<PAGE>
ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED NOVEMBER 30, 1997
[LOGO]
Seeks long-term capital appreciation
KEMPER CONTRARIAN
FUND
"...The key factor contributing to the fund's success during the year is that
we kept the portfolio true to its discipline -- conservative, risk-averse,
value-oriented and contrarian. ..."
[LOGO] KEMPER FUNDS
LONG-TERM INVESTING IN A SHORT-TERM WORLD-SM-
<PAGE>
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
INDUSTRY SECTORS
10
LARGEST HOLDINGS
11
PORTFOLIO OF INVESTMENTS
13
REPORT OF
INDEPENDENT AUDITORS
14
FINANCIAL STATEMENTS
17
NOTES TO
FINANCIAL STATEMENTS
21
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
AT A GLANCE
ABOUT YOUR REPORT
YOUR FUND'S FISCAL YEAR END CHANGED IN 1997 FROM DECEMBER 31
TO NOVEMBER 30. THE FINANCIAL STATEMENTS INCLUDED HEREIN ARE
FOR THE PERIOD JANUARY 1, 1997, THROUGH NOVEMBER 30, 1997.
CERTAIN OTHER INFORMATION CONTAINED IN THIS REPORT COVERS THE
12 MONTHS ENDED NOVEMBER 30, 1997. THIS CHANGE DOES NOT
AFFECT YOUR INVESTMENT.
- --------------------------------------------------------------------------------
KEMPER CONTRARIAN FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE 12 MONTHS ENDED NOVEMBER 30, 1997
(UNADJUSTED FOR ANY SALES CHARGE)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Class A 24.73%
Class B 23.53%
Class C 23.35%
Lipper Growth & Income Funds Category Average* 23.50%
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT REFLECT FUTURE PERFORMANCE.
RETURNS AND NET ASSET VALUE FLUCTUATE. SHARES ARE REDEEMABLE AT CURRENT NET
ASSET VALUE, WHICH MAY BE MORE OR LESS THAN ORIGINAL COST.
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN
NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF
SALES CHARGES. IF THEY HAD, RESULTS MAY HAVE BEEN LESS FAVORABLE.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
11/30/97 11/30/96
<S> <C> <C>
............................................
KEMPER CONTRARIAN FUND
CLASS A $21.13 $ 18.61
............................................
KEMPER CONTRARIAN FUND
CLASS B $21.08 $ 18.59
............................................
KEMPER CONTRARIAN FUND
CLASS C $21.06 $ 18.57
............................................
</TABLE>
- --------------------------------------------------------------------------------
KEMPER CONTRARIAN FUND
LIPPER RANKINGS*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH & INCOME FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
.....................................................
1-YEAR #245 of #296 of #306 of
608 funds 608 funds 608 funds
.....................................................
3-YEAR #143 of N/A N/A
388 funds
.....................................................
5-YEAR #92 of N/A N/A
235 funds
.....................................................
</TABLE>
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DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE FISCAL PERIOD, KEMPER CONTRARIAN FUND MADE THE FOLLOWING
DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
..............................................................
INCOME DIVIDEND $0.2000 $0.0566 $0.0229
..............................................................
SHORT-TERM
CAPITAL GAIN $ 0.05 $ 0.05 $ 0.05
..............................................................
LONG-TERM
CAPITAL GAIN $ 0.03 $ 0.03 $ 0.03
..............................................................
</TABLE>
- --------------------------------------------------------------------------------
TERMS TO KNOW
YOUR FUND'S STYLE
STYLE
SIZE
VALUE BLEND GROWTH
X LARGE
MEDIUM
SMALL
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar Style Box is
based on a portfolio date as of November 30, 1997.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN EXACT ASSESSMENT OF RISK AND DO
NOT REPRESENT FUTURE PERFORMANCE. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
DEEP DISCOUNT VALUE STOCKS Those stocks that have a very low price/earnings
ratio relative to the market and are either feared or loathed by most analysts
and neglected by Wall Street in general. These stocks often lack glamour and do
not always generate high comfort levels, hence their "contrarian" nature.
GRAY MONDAY The name used to identify Monday, October 27, 1997. On that
<PAGE>
day the Dow Jones Industrial Average lost 554 points or 7 percent of its total
value. Gray Monday is a comparison to Black Monday, October 19, 1987, when the
market lost almost 23 percent of its total value.
PRICE/EARNINGS RATIO A company's stock price divided by its earnings for the
past four quarters, also referred to as its P/E.
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
MARKET VOLATILITY IN THE SECOND HALF OF KEMPER CONTRARIAN FUND'S 12 MONTHS ENDED
NOVEMBER 30, 1997, PROVED BENEFICIAL, AS THE FUND'S CLASS A SHARE (UNADJUSTED
FOR ANY SALES CHARGE) PERFORMANCE BEAT ITS LIPPER PEER GROUP AVERAGE. PORTFOLIO
MANAGERS TOM SASSI, JONATHAN KAY AND FRED GASKIN DISCUSS THEIR APPROACH TO THE
FUND THROUGH THE YEAR.
TOM SASSI IS A MANAGING DIRECTOR OF WHAT IS NOW SCUDDER KEMPER INVESTMENTS AND
THE LEAD PORTFOLIO MANAGER FOR KEMPER CONTRARIAN FUND. SASSI RECEIVED A
BACHELOR'S OF BUSINESS ADMINISTRATION IN MANAGEMENT AND ECONOMICS AND AN M.B.A
IN FINANCE FROM HOFSTRA UNIVERSITY. HE HAS OVER 25 YEARS EXPERIENCE IN
INVESTMENT ANALYSIS AND MANAGEMENT.
FREDERICK L. GASKIN IS A VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS AND A
PORTFOLIO CO-MANAGER OF KEMPER CONTRARIAN FUND. GASKIN RECEIVED A B.S./B.A. IN
FINANCE FROM APPALACHIAN STATE UNIVERSITY AND AN MBA FROM THE BABCOCK SCHOOL OF
MANAGEMENT AT WAKE FOREST UNIVERSITY.
JONATHAN KAY IS A VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS AND A PORTFOLIO
CO-MANAGER OF KEMPER CONTRARIAN FUND. KAY RECEIVED A BACHELOR'S DEGREE IN
ECONOMICS FROM THE UNIVERSITY OF BUFFALO AND AN MBA IN FINANCE FROM BERNARD M.
BARUCH COLLEGE. HE IS A CHARTERED FINANCIAL ANALYST AND MEMBER OF A NUMBER OF
PROFESSIONAL ORGANIZATIONS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
Q DURING THE FUND'S TWELVE MONTHS
ENDED NOVEMBER 30, 1997, KEMPER CONTRARIAN FUND (CLASS A SHARES,
UNADJUSTED FOR ANY SALES CHARGE) RETURNED 24.73 PERCENT, BEATING ITS LIPPER
GROWTH AND INCOME PEER GROUP AVERAGE OF 23.50 PERCENT. THE FUND ALSO RETURNED
27.55 PERCENT AND 18.40 PERCENT FOR THE THREE- AND FIVE-YEAR RETURNS, COMPARED
WITH ITS LIPPER PEER GROUP AVERAGE OF 26.19 PERCENT AND 17.43 PERCENT. TO WHAT
DO YOU ATTRIBUTE THE FUND'S SUCCESS?
A The fund's holdings of
financial stocks, particularly regional banks, specialty financial services and
insurance companies, helped carry the fund this year, as did stocks in the
energy area and selected cyclical industries.
In addition, the volatile nature of the market in the second half of the
fund's fiscal year provided us excellent opportunities to sell a number of
stocks at profits while buying others at attractive prices. The portfolio was
well positioned due to its diversification. The fund was prepared so that a
correction in one sector or stock would not have a tremendous impact on the
portfolio.
We believe that low P/E stocks have the potential to perform better than higher
P/E stocks in volatile markets.
Overall, the key factor contributing to the fund's success is its discipline
- -- conservative, risk-averse, value-oriented and contrarian. Adhering to our
value philosophy has created a fund with better-than-market qualitative
characteristics, stronger-than-market earnings per share and dividend growth but
with lower-than-market price to earnings multiples (P/E) and higher-than-market
dividend yield.
Q WHILE THE FUND IS BEATING ITS
PEERS, IT'S STILL LAGGING THE STANDARD & POOR'S 500 STOCK INDEX (S&P 500).
THE GOOD NEWS LOOKS LIKE THE GAP IS ALMOST CLOSED. AT NOVEMBER 30, 1997, THE S&P
500 RETURNED 26.21 PERCENT, FOR THE ONE-YEAR PERIOD, JUST 1.48 PERCENT AHEAD OF
KEMPER CONTRARIAN FUND'S 24.73 PERCENT (CLASS A SHARES UNADJUSTED FOR ANY SALES
CHARGE). WOULD YOU CONSIDER THAT A SUCCESS?
A We want the fund to beat
the S&P 500, and we feel we are positioned for the opportunity to do that,
but there are other ways to measure the fund's accomplishments. But, yes,
closing the gap is a success. We're pleased to beat the Lipper peer group
averages, but we strive to give investors excellent long-term total returns
while keeping risks within prudent limits. We've been closing the gap over a
long time period, and we feel that shows that Kemper Contrarian Fund is a good
investment long term. Over the longer term, beating the S&P 500 should ensure a
good standing versus peer groups.
It was a tough year for funds overall to beat the S&P 500. That's because the
market was led by the Blue Chip "Nifty Fifty"
5
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
stocks. Most of the "Nifty Fifty" stocks, which are the most favored by
institutions, have high P/Es. Because we are value investors, we don't own them
and therefore haven't participated in their performance.
Q IS THERE AN UPSIDE TO A "NIFTY
FIFTY"-DRIVEN MARKET?
A I've mentioned before the
upside to a "Nifty Fifty" market is in essence most stocks are not as high
as the averages might suggest. Therefore, there are values available to patient
investors. As value investors, we continue to focus our research efforts on
laggard stocks and groups currently down in price due to short-term fundamental
or other problems perceived by the market where our research suggests that over
time fundamentals will improve.
The market has become increasingly intolerant of fundamental disappointments,
such as lower-than-expected earnings, which is a marked change from a year ago.
Seasoned companies experiencing declines of 20, 30, 40 percent in the space of
weeks, make people more cautious. Investors become a little more risk-averse in
this environment. That's good for us because it increases our opportunities to
buy good stocks at value prices. Moreover, we have been fortunate in that the
portfolio has not held securities that have suffered serious price declines.
Q THE MARKET PROBLEMS OF
SOUTHEAST ASIA AND JAPAN HAD AN IMMEDIATE EFFECT ON U.S. MARKETS, KNOWN AS "GRAY
MONDAY" (SEE TERMS TO KNOW). DO YOU EXPECT THERE TO BE A LONGER-TERM EFFECT ON
THE STOCK MARKET?
A The problems overseas
could create earnings problems for export companies. The real impact,
however, is that U.S. GDP growth is likely to slow, perhaps by 1/2 to 1 percent.
The U.S. market is more seasoned than the Asian markets and can withstand the
volatility better. If anything, the earnings effect will create some value
opportunities for the fund.
Q SINCE JUNE, THERE HAVE BEEN A
NUMBER OF CHANGES MADE TO THE PORTFOLIO. WHAT IS YOUR RATIONALE FOR THE
CHANGES?
A We consciously reduced the
companies represented in the portfolio, from approximately 100 to a range
of 50-70 companies. We did not change the fundamental makeup of the fund,
however, just increased our stakes in fewer stocks with the same industry
diversification strategy. The stocks we own have dividend yields greater than
the market, P/Es lower than the market and earnings growing faster than the
market.
The last half of the year, with its volatility, provided us an excellent
opportunity to accomplish this by selling stocks at advantageous prices. What we
sold during that time were stocks that we felt had realized their potential.
Q TAX EFFICIENCY IS AN IMPORTANT
FUND ASPECT WITH SHAREHOLDERS WHO DON'T WANT TO SEE THEIR RETURNS ERASED
BY CAPITAL GAINS TAXES. WITH THE SELL-OFF OF SO MANY STOCKS, HOW TAX EFFICIENT
IS THE FUND?
A There's no question tax
efficiency is extremely important within a fund and is something we are
conscious of. We have a consistent discipline and despite the reduction of names
held, we kept capital gains and dividends in check during the year. In general,
we have relatively low portfolio turnover.
Q WHAT STOCKS ARE YOU PLEASED
WITH THIS YEAR, AND WHICH ONES WERE DISAPPOINTMENTS?
A I mentioned earlier that
financial stocks, particularly regional money center banks and specialty
financial services stocks, did very well for the fund this year. General Re
Corp. is one that performed well. General Electric, Bristol Meyers and Ford
Motor Co. also had fundamentals that came through better than expected and have
performed better than the market. Exxon Corp. is one of our favorite energy
stocks that did well for the fund this year.
We prepared this fund for the volatility we expected in '97, and while some
stocks underperformed, the fund did not experience substantive losses in any of
its holdings. That's a tribute to its conservative, risk-averse, value-oriented
and contrarian nature.
6
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
But to answer your question, Philip Morris was somewhat of a disappointment to
us this year. While its fundamentals were good, the backdrop of uncertainty
associated with a tobacco settlement caused less-than-stellar stock performance.
We, however, believe tobacco will turn around as Congress is likely to pass
litigation protection for tobacco companies sometime in '98.
The fund has owned Louisiana-Pacific, a forest-products company, for some
time, but its earnings dragged a bit this year. We're holding on to it, however,
because it is a statistical value -- we expect its earnings power to grow once
the company has straightened out capacity issues on some of its better-selling
products.
Q YOUR LARGEST SECTOR ALLOCATION
CONTINUES TO BE IN FINANCIAL SERVICES, WITH ALMOST A QUARTER OF THE FUND'S
ASSETS INVESTED IN BANKS, INSURANCE COMPANIES AND OTHER FINANCIAL SERVICES
COMPANIES, ROUGHLY THE SAME AT DECEMBER 31, 1996. ASIDE FROM AN ALMOST FIVE
POINT, OR 60 PERCENT DECREASE IN THE TECHNOLOGY SECTOR IN THE PORTFOLIO, THE
FUND'S PORTFOLIO SECTOR ALLOCATION HAS REMAINED VIRTUALLY THE SAME AS LAST YEAR.
WHY?
A Well, the sector allocation
has remained virtually the same because we like the diversification it
gives us -- it's that diversification that helps cushion the fund in volatile
markets like the one we had this year. What has changed, as we mentioned
earlier, is that there are fewer names in each of those sectors. During the
year, we increased the fund's interests in stocks we particularly liked, such as
Aluminum Company of America (ALCOA), which is in the basic industry sector.
ALCOA is a cyclical company that has low expectations but has proven itself with
positive earnings surprises. The stock had been bought and sold at a profit
during the year. We added Texaco this year and also added to Xerox, AMP Inc.,
Chase Manhattan Bank and American Home Products. The combination we look for is
companies whose earnings and dividends are rising faster than the market, but
whose price is at a discount.
The fund is holding stocks with strong fundamentals and many that have good
dividend yields. A healthy dividend is an important component of our strategy
because, should the market flatten out, you will earn at least that.
Q WHAT ABOUT TECHNOLOGY? THE
FUND WAS HOLDING 8.5 PERCENT AND 11 NAMES IN TECHNOLOGY A YEAR AGO; NOW IT
HAS 3.5 PERCENT AND ONLY TWO NAMES, RAYTHEON CO. AND XEROX.
A Some of our holdings
simply reached valuation levels, which triggered our sell discipline and we sold
them at a profit. Intel is an example of a stock that reached prices that forced
us to sell based upon our sell discipline. Two years ago it was a value stock;
we bought it and then sold it when its valuations became high. There is
potential in technology, and when the prices are right, we'll buy.
Q GOING INTO 1998, ARE THERE ANY
CHANGES YOU PLAN TO MAKE TO THE FUND'S PORTFOLIO?
A We're going to stay the
course we're on. We like the diversification of the fund and the changes
that were made in recent months. We'll continue to seek out excellent value
opportunities, adhering to the discipline of conservative, risk-averse,
value-oriented, contrarian investing. To this end we have developed a long watch
list.
7
<PAGE>
ECONOMIC OVERVIEW
[PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPANIES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period.
As it has for several years, the country should continue to enjoy relatively
low interest rates and low inflation. But the new year will be different in at
least two ways, both of which can be expected to have direct bearing on
investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia will
depress capital goods spending and heighten import pricing pressure, putting a
damper on American corporations' pricing and profit growth at least through
1999. While the U.S. economy grew at an almost 4 percent rate in 1997, we look
for no better than 2 percent growth for the next two years -- with more than
half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had begun
to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to return
about 9.5 percent, including the effect of reinvested dividends. This would be
an average return and in line with the historical long-term 10 percent return of
the stock market. On the heels of the last three 20 percent-plus return years,
an investor in 1998 may weigh the 10 percent prospect against a projected 7
percent total return on bonds and consider the difference insufficient
compensation for the inherent added risk. Adopting a more conservative posture
for the new year may be an appropriate step that you'll want to discuss with
your financial representative in the context of your long-term investing
objectives.
To achieve a 9.5 percent return in 1998, the market's already high valuations
need to move even higher. We expect this to occur for a few reasons: the market
has so far demonstrated a certain complacency about the valuation levels;
American investors don't perceive there's anywhere better to go than the U.S.
equity market; and foreigners think of the U.S. market as a safe haven. All
should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
3
<PAGE>
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION, CREDIT EXPANSION OR
CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC EXPANSION GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE 10-YEAR
TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE OTHER DATA
REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NOW (12/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.81 6.22 6.58 5.65
Prime rate (2) 8.50 8.50 8.25 8.50
Inflation rate (3) 1.70 2.23 3.04 2.72
The U.S. dollar (4) 10.43 7.32 4.59 -0.57
Capital goods orders (5)* 11.61 8.58 2.23 9.56
Industrial production (5)* 5.59 3.91 4.70 2.34
Employment growth (6) 2.66 2.30 2.41 1.57
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AS INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
* DATA AS OF NOVEMBER 30, 1997.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even deflation and pricing
pressures change the U.S. economic climate. The only real antidote is growth,
and from now on growth is more likely to be found outside the United States.
Today to participate in the growth from global business you'd need to be exposed
to large capitalization companies.
International investing is a promising proposition in 1998, the Asian fallout
notwithstanding. In established markets, there are attractive opportunities to
be found in Europe and in Japan. Several Japanese companies have real cash flows
and even relatively attractive valuations. In addition, the effect of the Asian
problems has not been to discourage all investment into emerging markets; rather
investors have tended to divert investment dollars and business to other
increasingly attractive emerging markets in eastern Europe, the Middle East,
Africa and Latin America.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ MAUREEN ALLYN
MAUREEN ALLYN
CHIEF ECONOMIST, Scudder Kemper Investments, Inc.
January 9, 1998
4
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
KEMPER CONTRARIAN FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR PERIODS ENDED NOVEMBER 30, 1997 (ADJUSTED FOR THE APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR LIFE OF CLASS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------
KEMPER CONTRARIAN 17.53% 17.01% 14.12% (since 3/18/88)
FUND CLASS A
.......................................................................
KEMPER CONTRARIAN 20.53 N/A 22.78 (since 9/11/95)
FUND CLASS B
.......................................................................
KEMPER CONTRARIAN 23.35 N/A 23.70 (since 9/11/95)
FUND CLASS C
.......................................................................
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER CONTRARIAN FUND CLASS A
KEMPER CONTRARIAN
FUND CLASS A(1) CONSUMER PRICE INDEX+
<S> <C> <C>
3/18/88 $10,000 $10,000
12/31/91 $14,172 $11,837
12/31/95 $24,871 $13,176
11/30/97 $36,022 $13,871
Growth of an assumed $10,000 investment in Class A shares from 3/18/88 to
11/30/97
<CAPTION>
KEMPER CONTRARIAN FUND CLASS A
STANDARD & POOR'S 500 STOCK INDEX++
<S> <C>
3/18/88 $10,000
12/31/91 $17,641
12/31/95 $29,100
11/30/97 $46,750
Growth of an assumed $10,000 investment in Class A shares from 3/18/88 to
11/30/97
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Kemper Contrarian Fund Class B
Kemper Contrarian
Fund Class B(1) Consumer Price Index+
9/11/95 $10,000 $10,000
12/31/95 $11,284 $10,039
12/31/96 $12,820 $10,373
11/30/97 $15,780 $10,569
Growth of an assumed $10,000 investment in Class B shares from 9/11/95 to
11/30/97
<CAPTION>
Kemper Contrarian Fund Class B
<S> <C>
Standard & Poor's 500 Stock In-
dex++
9/11/95 $10,000
12/31/95 $10,859
12/31/96 $13,345
11/30/97 $17,445
Growth of an assumed $10,000 investment in Class B shares from 9/11/95 to
11/30/97
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Kemper Contrarian Fund Class C
Kemper Contrarian
Fund Class C(1) Consumer Price Index+
9/11/95 $10,000 $10,000
12/31/95 $11,285 $10,039
12/31/96 $12,810 $10,373
11/30/97 $16,046 $10,569
Growth of an assumed $10,000 investment in Class C shares from 9/11/95 to
11/30/97
<CAPTION>
Kemper Contrarian Fund Class C
<S> <C>
Standard & Poor's 500 Stock In-
dex++
9/11/95 $10,000
12/31/95 $10,859
12/31/96 $13,345
11/30/97 $17,445
Growth of an assumed $10,000 investment in Class C shares from 9/11/95 to
11/30/97
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT REPRESENT FUTURE PERFORMANCE. RETURNS AND NET
ASSET VALUE FLUCTUATE. SHARES ARE REDEEMABLE AT CURRENT NET ASSET VALUE, WHICH
MAY BE MORE OR LESS THAN ORIGINAL COST.
*AVERAGE ANNUAL TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR
LOSS FROM PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT OF ALL DIVIDENDS AND FOR
CLASS A SHARES ADJUSTMENT FOR THE MAXIMUM SALES CHARGE OF 5.75 PERCENT, FOR
CLASS B SHARES ADJUSTMENT FOR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE
(CDSC) AS FOLLOWS: 1 YEAR, 3 PERCENT; 5 YEAR, 1 PERCENT, SINCE INCEPTION, 0
PERCENT. FOR CLASS C SHARES THERE IS NO ADJUSTMENT FOR SALES CHARGE. THE
MAXIMUM CDSC FOR CLASS B SHARES IS 4 PERCENT. FOR C SHARES, THERE IS A 1
PERCENT CDSC ON CERTAIN REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASE. DURING
THE PERIODS NOTED, SECURITIES PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION,
SEE THE PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL
HIGHLIGHTS AT THE END OF THIS REPORT.
(1)PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CDSC IN EFFECT AT THE END OF
THE PERIOD FOR CLASS B SHARES. IN COMPARING KEMPER CONTRARIAN FUND TO THE
STANDARD & POOR'S 500 STOCK INDEX+ AND THE CONSUMER PRICE INDEX++, YOU
SHOULD NOTE THAT THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE,
WHILE NO SUCH CHARGES ARE REFLECTED IN THE PERFORMANCE OF THE INDICES.
+THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET. SOURCE IS TOWERS DATA SYSTEMS.
++THE CONSUMER PRICE INDEX IS A STATISTICAL MEASURE OF CHANGE, OVER TIME, IN THE
PRICES OF GOODS AND SERVICES IN MAJOR EXPENDITURE GROUPS FOR ALL URBAN
CONSUMERS. SOURCE IS TOWERS DATA SYSTEMS.
8
<PAGE>
- --------------------------------------------------------------------------------
INDUSTRY SECTORS
A FISCAL YEAR-END COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on December 31, 1996, and on November 30, 1997.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER CONTRARIAN FUND AS OF 11/30/97 KEMPER CONTRARIAN FUND AS OF 12/31/96
<S> <C> <C>
Finance 28.5% 27.7%
Consumer nondurables 20.9% 15.0%
Energy 14.3% 18.4%
Capital goods 9.8% 10.4%
Basic industries 8.6% 9.2%
Health care 7.2% 3.8%
Technology 4.3% 9.6%
Utilities 4.3% 2.1%
Transportation 2.1% 1.4%
Consumer durables 0.0% 2.4%
</TABLE>
A COMPARISON WITH THE STANDARD & POOR'S 500 STOCK INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of the Kemper Contrarian Fund represented on November 30, 1997, compared to the
industry sectors that make up the fund's benchmark, the Standard & Poor's 500
Stock Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER CONTRARIAN FUND AS OF 11/30/97 STANDARD & POOR'S 500 INDEX AS OF 11/30/97
<S> <C> <C>
Finance 28.5% 16.2%
Consumer nondurables 20.9% 22.2%
Energy 14.3% 9.2%
Capital goods 9.8% 9.1%
Basic industries 8.6% 4.9%
Health care 7.2% 11.0%
Technology 4.3% 14.1%
Utilities 4.3% 9.4%
Transportation 2.1% 1.3%
Consumer durables 0.0% 2.6%
</TABLE>
*THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET. SOURCE IS TOWERS DATA SYSTEMS.
9
<PAGE>
- --------------------------------------------------------------------------------
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 23.5 percent of the fund's total net assets on November 30, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Holdings Percent
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1. PHILIP The largest cigarette maker in the U.S. Through 4.3%
MORRIS its Miller Brewing subsidiary, it is also the
country's second-largest brewer. This company is
also a major branded food producer through its
Kraft Foods subsidiaries.
- --------------------------------------------------------------------------------
2. AMOCO Engaged in the exploration, development and 2.7%
production of crude oil and natural gas, and in
the refining and marketing of petroleum products
and petrochemicals.
- --------------------------------------------------------------------------------
3. FEDERAL HOME Often referred to as Freddie Mac, this corporation 2.1%
LOAN provides for the transfer of capital between
MORTGAGE mortgage lenders and mortgage security investors,
CORP. enabling mortgage lenders to provide a continuous
flow of funds to borrowers.
- --------------------------------------------------------------------------------
4. NESTLE Nestle is the largest food processor in the world. 2.1%
Its activities encompass the production and
marketing of dairy products, coffee, chocolate and
confectionery, culinary products, frozen foods and
ice cream, refrigerated products, mineral water,
other drinks, pet foods and pharmaceuticals.
- --------------------------------------------------------------------------------
5. CONSECO INC. A financial services organization headquartered in 2.1%
Carmel, IN., owns and operates life insurance
companies and provides investment management,
administrative and other fee-based services.
- --------------------------------------------------------------------------------
6. WELLS FARGO Bank holding company with subsidiaries, engaged in 2.1%
& CO. commercial banking.
- --------------------------------------------------------------------------------
7. GLAXO Engaged in the discovery, development, manufacture 2.1%
WELLCOME and marketing of prescription and non-prescription
drugs.
- --------------------------------------------------------------------------------
8. MCDONALD'S The largest and best known global food service 2.0%
retailer, with more than 21,000 locations in 102
countries. Their outstanding brand recognition,
high-quality food products, site development
expertise, advanced operational systems and unique
global infrastructure put the company in a strong
position to capitalize on the enormous global
growth potential.
- --------------------------------------------------------------------------------
9. BANC ONE Operates approximately 65 banks with 1,502 offices 2.0%
CORP. throughout the United States. Offers depository
and lending services to individuals and commercial
customers. Through its subsidiaries, provides data
processing, venture capital investment and
merchant banking, trust, brokerage, investment
management and equipment leasing services.
- --------------------------------------------------------------------------------
10. GTE The largest U.S.-based local telephone company and 2.0%
the second-largest cellular-service provider in
the U.S. with the potential to serve almost 30
percent of the country's pop-
ulation. With nearly $21 billion in revenues in
1996, the corporation is the fourth-largest
publicly owned telecommunications company in the
world.
- --------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
10
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
KEMPER CONTRARIAN FUND
Portfolio of Investments at November 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--7.1%
Dow Chemical Co. 18,000 $ 1,777
Eastman Chemical Co. 30,000 1,811
Georgia-Pacific Corp. 20,000 1,708
Louisiana-Pacific Corp. 117,000 2,362
Nucor Corp. 49,000 2,450
Reynolds Metals Co. 16,000 911
Sonoco Products Co. 49,000 1,608
----------------------------------------------------------------------
12,627
- -----------------------------------------------------------------------------------------------------
CAPITAL GOODS--8.0%
AMP, Inc. 62,000 2,693
Crown Cork & Seal Co. 72,000 3,515
General Electric Co. 34,000 2,508
Honeywell 16,000 1,048
Illinois Tool Works 44,000 2,412
Pitney Bowes, Inc. 25,000 2,102
----------------------------------------------------------------------
14,278
- -----------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--6.5%
Ford Motor Co. 78,000 3,354
May Department Stores Co. 40,000 2,150
Philips Electronics, N.V., ADR 48,000 3,216
V.F. Corp. 62,800 2,901
----------------------------------------------------------------------
11,621
- -----------------------------------------------------------------------------------------------------
CONSUMER STAPLES--10.6%
McDonald's Corp. 75,000 3,638
Nestle, S.A., ADR 51,000 3,755
Philip Morris Cos. 175,000 7,613
Unilever, N.V., ADR 36,000 2,090
UST, Inc. 60,000 1,853
----------------------------------------------------------------------
18,949
- -----------------------------------------------------------------------------------------------------
ENERGY--11.8%
AMOCO Corp. 54,000 4,860
Atlantic Richfield Co. 41,500 3,382
Chevron Corp. 21,000 1,684
Exxon Corp. 56,000 3,416
Mobil Corp. 28,000 2,014
Royal Dutch Petroleum Co. 40,000 2,108
Texaco 35,000 1,978
YPF Sociedad Anomima, ADR 45,000 1,510
----------------------------------------------------------------------
20,952
- -----------------------------------------------------------------------------------------------------
FINANCE--23.4%
American General Corp. 48,000 2,586
American International Group, Inc. 21,000 2,117
Banc One Corp. 69,000 3,545
Bankers Trust New York Corp. 22,000 2,608
Chase Manhattan Corp. 30,000 3,259
Citicorp 12,500 1,499
Conseco, Inc. 80,400 3,744
Federal Home Loan Mortgage Corp. 92,000 3,795
Federal National Mortgage Association 47,000 2,482
First Union Corp. 55,000 2,681
General Re Corp. 6,000 1,191
H.F. Ahmanson & Co. 24,000 1,428
J.P. Morgan & Co. 17,000 1,941
NationsBank 55,000 3,303
PNC Bank Corp., N.A. 35,000 1,883
Wells Fargo & Co. 11,900 3,656
----------------------------------------------------------------------
41,718
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
HEALTH CARE--5.9%
American Home Products Corp. 30,000 $ 2,096
Bristol-Myers Squibb Co. 21,000 1,966
C.R. Bard 91,000 2,724
Glaxo Wellcome, PLC, ADR 80,000 3,655
----------------------------------------------------------------------
10,441
- -----------------------------------------------------------------------------------------------------
TECHNOLOGY--3.5%
Raytheon Co. 61,000 3,412
Xerox Corp. 36,000 2,797
----------------------------------------------------------------------
6,209
- -----------------------------------------------------------------------------------------------------
TRANSPORTATION--1.8%
(a) Federal Express Corp. 46,500 3,118
----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
UTILITIES--3.5%
GTE Corp. 70,000 3,539
Southern Co. 113,700 2,729
----------------------------------------------------------------------
6,268
----------------------------------------------------------------------
TOTAL COMMON STOCKS--82.1%
(Cost: $126,482) 146,181
----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Principal
amount Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(b)MONEY MARKET
INSTRUMENTS--16.8%
Yield--5.50% to 5.76%
Due--December 1997 and January 1998
BAT Capital Corp. $1,000 997
BI Funding, Inc. 2,000 1,997
CIESCO, L.P. 2,000 1,998
Countrywide Funding Corp. 1,000 998
CSW Credit, Inc. 3,000 2,997
Dynamic Funding Corp. 4,000 3,992
FINOVA Capital Corp. 4,100 4,064
GTE Corp. 4,000 3,994
Other 9,000 8,973
---------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--16.8%
(Cost: $30,012) 30,010
---------------------------------------------------------------------
TOTAL INVESTMENTS--98.9%
(Cost: $156,494) 176,191
---------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--1.1% 1,924
---------------------------------------------------------------------
NET ASSETS--100% $178,115
---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) The Fund has entered into exchange-traded S&P 500 Index futures contracts in
order to take advantage of anticipated market conditions and effectively
invest in equities approximately $10,000,000 of money market instruments. As
a result, approximately 87% of the Fund's net assets are effectively
invested in equities. (See Note 6 of the Notes to Financial Statements.)
Based on the cost of investments of $156,494,000 for federal income tax purposes
at November 30, 1997, the gross unrealized appreciation was $20,399,000, the
gross unrealized depreciation was $702,000 and the net unrealized appreciation
on investments was $19,697,000.
See accompanying Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER CONTRARIAN FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Contrarian Fund as of November
30, 1997, the related statements of operations for the eleven months then ended
and changes in net assets for the eleven months then ended and year ended
December 31, 1996, and the financial highlights for each of the fiscal periods
since 1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the two years in the period ended
December 31, 1994 were audited by other auditors whose report dated January 19,
1995 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of November 30, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Contrarian Fund at November 30, 1997, the results of its operations for the
eleven months then ended, the changes in net assets for the eleven months then
ended and year ended December 31, 1996, and the financial highlights for each of
the fiscal periods since 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 20, 1998
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------
ASSETS
- --------------------------------------------------
Investments, at value
(Cost: $156,494) $176,191
- --------------------------------------------------
Cash 1,504
- --------------------------------------------------
Receivable for:
Fund shares sold 471
- --------------------------------------------------
Dividends 321
- --------------------------------------------------
TOTAL ASSETS 178,487
- --------------------------------------------------
- --------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------
Payable for:
Fund shares redeemed 99
- --------------------------------------------------
Management fee 106
- --------------------------------------------------
Distribution services fee 45
- --------------------------------------------------
Administrative services fee 44
- --------------------------------------------------
Custodian and transfer agent fees and
related expenses 75
- --------------------------------------------------
Directors' fees and other 3
- --------------------------------------------------
Total liabilities 372
- --------------------------------------------------
NET ASSETS $178,115
- --------------------------------------------------
- --------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------
Paid-in capital $143,431
- --------------------------------------------------
Undistributed net realized gain on
investments 14,566
- --------------------------------------------------
Net unrealized appreciation on
investments 19,697
- --------------------------------------------------
Undistributed net investment income 421
- --------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $178,115
- --------------------------------------------------
- --------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share
($101,554 DIVIDED BY 4,805 shares
outstanding) $21.13
- --------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of net
asset value or 5.75% of offering
price) $22.42
- --------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($70,645 DIVIDED BY 3,352 shares
outstanding) $21.08
- --------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($5,916 DIVIDED BY 281 shares
outstanding) $21.06
- --------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Eleven months ended November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------
Dividends $ 2,216
- -------------------------------------------------
Interest 1,175
- -------------------------------------------------
Total investment income 3,391
- -------------------------------------------------
Expenses:
Management fee 903
- -------------------------------------------------
Distribution services fee 382
- -------------------------------------------------
Administrative services fee 267
- -------------------------------------------------
Custodian and transfer agent fees and
related expenses 471
- -------------------------------------------------
Professional fees 7
- -------------------------------------------------
Reports to shareholders 41
- -------------------------------------------------
Registration fees 15
- -------------------------------------------------
Directors' fees and other 7
- -------------------------------------------------
Total expenses 2,093
- -------------------------------------------------
NET INVESTMENT INCOME 1,298
- -------------------------------------------------
- -------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -------------------------------------------------
Net realized gain on sales of
investments 12,220
- -------------------------------------------------
Net realized gain from futures
transactions 2,595
- -------------------------------------------------
Net realized gain 14,815
- -------------------------------------------------
Change in net unrealized appreciation
on investments 11,557
- -------------------------------------------------
Net gain on investments 26,372
- -------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $27,670
- -------------------------------------------------
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
<S> <C> <C>
- -----------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------
Net investment income $ 1,298 661
- -----------------------------------------------------------------------
Net realized gain 14,815 5,913
- -----------------------------------------------------------------------
Change in net unrealized appreciation 11,557 1,429
- -----------------------------------------------------------------------
Net increase in net assets resulting
from operations 27,670 8,003
- -----------------------------------------------------------------------
Distribution from net investment
income (963 ) (588 )
- -----------------------------------------------------------------------
Distribution from net realized gain (533 ) (5,627 )
- -----------------------------------------------------------------------
Total dividends to shareholders (1,496 ) (6,215 )
- -----------------------------------------------------------------------
Net increase from capital share
transactions 74,349 50,322
- -----------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 100,523 52,110
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------
Beginning of period 77,592 25,482
- -----------------------------------------------------------------------
END OF PERIOD
(including undistributed net investment
income
of $421 and $85, respectively) $ 178,115 77,592
- -----------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND
Kemper Contrarian Fund (the Fund) is a separate
series of Kemper Value Fund, Inc. (KVF), an
open-end management investment company organized as
a corporation in the state of Maryland. KVF is
authorized to issue 3 billion shares of $.01 par
value common stock.
The Fund currently offers four classes of shares.
Class A shares are sold to investors subject to an
initial sales charge. Class B shares are sold
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares (none sold
through November 30, 1997) are offered to a limited
group of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. Differences in
class expenses will result in the payment of
different per share income dividends by class. All
shares of the Fund have equal rights with respect
to voting, dividends and assets, subject to class
specific preferences.
In 1997, the Fund changed its fiscal year end for
financial reporting and federal income tax purposes
to November 30 from December 31.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES
INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Fixed income securities are valued by using market
quotations, or independent pricing services that
use prices provided by market makers or estimates
of market values obtained from yield data relating
to instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Other securities
and assets are valued at fair value as determined
in good faith by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on money market instruments. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
determined separately for each class by dividing
the Fund's net assets attributable to that class by
the number of shares of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income quarterly
and net realized capital gains at least annually,
which are recorded on the ex-dividend date.
Dividends are determined in accordance with income
tax principles which may treat certain transactions
differently from generally accepted accounting
principles.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES
INVESTMENT MANAGER COMBINATION. Zurich Insurance
Company, the parent of Zurich Kemper Investments,
Inc. (ZKI), has acquired a majority interest in
Scudder, Stevens & Clark, Inc. (Scudder), another
major investment manager. At completion of this
transaction on December 31, 1997, Scudder changed
its name to Scudder Kemper Investments, Inc.
(Scudder Kemper) and the operations of ZKI were
combined with Scudder Kemper. In addition, the
names of the Fund's principal underwriter and
shareholder service agent were changed to Kemper
Distributors, Inc. (KDI) and Kemper Service Company
(KSvC), respectively.
MANAGEMENT AGREEMENT. KVF has a management
agreement with Scudder Kemper. The Fund pays a
management fee at an annual rate of .75% of the
first $250 million of average daily net assets
declining to .62% of average daily net assets in
excess of $12.5 billion. The Fund incurred a
management fee of $903,000 for the eleven months
ended November 30, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
KVF has an underwriting and distribution services
agreement with KDI. Underwriting commissions paid
in connection with the distribution of Class A
shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
RETAINED COMMISSIONS ALLOWED
BY KDI BY KDI TO FIRMS
----------- -------------------
<S> <C> <C>
Eleven months ended
November 30, 1997 $ 90,000 576,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees, CDSC
and commissions related to Class B and Class C
shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Eleven months ended
November 30, 1997 $ 446,000 1,027,000
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. KVF has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets. KDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
Fund accounts the firms service. Administrative
services fees (ASF) paid by the Fund are as
follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID
THE FUND TO KDI BY KDI TO FIRMS
--------------- ---------------
<S> <C> <C>
Eleven months ended
November 30, 1997 $ 267,000 284,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with KVF's transfer agent, KSvC
is the shareholder service agent of the Fund. Under
the agreement, KSvC received shareholder services
fees of $386,000 for the eleven months ended
November 30, 1997.
OFFICERS AND DIRECTORS. Certain officers or
directors of the Fund are also officers or
directors of Scudder Kemper. During the eleven
months ended November 30, 1997, the Fund made no
payments to its officers and incurred directors'
fees of $6,000 to independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS
For the eleven months ended November 30, 1997,
investment transactions (excluding short-term
instruments) are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $141,162
Proceeds from sales 87,949
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS
The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
---------------- ----------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
SHARES SOLD
- ---------------------------------------------------------------------------
Class A 2,547 $49,549 1,915 $32,066
- ---------------------------------------------------------------------------
Class B 2,064 39,824 1,445 24,191
- ---------------------------------------------------------------------------
Class C 212 4,085 156 2,614
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
- ---------------------------------------------------------------------------
Class A 52 1,044 224 3,746
- ---------------------------------------------------------------------------
Class B 19 372 126 2,105
- ---------------------------------------------------------------------------
Class C 1 19 10 166
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHARES REDEEMED
- ---------------------------------------------------------------------------
Class A (623) (12,321) (571) (9,564)
- ---------------------------------------------------------------------------
Class B (361) (7,133) (243) (4,108)
- ---------------------------------------------------------------------------
Class C (55) (1,090) (53) (894)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
CONVERSION OF SHARES
- ---------------------------------------------------------------------------
Class A 58 1,143 11 180
- ---------------------------------------------------------------------------
Class B (58) (1,143) (11) (180)
- ---------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS $74,349 $50,322
- ---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS
The Fund has entered into exchange-traded financial
futures contracts in order to take advantage of
anticipated market conditions and, as such, bears
the risk that arises from owning these contracts.
At the time the Fund enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Fund and the broker as the market value
of the futures contract fluctuates. At November 30,
1997, the market value of assets pledged by the
Fund to cover margin requirements for open futures
positions was $989,000 for the following futures
contracts owned by the Fund.
<TABLE>
<CAPTION>
CONTRACT
TYPE AMOUNT POSITION
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
S&P 500 Index $9,549,000 Long
<CAPTION>
EXPIRATION GAIN AT
TYPE MONTH 11/30/97
<S> <C> <C>
- ---------------------------------------
S&P 500 Index Dec. '97 $292,000
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
ELEVEN MONTHS YEAR ENDED
ENDED DECEMBER 31,
NOVEMBER 30, ------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.93 16.20 12.18 13.62 13.50
- ---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .23 .23 .26 .28 .22
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 4.25 2.07 5.05 (.28) .96
- ---------------------------------------------------------------------------------------
Total from investment operations 4.48 2.30 5.31 -- 1.18
- ---------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income .20 .22 .24 .28 .22
- ---------------------------------------------------------------------------------------
Distribution from net realized gain .08 1.35 1.05 1.16 .84
- ---------------------------------------------------------------------------------------
Total dividends .28 1.57 1.29 1.44 1.06
- ---------------------------------------------------------------------------------------
Net asset value, end of period $ 21.13 16.93 16.20 12.18 13.62
- ---------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.58% 14.42 44.57 (.03) 9.10
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------
Expenses 1.35% 1.23 1.25 1.25 1.25
- ---------------------------------------------------------------------------------------
Net investment income 1.47% 1.56 1.85 1.89 1.64
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------
Expenses 1.35% 1.25 1.66 1.42 1.54
- ---------------------------------------------------------------------------------------
Net investment income 1.47% 1.54 1.44 1.71 1.34
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------ -------------------------------
CLASS B CLASS C
----------------------------------- ------------------------------------
ELEVEN MONTHS SEPT. 11 ELEVEN MONTHS SEPT. 11
ENDED YEAR ENDED TO ENDED YEAR ENDED TO
NOVEMBER 30, DEC. 31, DEC. 31, NOVEMBER 30, DEC. 31, DEC. 31,
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.92 16.20 15.26 16.90 16.20 15.26
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .08 .11 .07 .06 .11 .08
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 4.22 2.07 1.85 4.20 2.05 1.85
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.30 2.18 1.92 4.26 2.16 1.93
- ------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income .06 .11 .07 .02 .11 .08
- ------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .08 1.35 .91 .08 1.35 .91
- ------------------------------------------------------------------------------------------------------------------
Total dividends .14 1.46 .98 .10 1.46 .99
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.08 16.92 16.20 21.06 16.90 16.20
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 25.44% 13.61 12.83 25.26 13.51 12.85
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------
Expenses 2.26% 2.11 2.00 2.47 2.12 1.95
- ------------------------------------------------------------------------------------------------------------------
Net investment income .56% .68 .88 .35 .67 .93
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------
Expenses 2.26% 2.34 2.36 2.47 2.80 2.31
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .56% .45 .52 .35 (.01 ) .57
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
NOVEMBER 30, ----------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $ 178,115 77,592 25,482 12,983 17,157
- -------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 77% 95 30 16 16
- -------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the eleven
months ended November 30, 1997 and the year ended December 31, 1996 were $.0538
and $.0490, respectively.
- --------------------------------------------------------------------------------
NOTE:
Total return does not reflect the effect of any sales charges.
The investment manager waived a portion of its management fee and absorbed
certain operating expenses of the Fund through the period ended December 31,
1996.
22
<PAGE>
- --------------------------------------------------------------------------------
NOTES
23
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS&OFFICERS
LONG-TERM INVESTING IN A SHORT-TERM WORLD-SM-
DIRECTORS
DANIEL PIERCE
Chairman and Director
JAMES E. AKINS
Director
ARTHUR R. GOTTSCHALK
Director
FREDERICK T. KELSEY
Director
FRED B. RENWICK
Director
JOHN B. TINGLEFF
Director
EDMOND D. VILLANI
Director
JOHN G. WEITHERS
Director
OFFICERS
MARK S. CASADY
President
PHILIP J. COLLORA
Vice President,
Secretary and Treasurer
THOMAS H. FORESTER
Vice President
FREDERICK L. GASKIN
Vice President
JERARD R. HARTMAN
Vice President
JONATHAN KAY
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Vice President
THOMAS F. SASSI
Vice President
STEVEN T. STOKES
Vice President
LINDA J. WONDRACK
Vice President
JOHN R. HEBBLE
Assistant Treasurer
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
..............................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
..............................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
..............................................................................
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
..............................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60601
..............................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL
60606
www.kemper.com
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KCF - 2 (1/98) 1041980
