), the Custodian shall from time to time employ one or
more sub-custodians located in the United States of America, including any state
or political subdivision thereof and any territory over which its political
sovereignty extends (the "United States" or "U.S."), but only in accordance with
an applicable vote by the board of trustees of the Fund (the "Board of
Trustees") and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions or omissions
of any sub-custodian so employed than any such sub-custodian has to the
Custodian. The Custodian may employ as sub-custodians for the Fund's foreign
securities the foreign banking institutions and foreign securities depositories
designated in Schedule A hereto but only in accordance with the provisions of
Article 3.
<PAGE>
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian in the United States
----------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property to be held by it in
the United States including all domestic securities owned by the Fund
other than (a) securities which are maintained in a "U.S. Securities
System" (as such term is defined in Section 2.10 of this Contract) and
(b) commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Custodian's Direct Paper System
pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund and held by the Custodian or in a
U.S. Securities System account of the Custodian, which account shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for its customers ("U.S. Securities
System Account") or in the Custodian's Direct Paper book-entry system
account, which account shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for its
customers ("Direct Paper System Account") only upon receipt of Proper
Instructions from the Fund, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same
2
<PAGE>
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that, in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's U.S.
Securities System Account, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the
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<PAGE>
Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent"), for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information (the "Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption;
and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund, a
certified copy of a resolution of the Board of Trustees or of
the executive committee thereof signed by an officer of the
Fund and certified by the Fund's Secretary or Assistant
Secretary specifying the securities of the Fund to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee name
of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize reasonable
efforts only to (i) timely collect income due the Fund on such
securities and (ii) notify the Fund of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the banking department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank
4
<PAGE>
or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940, as amended (the "Investment Company
Act") and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of the
Fund be approved by vote of a majority of the Board of Trustees. Such
funds shall be deposited by the Custodian in its capacity as Custodian
and shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon agreement between the Fund and the
Custodian, the Custodian shall, upon the receipt of Proper Instructions
from the Fund, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the Fund which
are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States-registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to domestic bearer securities if, on
the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held
hereunder. Collection of income due the Fund on domestic securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund; the Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data in its possession as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian
of the income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Fund in the
following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Fund but only (a) against the delivery of such securities
or evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the
name of the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a
5
<PAGE>
purchase involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the Fund
-------------------------------------------------------------
as set forth in Article 4 hereof;
---------------------------------
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management fees,
accounting fees, transfer agent fees, legal fees and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund, a certified
copy of a resolution of the Board of Trustees or of the
executive committee thereof signed by an officer of the Fund
and certified by the Fund's Secretary or an Assistant
Secretary, specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the
6
<PAGE>
Fund to so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the securities
had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act to
act as a custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a
clearing agency registered with the Securities and Exchange Commission
(the "SEC") under Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies (a "U.S.
Securities System") in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of the Fund in a
U.S. Securities System provided that such securities are
represented in a U.S. Securities System Account;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for domestic securities purchased for
the account of the Fund upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund; the
Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the U.S. Securities
System that payment for such securities has been transferred
to the U.S. Securities System Account and (ii) the making of
an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies of
all advices from the U.S. Securities System of transfers of
securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
U.S. Securities System for the account of the Fund;
7
<PAGE>
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, required by Article 14
hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the U.S. Securities System
by reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
U.S. Securities System; at the election of the Fund, it shall
be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the U.S. Securities System
or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or
damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in the
Direct Paper System Account which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on
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<PAGE>
the next business day following such transfer and shall
furnish to the Fund copies of daily transaction sheets
reflecting each day's transaction in the Direct Paper System
for the account of the Fund; and
6) Upon the reasonable request of the Fund, the Custodian shall
provide the Fund with any report on the Direct Paper System's
system of internal accounting controls which had been prepared
as of the time of such request.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated account
or accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in a U.S. Securities System Account by the
Custodian pursuant to Section 2.10 hereof (i) in accordance with the
provisions of any agreement among the Fund, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered Contract
Market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the SEC relating to the maintenance
of segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of this clause
(iv), upon receipt of, in addition to Proper Instructions from the
Fund, a certified copy of a resolution of the Board of Trustees or of
the executive committee thereof signed by an officer of the Fund and
certified by the Fund's Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it and
in connection with transfers of such securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
9
<PAGE>
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires to take action
with respect to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least three (3)
business days prior to the date on which the Custodian is to take such
action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto (the "foreign sub-custodians"). Upon
receipt of Proper Instructions, together with a certified resolution of
the Board of Trustees, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
foreign sub-custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
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<PAGE>
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that (a) the assets of the
Fund will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of the assets of the Fund will
be freely transferable without the payment of money or value other than
for custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Custodian on behalf of its
customers; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the foreign sub-custodian
will be subject only to the instructions of the Custodian or its
agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of Fund securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian
on behalf of its customers indicating, as to securities acquired for
the Fund the identity of the entity having physical possession of such
securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the
Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established securities
trading or securities 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.
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<PAGE>
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by Section 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this Section 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of the Fund
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of
the Fund's assets to the extent necessary to obtain reimbursement.
12
<PAGE>
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund (during the month of June) information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the SEC is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the local currency
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
Fund assets are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the Investment
Company Act meeting the qualification set forth in Section 26(a) of
said Act. The appointment of any such branch as a sub-custodian shall
be governed by Article 1 of this Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained in
an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States. It shall
be the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares
----------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the Fund such payments as are
received for Shares of the Fund issued or sold from time to time by the Fund.
The Custodian will provide timely notification to the Fund and the Transfer
Agent of any receipt by it of payments for Shares of the Fund.
13
<PAGE>
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares, the
Custodian is authorized upon receipt of instructions from the Transfer Agent to
wire funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares, the
Custodian shall honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when presented
to the Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. If given pursuant to procedures to be agreed upon by the
Custodian and the Fund, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three - party agreement which requires a segregated
asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
14
<PAGE>
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Trustees.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding Shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Prospectus and shall advise the Fund and the
Transfer Agent daily of the total amount of such net income and, if instructed
in writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various components.
The calculations of the net asset value per share and the daily income of the
Fund shall be made at the time or times described from time to time in the
Prospectus.
9. Records
-------
The Custodian shall with respect to the Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company
Act, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open for inspection
by duly authorized officers, employees or agents of the Fund and employees and
agents of the SEC. The Custodian shall, at the Fund's request, supply the Fund
with a tabulation of securities owned by the Fund and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
15
<PAGE>
10. Opinion of Fund's Independent Accountants
-----------------------------------------
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A and N-SAR or other
annual reports to the SEC and with respect to any other SEC requirements.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian as agreed upon from time to time between the
Fund and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon 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 Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof
16
<PAGE>
with respect to sub-custodians located in the United States (except as
specifically provided in Section 3.9) and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank as contemplated by Section 3.12 hereof,
the Custodian shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from, or caused by, the direction of or authorization by the
Fund to maintain custody or any securities or cash of the Fund in a foreign
country including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to the Custodian.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, the purchase or sale of foreign exchange or of
contracts for foreign exchange, and assumed settlement), or in the event that
the Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the applicable Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund's assets
to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of the date of its execution,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not with respect to the Fund act
under Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Trustees has approved
the initial use of a particular Securities System by the Fund, as required by
Rule 17f-4 under the Investment Company Act and that the Custodian shall not
with respect to the Fund act under Section 2.11 hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has approved the initial use of the Direct Paper System by the
Fund; provided further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust, and further provided, that the Fund may
at any time by action of the Board of
17
<PAGE>
Trustees (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Trustees,
the Custodian shall, upon termination, deliver to such successor custodian at
the offices of the Custodian, duly endorsed and in the form for transfer, all
securities of the Fund then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of the Fund held in a
Securities System. If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy of a vote of
the Board of Trustees, deliver at the offices of the Custodian and transfer such
securities, funds and other properties in accordance with such vote. In the
event that no written order designating a successor custodian or certified copy
of a vote of the Board of Trustees shall have been delivered to the Custodian on
or before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the Investment Company Act, doing business in Boston,
Massachusetts, or New York, New York, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract on behalf of the Fund and to
transfer to an account of such successor custodian all of the securities of the
Fund held in any Securities System. Thereafter, such bank or trust company shall
be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
18
<PAGE>
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Contract.
17. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
18. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the assets of the Fund.
19. Shareholder Communications Election
-----------------------------------
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate
19
<PAGE>
communications. Please indicate below whether the Fund consents or objects by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of March 3, 1999.
ATTEST KEMPER TECHNOLOGY FUND
/s/Maureen Kane By: /s/Philip J. Collora
- --------------- ------------------------
Name: Maureen Kane Name: Philip J. Colloar
Ass't Sec. Title: Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/Marc L. Parsons By: /s/Ronald E. Logue
- ------------------ ----------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Executive Vice President
21
Exhibit (g)(1)(a)
AMENDMENT TO CUSTODY CONTRACT
Amendment dated March 31, 1999 by and between State Street Bank and
Trust Company (the "Bank") and the Kemper Funds listed on Attachment I hereto
(each a "Fund") to the custody contract (the "Custody Contract") between the
Bank and each Fund.
WHEREAS the Bank serves as the custodian of the Fund's assets pursuant
to the Custody Contract;
WHEREAS the Fund may appoint one or more banks identified on Schedule A
attached hereto, as amended from time to time, to serve as an additional
custodian for the Fund (each, a "Repo Custodian") for the limited purpose of
engaging in tri-party repurchase agreement transactions ("Tri-party Repos");
WHEREAS the Fund may direct the Bank to make "free delivery" to one or
more Repo Custodians of cash or other assets maintained in custody by the Bank
for the Fund pursuant to the Custody Contract for purposes of engaging in
Tri-party Repos; and
WHEREAS the Bank and the Fund desire to amend the Custody Contract to
permit the Bank to make "free delivery" of cash and other assets of the Fund to
Repo Custodians from time to time;
NOW THEREFORE, the Bank and the Fund hereby agree to amend the Custody
Contract as follows:
1. Notwithstanding anything to the contrary in the Custody Contract, upon
receipt of Proper Instructions (as defined in the Custody Contract), the Bank
shall deliver cash and/or other assets of the Fund to any account identified on
Schedule A attached hereto, as amended from time to time, maintained for the
Fund by a Repo Custodian, which delivery may be made without contemporaneous
receipt by the Bank of cash or other assets in exchange therefor. Upon such
delivery of cash or other assets in accordance with such Proper Instructions,
the Bank shall have no further responsibility or obligation to the Fund as a
custodian of the Fund with respect to the cash or assets so delivered.
2. The Fund may amend Schedule A from time to time to add or delete a Repo
Custodian or change the identification of the account maintained by a Repo
Custodian for the Fund by delivering Special Instructions (as defined herein) to
the Bank. The term Special Instructions shall mean written instructions executed
by at least two officers of the Fund holding the office of Vice President or
higher. In all other respects, the Custody Contract shall remain in full force
and effect and the Bank and the Fund shall perform their respective obligations
in accordance with the terms thereof.
<PAGE>
EXECUTED to be effective as of the date set forth above.
KEMPER FUNDS listed on Attachment I
By: /s/ Mark S. Casady
------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
-------------------
<PAGE>
SCHEDULE A*
----------
Repo Custodian Banks Accounts
- -------------------- --------
Chase Manhattan Bank CHASE NYC/D644755022
Bank of New York Account #111569
Authorized Signatures:
By: /s/ Daniel Pierce By: /s/ Kathryn L. Quirk
----------------- --------------------
Title: Managing Director Title: Managing Director
----------------- -----------------
Date: 3-30-99 Date: 3-30-99
------------------ -----------------
*This schedule was created solely to meet the requirements under the amendment
to the custody contract relating to tri-party repurchase agreements.
<PAGE>
Attachment I
------------
Cash Equivalent Fund- Government Securities Amendment Effective 4/19/99
Cash Equivalent Fund- Money Market Amendment Effective 4/19/99
Cash Equivalent Fund- Tax Exempt Amendment Effective 5/3/99
Growth Fund of Spain
Kemper California Tax-Free Income
Kemper Strategic Income Fund
Kemper Contrarian
Kemper-Dreman Financial Services
Kemper-Dreman High Return Equity
Kemper Small Cap Value
Kemper Emerging Markets Growth
Kemper Emerging Markets Income
Kemper Europe
Kemper Florida Tax-Free Income
Kemper Growth
Kemper High Income Trust Amendment Effective 4/5/99
Kemper High Yield Amendment Effective 4/5/99
Kemper High Yield Opportunity Amendment Effective 4/5/99
Kemper Income and Capital Preservation
Kemper Intermediate Government Trust Amendment Effective 4/5/99
Kemper International
Kemper International Growth and Income
Kemper Latin America
Kemper Multi-Market Income Trust
Kemper Municipal Income Trust
Kemper New York Tax-Free Income
Kemper Ohio Tax-Free Income
Kemper Retirement Series I
Kemper Retirement Series II
Kemper Retirement Series III
Kemper Retirement Series IV
<PAGE>
Attachment I
------------
Kemper Retirement Series V
Kemper Retirement Series VI
Kemper Retirement Series VII
Kemper Small Cap Relative Value
Kemper Strategic Income Trust Amendment Effective 4/5/99
Kemper Strategic Municipal Income Trust
Kemper U.S. Government Securities Amendment Effective 4/5/99
Kemper Value and Growth Amendment Effective 4/19/99
Kemper Worldwide 2004
Tax-Exempt California Money Market Amendment Effective 5/3/99
Tax-Exempt New York Money Market Amendment Effective 5/3/99
Cash Account Trust-Government Amendment Effective 4/19/99
Cash Account Trust-Money Market Amendment Effective 4/19/99
Cash Account Trust-Tax-Exempt Amendment Effective 5/3/99
Investors Cash Trust-Government Amendment Effective 4/19/99
Investors Cash Trust-Treasury Amendment Effective 4/19/99
Investors Florida Municipal Cash Amendment Effective 5/3/99
Investors Fund Series:
Kemper Blue Chip
Kemper Dreman Financial Services
Kemper Global Blue Chip
Kemper Global Income
Kemper Government Securities Amendment Effective 4/5/99
Kemper Growth
Kemper High Yield Amendment Effective 4/5/99
<PAGE>
Attachment I
Investors Fund Series:
Kemper Horizon 5
Kemper Horizon 10
Kemper Horizon 20
Kemper International
Kemper International Growth and Income
Kemper Investment Grade Bond
Kemper Money Market Amendment Effective 4/19/99
Kemper Small Cap Growth Amendment Effective 4/19/99
Kemper Small Cap Value
Kemper Total Return
Kemper Value and Growth Amendment Effective 4/19/99
Kemper Value
Dreman High Return Equity
Investors Michigan Municipal Cash Amendment Effective 5/3/99
Investors New Jersey Municipal Cash Amendment Effective 5/3/99
Investors Pennsylvania Municipal Cash Amendment Effective 5/3/99
Kemper Aggressive Growth Fund
Kemper Asian Growth
Kemper Blue Chip
Kemper Cash Reserves Amendment Effective 5/3/99
Kemper Global Blue Chip
Kemper Global Income
Kemper Horizon 5
Kemper Horizon 10
Kemper Horizon 20
Kemper Intermediate Municipal Bond
Kemper Municipal Bond
Kemper Short Term U.S. Government Amendment Effective 4/5/99
Kemper Small Capitalization Equity Amendment Effective 4/19/99
Kemper Technology
<PAGE>
Attachment I
------------
Kemper Total Return
Kemper U.S. Growth and Income
Kemper U.S. Mortgage Amendment Effective 4/5/99
Zurich Government Money Amendment Effective 4/19/99
Zurich Money Market Amendment Effective 4/19/99
Zurich Tax-Free Money Amendment Effective 5/3/99
Zurich YieldWise Money Amendment Effective 4/19/99
Zurich YieldWise Municipal Money Fund
Zurich YieldWise Government Money Fund
Kemper Research
Kemper Large Company Growth
Kemper High Yield II Fund
Kemper Small Cap Value & Growth
Exhibit (i)
VEDDER PRICE VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601
312-609-7500
FACSIMILE: 312-609-5005
A PARTNERSHIP INCLUDING VEDDER, PRICE, KAUFMAN & KAMMHOLZ, P.C.
WITH OFFICES IN CHICAGO AND NEW YORK CITY
January 25, 2000
Kemper Technology Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 70 to the
Registration Statement on Form N-1A under the Securities Act of 1933 being filed
by Kemper Technology Fund (the "Fund") in connection with the public offering
from time to time of units of beneficial interest, no par value ("Shares"), in
one authorized series (the "Portfolio").
We have acted as counsel to the Fund, and in such capacity are familiar
with the Fund's organization and have counseled the Fund regarding various legal
matters. We have examined such Fund records and other documents and certificates
as we have considered necessary or appropriate for the purposes of this opinion.
In our examination of such materials, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us.
Based upon the foregoing and assuming that the Fund's Amended and
Restated Agreement and Declaration of Trust dated May 27, 1994, the Written
Instrument Establishing and Designating Separate Classes of Shares dated May 27,
1994, the Amended and Restated Written Instrument Establishing and Designating
Separate Classes of Shares dated March 9, 1996, and the By-Laws of the Fund
effective February 1, 1988, are presently in full force and effect and have not
been amended in any respect and that the resolutions adopted by the Board of
Trustees of the Fund on January 28, 1986, January 14, 1994, March 5, 1994, and
March 9, 1996, relating to organizational matters, securities matters and the
issuance of shares are presently in full force and effect and have not been
amended in any respect, we advise you and opine that (a) the Fund is a validly
existing voluntary association with transferrable shares under the laws of the
Commonwealth of Massachusetts and is authorized to issue an unlimited number of
Shares in the Portfolio; and (b) presently and upon such further issuance of the
Shares in accordance with the Fund's Agreement and Declaration of Trust and the
receipt by the Fund of a purchase price not less than the net asset value per
Share and when the pertinent provisions of the Securities Act of 1933 and such
"blue-sky" and securities laws as may be
<PAGE>
VEDDER PRICE
Kemper Technology Fund
January 25, 2000
Page 2
applicable have been complied with, and assuming that the Fund continues to
validly exist as provided in (a) above, the Shares are and will be legally
issued and outstanding, fully paid and nonassessable.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund or the
Portfolio. However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts and obligations of the Fund or the Portfolio and requires
that notice of such disclaimer be given in each note, bond, contract,
instrument, certificate share or undertaking made or issued by the Trustees or
officers of the Fund. The Agreement and Declaration of Trust provides for
indemnification out of the property of the Portfolio for all loss and expense of
any shareholder of the Portfolio held personally liable for the obligations of
such Portfolio. Thus, the risk of liability is limited to circumstances in which
the Portfolio would be unable to meet its obligations.
This opinion is solely for the benefit of the Fund, the Fund's Board of
Trustees and the Fund's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this opinion
in connection with said Post-Effective Amendment.
Very truly yours,
/s/VEDDER, PRICE, KAUFMAN & KAMMHOLZ
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
Exhibit (j)
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 December 17, 1999 in the Registration Statement (Form
N-1A) of Kemper Technology Fund and its incorporation by reference in the
related Prospectus and Statement of Additional Information of Kemper Equity
Funds/Growth Style, filed with the Securities and Exchange Commission in this
Post-Effective Amendment No. 70 to the Registration Statement under the
Securities Act of 1933 (File No. 2-10668) and in this Amendment No. 70 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 26, 2000
