<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1998.
1933 ACT REGISTRATION NO. 33-18477
1940 ACT REGISTRATION NO. 811-5385
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _ [ ]
Post-Effective Amendment No. 21 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 23 [X]
</TABLE>
------------------
KEMPER VALUE FUND, INC.
(Exact name of Registrant as Specified in Charter)
<TABLE>
<S> <C>
222 South Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (312) 537-7000
</TABLE>
Copies to:
<TABLE>
<C> <C>
Philip J. Collora, Vice President and Secretary Cathy G. O'Kelly
Kemper Value Fund, Inc. David A. Sturms
222 South Riverside Plaza Vedder, Price, Kaufman & Kammholz
Chicago, Illinois 60606 222 North LaSalle Street
(Name and Address Chicago, Illinois 60601
of Agent for Service)
</TABLE>
It is proposed that this filing will become effective (check appropriate
box)
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
X on April 1, 1998 pursuant to paragraph (a)(1)
____
____ 75 days after filing pursuant to paragraph (a)(2)
____ on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
================================================================================
<PAGE> 2
KEMPER VALUE FUND, INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEMS REQUIRED
BY FORM N-1A LOCATION
<S> <C> <C>
PART A PROSPECTUS
Item 1. Cover Page.......................... Cover Page
Item 2. Synopsis............................ Summary; Summary of Expenses; Supplement to
Prospectus
Item 3. Condensed Financial Information..... Financial Highlights; Supplement to Prospectus
Item 4. General Description of Registrant... Cover Page; Summary; Investment Objectives, Policies
and Risk Factors
Item 5. Management of the Fund.............. Summary; Investment Manager and Underwriter
Item 5A. Management's Discussion of Fund
Performance......................... Performance
Item 6. Capital Stock and Other
Securities.......................... Summary; Investment Manager and Underwriter; Net
Asset Value; Purchase of Shares; Capital Structure
Item 7. Purchase of Securities Being
Offered............................. Summary; Purchase of Shares
Item 8. Redemption or Repurchase............ Summary; Redemption or Repurchase of Shares
Item 9. Legal Proceedings................... Inapplicable
</TABLE>
<PAGE> 3
KEMPER VALUE FUND, INC.
SUPPLEMENT TO PROSPECTUS
DATED APRIL 1, 1998
CLASS I SHARES
Kemper Contrarian Fund (the "Contrarian Fund"), Kemper-Dreman High Return Equity
Fund (the "High Return Equity Fund") and Kemper Small Cap Value Fund (the "Small
Cap Value Fund") (each a "Fund" and collectively, the "Funds") currently offer
four classes of shares to provide investors with different purchasing options.
The Class A, Class B and Class C shares are described in the prospectus; and
Class I shares are described in the prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of Scudder Kemper Investments, Inc.
("Scudder Kemper"), and its affiliates; and (b) the following investment
advisory clients of Scudder Kemper and its investment advisory affiliates that
invest at least $1 million in a Fund: (1) unaffiliated benefit plans, such as
qualified retirement plans (other than individual retirement accounts and
self-directed retirement plans); (2) unaffiliated banks and insurance companies
purchasing for their own accounts; and (3) endowment funds of unaffiliated
non-profit organizations. Class I shares currently are available for purchase
only from Kemper Distributors, Inc., principal underwriter for the Funds. Share
certificates are not available for Class I shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge schedules and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services fee
charged to Class I shares. As a result of the relatively lower expenses for
Class I shares, the level of income dividends per share (as a percentage of net
asset value) and, therefore, the overall investment return, will typically be
higher for Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO EACH FUND)
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
Maximum Sales Charge on Purchases (as a percentage of
offering price)........................................... None
Maximum Sales Charge on Reinvested Dividends................ None
Redemption Fees............................................. None
Exchange Fee................................................ None
Deferred Sales Charge (as a percentage of redemption
proceeds)................................................. None
</TABLE>
<PAGE> 4
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND EQUITY FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
Management Fees............................................. .75% .71% .73%
12b-1 Fees.................................................. None None None
Other Expenses.............................................. .15% .12% .16%
---- ---- ----
Total Operating Expenses.................................... .90% .83% .89%
==== ==== ====
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses Contrarian $9 $29 $50 $111
on a $1,000 investment, assuming High Return $9 $26 $46 $103
(1) 5% annual return and Small Cap Value $9 $28 $49 $110
(2) redemption at the end of each
time period:
</TABLE>
-----------------
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in Class I shares of a Fund will
bear directly or indirectly. See "Investment Manager and Underwriter" in the
prospectus for more information. Since no Class I shares had been issued for the
Contrarian Fund as of the fiscal year end, "Other Expenses" shown above are
estimates for that Fund.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. The
Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
FINANCIAL HIGHLIGHTS
HIGH RETURN EQUITY FUND
<TABLE>
<CAPTION>
JAN. 1 TO YEAR ENDED NOV. 1 TO
NOV. 30, 1997 DECEMBER 31, 1996 DEC. 31, 1995
------------- ----------------- -------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $26.49 21.51 19.90
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .75 .54 .04
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 6.81 5.70 2.03
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 7.56 6.24 2.07
- ---------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .48 .53 .06
- ---------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .06 .73 .40
- ---------------------------------------------------------------------------------------------------------------
Total dividends .54 1.26 .46
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.51 26.49 21.51
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 28.71% 29.36 10.47
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund .83% .88 .47
- ---------------------------------------------------------------------------------------------------------------
Net investment income 2.77% 2.45 1.99
- ---------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .83% .88 .85
- ---------------------------------------------------------------------------------------------------------------
Net investment income 2.77% 2.45 1.61
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
JAN. 1 TO YEAR ENDED NOV. 1
NOV. 30, 1997 DECEMBER 31, 1996 TO DEC. 31, 1995
------------- ----------------- ----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $18.40 14.52 14.25
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .13 .25 --
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 3.55 4.13 1.11
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.68 4.38 1.11
- ------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .07 --
- ------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- .43 .84
- ------------------------------------------------------------------------------------------------------------------
Total dividends -- .50 .84
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $22.08 18.40 14.52
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 20.00% 30.20 8.03
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund .89% .84 .47
- ------------------------------------------------------------------------------------------------------------------
Net investment income .94% 1.34 .28
- ------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .89% .84 .90
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .94% 1.34 (.15)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. The
investment manager waived its management fee and absorbed operating
expenses of the Funds through December 31, 1995. The "Other Ratios to
Average Net Assets" are computed without this expense waiver or
absorption.
For the Small Cap Value Fund, per share data for 1996 were determined
based on average shares outstanding.
No financial information is presented for Class I shares of the Contrarian Fund
since no Class I shares have been issued as of such Fund's fiscal year end. Each
Fund's fiscal year end has been changed from December 31 to November 30.
SPECIAL FEATURES
Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Zurich Money Funds--Zurich Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper and its affiliates and (ii) Class I shares of
any other "Kemper Mutual Fund" listed under "Special Features--Class A
Shares--Combined Purchases" in the prospectus. Conversely, shareholders of
Zurich Money Funds--Zurich Money Market Fund who have purchased shares because
they are participants in tax-exempt retirement plans of Scudder Kemper and its
affiliates may exchange their shares for Class I shares of "Kemper Mutual Funds"
to the extent that they are available through their plan. Exchanges will be made
at the relative net asset values of the shares. Exchanges are subject to the
limitations set forth in the prospectus under "Special Features--Exchange
Privilege--General."
April 1, 1998
DRE-1I (4/98)
3
<PAGE> 6
<TABLE>
<S> <C>
TABLE OF CONTENTS
- ------------------------------------------------
Summary 1
- ------------------------------------------------
Summary of Expenses 2
- ------------------------------------------------
Financial Highlights 5
- ------------------------------------------------
Investments Objectives, Policies and Risk
Factors 10
- ------------------------------------------------
Investment Manager and Underwriter 14
- ------------------------------------------------
Dividends and Taxes 17
- ------------------------------------------------
Net Asset Value 19
- ------------------------------------------------
Purchase of Shares 19
- ------------------------------------------------
Redemption or Repurchase of Shares 25
- ------------------------------------------------
Special Features 29
- ------------------------------------------------
Performance 32
- ------------------------------------------------
Capital Structure 34
- ------------------------------------------------
</TABLE>
This prospectus of the Kemper Value Fund, Inc. ("KVF") contains information
about KVF that you should know before investing and should be retained for
future reference. A Statement of Additional Information dated April 1, 1998, has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. It is available upon request without charge from KVF at the
address or telephone number on this cover or the firm from which this prospectus
was obtained.
KVF'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN A
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
[KEMPER FUNDS LOGO]
KEMPER VALUE
FUND, INC.
PROSPECTUS APRIL 1, 1998
KEMPER VALUE FUND, INC. (FORMERLY NAMED KEMPER-DREMAN FUND, INC.)
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This prospectus describes a choice of three portfolios managed by Scudder Kemper
Investments, Inc.
KEMPER CONTRARIAN FUND
KEMPER-DREMAN HIGH RETURN EQUITY FUND
KEMPER SMALL CAP VALUE FUND
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 7
KEMPER VALUE FUND, INC.
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVES. The Kemper Value Fund, Inc. (formerly named Kemper-Dreman
Fund, Inc.) ("KVF") is an open-end, diversified management investment company.
KVF's three portfolios (each a "Fund" and collectively the "Funds") are covered
in this prospectus and are as follows:
KEMPER CONTRARIAN FUND (the "Contrarian Fund") seeks long-term capital
appreciation with current income as its secondary objective.
KEMPER-DREMAN HIGH RETURN EQUITY FUND (the "High Return Equity Fund") seeks to
achieve a high rate of total return.
KEMPER SMALL CAP VALUE FUND (the "Small Cap Value Fund") seeks long-term capital
appreciation.
RISK FACTORS. There is no assurance that the investment objective of any Fund
will be achieved and investment in each Fund includes risks that vary in kind
and degree depending upon the investment policies of that Fund. The returns and
net asset value of each Fund will fluctuate. The Funds will invest principally
in securities that, in the judgment of the investment manager, are undervalued.
Investment by the Small Cap Value Fund primarily in smaller companies involves
greater risk than investment in larger, more established companies. The High
Return Equity Fund may invest a significant percentage of its total assets in
one or more market sectors, in which case, financial, economic, business and
other developments affecting issuers in that sector may have a greater effect on
the Fund than if it had not concentrated its assets in that sector. The Funds
are authorized to invest in stock index futures and options to buy and sell such
futures. In these investments, the Funds assume the risk that, if the investment
manager's judgment regarding the direction of the securities markets is
incorrect, their investment performance might have been better if they had not
acquired futures contracts. The Funds are authorized to write covered call
options on securities. The High Return Equity and Small Cap Value Funds may
write put options. If the market price of stock subject to a call option rises
above the exercise price of the option, the Funds will lose the opportunity for
further appreciation of that security. In selling a put option, the High Return
Equity and Small Cap Value Funds assume the risk that they might be obligated to
acquire the optioned stock at a price above the current market price. See
"Investment Objectives, Policies and Risk Factors."
PURCHASES AND REDEMPTIONS. KVF provides investors with the option of purchasing
shares in the following ways:
Class A Shares..............
Offered at net asset value plus a maximum sales
charge of 5.75% of the offering price. Reduced sales
charges apply to purchases of $50,000 or more. Class
A shares purchased at net asset value under the Large
Order NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge if redeemed within
one year of purchase and a .50% contingent deferred
sales change if redeemed during the second year of
purchase.
Class B Shares..............
Offered at net asset value, subject to a Rule 12b-1
distribution fee and a contingent deferred sales
charge that declines from 4% to zero on certain
redemptions made within six years of purchase. Class
B shares automatically convert into Class A shares
(which have lower ongoing expenses) six years after
purchase.
Class C Shares..............
Offered at net asset value without an initial sales
charge, but subject to a Rule 12b-1 distribution fee
and a 1% contingent deferred sales charge on
1
<PAGE> 8
redemptions made within one year of purchase. Class C
shares do not convert into another class.
Each class of shares represents interests in the same portfolio of investments
of a Fund. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value, which may be
more or less than original cost, subject to any applicable contingent deferred
sales charge. See "Purchase of Shares" and "Redemption or Repurchase of Shares."
INVESTMENT MANAGER AND UNDERWRITER. Scudder Kemper Investments, Inc. ("Scudder
Kemper") serves as investment manager for each Fund. Scudder Kemper is paid a
monthly investment management fee by each Fund based upon average daily net
assets of that Fund at an annual rate ranging from .75% to .62%. Dreman Value
Management, L.L.C. ("DVM") is a sub-adviser for the High Return Equity Fund and
is paid by Scudder Kemper a fee based upon average daily net assets of the Fund
at an annual rate ranging from .24% to .198%. Kemper Distributors, Inc. ("KDI"),
an affiliate of Scudder Kemper, is principal underwriter and administrator for
each Fund. For Class B shares and Class C shares, KDI receives a Rule 12b-1
distribution fee at an annual rate of .75% of average daily net assets. KDI also
receives the amount of any contingent deferred sales charges paid on the
redemption of shares. Administrative services are provided to shareholders under
an administrative services agreement with KDI. KVF pays an administrative
services fee at an annual rate of up to .25% of average daily net assets of
Class A, B and C shares of the Funds, which KDI pays to various broker-dealer
firms and other service or administrative firms. See "Investment Manager and
Underwriter."
DIVIDENDS. The Contrarian and High Return Equity Funds normally distribute
quarterly dividends of net investment income, and the Small Cap Value Fund
normally distributes annual dividends of net investment income. Each Fund
distributes any net realized capital gains at least annually. Income and capital
gain dividends of a Fund are automatically reinvested in additional shares of
that Fund, without sales charge, unless the shareholder makes a different
election. See "Dividends and Taxes."
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
(APPLICABLE TO ALL FUNDS)(1) ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases (as a
percentage of offering price).................. 5.75%(2) None None
Maximum Sales Charge on Reinvested Dividends..... None None None
Redemption Fees.................................. None None None
Exchange Fee..................................... None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)........................... None(3) 4% during the first 1% during the
year, 3% during the first year
second and third years,
2% during the fourth and
fifth years and 1% in
the sixth year
</TABLE>
- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details. The table does not include the $9.00 quarterly small
account fee. See "Redemption or Repurchase of Shares."
(2) Reduced sales charges apply to purchases of $50,000 or more. See "Purchase
of Shares--Initial Sales Charge Alternative--Class A Shares."
(3) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% the first year and .50% the second year. See "Purchase of
Shares--Initial Sales Charge Alternative--Class A Shares."
2
<PAGE> 9
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND EQUITY FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS A SHARES
Management Fees............................................. .75% .71% .73%
12b-1 Fees.................................................. None None None
Other Expenses.............................................. .60% .51% .59%
----- ----- -----
Total Operating Expenses.................................... 1.35% 1.22% 1.32%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND EQUITY FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS B SHARES
Management Fees............................................. .75% .71% .73%
12b-1 Fees(4)............................................... .75% .75% .75%
Other Expenses.............................................. .76% .66% .86%
----- ----- -----
Total Operating Expenses.................................... 2.26% 2.12% 2.34%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND EQUITY FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS C SHARES
Management Fees............................................. .75% .71% .73%
12b-1 Fees(5)............................................... .75% .75% .75%
Other Expenses.............................................. .97% .64% .76%
----- ----- -----
Total Operating Expenses.................................... 2.47% 2.10% 2.24%
===== ===== =====
</TABLE>
- ---------------
(4) As a result of 12b-1 fees, long-term shareholders may pay more than the
economic equivalent of the maximum initial sales charges permitted by the
National Association of Securities Dealers, although KDI believes that it is
unlikely because of the automatic conversion feature described under
"Purchase of Shares--Deferred Sales Charge Alternative--Class B Shares."
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
You would pay the Contrarian Fund $70 $98 $127 $211
following expenses on a High Return Equity Fund $69 $94 $121 $197
$1,000 investment, Small Cap Value Fund $70 $97 $126 $207
assuming (1) 5% annual
return and (2)
redemption at the end of
each time period:
</TABLE>
3
<PAGE> 10
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES(6)
You would pay the Contrarian Fund $63 $101 $141 $216
following expenses on a High Return Equity Fund $62 $96 $134 $201
$1,000 investment, Small Cap Value Fund $64 $103 $145 $219
assuming (1) 5% annual
return and (2)
redemption at the end of
each time period:
You would pay the Contrarian Fund $23 $71 $121 $216
following expenses on High Return Equity Fund $22 $66 $114 $201
the same investment, Small Cap Value Fund $23 $73 $125 $219
assuming no redemption:
</TABLE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS C SHARES(7)
You would pay the Contrarian Fund $35 $77 $132 $281
following expenses on a High Return Equity Fund $31 $66 $113 $243
$1,000 investment, Small Cap Value Fund $33 $70 $120 $257
assuming (1) 5% annual
return and (2)
redemption at the end of
each time period:
You would pay the Contrarian Fund $25 $77 $132 $281
following expenses on High Return Equity Fund $21 $66 $113 $243
the Small Cap Value Fund $23 $70 $120 $257
same investment,
assuming
no redemption
</TABLE>
- ---------------
(6) Assumes conversion to Class A shares six years after purchase. The
contingent deferred sales charge was applied as follows: 1 year (4%), 3
years (3%), 5 years (2%) and 10 years (0%). See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Class B Shares" for more
information regarding the calculation of the contingent deferred sales
charge.
(7) The contingent deferred sales charge was applied as follows: 1 year (1%), 3
years (0%), 5 years (0%) and 10 years (0%). See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Class C Shares."
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
4
<PAGE> 11
FINANCIAL HIGHLIGHTS
The tables below show financial information for the Funds expressed in terms of
one share outstanding throughout the period. The information in the tables has
been audited by Ernst & Young LLP, independent auditors, except for the
information for the periods ended December 31, 1994 and prior which have been
audited by other independent auditors. The report of Ernst & Young LLP is
contained in KVF's Registration Statement and is available from KVF. The
financial statements contained in the Funds' 1997 Annual Report to Shareholders
are incorporated herein by reference and may be obtained by writing or calling
KVF. Each Fund's fiscal year end has been changed from December 31 to November
30.
CONTRARIAN FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
JAN. 1 TO ------------------------------------------------------------------------------
NOV. 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(A)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period $16.93 16.20 12.18 13.62 13.50 12.38 10.11 11.34 10.55 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .23 .23 .26 .28 .22 .25 .28 .25 .29 .11
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 4.25 2.07 5.05 (.28) .96 1.13 2.38 (.94) 1.60 .54
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.48 2.30 5.31 -- 1.18 1.38 2.66 (.69) 1.89 .65
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net
investment income .20 .22 .24 .28 .22 .26 .28 .26 .29 .10
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gain .08 1.35 1.05 1.16 .84 -- .11 .28 .81 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .28 1.57 1.29 1.44 1.06 .26 .39 .54 1.10 .10
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.13 16.93 16.20 12.18 13.62 13.50 12.38 10.11 11.34 10.55
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.58% 14.42 44.57 (.03) 9.10 11.32 26.53 (6.08) 18.29 6.96
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses absorbed by the Fund 1.35% 1.23 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.34
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.47% 1.56 1.85 1.89 1.64 2.04 2.35 2.46 2.59 2.42
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET
ASSETS (ANNUALIZED)
Expenses 1.35% 1.25 1.66 1.42 1.54 1.53 1.76 1.52 1.67 2.37
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.47% 1.54 1.44 1.71 1.34 1.76 1.84 2.19 2.17 1.39
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 18, 1988 (inception date) to December 31, 1988.
5
<PAGE> 12
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------ ---------------------------------
JAN. 1 TO YEAR ENDED SEPTEMBER 11 TO JAN. 1 TO YEAR ENDED
NOV. 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 NOV. 30, 1997 DECEMBER 31, 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period $16.92 16.20 15.26 16.90 16.20
- --------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .08 .11 .07 .06 .11
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain 4.22 2.07 1.85 4.20 2.05
- --------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 4.30 2.18 1.92 4.26 2.16
- --------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net
investment income .06 .11 .07 .02 .11
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain .08 1.35 .91 .08 1.35
- --------------------------------------------------------------------------------------------------------------------------
Total dividends .14 1.46 .98 .10 1.46
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.08 16.92 16.20 21.06 16.90
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 25.44% 13.61 12.83 25.26 13.51
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses absorbed by the Fund 2.26% 2.11 2.00 2.47 2.12
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .56% .68 .88 .35 .67
- --------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses 2.26% 2.34 2.36 2.47 2.80
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .56% .45 .52 .35 (.01)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
------------------
SEPTEMBER 11 TO
DECEMBER 31, 1995
------------------
<S> <C>
CLASS B AND C SHARES
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period 15.26
- ------------------------------
Income from investment
operations:
Net investment income .08
- ------------------------------
Net realized and unrealized
gain 1.85
- ------------------------------
Total from investment
operations 1.93
- ------------------------------
Less dividends:
Distributions from net
investment income .08
- ------------------------------
Distributions from net
realized gain .91
- ------------------------------
Total dividends .99
- ------------------------------
Net asset value, end of period 16.20
- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.85
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses absorbed by the Fund 1.95
- ------------------------------
Net investment income .93
- ------------------------------
OTHER RATIOS TO AVERAGE NET AS
(ANNUALIZED)
Expenses 2.31
- ------------------------------
Net investment income (loss) .57
- ------------------------------
</TABLE>
ALL CLASSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
JAN. 1 TO -------------------------------------------------------------------- MARCH 18 TO
NOV. 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989 DECEMBER 31, 1988
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of
period (in thousands) $178,115 77,592 25,482 12,983 17,157 14,884 14,292 11,782 9,632 5,889
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(annualized) 77% 95 30 16 16 28 36 37 45 39
- ----------------------------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the period from January 1 to November 30, 1997 and the year
ended December 31, 1996 were $.0538 and $.0490, respectively.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 13
HIGH RETURN EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
JAN. 1, TO ------------------------------------------------------------------------
NOV. 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(A)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $26.52 21.49 15.11 15.50 14.62 12.53 8.85 10.14 11.03 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .54 .39 .26 .25 .21 .24 .31 .34 .39 .25
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 6.89 5.75 6.76 (.39) 1.13 2.21 3.87 (1.21) 1.41 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 7.43 6.14 7.02 (.14) 1.34 2.45 4.18 (.87) 1.80 1.25
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment
income .37 .38 .24 .25 .21 .24 .30 .35 .43 .22
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain .06 .73 .40 -- .25 .12 .20 .07 2.26 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .43 1.11 .64 .25 .46 .36 .50 .42 2.69 .22
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.52 26.52 21.49 15.11 15.50 14.62 12.53 8.85 10.14 11.03
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 28.15% 28.79 46.86 (.99) 9.22 19.80 47.57 (8.63) 18.45 13.04
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses absorbed by the Fund 1.22% 1.21 1.25 1.25 1.25 1.25 1.25 1.25 1.25 .57
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.38% 2.12 1.55 1.58 1.47 1.88 2.52 3.61 3.83 3.75
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses 1.22% 1.21 1.57 1.39 1.56 1.70 2.31 2.38 2.74 3.36
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.38% 2.12 1.23 1.44 1.16 1.43 1.46 2.48 2.34 .96
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 18, 1988 (inception date) to December 31, 1988.
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------- ---------------------------------------------
JAN. 1 TO YEAR ENDED SEPT. 11 TO JAN. 1 TO YEAR ENDED SEPT. 11 TO
NOV. 30, 1997 DEC. 31, 1996 DEC. 31, 1995 NOV. 30, 1997 DEC. 31, 1996 DEC. 31, 1995
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period $26.44 21.47 19.45 26.45 21.48 19.45
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .31 .19 .07 .32 .20 .09
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain 6.84 5.72 2.41 6.83 5.72 2.41
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 7.15 5.91 2.48 7.15 5.92 2.50
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net
investment income .16 .21 .06 .16 .22 .07
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain .06 .73 .40 .06 .73 .40
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .22 .94 .46 .22 .95 .47
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.37 26.44 21.47 33.38 26.45 21.48
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 27.10% 27.63 12.88 27.10 27.66 12.94
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses absorbed by the Fund 2.12% 2.20 2.00 2.10 2.22 1.95
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.48% 1.13 .61 1.50 1.11 .66
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses 2.12% 2.31 2.35 2.10 2.33 2.30
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.48% 1.02 .26 1.50 1.00 .31
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ALL CLASSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
JAN 1 TO ---------------------------------------------------------------------
NOV. 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands) $2,931,721 737,834 98,196 35,005 28,413 14,425 7,238 3,868 3,992
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 5% 10 18 12 14 13 37 204 156
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the period from January 1 to November 30, 1997 and the year
ended December 31, 1996 were $.0501 and $.0513, respectively.
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MARCH 18 TO
DECEMBER 31, 1988
-----------------
<S> <C>
SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands) 2,413
- ---------------------------------------
Portfolio turnover rate (annualized) 107
- ---------------------------------------
</TABLE>
7
<PAGE> 14
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
JAN. 1 TO ----------------------------------------------------------
NOV. 30, 1997 1996(B) 1995 1994 1993 1992(A)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $18.28 14.50 10.85 11.23 11.52 10.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .05 .14 (.02) -- .06 .03
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 3.50 4.14 4.64 .02 .23 1.95
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.55 4.28 4.62 .02 .29 1.98
- -------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment income -- .07 -- -- .06 .03
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain -- .43 .97 .40 .52 .43
- -------------------------------------------------------------------------------------------------------------------------------
Total dividends -- .50 .97 .40 .58 .46
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.83 18.28 14.50 10.85 11.23 11.52
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NET ANNUALIZED) 19.42% 29.60 43.29 .15 2.54 32.51*
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 1.32% 1.31 1.25 1.25 1.25 1.25
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .51% .87 (.16) (.03) .53 .81
- -------------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.32% 1.47 1.83 1.82 2.09 4.29
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .51% .71 (.74) (.61) (.32) (2.24)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) For the period May 22, 1992 (commencement of operations) to December 31,
1992.
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------- ---------------------------------
JAN. 1 TO YEAR ENDED SEPT. 11 TO JAN. 1 TO YEAR ENDED
NOV. 30, 1997 DEC. 31, 1996(B) DEC. 31, 1995 NOV. 30, 1997 DEC. 31, 1996(B)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B AND C SHARES
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period $18.14 14.48 15.75 18.17 14.48
- ---------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (.04) .01 (.02) (.03) .01
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 3.36 4.11 (.41) 3.37 4.14
- ---------------------------------------------------------------------------------------------------------------------
Total from investment
operations 3.32 4.12 (.43) 3.34 4.15
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net
investment income -- .03 -- -- .03
- ---------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain -- .43 .84 -- .43
- ---------------------------------------------------------------------------------------------------------------------
Total dividends -- .46 .84 -- .46
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $21.46 18.14 14.48 21.51 18.17
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.30% 28.54 (2.52) 18.38 28.77
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses absorbed by the Fund 2.34% 2.12 2.00 2.24 2.06
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.51)% .06 (.99) (.41) .12
- ---------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses 2.34% 2.49 2.39 2.24 2.19
- ---------------------------------------------------------------------------------------------------------------------
Net investment loss (.51)% (.31) (1.38) (.41) (.01)
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
----------------
SEPT. 11 TO
DEC. 31, 1995
----------------
<S> <C>
CLASS B AND C SHARES
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period 15.75
- -----------------------------------------------
Income from investment
operations:
Net investment income (loss) (.02)
- -----------------------------------------------
Net realized and unrealized
gain (loss) (.41)
- -----------------------------------------------
Total from investment
operations (.43)
- -----------------------------------------------
Less dividends:
Distribution from net
investment income --
- -----------------------------------------------
Distributions from net
realized gain .84
- -----------------------------------------------
Total dividends .84
- -----------------------------------------------
Net asset value, end of
period 14.48
- -----------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (2.51)
- -----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
Expenses absorbed by the Fund 1.95
- -----------------------------------------------
Net investment income (loss) (.94)
- -----------------------------------------------
OTHER RATIOS TO AVERAGE NET A
(ANNUALIZED)
Expenses 2.35
- -----------------------------------------------
Net investment loss (1.34)
- -----------------------------------------------
</TABLE>
(b) Per share data for 1996 were determined based on average shares outstanding.
8
<PAGE> 15
ALL CLASSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
JAN. 1 TO ------------------------------------------- MAY 22 TO
NOV. 30, 1997 1996 1995 1994 1993 DECEMBER 31, 1992
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $1,263,144 273,222 31,606 6,931 4,875 2,385
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 83% 23 86 140 79 37
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the period
from January 1 to November 30, 1997 and the year ended December 31, 1996 were
$.0547 and $.0426, respectively.
- --------------------------------------------------------------------------------
NOTES: Total return does not reflect the effect of any sales charges. The
investment manager waived its management fee and absorbed operating
expenses of the Funds through November 11, 1996. The "Other Ratios to
Average Net Assets" are computed without this expense waiver or
absorption.
9
<PAGE> 16
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The following information sets forth each Fund's investment objective and
policies. The investment objective of each Fund may be changed without the
affirmative vote of a majority of the outstanding securities of that Fund. Each
Fund's returns and net asset value will fluctuate and there is no assurance that
any Fund will meet its objective. For a description of how the investment
manager selects specific securities for inclusion in a Fund's portfolio, see
"Additional Investment Information."
Each Fund will invest principally in a diversified portfolio of equity
securities of companies that the investment manager believes to be undervalued.
Securities of a company may be undervalued as a result of overreaction by
investors to unfavorable news about a company, industry or the stock markets in
general or as a result of a market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments affecting the company.
CONTRARIAN FUND. The Contrarian Fund's primary investment objective is to seek
long-term capital appreciation and its secondary objective is to seek current
income. The Fund will invest primarily in common stocks of larger, listed
companies with a record of earnings and dividends, low price-earnings ratios,
reasonable returns on equity, and sound finances which, in the opinion of the
investment manager, have intrinsic value. The Fund may, however, from time to
time, invest in stocks that pay no dividends. It is anticipated that most stocks
purchased will be listed on the New York Stock Exchange, but the Fund may also
purchase securities listed on other securities exchanges and in the
over-the-counter market. The Fund may also invest in preferred stocks,
convertible securities and warrants. The Fund may sell call options on
securities it holds ("covered call options").
HIGH RETURN EQUITY FUND. The High Return Equity Fund's investment objective is
to achieve a high rate of total return. The common stocks held by the Fund will
have the same investment characteristics as those held by the Contrarian Fund.
The Fund generally will invest in common stocks that pay relatively high
dividends, i.e. comparable to the dividend yield of Standard & Poor's 500
Composite Stock Index. In order to enhance its investment return, the Fund may
sell covered call options, and sell put options on securities it may acquire.
The Fund will earn premium income on the sale of these options.
Under normal market conditions, the Fund will invest at least 65% 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 and equity equivalents.
While most investments will be in dividend paying stocks, the Fund may also
acquire stocks that do not pay dividends in anticipation of market appreciation,
future dividends, and when the investment manager believes that it would be
advantageous to write options on such stocks. The Fund will be managed with a
view to achieving a high rate of total return on investors' capital primarily
through appreciation of its common stock holdings, options transactions and by
acquiring and selling stock index futures and options thereon and, to a lesser
extent, through dividend and interest income, all of which, in the investment
manager's judgment, are elements of "total return."
Although the Fund will not invest 25% or more of its total assets in any one
industry, it may, from time to time, invest a significant percentage of its
total assets in one or more market sectors, such as the financial services
sector. The investment manager considers a market sector to be comprised of a
group of industries. If the Fund concentrates its investments in a market
sector, financial, economic, business and other developments affecting issuers
in that sector may have a greater effect on the Fund than if it had not
concentrated its assets in that sector.
SMALL CAP VALUE FUND. The Small Cap Value Fund's investment objective is to seek
long-term capital appreciation. It will invest principally in a diversified
portfolio of equity securities of small companies with market capitalizations
ranging from $100 million to $1 billion that the investment manager believes to
be undervalued.
10
<PAGE> 17
Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in securities of companies whose market capitalizations are
less than $1 billion.
The Fund will invest primarily in common stocks of companies with a record of
earnings, low price-earnings ratios, reasonable returns on equity and sound
finances which, in the opinion of the investment manager, have intrinsic value.
Such securities are generally traded on the New York Stock Exchange, the
American Stock Exchange and in the over-the-counter market. The Fund may also
invest in preferred stocks, convertible securities and warrants. The Fund may
also sell covered call options and put options on securities it may acquire.
ADDITIONAL INVESTMENT INFORMATION. The portfolio turnover rates of each Fund are
listed under "Financial Highlights." A Fund may periodically experience a high
turnover rate (over 100%). The Funds will usually hold stocks acquired for the
long-term and will sell stocks when the investment manager believes that
anticipated price appreciation is no longer probable, alternative investments
offer superior appreciation prospects, or the risk of decline in market prices
is greater than the potential for gain. Portfolio turnover will tend to rise
during periods of economic turbulence and decline during periods of stable
growth. The use of options and futures contracts will tend to increase the
portfolio turnover rate of a Fund. To the extent the investment policies of that
Fund result in a relatively high turnover rate, it will incur greater expenses
and brokerage fees.
SELECTION OF INVESTMENTS. In order to determine whether a security is
"undervalued," the principal factor considered by the investment manager is the
P/E ratio of the security. The investment manager believes that the risk in
owning stocks can be reduced by investing in companies with sound finances whose
current market prices are low in relation to earnings. In determining whether a
company's finances are sound, the investment manager considers among other
things, its cash position and current ratio (current assets compared to current
liabilities).
The investment manager applies quantitative analysis to its research process,
and begins by screening a large number of stocks. Typically, most companies
selected for inclusion in the Contrarian and High Return Equity Funds will have
market capitalizations well in excess of $1 billion and those selected for
inclusion in the Small Cap Value Fund will have market capitalizations ranging
from approximately $100 million to $1 billion. In selecting among stocks with
low P/E ratios, the investment manager also considers factors such as the
following about the issuer:
- Financial strength,
- Book-to-market value,
- Five and ten-year earnings growth rates,
- Five and ten-year dividend growth rates,
- Five and ten-year return on equity,
- Size of institutional ownership, and
- Earnings estimates for the next 12 months.
Fundamental analysis is used on companies that initially look promising.
Earnings and cash flow analysis as well as a company's conventional dividend
payout ratio are important to this process. Typically, the Funds will consist of
approximately 25 to 50 stocks, diversified by both sector and industry,
although, as noted above, the High Return Equity Fund may, from time to time,
concentrate its assets in one or more market sectors. While it is anticipated
that under normal circumstances all Funds will be fully invested, in order to
conserve assets during temporary defensive periods when the investment manager
deems it appropriate, each Fund may invest up to 50% of its assets in cash or
defensive-type securities, such as high-grade debt securities, securities of the
U.S. Government or its agencies and high quality money market instruments,
including repurchase agreements. Investments in such interest bearing securities
will be for temporary defensive purposes only.
The Funds' policies of investing in securities that may be out of favor differs
from the investment approach followed by many other mutual funds. Companies
reporting poor earnings, whose businesses are cyclically
11
<PAGE> 18
down, whose prices have declined sharply or that are not widely followed are not
typically held by most investment companies. It is the investment manager's
belief, however, that the securities of sound, well-managed companies that may
be temporarily out of favor due to earnings declines or other adverse
developments are likely to provide a greater total investment return than
securities whose prices appear to reflect anticipated favorable developments.
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements, under
which it acquires ownership of a security and the broker-dealer or bank agrees
to repurchase the security at a mutually agreed upon time and 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 have 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. In addition, the Fund must take physical possession of
the security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book-Entry System. Repurchase agreements
will be limited to transactions with financial institutions believed by the
investment manager to present minimal credit risk. The investment manager will
monitor on an on-going basis the creditworthiness of the broker-dealers and
banks with which the Funds may engage in repurchase agreements. Repurchase
agreements maturing in more than seven days will be considered as illiquid for
purposes of the Funds' limitations on illiquid securities. The Funds will not
invest more than 10% of the value of their net assets in illiquid securities.
OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. A Fund may deal in options on
securities and securities indexes that are listed for trading on a national
securities exchange.
Each Fund may write (sell) covered call options on up to 100% of net assets and
each Fund other than the Contrarian Fund may write (sell) secured put options on
up to 50% of net assets.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during or at the end of the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security or
other asset at the exercise price during or at the end of the option period. The
writer of a covered call owns securities or other assets that are acceptable for
escrow and the writer of a secured put invests an amount not less than the
exercise price in eligible securities or other assets to the extent that it is
obligated as a writer. If a call written by a Fund is exercised, the Fund
foregoes any possible profit from an increase in the market price of the
underlying security or other asset over the exercise price plus the premium
received. In writing puts, there is a risk that a Fund may be required to take
delivery of the underlying security or other asset at a disadvantageous price.
A Fund may engage in financial futures transactions. Financial futures contracts
are commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a security,
or the cash value of a securities index during a specified future period at a
specified price. A Fund will "cover" futures contracts sold by the Fund and
maintain in a segregated account certain liquid assets in connection with
futures contracts purchased by the Fund as described under "Investment Policies
and Techniques" in the Statement of Additional Information. A Fund will not
enter into any futures contracts or options on futures contracts if the
aggregate of the contract value of the outstanding futures contracts of the Fund
and futures contracts subject to outstanding options written by the Fund would
exceed 50% of the total assets of the Fund.
The Funds may engage in financial futures transactions and may use index options
as an attempt to hedge against market risks. For example, when the near-term
market view is bearish but the portfolio composition is judged satisfactory for
the longer term, exposure to temporary declines in the market may be reduced by
entering into futures contracts to sell securities or the cash value of a
securities index. Conversely, where the near-term view is bullish, but the Fund
is believed to be well positioned for the longer term with a high cash
12
<PAGE> 19
position, the Fund can hedge against market increases by entering into futures
contracts to buy securities or the cash value of a securities index. In either
case, the use of futures contracts would tend to reduce portfolio turnover and
facilitate the Fund's pursuit of its investment objective.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. For example, if
participants in the futures market elect to close out their contracts rather
than meet margin requirements, distortions in the normal relationship between
the underlying assets and the futures market could result. Price distortions
also could result if investors in futures contracts decide to make or take
delivery of underlying securities or other assets rather than engage in closing
transactions because of the resultant reduction in the liquidity of the futures
market. In addition, because, from the point of view of speculators, margin
requirements in the futures market are less onerous than margin requirements in
the cash market, increased participation by speculators in the futures market
could cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities or other assets and movements in
the prices of futures contracts, a correct forecast of market trends by the
investment manager still may not result in a successful hedging transaction. If
any of these events should occur, a Fund could lose money on the financial
futures contracts and also on the value of its portfolio assets. The costs
incurred in connection with futures transactions could reduce a Fund's return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by a Fund
may expire worthless, in which case a Fund would lose the premium paid therefor.
A Fund may engage in futures transactions only on commodities exchanges or
boards of trade. A Fund will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities which the Fund owns or intends to purchase.
SPECIAL RISK FACTORS--OPTIONS, FUTURES AND OTHER DERIVATIVES. The Statement of
Additional Information contains further information about the characteristics,
risks and possible benefits of options, futures and other derivative
transactions. See "Investment Policies and Techniques" in the Statement of
Additional Information. The principal risks are: (a) possible imperfect
correlation between movements in the prices of options, futures and other
derivatives contracts and movements in the prices of the securities hedged, used
for cover or that the derivatives intended to replicate; (b) lack of assurance
that a liquid secondary market will exist for any particular option, futures or
other derivatives contract at any particular time; (c) the need for additional
skills and techniques beyond those required for normal portfolio management; (d)
losses on futures contracts resulting from market movements not anticipated by
the investment manager; and (e) the possible non-performance of the
counter-party to the derivative contract.
SECURITIES LOANS. The Funds are authorized to lend their portfolio securities to
qualified brokers, dealers, banks and other financial institutions for the
purpose of realizing additional investment income. The Funds do not intend to
loan securities if as a result more than 5% of their respective net assets would
be on loan.
BORROWING. While each Fund is authorized to borrow from banks in amounts not in
excess of 10% of their respective total assets, they do not intend to do so. If,
in the future, they do borrow from banks, they would not purchase additional
securities at any time when such borrowings exceed 5% of their respective net
assets.
SMALL CAP SECURITIES. Investments in securities of companies with small market
capitalizations are generally considered to offer greater opportunity for
appreciation and to involve greater risks of depreciation than securities of
companies with larger market capitalizations. Since the securities of such
companies are not as
13
<PAGE> 20
broadly traded as those of companies with larger market capitalizations, these
securities are often subject to wider and more abrupt fluctuations in market
price.
Among the reasons for the greater price volatility of these securities are the
less certain growth prospects of smaller firms, a lower degree of liquidity in
the markets for such stocks compared to larger capitalization stocks, and the
greater sensitivity of small companies to changing economic conditions. In
addition to exhibiting greater volatility, small company stocks may, to a
degree, fluctuate independently of larger company stocks. Small company stocks
may decline in price as large company stock prices rise, or rise in price as
large company stock prices decline. Investors should therefore expect that the
value of the Small Cap Value Fund's shares may be more volatile than the shares
of a fund that invests in larger capitalization stocks.
DERIVATIVES. In addition to options and financial futures transactions,
consistent with its objective, each Fund may invest in a broad array of
financial instruments and securities in which the value of the instrument or
security is "derived" from the performance of an underlying asset or a
"benchmark" such as a security index or an interest rate ("derivatives").
Derivatives are most often used in an effort to manage investment risk, to
increase or decrease exposure to an asset class or benchmark (as a hedge or to
enhance return), or to create an investment position indirectly (often because
it is more efficient or less costly than direct investment). There is no
guarantee that these results can be achieved through the use of derivatives. The
types of derivatives used by each Fund and the techniques employed by the
investment manager may change over time as new derivatives and strategies are
developed or regulatory changes occur.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345
Park Avenue, New York, New York, is the investment manager of each Fund and
provides each Fund with continuous professional investment supervision. Dreman
Value Management, L.L.C. ("DVM"), Three Harding Road, Red Bank, New Jersey
07701, is the sub-adviser for the High Return Equity Fund. See "High Return
Equity Fund" below for information about DVM. Scudder Kemper is one of the
largest investment managers in the country with more than $200 billion under
management and has been engaged in the management of investment funds for more
than seventy years. Zurich Insurance Company, a leading internationally
recognized provider of insurance and financial services in property/casualty and
life insurance, reinsurance and structured financial solutions as well as asset
management, owns approximately 70% of Scudder Kemper, with the balance owned by
Scudder Kemper's officers and employees.
Responsibility for overall management of KVF rests with its Board of Directors
and officers. Professional investment supervision is provided by Scudder Kemper.
The investment management agreement provides that Scudder Kemper shall act as
each Fund's investment adviser, manage its investments and provide it with
various services and facilities.
Thomas Sassi and Jonathan Kay have been co-managers of the Contrarian Fund since
July 1997 and Frederick L. Gaskin has been a co-manager of the Fund since
September 1997. Mr. Sassi is the lead manager of the Fund. He joined Scudder
Kemper in August 1996. He was a consultant with an unaffiliated investment
consulting firm and an officer of an unaffiliated investment banking firm from
1993 to 1996. Mr. Gaskin joined Scudder Kemper in 1996. From 1993 until 1996,
Mr. Gaskin served as a vice president and portfolio manager for an unaffiliated
investment management firm. He received a B.S. in finance from Appalachian State
University and an M.B.A. from Babcock Graduate School of Management. Mr. Sassi
received a B.B.A. in management and economics and an M.B.A. in Finance from
Hofstra University in New York City, New York. Jonathan Kay joined Scudder
Kemper in 1993 where he has served as a portfolio manager for institutional
accounts. He received a B.A. in economics from the University of Buffalo and an
M.B.A. in Finance from Bernard M. Baruch College in New York City, New York.
David N. Dreman has been the portfolio manager of the High Return Equity Fund
since its inception in 1988. He is the Chairman of DVM, and was associated with
KVF's former investment adviser. Mr. Dreman is a
14
<PAGE> 21
pioneer of the philosophy of contrarian investing (buying what is out of favor)
and a leading proponent of the low P/E investment style. He is a columnist for
FORBES and the author of several books on the value style of investing. He
received a Bachelor of Commerce from the University of Manitoba, Winnipeg,
Manitoba, Canada.
Thomas H. Forester and Steven T. Stokes have been the portfolio co-managers of
the Small Cap Value Fund since July 1997. Mr. Forester has lead responsibility
for the management of the Fund. He joined Scudder Kemper in May 1997. Prior to
joining Scudder Kemper, he served as a senior portfolio manager of an
unaffiliated investment management firm from 1995 to 1997. For the three years
prior to 1995, he was a portfolio manager for another investment management
firm. He received his undergraduate degree at the University of Colorado and an
M.B.A. in finance from Northwestern University. He is a chartered financial
analyst. Mr. Stokes joined Scudder Kemper in April 1996. Prior to joining
Scudder Kemper, he served as a portfolio manager and financial analyst for an
unaffiliated investment management firm from 1986 to 1996. Mr. Stokes received a
B.S. degree in Finance from State University of New York at New Paltz. He is a
chartered financial analyst.
Each Fund pays Scudder Kemper an investment management fee, payable monthly, at
1/12 of the annual rate of .75% of the first $250 million of its average daily
net assets, .72% of average daily net assets between $250 million and $1
billion, .70% of average daily net assets between $1 billion and $2.5 billion,
.68% of average daily net assets between $2.5 billion and $5 billion, .65% of
average daily net assets between $5 billion and $7.5 billion, .64% of average
daily net assets between $7.5 billion and $10 billion, .63% of average daily net
assets between $10 billion and $12.5 billion and .62% of its average daily net
assets over $12.5 billion. To the extent that the management fee paid to Scudder
Kemper is .75%, it is higher than that paid by most other mutual funds.
HIGH RETURN EQUITY FUND. As mentioned above, DVM is a sub-adviser for the High
Return Equity Fund. Under the terms of the sub-advisory agreement between
Scudder Kemper and DVM, DVM manages the investment and reinvestment of the
Fund's assets in accordance with the investment objectives, policies and
limitations and subject to the supervision of Scudder Kemper and the Board of
Directors. DVM was formed in April 1997 and has served as sub-adviser for the
Fund since August 1997. DVM is controlled by David N. Dreman. Scudder Kemper
pays DVM for its services a sub-advisory fee, payable monthly, at the annual
rate of .24% of the first $250 million of the Fund's average daily net assets,
.23% of the average daily net assets between $250 million and $1 billion, .224%
of average daily net assets between $1 billion and $2.5 billion, .218% of
average daily net assets between $2.5 billion and $5 billion, .208% of average
daily net assets between $5 billion and $7.5 billion, .205% of average daily net
assets between $7.5 billion and $10 billion, .202% of average daily net assets
between $10 billion and $12.5 billion and .198% of the Fund's average daily net
assets over $12 billion. In addition, Scudder Kemper has guaranteed to pay a
minimum of $8 million to DVM during each of the calendar years 2000, 2001 and
2002 that DVM serves as sub-adviser.
FUND ACCOUNTING AGENT. Scudder Fund Accounting Corporation ("SFAC"), 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
hereto. Currently, SFAC receives no fee for its services to the Funds; however,
subject to Board approval, at some time in the future SFAC may seek payment for
its services under this agreement.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with KVF, Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois 60606, a wholly owned
subsidiary of Scudder Kemper, is the principal underwriter and distributor of
each Fund's shares and acts as agent of each Fund in the sale of its shares. KDI
bears all its expenses of providing services pursuant to the distribution
agreement, including the payment of any commissions. KDI provides for the
preparation of advertising or sales literature and bears the cost of printing
and mailing prospectuses to persons other than shareholders. KDI bears the cost
of qualifying and maintaining the qualification of the Funds' shares for sale
under the securities laws of the various states and KVF bears the expense of
registering its shares with the
15
<PAGE> 22
Securities and Exchange Commission. KDI may enter into related selling group
agreements with various broker-dealers, including affiliates of KDI, that
provide distribution services to investors. KDI also may provide some of the
distribution services.
CLASS A SHARES. KDI receives no compensation from KVF as principal underwriter
for Class A shares and pays all expenses of distribution of KVF's Class A shares
under the distribution agreement 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 KVF shares.
CLASS B SHARES. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of such Fund attributable to Class B shares. This fee is
accrued daily as an expense of Class B shares. KDI also receives any contingent
deferred sales charges. See "Redemption or Repurchase of Shares-Contingent
Deferred Sales Charge-Class B Shares." KDI currently compensates firms for sales
of Class B shares at a commission rate of 3.75%.
CLASS C SHARES. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of such Fund attributable to Class C shares. This fee is
accrued daily as an expense of Class C shares. KDI currently advances to firms
the first year distribution fee at a rate of .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 .75% of net assets attributable to Class C shares maintained and serviced by
the firm and the fee continues until terminated by KDI or KVF. KDI also receives
any contingent deferred sales charges. See "Redemption or Repurchase of
Shares--Contingent Deferred Charge--Class C Shares."
RULE 12B-1 PLAN. Since the distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the Investment Company Act of 1940, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expenses of distributing its shares. The table below shows amounts paid in
connection with each Fund's Rule 12b-1 Plan during the period January 1, 1997
through November 30, 1997.
<TABLE>
<CAPTION>
DISTRIBUTION FEES CONTINGENT DEFERRED
DISTRIBUTION EXPENSES PAID BY FUND SALES CHARGE PAID
INCURRED BY UNDERWRITER TO UNDERWRITER TO UNDERWRITER
-------------------------- ---------------------- --------------------
FUND CLASS B CLASS C CLASS B CLASS C CLASS B CLASS C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Contrarian................. $ 1,552,000 104,000 353,000 29,000 62,000 2,000
High Return Equity......... $43,649,000 3,515,000 5,477,000 901,000 817,000 31,000
Small Cap Value............ $14,136,000 1,560,000 1,716,000 392,000 221,000 22,000
</TABLE>
If the Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of KVF to make payments to KDI pursuant to the Plan will cease
and KVF will not be required to make any payments past the termination date.
Thus, there is no legal obligation for KVF to pay any expenses incurred by KDI
in excess of its fees under the Plan, if for any reason the Plan is terminated
in accordance with its terms. Future fees under the Plan may or may not be
sufficient to reimburse KDI for its expenses incurred.
ADMINISTRATIVE SERVICES. KDI also provides information and administrative
services for shareholders of KVF pursuant to an administrative services
agreement ("administrative agreement"). KDI may enter 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 investors in KVF. Such administrative 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 each Fund and its special features, and such other
administrative services as may be agreed upon from time to time and permitted by
applicable
16
<PAGE> 23
statute, rule or regulation. KDI bears all its expenses of providing services
pursuant to the administrative agreement, including the payment of any service
fees. For services under the administrative agreement, KVF pays KDI a fee,
payable monthly, at an annual rate of up to .25% of average daily net assets of
Class A, B and C shares of each Fund. KDI then pays each firm a service fee,
normally payable quarterly, at an annual rate of up to .25% of net assets of
each class of those accounts that it maintains and services for KVF. Firms to
which service fees may be paid include affiliates of KDI.
CLASS A SHARES. For Class A shares, a firm becomes eligible for the service fee
based upon assets in the accounts in the month following the month of purchase
and the fee continues until terminated by KDI or KVF. The fees are calculated
monthly and normally paid quarterly.
CLASS B AND CLASS C SHARES. KDI currently advances to firms the first-year
service fee at a rate of up to .25% of the purchase price of such shares. For
periods after the first year, KDI currently intends to pay firms a service fee
at a rate of up to .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 KVF.
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 KVF. Currently, the
administrative services fee payable to KDI is based only upon KVF assets in
accounts for which a firm provides administrative services and it is intended
that KDI will pay all the administrative services fee that it receives from KVF
to firms in the form of service fees. The effective administrative services fee
rate to be charged against all assets of KVF while this procedure is in effect
will depend upon the proportion of Fund assets that is in accounts for which a
firm provides administrative services as well as, with respect to Class A
shares, the date when shares representing such assets were purchased. In
addition, KDI may, from time to time, from its own resources pay certain firms
additional amounts for ongoing administrative services and assistance provided
to their customers and clients who are shareholders of each Fund.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of KVF maintained in the United States. IFTC also is KVF'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 KVF and, as such, performs all of IFTC's duties as transfer
agent and dividend-paying agent. For a description of transfer agent and
shareholder service agent fees, see "Investment Manager and Underwriter" in the
Statement of Additional Information.
PORTFOLIO TRANSACTIONS. Scudder Kemper places all orders for purchases and sales
of a Fund's securities (except that DVM places all orders for the High Return
Equity Fund). Subject to seeking the most favorable net results, they may
consider sales of shares of a Fund and of funds managed by Scudder Kemper or its
affiliates as a factor in selecting broker-dealers. See "Portfolio Transactions"
in the Statement of Additional Information.
DIVIDENDS AND TAXES
DIVIDENDS. The Contrarian and High Return Equity Funds normally distribute
quarterly dividends of net investment income, the Small Cap Value Fund normally
distributes annual dividends of net investment income and each Fund distributes
any net realized short-term and long-term capital gains at least annually.
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.
17
<PAGE> 24
Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
Fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset
value; or
(2) To receive income and capital gain dividends in cash.
Any dividends of a Fund that are reinvested will normally be reinvested in
shares of the same class of that same Fund. However, 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 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 in the aggregate amount of $10
or less are automatically reinvested in shares of the same 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 Internal Revenue Code (the "Code") and, if so
qualified, will not be liable for federal income taxes to the extent its
earnings are distributed. Dividends derived from net investment income and net
short-term capital gains are taxable to shareholders as ordinary income and
long-term capital gain dividends are taxable to shareholders as long-term
capital gain regardless of how long the shares have been held and whether
received in cash or shares. Long-term capital gain dividends received by
individual shareholders are currently taxed at a maximum rate of 20% on gains
realized by a Fund from securities held more than 18 months and at a maximum
rate of 28% on gains realized by a Fund from securities held more than 12 months
but not more than 18 months. Dividends declared in October, November or December
to shareholders of record as of a date in one of those months and paid during
the following January are treated as paid on December 31 of the calendar year
declared. A portion of the dividends paid by a Fund may qualify for the
dividends received deduction available to corporate shareholders.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a
return of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing gains
realized on sales of securities, such dividends would be a return of investment
though taxable as stated above.
Each Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
(IRAs) or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving dividend reinvestment and periodic
investment and redemption programs. Information for income tax purposes 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.
18
<PAGE> 25
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.
NET ASSET VALUE
The net asset value per share of a Fund is determined separately for each class
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The per share net asset value of the
Class B and Class C shares of a Fund will generally be lower than that of the
Class A shares of the Fund because of the higher expenses borne by Class B and
Class C shares. Fund securities that are primarily traded on a domestic
securities exchange or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed or, if there is no recent sale price available, at the last current
bid quotation. A security that is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security by the Board of Directors or its delegates. Securities not so
traded or listed are valued at the last current bid quotation if market
quotations are available. Fixed income securities are valued by using market
quotations, or independent pricing services that use prices provided by market
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Equity options are
valued at the last sale price unless the bid price is higher or the asked price
is lower, in which event such bid or asked price is used. Exchange traded fixed
income options, 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. If an event were to occur,
after the value of a security was so established but before the net asset value
per share was determined, which was likely to materially change the net asset
value, then that security would be valued using fair value determinations by the
Board of Directors or its delegates. On each day the New York Stock Exchange
(the "Exchange") is open for trading, the net asset value is determined as of
the earlier of 3:00 pm. Chicago time or the close of the Exchange.
PURCHASE OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial 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
19
<PAGE> 26
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 Maximum initial sales charge of None Initial sales charge waived or
A.... 5.75% of the public offering reduced for certain purchases
price
Class Maximum contingent deferred sales 0.75% Shares convert to Class A shares
B.... charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class Contingent deferred sales charge 0.75% No conversion feature
C.... of 1% 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
------------------------------------------------------------------
ALLOWED TO
AS A PERCENTAGE DEALERS AS A
AS A PERCENTAGE OF NET ASSET PERCENTAGE OF
OF OFFERING PRICE VALUE* OFFERING PRICE
AMOUNT OF PURCHASE ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $50,000..................................... 5.75% 6.10% 5.20%
$50,000 but less than $100,000........................ 4.50 4.71 4.00
$100,000 but less than $250,000....................... 3.50 3.63 3.00
$250,000 but less than $500,000....................... 2.60 2.67 2.25
$500,000 but less than $1 million..................... 2.00 2.04 1.75
$1 million and over................................... .00** .00** ***
</TABLE>
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
*** Commission is payable by KDI as discussed below.
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<PAGE> 27
Each Fund receives the entire net asset value of all its Class A shares sold.
KDI, the Funds' principal underwriter, retains the sales charge on sales of
Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth in the above table. Upon notice to all dealers with whom it
has sales agreements, KDI may reallow up to the full applicable sales charge, as
shown in the above table, during periods and for transactions specified in such
notice and such reallowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is reallowed, such
dealers may be deemed to be underwriters as that term is defined in the
Securities Act of 1933.
Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which Scudder Kemper or an affiliate does not serve as
investment manager ("non-Kemper fund") provided that: (a) the investor has
previously paid either an initial sales charge in connection with the purchase
of the non-Kemper fund shares redeemed or a contingent deferred sales charge in
connection with the redemption of the non-Kemper fund shares, and (b) the
purchase of Fund shares is made within 90 days after the date of such
redemption. To make such a purchase at net asset value, the investor or the
investor's dealer must, at the time of purchase, submit a request that the
purchase be processed at net asset value pursuant to this privilege. The
redemption of the shares of the non-Kemper fund is, for federal income tax
purposes, a sale upon which a gain or loss may be realized. KDI may in its
discretion compensate firms for sales of Class A shares under this privilege at
a commission rate of .50% of the amount of Class A shares purchased.
Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such Fund or other Kemper Mutual
Funds listed under "Special Features--Class A Shares--Combined Purchases" totals
at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 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, .50% on the next $45 million and .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 under the foregoing schedules, KDI will
consider the cumulative amount invested by the purchaser in a Fund and other
Kemper Mutual Funds listed under "Special Features--Class A Shares--Combined
Purchases," including purchases pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features referred to above. The privilege of
purchasing Class A shares of a Fund at net asset value under the Large Order NAV
Purchase Privilege is not available if another net asset value purchase
privilege also applies.
Effective on February 1, 1996, Class A shares of a Fund or any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be purchased at net asset value in any amount by members of the plaintiff
class in the proceeding known as HOWARD AND AUDREY TABANKIN, ET AL. V. KEMPER
SHORT-TERM GLOBAL INCOME FUND, ET. AL., Case No. 93 C 5231 (N.D.IL). This
privilege is generally non-transferrable and continues for the lifetime of
individual class members and for a ten year period for non-individual class
members. To make a purchase at net asset value under this privilege, the
investor must, at the
21
<PAGE> 28
time of purchase, submit a written request that the purchase be processed at net
asset value pursuant to this privilege specifically identifying the purchaser as
a member of the "Tabankin Class." Shares purchased under this privilege will be
maintained in a separate account that includes only shares purchased under this
privilege. For more details concerning this privilege, class members should
refer to the Notice of (1) Proposed Settlement with Defendants; and (2) Hearing
to Determine Fairness of Proposed Settlement dated August 31, 1995, issued in
connection with the aforementioned court proceeding. For sales of Fund shares at
net asset value pursuant to this privilege, KDI may in its discretion pay
investment dealers and other financial services firms a concession, payable
quarterly, at an annual rate of up to .25% of net assets attributable to such
shares maintained and serviced by the firm. A firm becomes eligible for the
concession based upon assets in accounts attributable to shares purchased under
this privilege in the month after the month of purchase and the concession
continues until terminated by KDI. The privilege of purchasing Class A shares of
the Fund at net asset value under this privilege is not available if another net
asset value purchase privilege also applies.
Class A shares may be sold at net asset value in any amount to: (a) officers,
directors, employees (including retirees) and sales representatives of KVF, 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; (c)
officers, directors, and employees of service agents of KVF; (d) shareholders
who owned shares of KVF on September 8, 1995, and have continuously owned shares
of KVF (or a Kemper Fund acquired by exchange of KVF shares) since that date,
for themselves or members of their families; and (e) 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 KVF 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 a Fund's 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 advisers registered under the Investment Advisers Act of 1940
and other financial services firms that adhere to certain standards established
by KDI, including a requirement that such shares be sold for the benefit of
their clients participating in an investment advisory program under which such
clients pay a fee to the investment advisor or other firm for portfolio
management and other services. Such shares are sold for investment purposes and
on the condition that they will not be resold except through redemption or
repurchase by KVF. KVF 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.
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 .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.
22
<PAGE> 29
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by KVF 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. 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 KVF 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 redemption
of Class C shares 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 .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 .75% of net assets attributable to Class C
shares maintained and serviced by the firm. KDI is compensated by KVF 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 KVF or any Kemper Mutual Fund 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.
23
<PAGE> 30
GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of KVF for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers, as
described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
KVF.
KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of a Fund sold by the firm under the following conditions: (i) the
purchased shares are held in a Kemper IRA account, (ii) the shares are purchased
as a direct "roll over' of a distribution from a qualified retirement plan
account maintained on a participant subaccount record keeping system provided by
KSVC, (iii) the registered representative placing the trade is a member of
ProStar, a group of persons designated by KDI in acknowledgment of their
dedication to the employee benefit plan area; and (iv) the purchase is not
otherwise subject to a commission.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of KVF. Non-cash compensation includes luxury merchandise and trips to luxury
resorts. In some instances, such discounts, commissions or other incentives will
be offered only to certain firms that sell or are expected to sell during
specified time periods certain minimum amounts of shares of KVF, or other funds
underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other
financial services firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of its business day will be
confirmed at a price based on the net asset value effective on that day ("trade
date"). KVF reserves the right to determine the net asset value more frequently
than once a day if deemed desirable. Dealers and other financial services firms
are obligated to transmit orders promptly. Collection may take significantly
longer for a check drawn on a foreign bank than for a check drawn on a domestic
bank. Therefore, if an order is accompanied by a check drawn on a foreign bank,
funds must normally be collected before shares will be purchased. See "Purchase
and Redemption of Shares" in the Statement of Additional Information.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem KVF's 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
KVF's shares in nominee or street name as agent for and on behalf of their
customers. In such instances, KVF's 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 KVF 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 KVF through the Shareholder Service Agent for these
services. This prospectus should be read in connection with such firms' material
regarding their fees and services.
24
<PAGE> 31
KVF reserves the right to withdraw all or any part of the offering made by this
prospectus and to reject purchase orders. Also, from time to time, KVF may
temporarily suspend the offering of shares of any Fund or class of a Fund 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 Fund or class and to have dividends
reinvested.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require KVF to redeem his or her shares. When
shares are held for the account of a shareholder by KVF's 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 KVF 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 KVF 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, KVF 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. KVF 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 KVF or its agents reasonably
believe, based upon reasonable verification procedures, that the telephone
instructions are genuine.
25
<PAGE> 32
THE SHAREHOLDER WILL BEAR THE RISK OF LOSS, including loss resulting from
fraudulent or unauthorized transactions, so long as the reasonable verification
procedures are followed. The verification procedures include recording
instructions, requiring certain identifying information before acting upon
instructions and sending written confirmations.
TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. KVF reserves 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 KVF 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 applicable 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 KVF 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. KVF is not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. KVF currently does 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 KVF were purchased. Shares purchased by
check or through
26
<PAGE> 33
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. KVF
reserves 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 .50% if they
are redeemed during the second year following purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457 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 KVF's Systematic Withdrawal Plan at a maximum of 10% per year
of the net asset value of the account; and (f) redemptions of shares whose
dealer of record at the time of the investment notifies KDI that the dealer
waives the 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.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES
YEAR OF REDEMPTION AFTER PURCHASE CHARGE
--------------------------------- ----------
<S> <C>
First....................................................... 4%
Second...................................................... 3%
Third....................................................... 3%
Fourth...................................................... 2%
Fifth....................................................... 2%
Sixth....................................................... 1%
</TABLE>
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
27
<PAGE> 34
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 in the event of: (a)
redemptions by a participant-directed qualified retirement plan described in
Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457; (b) redemptions by employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent; (c) redemption of shares of a
shareholder (including a registered joint owner) who has died; (d) redemption of
shares of a shareholder (including a registered joint owner) who after purchase
of the shares being redeemed becomes totally disabled (as evidenced by a
determination by the federal Social Security Administration); (e) redemptions
under KVF's Systematic Withdrawal Plan at a maximum of 10% per year of the net
asset value of the account; (f) any participant-directed redemption of shares
held by employer sponsored employee benefit plans maintained on the subaccount
record keeping system made available by the Shareholder Service Agent; and (g)
redemption of shares by an employer sponsored employee benefit plan that offers
funds in addition to Kemper Funds and whose dealer of record has waived the
advance of the first year administrative service and distribution fees
applicable to such shares and agrees to receive such fees quarterly.
CONTINGENT DEFERRED SALES CHARGE--GENERAL. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of a Fund's Class B shares and that 16 months
later the value of the shares has grown by $1,000 through reinvested dividends
and by an additional $1,000 of share appreciation to a total of $12,000. If the
investor were then to redeem the entire $12,000 in share value, the contingent
deferred sales charge would be payable only with respect to $10,000 because
neither the $1,000 of reinvested dividends nor the $1,000 of share appreciation
is subject to the charge. The charge would be at the rate of 3% ($300) because
it was in the second year after the purchase was made.
The rate of the contingent deferred sales charge under the schedule above is
determined by the length of the period of ownership. Investments are tracked on
a monthly basis. The period of ownership for this purpose begins the first day
of the month in which the order for the investment is received. For example, an
investment made in May, 1998 will be eligible for the 3% charge if redeemed on
or after May 1, 1999. In the event no specific order is requested, 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 Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of 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 a
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"), 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, Class B 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
28
<PAGE> 35
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 the same
Fund may be subject to the "wash sale" rules if made within 30 days of the
redemption, resulting in a postponement of the recognition of such loss for
federal income tax purposes. The reinvestment privilege may be terminated or
modified at any time.
SPECIAL FEATURES
CLASS A SHARES--COMBINED PURCHASES. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following funds: Kemper Technology Fund, Kemper Total Return Fund, Kemper Growth
Fund, Kemper Small Capitalization Equity Fund, Kemper Income and Capital
Preservation Fund, Kemper Municipal Bond Fund, Kemper Diversified Income Fund,
Kemper High Yield Series, Kemper U.S. Government Securities Fund, Kemper
International Fund, Kemper State Tax-Free Income Series, Kemper Adjustable Rate
U.S. Government Fund, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper
Target Equity Fund (series are subject to a limited offering period), Kemper
Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund (available only upon
exchange or conversion from Class A shares of another Kemper Mutual Fund),
Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper
Value Fund, Inc., Kemper Value Plus Growth Fund, Kemper Quantitative Equity
Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper Asian Growth Fund, Kemper
Aggressive Growth Fund and Kemper Global/International Series, Inc. ("Kemper
Mutual Funds"). Except as noted below, there is no combined purchase credit for
direct purchases of shares of Zurich Money Funds, Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Investors Municipal
Cash Fund or Investors Cash Trust ("Money Market Funds"), which are not
considered "Kemper Mutual Funds" for purposes hereof. For purposes of the
Combined Purchases feature described above as well as for the Letter of Intent
and Cumulative Discount features described below, employer sponsored employee
benefit plans using the subaccount record keeping system made available through
the Shareholder Service Agent may include: (a) Money Market Funds as "Kemper
Mutual Funds", (b) all classes of shares of any Kemper Mutual Fund and (c) the
value of any other plan investment, such as guaranteed investment contracts and
employer stock, maintained on such subaccount record keeping system.
CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Mutual Funds listed above made by any
purchaser within a 24-month period under a written Letter of Intent ("Letter")
provided by KDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than actually
paid, the appropriate number of escrowed shares are redeemed and the proceeds
used toward satisfaction of the obligation to pay the increased sales charge.
The Letter for an employer sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Mutual Funds held of record as of the initial purchase date under
the Letter as an "accumulation credit" toward the completion of the Letter, but
no price adjustment will be made on such shares. Only investments in Class A
shares are included in this privilege.
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<PAGE> 36
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 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 Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the Offering Period for such
series as described in the applicable prospectus. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, 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 any 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 Kemper Mutual
Fund listed under "Special Features--Class A Shares--Combined Purchases" may be
exchanged for each other at their relative net asset values. Class B shares may
be exchanged without a contingent deferred sales charge being imposed at the
time of exchange. For purposes of the contingent deferred sales charge that may
be imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.
CLASS C SHARES. Class C shares of a Fund and Class C shares of any 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 purposes of the contingent deferred sales charge that may
be imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.
GENERAL. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged thereafter until
they have been owned for 15 days (the "15 Day Hold Policy"). For purposes of
determining whether the 15-Day Hold Policy applies to a particular exchange, the
value of the shares to be exchanged shall be computed by aggregating the value
of shares being exchanged for all accounts under common control, direction 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
30
<PAGE> 37
may be realized, depending upon whether the value of the shares being exchanged
is more or less than the shareholder's adjusted cost basis. 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 Kemper Funds that are eligible 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.
Except as otherwise permitted by applicable regulations, 60 days' prior written
notice of any termination or material change will be provided.
SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of any class of the
shares of a Fund, 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 Kemper Fund. If selected, exchanges will be
made automatically until the privilege is terminated by the shareholder or the
other 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 KVF 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 KVF 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 (minimum $50 and maximum $50,000) from
the shareholder's account at a bank, savings and loan or credit union into the
shareholder's KVF account. By enrolling in Bank Direct Deposit, the shareholder
authorizes KVF 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. KVF may
immediately terminate a shareholder's Plan in the event that any item is unpaid
by the shareholder's financial institution. KVF may terminate or modify this
privilege at any time.
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<PAGE> 38
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 KVF 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.) KVF is not responsible for the efficiency of the employer
or government agency making the payment or any financial institutions
transmitting payments.
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount up to $50,000 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 (and Class A shares purchased under the Large Order NAV Purchase
Privilege and Class C shares in the first year following the purchase) may be
redeemed under a systematic withdrawal plan is 10% of the net asset value of the
account. Shares are redeemed so that the payee will receive payment
approximately the first of the month. Any income and capital gain dividends will
be automatically reinvested at net asset value. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested and fluctuations in the net asset value
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, KVF 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 KVF.
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 IFTC as custodian. This includes
Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE") IRA
accounts and Simplified Employee Pension Plan ("SEP") IRA accounts and
prototype documents.
- - 403(b)(7) Custodial Accounts with IFTC 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 IFTC as custodian describe the current
fees payable to IFTC for its services as custodian. Investors should consult
with their own tax advisers before establishing a retirement plan.
PERFORMANCE
KVF may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return." Performance
information will be computed separately for Class A, Class B and
32
<PAGE> 39
Class C shares. Each of these figures is based upon historical results and is
not representative of the future performance of any class of the Funds.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Standard &
Poor's/Barra Value Index, the Russell 1000 Value Index and the Russell 2000
Value Index. The performance of a Fund may also be compared to the combined
performance of two indexes. The performance of a Fund may also be compared to
the performance of other mutual funds or mutual fund indexes with similar
objectives and policies as reported by independent mutual fund reporting
services such as Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations are based upon changes in net asset value with all dividends
reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as MORNINGSTAR, INC., THE WALL
STREET JOURNAL, MONEY MAGAZINE, FORBES, BARRON'S, FORTUNE, THE CHICAGO TRIBUNE,
USA TODAY, INSTITUTIONAL INVESTOR and REGISTERED REPRESENTATIVE. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the IBC
Financial Data, Inc.'s Money Fund Report(R) or Money Market Insight(R),
reporting services on money market funds. Performance of U.S. Treasury
obligations may be based upon, among other things, various U.S. Treasury bill
indexes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured.
A Fund may depict the historical performance of the securities in which a 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. A Fund may also discuss the relative performance of
growth stocks versus value stocks.
Each Fund's Class A shares are sold at net asset value plus a maximum sales
charge of 5.75% of the offering price. While the maximum sales charge is
normally reflected in the Fund's Class A performance figures, certain total
return calculations may not include such charge and those results would be
reduced if it were included. Class B shares and Class C shares are sold at net
asset value. Redemptions of Class B shares within the first six years after
purchase may be subject to a contingent deferred sales charge that ranges from
4% during the first year to 0% after six years. Redemption of the Class C shares
within the first year after purchase may be subject to a 1% contingent deferred
sales charge. 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.
Each Fund's returns and net asset value will fluctuate. Shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above. Additional
information
33
<PAGE> 40
concerning each Fund's performance appears in the Statement of Additional
Information. Additional information about each Fund's performance also appears
in its Annual Report to Shareholders, which is available without charge from
KVF.
CAPITAL STRUCTURE
KVF was organized as a Maryland corporation in October, 1987 and has an
authorized capitalization of 3,000,000,000 shares of $.01 par value common
stock. In July, 1997, KVF changed its name from Kemper-Dreman Fund, Inc. to
Kemper Value Fund, Inc. In September, 1995, KVF changed its name from Dreman
Mutual Group, Inc. to Kemper-Dreman Fund, Inc. Since KVF may offer multiple
funds, it is known as a "series company." Currently, KVF offers four classes of
shares of each Fund. These are Class A, Class B and Class C shares, as well as
Class I shares, which have different expenses, that may affect performance, and
are available for purchase exclusively by the following investors: (a)
tax-exempt retirement plans of Scudder Kemper and its affiliates; and (b) the
following investment advisory clients of Scudder Kemper and its investment
advisory affiliates that invest at least $1 million in a Fund: (1) unaffiliated
benefit plans, such as qualified retirement plans (other than individual
retirement accounts and self-directed retirement plans); (2) unaffiliated banks
and insurance companies purchasing for their own accounts; and (3) endowment
funds of unaffiliated non-profit organizations. The Board of Directors may
authorize the issuance of additional classes and additional Funds if deemed
desirable, each with its own investment objectives, policies and restrictions.
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 the
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 Board of Directors of KVF may, to the
extent permitted by applicable law, have the right at any time to redeem from
any shareholder, or from all shareholders, all or any part of any series or
class, or of all series or classes, of the shares of KVF.
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 directors, changing fundamental policies
or approving an investment management agreement. KVF will call a meeting of
shareholders, if requested to do so by the holders of at least 10% of KVF's
outstanding shares and, in the case of a meeting called to consider removal of a
director or directors, will assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940. If shares of
more than one Fund are outstanding, shareholders will vote by Fund and not in
the aggregate or by class except when voting in the aggregate is required under
the Investment Company Act of 1940, such as for the election of directors, or
when voting by class is appropriate.
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<PAGE> 41
April 1, 1998
PROSPECTUS
KEMPER EQUITY FUNDS/
VALUE STYLE
Kemper Contrarian Fund
Kemper-Dreman High Return Equity Fund
Kemper Small Cap Value Fund
Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com E-mail [email protected]
Tel (800) 621-1048
[KEMPER FUNDS LOGO] [KEMPER FUNDS LOGO]
[RECYCLED LOGO] Printed on Recycled Paper DRE-1 (4/98) KDI 801196
<PAGE> 42
KEMPER VALUE FUND, INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEMS REQUIRED
BY FORM N-1A LOCATION
-------------- --------
<S> <C> <C>
PART B STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page........................... Cover Page
Item 11. Table of Contents.................... Table of Contents
Item 12. General Information and History...... Cover Page
Item 13. Investment Objectives and Policies... Investment Restrictions; Investment Policies and
Techniques
Item 14. Management of the Fund............... Investment Manager and Underwriter; Officers and
Directors
Item 15. Control Persons and Principal Holders
of Securities........................ Officers and Directors--Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services............................. Investment Manager and Underwriter; Distribution and
Servicing Arrangements
Item 17. Brokerage Allocation and Other
Practices............................ Portfolio Transactions
Item 18. Capital Stock and Other Securities... Dividends and Taxes; Shareholders Rights
Item 19. Purchase, Redemption and Price of
Securities Being Offered............. Purchase and Redemption of Shares
Item 20. Tax Status........................... Dividends and Taxes
Item 21. Underwriters......................... Investment Manager and Underwriter
Item 22. Calculation of Performance Data...... Performance
Item 23. Financial Statements................. Financial Statements
</TABLE>
<PAGE> 43
KEMPER VALUE FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1998
KEMPER CONTRARIAN FUND ("CONTRARIAN FUND")
KEMPER-DREMAN HIGH RETURN EQUITY FUND ("HIGH RETURN EQUITY FUND")
KEMPER SMALL CAP VALUE FUND ("SMALL CAP VALUE FUND")
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for each of the above funds (the "Funds") of
the Kemper Value Fund, Inc. ("KVF"). It should be read in conjunction with the
prospectus of KVF dated April 1, 1998. The prospectus may be obtained without
charge from KVF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Restrictions..................................... B-1
Investment Policies and Techniques.......................... B-2
Portfolio Transactions...................................... B-4
Investment Manager and Underwriter.......................... B-7
Purchase and Redemption of Shares........................... B-12
Dividends and Taxes......................................... B-13
Performance................................................. B-14
Officers and Directors...................................... B-20
</TABLE>
The financial statements appearing in KVF's 1997 Annual Report to Shareholders
are incorporated herein by reference. The financial statements for KVF accompany
this document.
DRE-13 (4/98) (LOGO)printed on recycled paper
<PAGE> 44
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, 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.
A FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any one issuer other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
collectively ("U.S. Government Securities") if immediately thereafter more than
5% of its total assets would be invested in the securities of any one issuer, or
purchase more than 10% of an issuer's outstanding securities, except that up to
25% of each Fund's total assets may be invested without regard to these
limitations.
(2) Borrow money or issue senior securities, except that each Fund may borrow
from banks for temporary purposes in amounts not in excess of 10% of the value
of its total assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets except in connection with any such borrowing in amounts
not in excess of the lesser of the amount borrowed or 10% of the value of its
total assets at the time of such borrowing; provided that the Funds may enter
into futures contracts and related options as described in the prospectus.
Optioned securities are not considered to be pledged for purposes of this
limitation.
(3) Purchase any securities which would cause more than 25% of the value of its
total assets at the time of purchase to be invested in the securities of issuers
conducting their principal activities in the same industry.
(4) Invest more than 10% of the value of its net assets in illiquid securities,
including restricted securities and repurchase agreements with remaining
maturities in excess of seven days, and other securities for which market
quotations are not readily available.
(5) Make loans, except that each Fund may lend securities it owns as described
herein and enter into repurchase agreements pursuant to its investment objective
and policies.
(6) Purchase securities on margin or make short sales of securities, provided
that the Funds may enter into futures contracts and related options and make
initial and variation margin deposits in connection therewith.
(7) Purchase or sell commodities or commodity contracts, except futures
contracts and options thereon as stated in the prospectus, or invest in oil, gas
or mineral exploration or development programs, or in real estate or mortgage
loans provided that the Funds may, to the extent appropriate to their investment
objectives, purchase publicly traded securities of companies engaging in whole
or in part in such activities.
(8) Engage in the business of underwriting securities issued by others, except
that each Fund may acquire securities which are subject to restrictions on
disposition ("restricted securities") within the meaning of the Securities Act
of 1933.
THE FUNDS MAY NOT, AS A NON-FUNDAMENTAL POLICY:
(1) Invest for the purpose of exercising control over management of any company.
(2) Invest its assets in securities of any investment company, except by open
market purchases, including an ordinary broker's commission, or in connection
with a merger, acquisition of assets, consolidation or reorganization, and any
investments in the securities of other investment companies will be in
compliance with the Investment Company Act of 1940.
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<PAGE> 45
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. Each Fund may engage in options and financial futures and other
derivatives transactions in accordance with its respective investment objectives
and policies. Each such Fund intends to engage in such transactions if it
appears to the investment manager to be advantageous to do so in order to pursue
its investment objective and also to hedge against the effects of market risks
but not for speculative purposes. The use of futures and options, and possible
benefits and attendant risks, are discussed below along with information
concerning other investment policies and techniques.
OPTIONS ON SECURITIES. A Fund may write (sell) "covered" call options on
securities as long as it owns the underlying securities subject to the option or
an option to purchase the same underlying securities, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain for the term of the option a segregated account
consisting of cash or other liquid securities ("eligible securities") to the
extent required by applicable regulation in connection with the optioned
securities. A Fund (other than the Contrarian Fund) may write "covered" put
options provided that, as long as the Fund is obligated as a writer of a put
option, the Fund will own an option to sell the underlying securities subject to
the option, having an exercise price equal to or greater than the exercise price
of the "covered" option, or it will deposit and maintain in a segregated account
eligible securities having a value equal to or greater than the exercise price
of the option. A call option gives the purchaser the right to buy, and the
writer the obligation to sell, the underlying security at the exercise price
during or at the end of the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security at
the exercise price during or at the end of the option period. The premium
received for writing an option will reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to such market price, the price volatility of the underlying security, the
option period, supply and demand and interest rates. The Funds may write spread
options, which are options for which the exercise price may be a fixed dollar
spread or yield spread between the security underlying the option and another
security that is used as a bench mark. The exercise price of an option may be
below, equal to or above the current market value of the underlying security at
the time the option is written.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However,
this would be offset in whole or in part by gain from the premium received.
OPTIONS ON SECURITIES INDICES. Each Fund may write call options on securities
indices, and each Fund other than the Contrarian Fund may write put options on
securities indices in an attempt to hedge against market conditions affecting
the value of securities that the Fund owns or intends to purchase, and not for
speculation. Through the writing of index options, a Fund can achieve many of
the same objectives as through the use of options on individual securities.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
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<PAGE> 46
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Unlike security options, all settlements are in cash and gain or loss depends
upon price movements in the market generally (or in a particular industry or
segment of the market), rather than upon price movements in individual
securities. Price movements in securities that the Fund owns or intends to
purchase will probably not correlate perfectly with movements in the level of an
index since the prices of such securities may be affected by somewhat different
factors and, therefore, the Fund bears the risk that a loss on an index option
would not be completely offset by movements in the price of such securities.
When a Fund writes an option on a securities index, it will segregate, and
mark-to-market, eligible securities to the extent required by applicable
regulation. In addition, where the Fund writes a call option on a securities
index at a time when the contract value exceeds the exercise price, the Fund
will segregate and mark-to-market, until the option expires or is closed out,
cash or cash equivalents equal in value to such excess.
A Fund may also deal in options on other appropriate indices as available.
Options on a securities index involve risks similar to those risks relating to
transactions in financial futures contracts described below.
FINANCIAL FUTURES CONTRACTS. The Funds may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security
or the cash value of a securities index. This investment technique is designed
primarily to hedge (i.e., protect) against anticipated future changes in market
conditions which otherwise might affect adversely the value of securities or
other assets which the Fund holds or intends to purchase. A "sale" of a futures
contract means the undertaking of a contractual obligation to deliver the
securities or the cash value of an index called for by the contract at a
specified price during a specified delivery period. A "purchase" of a futures
contract means the undertaking of a contractual obligation to acquire the
securities or cash value of an index at a specified price during a specified
delivery period. In some cases, securities called for by a futures contract may
not have been issued at the time the contract was written.
Although some futures contracts by their terms call for the actual delivery or
acquisition of securities or other assets, in most cases a party will close out
the contractual commitment before delivery of the underlying assets by
purchasing (or selling, as the case may be) on a commodities exchange an
identical futures contract calling for delivery in the same month. Such a
transaction, if effected through a member of an exchange, cancels the obligation
to make or take delivery of the underlying securities or other assets. All
transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded. A
Fund will incur brokerage fees when it purchases or sells contracts, and will be
required to maintain margin deposits. At the time a Fund enters into a futures
contract, it is required to deposit with its custodian, on behalf of the broker,
a specified amount of cash or eligible securities, called "initial margin." The
initial margin required for a futures contract is set by the exchange on which
the contract is traded. Subsequent payments, called "variation margin," to and
from the broker are made on a daily basis as the market price of the futures
contract fluctuates. The costs incurred in connection with futures transactions
could reduce a Fund's return. Futures contracts entail risks. If the investment
manager's judgment about the general direction of markets is wrong, the overall
performance may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures markets are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the
B-3
<PAGE> 47
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities or other
assets and movements in the prices of futures contracts, a correct forecast of
market trends by the investment manager may still not result in a successful
hedging transaction. If any of these events should occur, the Fund could lose
money on the financial futures contracts and also on the value of its portfolio
assets.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. Each Fund may write call options on
financial futures contracts and each Fund other than the Contrarian Fund may
write put options on financial futures contracts. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time during the period of the option. Upon exercise, the writer of the option
delivers the futures contract to the holder at the exercise price. A Fund would
be required to deposit with its custodian initial margin and maintenance margin
with respect to put and call options on futures contracts written by it. A Fund
will establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities." Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above.
LENDING PORTFOLIO SECURITIES. A Fund may lend its portfolio securities to
brokers, dealers and institutional investors who need to borrow securities in
order to complete certain transactions, such as covering short sales, avoiding
failures to deliver securities or completing arbitrage operations. By lending
its securities, a portfolio can increase its income by the receipt of interest
on the loan. Any gain or loss in the market value of the securities loaned that
might occur during the term of the loan would accrue to the Fund. Securities'
loans will be made on terms which require that (a) the borrower pledge and
maintain (on a daily basis) with the Fund collateral consisting of cash, a
letter of credit or United States Government securities having a value at all
times not less than 100% of the value of the securities loaned, (b) the loan can
be terminated by the Fund at any time, (c) the Fund receives reasonable interest
on the loan which may include the Fund's investing any cash collateral in
interest bearing short-term investments), and (d) any distributions on the
loaned securities must be paid to the Fund. The Fund will not lend its
securities if, as a result, the aggregate of such loans exceeds 33% of the value
of the Fund's total assets. Loan arrangements made by a Fund will comply with
all other applicable regulatory requirements, including the rules of the New
York Stock Exchange, which require the borrower, after notice, to redeliver the
securities within the normal settlement time of five business days. All relevant
facts and circumstances, including the credit worthiness of the broker, dealer
or institution, will be considered in making decisions with respect to the
lending of securities, subject to review by KVF's Board of Directors. While
voting rights may pass with the loaned securities, if a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted. KVF does not intend to lend securities of any Fund if as a result more
than 5% of the net assets of the Fund would be on loan.
REGULATORY RESTRICTIONS. To the extent required to comply with applicable
regulation, when purchasing a futures contract or writing a put option, a Fund
will maintain eligible securities in a segregated account. A Fund will use cover
in connection with selling a futures contract.
A Fund will not engage in transactions in financial futures contracts or options
thereon for speculation, but only in an attempt to hedge against changes in
interest rates or market conditions affecting the value of securities that the
Fund holds or intends to purchase.
PORTFOLIO TRANSACTIONS
SCUDDER KEMPER
Allocation of brokerage is supervised by Scudder Kemper Investments, Inc.
("Scudder Kemper").
The primary objective of Scudder Kemper in placing orders for the purchase and
sale of securities for a Fund's portfolio is to obtain the most favorable net
results taking into account such factors as price, commission
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<PAGE> 48
where applicable, size of order, difficulty of execution and skill required of
the executing broker/dealer. Scudder Kemper seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable) through
its familiarity with commissions charged on comparable transactions, as well as
by comparing commissions paid by a Fund to reported commissions paid by others.
Scudder Kemper reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is Scudder Kemper's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
Scudder Kemper is authorized when placing portfolio transactions for a Fund to
pay a brokerage commission in excess of that which another broker might charge
for executing the same transaction solely on account of the receipt of research,
market or statistical information. 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.
In selecting among firms believed to meet the criteria for handling a particular
transaction, Scudder Kemper may give consideration to those firms that have sold
or are selling shares of a Fund managed by Scudder Kemper.
To the maximum extent feasible, it is expected that Scudder Kemper will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of Scudder
Kemper. 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, market and statistical information from
broker/dealers may be useful to a Fund and to Scudder Kemper, it is the opinion
of Scudder Kemper that such information only supplements its own research effort
since the information must still be analyzed, weighed and reviewed by Scudder
Kemper's staff. Such information may be useful to Scudder Kemper in providing
services to clients other than the Funds and not all such information is used by
Scudder Kemper in connection with the Funds. Conversely, such information
provided to Scudder Kemper by broker/dealers through whom other clients of
Scudder Kemper effect securities transactions may be useful to Scudder Kemper in
providing services to a Fund.
The Directors of KVF review from time to time whether the recapture for the
benefit of a Fund of some portion of the brokerage commissions or similar fees
paid by a Fund on portfolio transactions is legally permissible and advisable.
Each Fund's average portfolio turnover rate is the ratio of the lesser of sales
or purchases to the monthly average value of the portfolio securities owned
during the year, excluding all securities with maturities or expiration dates at
the time of acquisition of one year or less. A higher rate involves greater
brokerage transaction expenses to a Fund and may result in the realization of
net capital gains, which would be taxable to shareholders when distributed.
Purchases and sales are made for a Fund's portfolio whenever necessary, in
management's opinion, to meet a Fund's objective.
DVM
Under the sub-advisory agreement between Scudder Kemper and Dreman Value
Management, L.L.C. ("DVM"), DVM places all orders for purchases and sales of the
High Return Equity Fund's securities. At times
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<PAGE> 49
investment decisions may be made to purchase or sell the same investment
securities of the Fund and for one or more of the other clients managed by DVM.
When two or more of such clients are simultaneously engaged in the purchase or
sale of the same security through the same trading facility, the transactions
are allocated as to amount and price in a manner considered equitable to each.
Position limits imposed by national securities exchanges may restrict the number
of options the Fund will be able to write on a particular security.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or future contracts available to the Fund. On the
other hand, the ability of the Fund to participate in volume transactions may
produce better executions for the Fund in some cases. The Board of Directors
believes that the benefits of DVM's organization outweigh any limitations that
may arise from simultaneous transactions or position limitations.
DVM, in effecting purchases and sale of portfolio securities for the account of
the Fund, will implement the Fund's policy of seeking best execution of orders.
DVM may be permitted to pay higher brokerage commissions for research services
as described below. Consistent with this policy, orders for portfolio
transactions are placed with broker-dealer firms giving consideration to the
quality, quantity and nature of each firm's professional services, which include
execution, financial responsibility, responsiveness, clearance procedures, wire
service quotations and statistical and other research information provided to
the Fund and DVM. Subject to seeking best execution of an order, brokerage is
allocated on the basis of all services provided. Any research benefits derived
are available for all clients of DVM. In selecting among firms believed to meet
the criteria for handling a particular transaction, DVM may give consideration
to those firms that have sold or are selling shares of the Fund and of other
funds managed by Scudder Kemper and its affiliates, as well as to those firms
that provide market, statistical and other research information to the Fund and
DVM, although DVM is not authorized to pay higher commissions to firms that
provide such services, except as described below.
DVM may in certain instances be permitted to pay higher brokerage commissions
solely for receipt of market, statistical and other research services as defined
in Section 28(e) of the Securities Exchange Act of 1934 and interpretations
thereunder. Such services may include among other things: economic, industry or
company research reports or investment recommendations; computerized databases;
quotation and execution equipment and software; and research or analytical
computer software and services. Where products or services have a "mixed use," a
good faith effort is made to make a reasonable allocation of the cost of
products or services in accordance with the anticipated research and
non-research uses and the cost attributable to non-research use is paid by DVM
in cash. Subject to Section 28(e) and procedures adopted by the Board of
Directors of KVF, the Fund could pay a firm that provides research services
commissions for effecting a securities transaction for the Fund in excess of the
amount other firms would have charged for the transaction if DVM determines in
good faith that the greater commission is reasonable in relation to the value of
the brokerage and research services provided by the executing firm viewed in
terms either of a particular transaction or DVM's overall responsibilities to
the Fund and other clients. Not all of such research services may be useful or
of value in advising the Fund. Research benefits will be available for all
clients of DVM. The sub-advisory fee paid by Scudder Kemper to DVM is not
reduced because these research services are received.
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<PAGE> 50
BROKERAGE COMMISSIONS
The table below shows total brokerage commissions paid by the Funds for the last
three fiscal periods and for the most recent fiscal period, the percentage
thereof that was allocated to firms based upon research information provided.
<TABLE>
<CAPTION>
ALLOCATED TO FIRMS
BASED ON
RESEARCH IN
FUND FISCAL 1997* FISCAL 1997 FISCAL 1996 FISCAL 1995
---- ------------ ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Contrarian Fund................................. $ 243,000 59% $157,000 $15,000
High Return Equity Fund......................... $1,432,000 25% $489,000 $40,000
Small Cap Value Fund............................ $1,339,000 74% $365,000 $58,000
</TABLE>
* January 1, 1997 -- November 30, 1997.
The increase in the dollar amount of brokerage commissions paid by the Funds
during the 1996 fiscal year was primarily due to the increase in the amount of
assets under management of each Fund.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper, 345 Park Avenue, New York, New York, is the
investment manager of each Fund. Scudder Kemper is approximately 70% owned by
Zurich Insurance Company, a leading internationally recognized provider of
insurance and financial services in property/casualty and life insurance,
reinsurance and structured financial solutions as well as asset management. The
balance of Scudder Kemper is owned by Scudder Kemper's officers and employees.
Pursuant to an investment management agreement, Scudder Kemper acts as the
investment adviser of each Fund, 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 directors or officers of KVF if elected to such
positions. The investment management agreement provides that each Fund pays the
charges and expenses of its operations, including the fees and expenses of the
directors (except those who are affiliates of Scudder Kemper or its affiliates),
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. KVF bears the
expenses of registration of its shares with the Securities and Exchange
Commission, while Kemper Distributors, Inc. ("KDI"), as principal underwriter,
pays the cost of qualifying and maintaining the qualification of each Fund's
shares for sale under the securities laws of the various states.
The investment management agreement provides 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 the agreement.
The Funds' investment management agreement continues in effect from year to year
so long as its continuation is approved at least annually by (a) a majority of
the directors who are not parties to such agreement or interested persons of any
such party except in their capacity as directors of KVF, and (b) by the
shareholders or the Board of Directors of KVF. The 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 each Fund for that Fund, and
will terminate automatically upon assignment.
Pursuant to the terms of an agreement, Scudder, Stevens & Clark, Inc.
("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new global
investment organization by combining Scudder with Zurich Kemper Investments,
Inc. ("ZKI"), a former subsidiary of Zurich and the parent of the former
investment manager to
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<PAGE> 51
the Funds and Scudder changed its name to Scudder Kemper Investments, Inc. As a
result of the transaction, Zurich owns approximately 70% of Scudder Kemper, with
the balance owned by Scudder Kemper's officers and employees.
Because the transaction between Scudder and Zurich resulted in the assignment of
the Funds' investment management agreements with Zurich Kemper Value Advisors,
Inc. ("ZKVA"), a subsidiary of ZKI, the agreements were deemed to be
automatically terminated upon consummation of the transaction. In anticipation
of the transaction, however, new investment management agreements between the
Funds and Scudder Kemper were approved by the Funds' Board of Directors and
shareholders. The new investment management agreements were effective as of
December 31, 1997 and will be in effect for an initial term ending on the same
date as would the previous investment management agreement with ZKVA.
The Funds' investment management agreements are on substantially similar terms
as the investment management agreements terminated by the transaction, except
that Scudder Kemper is the new investment adviser to the Funds.
The current investment management fee rates paid by the Funds are in the
prospectus under "Investment Manager and Underwriter." From August 24, 1995
through November 30, 1997, the Funds paid the former adviser an investment
management fee at the same annual rate as that currently paid by the Funds.
Prior to August 24, 1995, the Funds paid a second former adviser an investment
management fee at the annual rate of 1.00% of average daily net assets of the
Fund up to $1 billion in net assets and .75% thereafter. The table below shows
the total investment management fees paid by the Funds for the last three fiscal
years.
<TABLE>
<CAPTION>
FUND FISCAL 1997* FISCAL 1996 FISCAL 1995
---- ------------ ----------- -----------
<S> <C> <C> <C>
Contrarian Fund............................................. $ 903,000 $ 400,000 $119,000
High Return Equity Fund..................................... $12,084,000 $2,430,000 $369,000
Small Cap Value Fund........................................ $ 5,160,000 $ 943,000 $ 90,000
</TABLE>
- ---------------
*January 1, 1997 -- November 30, 1997.
HIGH RETURN EQUITY FUND SUB-ADVISER. Dreman Value Management, L.L.C. ("DVM"),
Three Harding Road, Red Bank, New Jersey 07701, is the sub-adviser for the High
Return Equity Fund. DVM is controlled by David N. Dreman. DVM serves as
sub-adviser pursuant to the terms of a Sub-Advisory Agreement between it and
Scudder Kemper.
Under the terms of the Sub-Advisory Agreement, DVM manages the investment and
reinvestment of the High Return Equity Fund's portfolio and will provide such
investment advice, research and assistance as Scudder Kemper may, from time to
time, reasonably request. The current sub-advisory fee rates paid by Scudder
Kemper to DVM are in the prospectus under "Investment Manager and Underwriter."
The Sub-Advisory Agreement provides that DVM will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
DVM in the performance of its duties or from reckless disregard by DVM of its
obligations and duties under the Sub-Advisory Agreement.
The Sub-Advisory Agreement remains in effect until December 31, 2002 unless
sooner terminated or not annually approved as described below. Notwithstanding
the foregoing, the Sub-Advisory Agreement shall continue in effect through
December 31, 2002 and year to year thereafter, but only as long as such
continuance is specifically approved at least annually (a) by a majority of the
directors who are not parties to such agreement or interested persons of any
such party except in their capacity as directors of KVF, and (b) by the
shareholders or the Board of Directors of the Fund. The Sub-Advisory Agreement
may be terminated at any time upon 60 days' notice by Scudder Kemper or by the
Board of Directors of KVF or by majority vote of the outstanding shares of the
Fund, and will terminate automatically upon assignment or upon termination of
the Fund's
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investment management agreement. DVM may not terminate the Sub-Advisory
Agreement prior to July 30, 2000. Thereafter, DVM may terminate the Sub-Advisory
Agreement upon 90 days' notice to Scudder Kemper.
FUND ACCOUNTING AGENT. SFAC, 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 an underwriting and distribution services
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), an
affiliate of Scudder Kemper, and a wholly owned subsidiary of Scudder Kemper, is
the principal underwriter and distributor for the shares KVF and acts as agent
of KVF in the continuous offering of its shares. KDI bears all its expenses of
providing services pursuant to the distribution agreement, including the payment
of any commissions. KVF 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.
The distribution agreement continues in effect from year to year so long as such
continuance is approved for each class at least annually by a vote of the Board
of Directors of KVF, including the Directors who are not interested persons of
KVF and who have no direct or indirect financial interest in the agreement. The
agreement automatically terminates in the event of its assignment and may be
terminated for a class at any time without penalty by a Fund for that 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 Directors, or a majority of the Directors
who are not interested persons of KVF and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the class of KVF, as defined under the Investment Company Act of
1940. The agreement may not be amended for a class to increase the fee to be
paid by a Fund with respect to such class without approval by a majority of the
outstanding voting securities of such class of a Fund and all material
amendments must in any event be approved by the Board of Directors in the manner
described above with respect to the continuation of the agreement.
Prior to September 11, 1995, Fund/Plan Broker Services, Inc. ("FBS"), served as
the underwriter of KVF's shares, pursuant to an underwriting agreement which
became effective January 4, 1993. Under the agreement, FBS was the exclusive
agent for KVF's continuous offer of shares. Prior to September 11, 1995, shares
of KVF were offered to the public at net asset value, without a sales load. No
underwriting commissions were associated with sales of Fund shares for the
period January 1, 1995 to September 10, 1995.
CLASS A SHARES. The following information concerns the underwriting commissions
paid in connection with the distribution of Class A shares of the Funds for the
periods noted.
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
COMMISSIONS RETAINED UNDERWRITER PAID TO
FUND FISCAL YEAR BY UNDERWRITER PAID TO ALL FIRMS AFFILIATED FIRMS
---- ----------- -------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Contrarian Fund........................... 1997* $ 90,000 $ 576,000 $ --
1996 $ 65,000 $ 462,000 $ 41,000
1995** $ -- $ 117,000 $ 6,000
High Return Equity Fund................... 1997* $3,113,000 $13,161,000 $221,000
1996 $ 601,000 $ 4,531,000 $356,000
1995** $ -- $ 427,000 $ 52,000
Small Cap Value Fund...................... 1997* $ 584,000 $ 4,828,000 $ 68,000
1996 $ 231,000 $ 1,734,000 $114,000
1995** $ -- $ 178,000 $ 13,000
</TABLE>
- ---------------
*Amounts paid from January 1, 1997 through November 30, 1997.
**Amounts paid from September 11, 1995 through December 31, 1995.
B-9
<PAGE> 53
CLASS B SHARES AND CLASS C SHARES. Since the distribution agreement provides
for fees charged to Class B and Class C shares that are used by KDI to pay for
distribution services (see the prospectus under "Investment Manager and
Underwriter"), the agreement (the "Plan") is approved and renewed separately for
the Class B and Class C shares in accordance with Rule 12b-1 under the
Investment Company Act of 1940, which regulates the manner in which an
investment company may, directly or indirectly, bear expenses of distributing
its shares. Expenses of the Funds and of KDI 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.
<TABLE>
<CAPTION>
TOTAL DISTRIBUTION
DISTRIBUTION FEES PAID
DISTRIBUTION CONTINGENT FEES BY
FEES PAID DEFERRED PAID BY UNDERWRITER
FISCAL BY FUND TO SALES CHARGES UNDERWRITER TO AFFILIATED
FUND CLASS B SHARES YEAR UNDERWRITER TO UNDERWRITER TO FIRMS FIRMS
------------------- ------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Contrarian Fund...... 1997* $ 353,000 62,000 989,000 --
1996 $ 95,000*** 15,000 584,000 15,000
1995** $ 7,000 -- 172,000 12,000
High Return Equity
Fund............... 1997* $5,477,000 817,000 29,872,000 --
1996 $ 750,000*** 127,000 7,215,000 126,000
1995** $ 15,000 1,000 455,000 57,000
Small Cap Value
Fund............... 1997* $1,716,000 221,000 9,907,000 --
1996 $ 191,000*** 52,000 2,299,000 47,000
1995** $ 8,000 1,000 208,000 13,000
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY UNDERWRITER
------------------------------------------------------------
ADVERTISING MARKETING MIS.
AND PROSPECTUS AND SALES OPERATING INTEREST
FUND CLASS B SHARES LITERATURE PRINTING EXPENSES EXPENSES EXPENSE
------------------- ----------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Contrarian Fund...... 96,000 7,000 287,000 7,000 166,000
148,000 9,000 293,000 57,000 74,000
14,000 3,000 34,000 5,000 3,000
High Return Equity
Fund............... 2,812,000 210,000 7,887,000 330,000 2,538,000
1,186,000 75,000 2,455,000 468,000 422,000
35,000 9,000 75,000 13,000 7,000
Small Cap Value
Fund............... 867,000 65,000 2,409,000 78,000 810,000
391,000 25,000 813,000 134,000 156,000
17,000 4,000 39,000 6,000 4,000
</TABLE>
<TABLE>
<CAPTION>
TOTAL DISTRIBUTION
DISTRIBUTION FEES PAID
DISTRIBUTION CONTINGENT FEES BY
FEES PAID DEFERRED PAID BY UNDERWRITER
FISCAL BY FUND TO SALES CHARGES UNDERWRITER TO AFFILIATED
FUND CLASS C SHARES YEAR UNDERWRITER TO UNDERWRITER TO FIRMS FIRMS
------------------- ------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Contrarian Fund...... 1997* $ 29,000 2,000 38,000 --
1996 $ 2,000*** 2,000 15,000 --
1995** $ -- -- -- --
High Return Equity
Fund............... 1997 $901,000 31,000 1,417,000 --
1996 $ 96,000*** 3,000 281,000 --
1995** $ 1,000 -- 1,000 --
Small Cap Value
Fund............... 1997* $392,000 22,000 677,000 --
1996 $ 48,000 1,000 130,000 --
1995** $ 1,000 -- 1,000 --
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY UNDERWRITER
-----------------------------------------------------------
ADVERTISING MARKETING MIS.
AND PROSPECTUS AND SALES OPERATING INTEREST
FUND CLASS C SHARES LITERATURE PRINTING EXPENSES EXPENSES EXPENSE
------------------- ----------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Contrarian Fund...... 12,000 1,000 35,000 9,000 9,000
20,000 1,000 41,000 6,000 3,000
-- 1,000 -- -- --
High Return Equity
Fund............... 565,000 42,000 1,309,000 32,000 150,000
202,000 13,000 237,000 55,000 22,000
5,000 1,000 11,000 2,000 --
Small Cap Value
Fund............... 248,000 19,000 537,000 10,000 69,000
103,000 7,000 136,000 35,000 12,000
4,000 1,000 10,000 2,000 --
</TABLE>
- ---------------
(1) No contingent deferred sales charges have been imposed on Class C shares
purchased prior to April 1, 1996.
* Amounts paid from January 1, 1997 through November 30, 1997.
** Amounts paid from September 11, 1995 through December 31, 1995.
*** Amounts shown are after expense waiver.
ADMINISTRATIVE SERVICES. Administrative services are provided to KVF under an
administrative services agreement ("administrative agreement") with KDI, which
became effective September 11, 1995. KDI bears all its expenses of providing
services pursuant to the administrative agreement between KDI and KVF, including
the payment of service fees. KVF pays KDI an administrative services fee,
payable monthly, at an annual rate of up to .25% of average daily net assets of
the Class A, B and C shares of each Fund.
KDI has entered 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 investors in KVF. The
B-10
<PAGE> 54
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 Funds,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other administrative services as may be
agreed upon from time to time and permitted by applicable statute, rule or
regulation. With respect to Class A shares, KDI pays each firm a service fee,
normally payable quarterly, at an annual rate of up to .25% of the net assets in
the Funds' 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 .25% of the purchase price of such shares. For periods after the
first year, KDI currently intends to pay firms a service fee at a rate of up to
.25% (calculated monthly and normally paid quarterly) of the net assets
attributable to Class B and C shares maintained and serviced by the firm. After
the first year, a firm becomes eligible for the quarterly service fee and the
fee continues until terminated by KDI or KVF. Firms to which service fees may be
paid may include affiliates of KDI.
The following information concerns the administrative services fee paid by each
Fund.
<TABLE>
<CAPTION>
ADMINISTRATIVE SERVICE FEES
PAID BY FUND SERVICE FEES SERVICE FEES
----------------------------------- PAID BY ADMINISTRATOR PAID BY ADMINISTRATOR
FUND FISCAL YEAR CLASS A CLASS B CLASS C TO FIRMS TO AFFILIATED FIRMS
---- ----------- ---------- ---------- -------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Contrarian Fund...... 1997* $ 146,000 111,000 10,000 284,000 --
1996 $ 32,000*** 42,000 3,000 114,000 2,000
1995** $ 5,000 3,000 -- 16,000 1,000
High Return Equity
Fund............... 1997* $1,732,000 1,818,000 299,000 4,879,000 15,000
1996 $ 304,000 293,000 38,000 941,000 19,000
1995** $ 19,000 6,000 -- 41,000 4,000
Small Cap Value...... 1997* $ 936,000 577,000 130,000 2,042,000 5,000
1996 $ 42,000*** 109,000 19,000 351,000 6,000
1995** $ 7,000 3,000 -- 20,000 1,000
</TABLE>
- ---------------
* Amounts paid from January 1, 1997 through November 30, 1997.
** Amounts paid from September 11, 1995 through December 31, 1995.
*** Amounts shown are 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 the Funds. Currently, the
administrative services fee payable to KDI is based only upon KVF assets in
accounts for which a firm provides administrative services and it is intended
that KDI will pay all the administrative services fee that it receives from KVF
to firms in the form of service fees. The effective administrative services fee
rate to be charged against all assets of KVF while this procedure is in effect
will depend upon the proportion of KVF assets that is in accounts for which a
firm of record provides administrative services.
Certain directors or officers of KVF are also directors or officers of Scudder
Kemper or KDI as indicated under "Officers and Directors."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 as sub-custodian, have custody of all securities and cash of
KVF maintained in the United States. They attend to the collection of principal
and income, and payment for and collection of proceeds of securities bought and
sold by KVF. IFTC is also the KVF
B-11
<PAGE> 55
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 the Funds, and as such, performs all of IFTC's
duties as transfer agent and dividend paying agent. IFTC receives as transfer
agent, and pays to KSVC, annual account fees of $6 per account plus account set
up, transaction and maintenance charges, annual fees associated with the
contingent deferred sales charge (Class B shares only) and out-of-pocket expense
reimbursement. IFTC's fee is reduced by certain earnings credits in favor of
KVF. The following shows for each Fund, the shareholder service fees IFTC
remitted to KSVC for the fiscal period from January 1, 1997 through November 30,
1997.
<TABLE>
<CAPTION>
FEES IFTC
PAID TO KSVC
FUND --------------
<S> <C>
Contrarian Fund............................................. $ 386,000
High Return Equity Fund..................................... $4,150,000
Small Cap Value Fund........................................ $2,132,000
</TABLE>
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. KVF's independent auditors,
Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606, audit and
report on KVF annual financial statements, review certain regulatory reports and
KVF's federal income tax returns, and perform other professional accounting,
auditing, tax and advisory services when engaged to do so by KVF. 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 AND REDEMPTION OF SHARES
As described in KVF's prospectus, shares of a Fund are sold at their public
offering price, which is the net asset value per share of the Fund next
determined after an order is received in proper form plus, with respect to Class
A shares, an initial sales charge. The minimum initial investment is $1,000 and
the minimum subsequent investment is $100 but such minimum amounts may be
changed at any time. See the prospectus for certain exceptions to these
minimums. An order for the purchase of shares that is accompanied by a check
drawn on a foreign bank (other than a check drawn on a Canadian bank in U.S.
Dollars) will not be considered in proper form and will not be processed unless
and until KVF determines that it has received payment of the proceeds of the
check. The time required for such a determination will vary and cannot be
determined in advance.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by KVF at the applicable net asset value per
share of such Fund as described in KVF's prospectus.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B shares or Class C shares by certain classes of persons or
through certain types of transactions as described in the prospectus are
provided because of anticipated economies in sales and sales related efforts.
KVF 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 KVF to
determine the value of a Fund's net assets, or (c) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
KVF's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel or ruling by the Internal
Revenue Service or other assurance acceptable to KVF to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares and the
B-12
<PAGE> 56
assessment of the administrative services fee with respect to each Class does
not result in KVF's dividends constituting "preferential dividends" under the
Internal Revenue Code, and (b) that the conversion of Class B shares to Class A
shares does not constitute a taxable event under the Internal Revenue Code. The
conversion of Class B shares to Class A shares may be suspended if such
assurance is not available. In that event, no further conversions of Class B
shares would occur, and shares might continue to be subject to the distribution
services fee for an indefinite period that may extend beyond the proposed
conversion date as described in the prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. The Contrarian and High Return Equity Funds normally distribute
quarterly dividends of net investment income and the Small Cap Value Fund
normally distributes annual dividends of net investment income. Each Fund
distributes any net realized short-term and long-term capital gains at least
annually.
Each Fund may at any time vary the 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 Directors of KVF 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
Kemper Funds as described in the prospectus.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
TAXES. Each Fund intends to continue to qualify 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.
A Fund's options and futures transactions are subject to special tax provisions
that may accelerate or defer recognition of certain gains or losses, change the
character of certain gains or losses, or alter the holding periods of certain of
a Fund's securities.
The mark-to-market rules of the Code may require a Fund to recognize unrealized
gains and losses on certain options, futures and forward contracts held by the
Fund at the end of the fiscal year. Under these provisions, 60% of any capital
gain net income or loss recognized will generally be treated as long-term and
40% as short-term. In addition, the straddle rules of the Code would require
deferral of certain losses realized on positions of a straddle to the extent
that such Fund had unrealized gains in offsetting positions at year end.
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. Each Fund intends to declare or distribute dividends
during the appropriate periods of an amount sufficient to prevent imposition of
the 4% excise tax.
A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of 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. An exchange of a Fund's shares
for shares of another fund is treated as a redemption and reinvestment for
federal
B-13
<PAGE> 57
income tax purposes upon which gain or loss may be recognized. A shareholder who
has redeemed shares of a Fund or other Kemper Mutual Fund listed in the
prospectus under "Special Features--Class A Shares--Combined Purchases" (other
than shares of Kemper Cash Reserves Fund not acquired by exchange from another
Kemper Mutual Fund) may reinvest the amount redeemed at net asset value at the
time of the reinvestment in shares of a Fund or in shares of a Kemper Mutual
Fund within six months of the redemption as described in the prospectus under
"Redemption or Repurchase of Shares--Reinvestment Privilege." If redeemed shares
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. If a shareholder of Class A shares redeems or
otherwise disposes of such Class A shares less than ninety-one days after they
are acquired and subsequently acquires shares of the Fund or of a Kemper Mutual
Fund without payment of any sales charge (or for a reduced sales charge)
pursuant to a reinvestment privilege acquired in connection with the Class A
shares disposed of, then the sales charge on the Class A shares disposed of (to
the extent of the reduction in the sales charge on the shares subsequently
acquired) shall not be taken into account in determining gain or loss on the
Class A shares disposed of, but shall be treated as incurred on the acquisition
of the shares subsequently acquired.
Investment income derived from certain American Depository Receipts may be
subject to foreign income taxes withheld at the source. Because the amount of a
Fund's investments in various countries will change from time to time, it is not
possible to determine the effective rate of such taxes in advance.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, each Fund's historical performance or return for
a class of shares may be shown in the form of "average annual total return" and
"total return" figures. These various measures of performance are described
below. Performance information will be computed separately for each class.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value in the case of Class B 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 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 a Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total return may
also be calculated without adjusting to deduct 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 "Financial Highlights" table in KVF's
financial statements and prospectus. Total return performance for a specific
period is calculated by first taking a hypothetical investment ("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
B-14
<PAGE> 58
value and dividing the remainder by the initial investment and expressing the
result as a percentage. The ending value in the case of Class B shares 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 shares and Class C shares would be reduced if such charge
were included.
A Fund's performance figures are based upon historical results and are not
representative of future performance. A 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 each year
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 the
purchase. 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.
B-15
<PAGE> 59
The figures below show performance information for various periods. Comparative
information for certain indices is also included. Please note the differences
and similarities between the investments which a Fund may purchase and the
investments measured by the applicable indices. The net asset values and returns
of each class of shares of the Funds will also fluctuate. No adjustment has been
made for taxes payable on dividends. The periods indicated were ones of
fluctuating securities prices and interest rates.
CONTRARIAN FUND--NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Initial Capital Gain Income Ending Percentage Ending Percentage Dow Jones
TOTAL $10,000 Income Dividends Value Increase Value Increase Industrial
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Average
TABLE (1) Reinvested (2) (1) (1) (1) (1) (3)
------ ---------- ------------ ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $19,916 $10,861 $5,245 $36,022 260.2% $38,220 282.2% 429.0%
Five Years 14,954 5,176 1,803 21,933 119.3 23,266 132.7 168.0
One Year 10,699 792 262 11,753 17.5 12,473 24.7 22.2
CLASS B SHARES
Life of Fund(++) $13,813 $ 1,817 $ 450 $15,780 57.8% $16,080 60.8% 78.0%
One Year 11,340 840 173 12,053 20.5 12,353 23.5 22.2
CLASS C SHARES
Life of Fund(++) $13,800 $ 1,817 $ 429 $ * *% $16,046 60.5% 78.0%
One Year 11,341 841 153 * * 12,335 23.4 22.2
<CAPTION>
Lipper
Growth
Standard Consumer Russell and U.S.
TOTAL & Poor's Price 1,000(R) Income Treasury
RETURN 500 Index Value Fund Bill
TABLE (4) (5) (6) (7) (8)
------ -------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 389.5% 38.6% 379.63% 308.6% 67.3%
Five Years 150.3 13.7 163.38 129.1 25.8
One Year 28.5 1.8 35.18 23.7 5.2
CLASS B SHARES
Life of Fund(++) 78.1% 5.6% 81.69% 62.3% 10.7%
One Year 28.5 1.8 35.18 23.7 5.2
CLASS C SHARES
Life of Fund(++) 78.1% 5.6% 81.69% 62.3% 10.7%
One Year 28.5 1.8 35.18 23.7 5.2
</TABLE>
<TABLE>
<CAPTION>
Lipper
Growth
AVERAGE Dow Jones Standard Consumer Russell and U.S.
ANNUAL Fund Fund Fund Industrial & Poor's Price 1000(R) Income Treasury
TOTAL RETURN Class A Class B Class C Average 500 Index Value Fund Bill
TABLE Shares Shares Shares (3) (4) (5) (6) (7) (8)
------------ ------- ------- ------- ---------- -------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 14.1% * * 18.7% 17.8% 3.4% 17.45% 15.5 5.4
Life of Fund(++) * 22.8 23.7 29.7 29.7 2.5 29.16 24.4 4.7
Five Years 17.0 * * 21.8 20.1 2.6 21.37 18.0 4.7
One Year 17.5 20.5 23.4 22.2 28.5 1.8 35.18 23.7 5.2
</TABLE>
- ---------------
(+) Since March 18, 1988, except for the Russell 1,000(R) Value which is since
March 31, 1988.
(++) Since September 11, 1995 for Class B and Class C shares, except for the
Russell 1,000(R) Value which is since August 31, 1995.
N/A - Not Available.
B-16
<PAGE> 60
HIGH RETURN EQUITY FUND--NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage Dow Jones
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase Industrial
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Average
TABLE (1) Reinvested (2) (1) (1) (1) (1) (3)
------ ---------- ------------ ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 31,593 11,193 10,649 53,435 434.4 56,694 466.9 429.0
Five Years 21,966 1,167 2,239 25,372 153.7 26,925 169.3 168.0
One Year 11,335 132 406 11,873 18.7 12,598 26.0 22.2
CLASS B SHARES
Life of Fund(++) 17,157 537 617 18,011 80.1 18,311 83.1 78.0
One Year 12,016 140 324 12,180 21.8 12,480 24.8 22.2
CLASS C SHARES
Life of Fund(++) 17,163 537 626 * * 18,326 83.3 78.0
One Year 12,015 140 324 * * 12,479 24.8 22.2
<CAPTION>
Lipper
Standard Consumer S&P/ Equity
TOTAL & Poor's Price Barra's Income
RETURN 500 Index Value Fund
TABLE (4) (5) (9) (12)
------ -------- -------- ------- ------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 389.5 38.6 354.16 281.8
Five Years 150.3 13.7 156.03 121.2
One Year 28.5 1.8 29.99 23.8
CLASS B SHARES
Life of Fund(++) 78.1 5.6 74.70 59.4
One Year 28.5 1.8 29.99 23.8
CLASS C SHARES
Life of Fund(++) 78.1 5.6 74.70 59.4
One Year 28.5 1.8 29.99 23.8
</TABLE>
<TABLE>
<CAPTION>
AVERAGE Standard Consumer S&P/ Lipper
ANNUAL Fund Fund Fund Dow Jones & Poor's Price Barra's Equity
TOTAL RETURN Class A Class B Class C Industrial 500 Index Value Income
TABLE Shares Shares Shares Average(3) (4) (5) (9) Fund(12)
------------ ------- ------- ------- ---------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 18.8 * * 18.7 17.8 3.4 16.79 14.8
Life of Fund(++) * 30.4 31.4 29.7 29.7 2.5 27.01 23.4
Five Years 20.5 * * 21.8 20.1 2.6 20.69 17.2
One Year 18.7 21.8 24.8 22.2 28.5 1.8 29.99 23.8
</TABLE>
- ---------------
(+) Since March 18, 1988, except for the S&P/Barra's Value which is since March
31, 1988.
(++) Since September 11, 1995 for Class B and Class C shares, except for the
S&P/Barra's Value which is since August 31, 1995.
N/A - Not Available.
SMALL CAP VALUE FUND--NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage Dow Jones
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase Industrial
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Average
TABLE (1) Reinvested (2) (1) (1) (1) (1) (3)
------ ---------- ------------ ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 20,574 3,295 1,859 25,728 157.3 27,298 173.0 165.5
Five Year 17,719 2,837 1,601 22,157 23,512 135.1 168.0
One Year 11,053 25 245 11,323 13.2 12,017 20.2 22.2
CLASS B SHARES
Life of Fund(++) 13,625 250 951 14,526 45.3 14,826 48.3 78.0
One Year 11,638 26 237 11,601 16.0 11,901 19.0 22.2
CLASS C SHARES
Life of Fund(++) 13,657 251 953 * * 14,861 48.6 78.0
One Year 11,640 26 237 11,903 19.0 22.2
<CAPTION>
Standard Consumer Russell Lipper Small
TOTAL & Poor's Price 2000(R) Cap
RETURN 500 Index Value Fund
TABLE (4) (5) (10) (11)
------ -------- -------- ------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 164.6 15.6 178.97 127.6
Five Year 150.3 13.7 145.74 105.1
One Year 28.5 1.8 31.69 13.5
CLASS B SHARES
Life of Fund(++) 78.1 5.6 66.94 34.90
One Year 28.5 1.8 31.69 13.5
CLASS C SHARES
Life of Fund(++) 78.1 5.6 66.94 34.90
One Year 28.5 1.8 31.69 13.5
</TABLE>
<TABLE>
<CAPTION>
AVERAGE Lipper
ANNUAL Fund Fund Fund Dow Jones Standard Consumer Russell Small
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price 2000(R) Cap
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Value(10) Fund(11)
------------ ------- ------- ------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 18.6 * * 19.3 19.2 2.7 20.17 16.0
Life of Fund(++) * 18.3 19.5 29.7 29.7 2.5 24.56 14.4
Five Years 17.3 * * 21.8 20.1 2.6 19.70 15.5
One Year 13.2 16.0 19.0 22.2 28.5 1.8 31.69 13.5
</TABLE>
- ---------------
(+) Since May 22, 1992, except for the Lipper Small Company Growth Fund which
is since May 31, 1992.
(++) Since September 11, 1995 for Class B and Class C shares, except for the
Russell 2000 Value which is since August 31, 1995.
N/A - Not Available.
B-17
<PAGE> 61
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 and Class C
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.
(2) Includes short-term capital gain dividends, if any.
(3) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(4) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(5) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(6) The Russell 1000(R) Value Index is an unmanaged index comprised of common
stocks of larger U.S. companies with less than average growth orientation.
Companies in this index generally have low price to book and price-earnings
ratios, higher dividend yields and lower forecasted growth values. Assumes
reinvestment of dividends. Source is Lipper Analytical Services, Inc.
(7) The Lipper Growth and Income Fund Index is a net asset value weighted index
of the performance of the 30 largest growth and income mutual funds tracked
by Lipper Analytical Services, Inc. Performance is based on changes in net
asset value with all dividends reinvested and with no adjustment for sales
charges. Source is Towers Data Systems.
(8) The U.S. Treasury Bill Index is an unmanaged index based on the average
monthly yield of Treasury Bills maturing in 6 months. Source is Towers Data
Systems.
(9) The Standard & Poor's/Barra Value Index is constructed by dividing the
stocks in the S&P 500 Index according to a single attribute: book-to-price
ratio. The Value Index contains firms with higher book-to-price ratios and
is capitalization weighted. Source is Lipper Analytical Services, Inc.
(10) The Russell 2000(R) Value Index is an unmanaged index comprised of
securities in the Russell 2000 Index (small companies) with a less than
average growth orientation. Companies in this index generally have low
price to book and price-earnings ratios. Source is Lipper Analytical
Services, Inc.
(11) The Lipper Small Cap Growth Fund Index is a net asset value weighted index
of the 30 largest small company growth funds. Performance is based on
changes in net asset value with all dividends reinvested and with no
adjustment for sales charges. Source is Towers Data Systems.
(12) The Lipper Equity Income Fund Index is a net asset value weighted index of
the 30 largest equity income funds. Performance is based on changes in net
asset value with all dividends reinvested and with no adjustment for sales
charges. Source is Towers Data Systems.
The following tables illustrate an assumed $10,000 investment in Class A shares
of each Fund, which includes the current maximum sales charge of 5.75%, with
income and capital gain dividends reinvested in additional shares. Each table
covers the period from commencement of operations of the Fund to December 31,
1997.
CONTRARIAN FUND (3/18/88)
<TABLE>
<CAPTION>
-------DIVIDENDS-------- -----CUMULATIVE VALUE OF SHARES ACQUIRED------
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- ---------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1988 $ 132 $ 0 $ 9,925 $ 137 $ 0 $10,062
1989 285 785 10,668 429 806 11,903
1990 277 303 9,512 649 1,019 11,180
1991 307 126 11,645 1,119 1,381 14,145
1992 303 0 12,700 1,542 1,505 15,747
1993 267 1,001 12,812 1,827 2,537 17,176
1994 360 1,483 11,458 1,965 3,748 17,171
1995 473 1,385 15,240 3,130 6,454 24,824
1996 557 1,878 15,956 3,842 8,660 28,458
1997 2,106 1,414 18,540 6,597 11,499 36,636
</TABLE>
B-18
<PAGE> 62
HIGH RETURN EQUITY FUND (3/18/88)
<TABLE>
<CAPTION>
-------DIVIDENDS-------- -----CUMULATIVE VALUE OF SHARES ACQUIRED------
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1988 $ 247 $ 0 $10,376 $ 258 $ 0 $10,634
1989 468 2,331 9,539 687 2,370 12,596
1990 524 0 8,326 1,115 2,069 11,510
1991 387 265 11,786 1,990 3,208 16,984
1992 370 123 13,753 2,722 3,872 20,347
1993 298 345 14,581 3,189 4,453 22,223
1994 352 0 14,214 3,449 4,341 22,004
1995 351 589 20,216 5,317 6,782 32,315
1996 1,261 426 24,995 7,887 8,816 41,698
1997 1,832 1,562 30,895 11,632 12,483 55,010
</TABLE>
SMALL CAP VALUE FUND (5/22/92)
<TABLE>
<CAPTION>
-------DIVIDENDS-------- -----CUMULATIVE VALUE OF SHARES ACQUIRED------
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1992 $ 28 $405 $10,857 $ 29 $ 411 $11,297
1993 58 507 10,584 86 914 11,584
1994 0 416 10,226 83 1,292 11,601
1995 724 326 13,666 864 2,093 16,623
1996 454 118 17,228 1,557 2,759 21,544
1997 295 460 20,056 2,116 3,685 25,857
</TABLE>
* Includes short-term capital gain dividends.
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
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
B-19
<PAGE> 63
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 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's Money Fund Report Averages(R) (All
Taxable). As reported by IBC Financial Data, Inc., 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 ended November 30, 1997 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.
<TABLE>
<CAPTION>
GROWTH & INCOME
FUNDS
CONTRARIAN FUND ---------------
<S> <C>
Five Years................................................ 92 of 235
One Year.................................................. 245 of 608
</TABLE>
The Lipper Growth & Income Funds category includes funds that combine a growth
of earnings orientation and an income requirement for level and/or rising
dividends.
<TABLE>
<CAPTION>
EQUITY INCOME
FUNDS
HIGH RETURN EQUITY FUND -------------
<S> <C>
Five Years................................................ 1 of 60
One Year.................................................. 45 of 178
</TABLE>
The Lipper Equity Income Funds category includes funds that seek relatively high
current income and growth of income through investing 60% or more of its
portfolio in equities.
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUNDS
SMALL CAP VALUE FUND -------------
<S> <C>
One Year.................................................. 255 of 447
Five Years................................................ 47 of 134
</TABLE>
The Lipper Small Company Growth Fund category includes funds that by prospectus
or portfolio practice limit investments to companies on the basis of the size of
the company.
OFFICERS AND DIRECTORS
The officers and directors of KVF, their birthdates, their principal occupations
and their affiliations, if any, with Scudder Kemper Investments, Inc. ("Scudder
Kemper") and Kemper Distributors, Inc. ("KDI"), or their affiliates are listed
below. All persons named as Directors also serve in similar capacities for other
funds advised by Scudder Kemper.
B-20
<PAGE> 64
JAMES E. AKINS (10/15/26), Director, 2904 Garfield Terrace N.W., Washington,
D.C.; Consultant on International, Political and Economic Affairs; formerly, a
career United States Foreign Service Officer; Energy Adviser for the White
House; United States Ambassador to Saudi Arabia, 1973-1976.
ARTHUR R. GOTTSCHALK (2/13/25), Director, 10642 Brookridge Drive, Frankfort,
Illinois; Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; Member, Board of Governors, Heartland
Institute/Illinois; formerly, Illinois State Senator; formerly, Vice President,
the Reuben H. Donnelley Corp.
FREDERICK T. KELSEY (4/25/27), Director, 738 York Court, Northbrook, Illinois;
Retired; formerly, consultant to Goldman, Sachs & Co.; formerly, President,
Treasurer and Trustee of Institutional Liquid Assets and its affiliated mutual
funds; Trustee of the Benchmark Fund and the Pilot Fund.
DANIEL PIERCE (3/18/34), Director*, 345 Park Avenue, New York, New York;
Chairman of the Board and Managing Director, Scudder Kemper; Director, Fiduciary
Trust Company and Fiduciary Company Incorporated.
FRED B. RENWICK (2/1/30), Director, 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director;
TIFF Industrial Program, Inc.; Director, The Wartburg Home Foundation; Chairman,
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment Committee; previously member of the Investment
Committee of Atlanta University Board of Trustees; previously Director of Board
of Pensions Evangelical Lutheran Church in America.
JOHN B. TINGLEFF (5/4/35), Director, 2015 South Lake Shore Drive, Harbor
Springs, Michigan; Retired; formerly, President, Tingleff & Associates
(management consulting firm); formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
EDMOND D. VILLANI (3/4/47), Director*, 345 Park Avenue, New York, New York;
President, Chief Executive Officer and Managing Director, Scudder Kemper.
JOHN G. WEITHERS (8/8/33), Director, 311 Spring Lake, Hinsdale, Illinois;
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company; President of the
Members of the Corporation and Trustee, DePaul University.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
PHILIP J. COLLORA (11/15/45), Vice President, Treasurer and Secretary*, 222
South Riverside Plaza, Chicago, Illinois; Attorney, Scudder Kemper.
JERALD K. HARTMAN (3/1/33), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Scudder Kemper.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
STEVEN T. STOKES (7/18/62), Vice President*, 280 Park Avenue, 40th Floor, New
York, New York; Managing Director, Scudder Kemper.
B-21
<PAGE> 65
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Scudder Kemper; Vice President, KDI.
- ---------------
* "Interested persons" as defined in the Investment Company Act of 1940.
The directors and officers who are "interested persons" as designated above
receive no compensation from KVF. The table below shows amounts from KVF paid or
accrued to those directors who are not designated "interested persons" during
the fiscal period January 1, 1997 through November 30, 1997, except that the
total compensation from the Kemper Fund complex is for the 1997 calendar year.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE FROM KEMPER FUND
COMPENSATION COMPLEX PAID TO
NAME OF BOARD MEMBERS FROM KVF BOARD MEMBERS(2)
--------------------- ------------ ----------------
<S> <C> <C>
James E. Akins.............................................. $13,700 $149,100
Arthur R. Gottschalk(1)..................................... $15,400 $161,200
Frederick T. Kelsey(1)...................................... $13,700 $150,300
Fred B. Renwick............................................. $13,700 $149,200
John B. Tingleff............................................ $13,700 $149,200
John G. Weithers............................................ $13,700 $149,200
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with certain Kemper funds. Deferred amounts accrue
interest monthly at a rate equal to the yield of Zurich Money Funds - Zurich
Money Market Fund. The total deferred amount and interest accrued for the
fiscal period ended November 30, 1997 for KVF is $14,500 for Mr. Gottschalk.
(2) Includes compensation for service on the boards of 13 Kemper funds with 39
fund portfolios. Each board member currently serves as a board member of 14
Kemper Funds with 44 fund portfolios.
As of January 21, 1998, the officers and directors of KVF as a group owned less
than 1% of each Fund.
B-22
<PAGE> 66
PRINCIPAL HOLDERS OF SECURITIES
As of January 21, 1998 the following owned of record more than 5% of the
outstanding stock of the Funds, as set forth below.
CONTRARIAN FUND
<TABLE>
<CAPTION>
NAME & ADDRESS CLASS PERCENTAGE
-------------- ----- ----------
<S> <C> <C>
*NFSC....................................................... B 7.74
1 World Financial Center
200 Liberty St., 4th floor
New York NY 10281-1003
*NFSC....................................................... C 5.30
1 World Financial Center
200 Liberty St., 4th floor
New York NY 10281-1003
*MLPF & S................................................... C 7.46
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville FL 32246
</TABLE>
B-23
<PAGE> 67
HIGH RETURN EQUITY FUND
<TABLE>
<CAPTION>
NAME & ADDRESS CLASS PERCENTAGE
-------------- ----- ----------
<S> <C> <C>
*NFSC....................................................... A 7.38
1 World Financial Center
200 Liberty St., 4th Floor
New York NY 10281-1003
*Donaldson Lufkin Jenrette.................................. A 5.60
Securities Corporation Inc
P.O. Box 2052
Jersey City NJ 07303
*NFSC....................................................... B 10.01
1 World Financial Center
200 Liberty St., 4th Floor
New York NY 10281-1003
*Donaldson Lufkin Jenrette.................................. B 5.59
Securities Corporation Inc.
P.O. Box 2052
Jersey City NJ 07303
*MLPF & S................................................... B 5.48
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville FL 32246
*Raymond James & Assoc Inc.................................. C 5.63
Roy I Frekse IRA
5554 Devonshire Ave
St. Louis MO 63109
*NFSC....................................................... C 7.95
1 World Financial Center
200 Liberty St., 4th Floor
New York NY 10281-1003
*MLPF & S................................................... C 17.16
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville FL 32246
*Donaldson Lufkin Jenrette.................................. C 6.97
Securities Corporation Inc.
P.O. Box 2052
Jersey City NJ 07303
*Scudder Kemper Investments, Inc............................ I 100.00
401(k) Plan
345 Park Ave.
New York NY 10154
</TABLE>
B-24
<PAGE> 68
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
NAME & ADDRESS CLASS PERCENTAGE
-------------- ----- ----------
<S> <C> <C>
*NFSC....................................................... A 6.14
1 World Financial Center
200 Liberty St., 4th Floor
New York NY 10281-1003
*Donaldson Lufkin Jenrette.................................. A 9.97
Securities Corporation Inc.
P.O. Box 2050
Jersey City NJ 07303
*MLPF & S................................................... A 20.55
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville FL 32246
*Donaldson Lufkin Jenrette.................................. B 5.82
Securities Corporation Inc.
P.O. Box 2050
Jersey City NJ 07303
*NFSC....................................................... B 10.00
1 World Financial Center
200 Liberty St., 4th Floor
New York NY 10281-1003
*MLPF & S................................................... B 11.51
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville FL 32246
*Donaldson Lufkin Jenrette.................................. C 7.50
Securities Corporation Inc.
P.O. Box 2052
Jersey City NJ 07303
*NFSC....................................................... C 8.51
1 World Financial Center
200 Liberty St., 4th Floor
New York NY 10281-1003
*MLPS & S................................................... C 28.58
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville FL 32246
*Scudder Kemper Investments, Inc............................ I 100.00
401(k) Plan
345 Park Ave.
New York NY 10154
</TABLE>
- ---------------
* Record owner only.
B-25
<PAGE> 69
- --------------------------------------------------------------------------------
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> 70
- --------------------------------------------------------------------------------
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
----------------------------------------------------------------------
<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> 71
- --------------------------------------------------------------------------------
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> 72
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
(IN THOUSANDS)
<TABLE>
- --------------------------------------------------
ASSETS
- --------------------------------------------------
<S> <C>
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> 73
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Eleven months ended November 30, 1997
(IN THOUSANDS)
<TABLE>
- -------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------
<S> <C>
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> 74
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
- -----------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------
<S> <C> <C>
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> 75
- --------------------------------------------------------------------------------
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> 76
- --------------------------------------------------------------------------------
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> 77
- --------------------------------------------------------------------------------
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):
Purchases $141,162
Proceeds from sales 87,949
19
<PAGE> 78
- --------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------
SHARES SOLD
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION GAIN AT
TYPE MONTH 11/30/97
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
S&P 500 Index Dec. '97 $292,000
</TABLE>
20
<PAGE> 79
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
ELEVEN MONTHS YEAR ENDED
ENDED DECEMBER 31,
NOVEMBER 30, ------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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> 80
- --------------------------------------------------------------------------------
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> 81
PORTFOLIO OF INVESTMENTS
KEMPER-DREMAN HIGH RETURN EQUITY FUND
Portfolio of Investments at November 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANKS--13.1% Banc One Corp. 603,300 $ 30,995
Bank of New York Co. 311,100 16,722
BankAmerica Corp. 285,864 20,868
BankBoston 333,600 29,732
Bankers Trust New York Corp. 66,000 7,825
Barnett Banks 327,300 23,034
Capital One Financial Corp. 566,700 25,679
Crestar Financial Corp. 437,800 22,492
First Chicago NBD Corp. 729,232 57,062
First Union Corp. 395,710 19,291
Fleet Financial Group, Inc. 82,200 5,430
KeyCorp 240,600 16,225
J.P. Morgan & Co. 157,200 17,950
NationsBank 667,980 40,121
Norwest Corp. 180,800 6,769
PNC Bank Corp., N.A. 424,035 22,818
Signet Banking Corp. 355,100 19,153
Wells Fargo & Co. 6,000 1,844
----------------------------------------------------------------------------
384,010
- ---------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRIES--1.0% Hanson PLC, ADR 710,925 18,484
Louisiana-Pacific Corp. 508,300 10,261
----------------------------------------------------------------------------
28,745
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--1.6% General Electric Co. 284,200 20,960
Xerox Corp. 327,300 25,427
----------------------------------------------------------------------------
46,387
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--2.1% Liz Claiborne 78,600 3,950
Dayton Hudson Corp. 107,800 7,162
Dillard Department Stores 77,800 2,844
Ford Motor Co. 146,100 6,282
(a)Fruit of The Loom 156,600 3,651
Philips Electronics N.V., ADR 361,100 24,194
(a)Toys R Us 94,300 3,218
V.F. Corp. 123,000 5,681
Wal-Mart Stores 153,100 6,114
----------------------------------------------------------------------------
63,096
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--16.2% Imperial Tobacco Group, ADR 1,006,150 13,080
Philip Morris Cos. 4,800,400 208,817
Quaker Oats Co. 178,900 9,482
RJR Nabisco Holdings Corp. 2,635,400 96,027
UST, Inc. 4,558,400 140,741
Universal Corp. 190,600 7,541
----------------------------------------------------------------------------
475,688
- ---------------------------------------------------------------------------------------------------------------------
ENERGY--14.8% AMOCO Corp. 1,557,800 140,202
Atlantic Richfield Co. 1,672,200 136,284
Columbia Gas System 723,900 52,664
Energy Group PLC, ADS 685,825 29,319
Texaco 1,362,300 76,970
----------------------------------------------------------------------------
435,439
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--6.0% American General Corp. 74,800 4,030
American International Group, Inc. 145,200 14,638
Federal Home Loan Mortgage Corp. 1,911,100 78,833
Federal National Mortgage Association 1,475,400 77,919
----------------------------------------------------------------------------
175,420
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE--4.3% Columbia/HCA Healthcare Corp. 2,208,800 65,160
(a)Humana, Inc. 1,312,300 29,117
(a)Tenet Healthcare Corp. 963,600 30,534
----------------------------------------------------------------------------
124,811
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 82
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C>
TECHNOLOGY--2.4% AT&T 1,245,000 $ 69,564
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--61.5%
(Cost: $1,472,277) 1,803,160
----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
(B)MONEY MARKET Yield--4.67% to 6.05%
INSTRUMENTS--36.9%
Due--December 1997 and January 1998
AMOCO Corp. $ 30,000 29,991
AT&T 30,000 29,863
Bank of New York Co. Inc. 25,000 24,766
Banner Receivables Corp. 23,687 23,505
Bayerische Landesbank Girozentrale 34,000 33,881
Campbell Soup Co. 50,000 49,717
Coca Cola Enterprises, Inc. 72,000 71,789
Corporation Asset Funding Co. Inc. 44,000 43,692
Walt Disney Co. 40,000 39,781
Dow Chemical Co. 54,000 53,848
E.I. DuPont de Nemours and Co. 57,000 56,743
Eureka Securities 62,000 61,939
FP Funding Corp. 25,000 24,922
Metlife Funding, Inc. 26,000 25,988
Morgan Stanley, Dean Witter, Discover &
Co. 75,000 74,502
National Australia 30,000 29,973
Nestle Capital Corp. 25,000 24,952
Sheffield Receivables Corp. 27,050 26,926
Southern Co. 35,000 34,941
U.S. Treasury bills 45,000 44,801
Warner-Lambert Co. 35,200 35,031
Windmill Funding Corp. 75,774 75,446
Xerox Credit Corp. 26,100 25,941
Other 138,384 137,717
----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--36.9%
(Cost: $1,080,655) 1,080,655
----------------------------------------------------------------------------
TOTAL INVESTMENTS--98.4%
(Cost: $2,552,932) 2,883,815
----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--1.6% 47,906
----------------------------------------------------------------------------
NET ASSETS--100% $2,931,721
----------------------------------------------------------------------------
</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 $949,000,000 of money market instruments.
As a result, approximately 94% 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 $2,552,932,000 for federal income tax
purposes at November 30, 1997, the gross unrealized appreciation was
$337,988,000, the gross unrealized depreciation was $7,105,000 and the net
unrealized appreciation on investments was $330,883,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 83
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER-DREMAN HIGH RETURN EQUITY FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper-Dreman High Return Equity Fund
as of November 30, 1997, and 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-Dreman High Return Equity Fund at November 30, 1997, the results of its
operations for the eleven months then ended, the changes in its 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> 84
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $2,552,932) $2,883,815
- --------------------------------------------------------------------------
Cash 52,929
- --------------------------------------------------------------------------
Receivable for:
Fund shares sold 16,531
- --------------------------------------------------------------------------
Dividends 3,056
- --------------------------------------------------------------------------
TOTAL ASSETS 2,956,331
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Payable for:
Investments purchased 19,023
- --------------------------------------------------------------------------
Fund shares redeemed 1,465
- --------------------------------------------------------------------------
Management fee 1,607
- --------------------------------------------------------------------------
Distribution services fee 882
- --------------------------------------------------------------------------
Administrative services fee 500
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,125
- --------------------------------------------------------------------------
Directors' fees 8
- --------------------------------------------------------------------------
Total liabilities 24,610
- --------------------------------------------------------------------------
NET ASSETS $2,931,721
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid-in capital $2,451,365
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 134,180
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 330,883
- --------------------------------------------------------------------------
Undistributed net investment income 15,293
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,931,721
- --------------------------------------------------------------------------
THE PRICING OF SHARES
CLASS A SHARES
Net asset value and redemption price per share
($1,383,012 / 41,258 shares outstanding) $33.52
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $35.56
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,300,158 / 38,968 shares outstanding) $33.37
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($220,621 / 6,609 shares outstanding) $33.38
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($27,930 / 834 shares outstanding) $33.51
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 85
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Eleven months ended November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Interest $ 36,552
- ------------------------------------------------------------------------
Dividends 24,258
- ------------------------------------------------------------------------
Total investment income 60,810
- ------------------------------------------------------------------------
Expenses:
Management fee 12,084
- ------------------------------------------------------------------------
Distribution services fee 6,378
- ------------------------------------------------------------------------
Administrative services fee 3,849
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 5,374
- ------------------------------------------------------------------------
Professional fees 75
- ------------------------------------------------------------------------
Reports to shareholders 252
- ------------------------------------------------------------------------
Directors' fees and other 82
- ------------------------------------------------------------------------
Total expenses 28,094
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 32,716
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sales of investments 21,339
- ------------------------------------------------------------------------
Net realized gain from futures transactions 113,531
- ------------------------------------------------------------------------
Net realized gain 134,870
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments 249,096
- ------------------------------------------------------------------------
Net gain on investments 383,966
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $416,682
- ------------------------------------------------------------------------
</TABLE>
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 $ 32,716 5,651
- -----------------------------------------------------------------------------------------------------
Net realized gain 134,870 21,480
- -----------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 249,096 61,834
- -----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 416,682 88,965
- -----------------------------------------------------------------------------------------------------
Distribution from net investment income (17,802) (5,373)
- -----------------------------------------------------------------------------------------------------
Distribution from net realized gain (3,648) (18,442)
- -----------------------------------------------------------------------------------------------------
Total dividends to shareholders (21,450) (23,815)
- -----------------------------------------------------------------------------------------------------
Net increase from capital share transactions 1,798,655 574,488
- -----------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 2,193,887 639,638
- -----------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 737,834 98,196
- -----------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of
$15,293 and $373, respectively) $2,931,721 737,834
- -----------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper-Dreman High Return Equity 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 are sold to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
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 determined separately for each
class
16
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS
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 $12,084,000 for the eleven months
ended November 30, 1997. Dreman Value Management,
L.L.C. serves as sub-adviser with respect to the
investment and reinvestment of assets in the Fund,
and is paid by Scudder Kemper for its services.
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
ALLOWED BY KDI
COMMISSIONS ----------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Eleven months ended
November 30, 1997 $ 3,113,000 13,161,000 221,000
</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>
COMMISSIONS AND
DISTRIBUTION FEES DISTRIBUTION FEES
AND CDSC PAID BY KDI
RECEIVED BY KDI TO FIRMS
----------------- -----------------
<S> <C> <C>
Eleven months ended
November 30, 1997 $ 7,226,000 31,289,000
</TABLE>
17
<PAGE> 88
NOTES TO FINANCIAL STATEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. KVF has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid by
the Fund are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ----------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Eleven months ended
November 30, 1997 $3,849,000 4,879,000 15,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with KVF's transfer agent, KSvC
is the shareholder service agent of the Fund. Under
this agreement, KSvC received shareholder services
fees of $4,150,000 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 $39,000 to independent directors.
- --------------------------------------------------------------------------------
4 TRANSACTIONS
INVESTMENT For the eleven months ended November 30, 1997,
investment transactions (excluding short-term
instruments) are as follows (in thousands):
Purchases $1,168,965
Proceeds from sales 86,880
18
<PAGE> 89
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,-1997 DECEMBER-31,-1996
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 32,374 $ 979,187 11,969 $294,186
--------------------------------------------------------------------------------
Class B 31,055 934,233 10,792 264,773
--------------------------------------------------------------------------------
Class C 5,473 164,900 1,617 40,240
--------------------------------------------------------------------------------
Class I 952 28,381 612 14,409
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 395 12,470 483 12,533
--------------------------------------------------------------------------------
Class B 193 6,172 322 8,424
--------------------------------------------------------------------------------
Class C 26 855 51 1,337
--------------------------------------------------------------------------------
Class I 14 422 21 512
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (6,529) (201,847) (1,483) (35,513)
--------------------------------------------------------------------------------
Class B (2,981) (90,730) (682) (16,613)
--------------------------------------------------------------------------------
Class C (572) (17,377) (77) (1,854)
--------------------------------------------------------------------------------
Class I (586) (18,011) (338) (7,946)
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 469 14,557 37 907
--------------------------------------------------------------------------------
Class B (471) (14,557) (37) (907)
--------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $1,798,655 $574,488
--------------------------------------------------------------------------------
</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 $44,795,000 for the following futures
contracts owned by the Fund.
<TABLE>
<CAPTION>
CONTRACT EXPIRATION GAIN AT
TYPE AMOUNT POSITION MONTH 11/30/97
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index $948,693,000 Long Dec. '97 $25,155,000
</TABLE>
19
<PAGE> 90
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------------
Class A
-----------------------------------------------------
ELEVEN MONTHS
ENDED YEAR 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 $26.52 21.49 15.11 15.50 14.62
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .54 .39 .26 .25 .21
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 6.89 5.75 6.76 (.39) 1.13
- ---------------------------------------------------------------------------------------------------------
Total from investment operations 7.43 6.14 7.02 (.14) 1.34
- ---------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .37 .38 .24 .25 .21
- ---------------------------------------------------------------------------------------------------------
Distribution from net realized gain .06 .73 .40 -- .25
- ---------------------------------------------------------------------------------------------------------
Total dividends .43 1.11 .64 .25 .46
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.52 26.52 21.49 15.11 15.50
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 28.15% 28.79 46.86 (.99) 9.22
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
Expenses 1.22% 1.21 1.25 1.25 1.25
- ---------------------------------------------------------------------------------------------------------
Net investment income 2.38% 2.12 1.55 1.58 1.47
- ---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
Expenses 1.22% 1.21 1.57 1.39 1.56
- ---------------------------------------------------------------------------------------------------------
Net investment income 2.38% 2.12 1.23 1.44 1.16
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------
Class B
----------------------------------------
ELEVEN MONTHS YEAR SEPT. 11
ENDED ENDED TO
NOVEMBER 30, DEC. 31, DEC. 31,
1997 1996 1995
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 26.44 21.47 19.45
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .31 .19 .07
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 6.84 5.72 2.41
- ---------------------------------------------------------------------------------------------------------
Total from investment operations 7.15 5.91 2.48
- ---------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .16 .21 .06
- ---------------------------------------------------------------------------------------------------------
Distribution from net realized gain .06 .73 .40
- ---------------------------------------------------------------------------------------------------------
Total dividends .22 .94 .46
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.37 26.44 21.47
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 27.10% 27.63 12.88
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
Expenses 2.12% 2.20 2.00
- ---------------------------------------------------------------------------------------------------------
Net investment income 1.48% 1.13 .61
- ---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
Expenses 2.12% 2.31 2.35
- ---------------------------------------------------------------------------------------------------------
Net investment income 1.48% 1.02 .26
- ---------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 91
FINANCIAL HIGHLIGHTS
[CAPTION]
<TABLE>
<CAPTION>
----------------------------------- ---------------------------------
CLASS C CLASS I
----------------------------------- ---------------------------------
ELEVEN MONTHS YEAR SEPT. 11 ELEVEN MONTHS YEAR NOV.1
ENDED ENDED TO ENDED 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 $ 26.45 21.48 19.45 26.49 21.51 19.90
- ------------------------------------------------------------------------------------------------ ---------------------------------
Income from investment operations:
Net investment income .32 .20 .09 .75 .54 .04
- ------------------------------------------------------------------------------------------------ ---------------------------------
Net realized and unrealized gain 6.83 5.72 2.41 6.81 5.70 2.03
- ------------------------------------------------------------------------------------------------ ---------------------------------
Total from investment operations 7.15 5.92 2.50 7.56 6.24 2.07
- ------------------------------------------------------------------------------------------------ ---------------------------------
Less dividends:
Distribution from net investment income .16 .22 .07 .48 .53 .06
- ------------------------------------------------------------------------------------------------ ---------------------------------
Distribution from net realized gain .06 .73 .40 .06 .73 .40
- ------------------------------------------------------------------------------------------------ ---------------------------------
Total dividends .22 .95 .47 .54 1.26 .46
- ------------------------------------------------------------------------------------------------ ---------------------------------
Net asset value, end of period $ 33.38 26.45 21.48 33.51 26.49 21.51
- ------------------------------------------------------------------------------------------------ ---------------------------------
TOTAL RETURN (NOT ANNUALIZED) 27.10% 27.66 12.94 28.71 29.36 10.47
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
Expenses 2.10% 2.22 1.95 .83 .88 .47
- ------------------------------------------------------------------------------------------------ ---------------------------------
Net investment income 1.50% 1.11 .66 2.77 2.45 1.99
- ------------------------------------------------------------------------------------------------ ---------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
Expenses 2.10% 2.33 2.30 .83 .88 .85
- ------------------------------------------------------------------------------------------------ ---------------------------------
Net investment income 1.50% 1.00 .31 2.77 2.45 1.61
- ------------------------------------------------------------------------------------------------ ---------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------------------
<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) $ 2,931,721 737,834 98,196 35,005 28,413
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 5% 10 18 12 14
- -------------------------------------------------------------------------------------------------------------------
</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 $.0501
and $.0513, 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.
21
<PAGE> 92
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
KEMPER SMALL CAP VALUE FUND
Portfolio of Investments at November 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Coupon Principal
obligations Type rate Maturity amount Value
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY SECURITY--2.0%
Notes
(Cost: $24,940) 5.875% 1999 $ 25,000 $ 25,043
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Number of
Common stocks shares Value
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER
DISCRETIONARY--15.4%
Applebee's International 432,500 9,137
BJ Services Co. 307,500 8,956
(a) Boston Chicken 660,500 5,305
Brown Group, Inc. 558,900 9,047
Burlington Coat Factory 95,000 1,775
Bush Industries 153,300 4,043
Carmike Cinemas 201,300 6,228
CDI Corp. 188,700 7,807
DIMON Inc. 421,500 10,537
Finish Line 535,500 10,174
First Brands Corp. 431,100 11,074
Footstar, Inc. 126,500 3,795
(a) Friedman's Inc. 642,000 9,389
Haggar Apparel Co. 204,500 3,246
Harman International Industries 227,500 11,517
Heilig - Myers 271,000 3,506
Herbalife International, Inc. 463,100 9,262
Hollywood Entertainment Corp. 874,000 7,538
Homebase, Inc. 346,500 2,902
J. Baker, Inc. 188,500 1,296
(a) Lone Star Steakhouse & Saloon 451,200 8,404
(a) Nine West Group 260,200 7,074
Springs Industries Inc. 211,100 10,647
(a) The Wet Seal 170,000 5,026
(a) Tommy Hilfiger Corp. 75,500 2,963
(a) Vallassis Communications 326,400 9,812
(a) Young Broadcasting Corp. 372,200 13,539
-------------------------------------------------------------------------
193,999
- --------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--.6%
(a) Performance Food Group 362,500 7,612
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
ENERGY--7.8%
Atmos Energy Corp. 382,900 10,171
(a) Basin Exploration 131,300 2,429
(a) Belden & Blake Corp. 286,600 9,494
(a) Chieftain International, Inc. 409,200 9,054
Giant Industries 214,600 3,943
KCS Energy 504,600 11,984
(a) Nuevo Energy Co. 300,700 12,535
(a) Seitel, Inc. 247,400 9,525
(a) Tesoro Petroleum Corp. 550,500 9,152
(a) Triton Energy Corp. 181,000 6,335
(a) Veritas DGC, Inc. 356,500 14,260
-------------------------------------------------------------------------
98,882
- --------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--22.5%
Aames Financial Corp. 88,600 1,196
(a) Acceptance Insurance Cos. 355,100 8,633
Ambassador Apartments, Inc. 354,500 7,068
(a) Amerin 157,500 3,682
Associated Banc Corp. 252,889 12,581
Astoria Financial Corp. 215,000 11,852
BankAtlantic Bancorp 691,900 9,341
Chartwell Re Corp. 252,500 8,522
(a) Cityscape Financial Corp. 251,000 455
Commercial Federal Corp. 306,500 14,731
Compass Bancshares 204,500 8,180
</TABLE>
11
<PAGE> 93
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Number of
Common stocks shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Portfolio Services 295,000 $ 3,097
Cullen Frost Bankers 258,000 13,706
Doral Financial Corp. 122,000 2,653
Excel Realty Trust, Inc. 210,200 6,411
(a) First Alliance Corp. 72,500 1,522
First Commerce Corp. 184,000 11,799
Freemont General Corp. 231,500 10,649
HUBCO, Inc. 173,555 6,020
Imperial Credit Industries 597,920 14,313
Imperial Credit Mortgage Holdings 497,000 7,766
Lawyers Title Insurance Corp. 115,000 3,651
Long Island Bancorp 202,000 9,519
ML Bancorp, Inc. 47,500 1,366
New Century Financial Co. 100,000 1,312
North Fork Bancorp 236,613 7,187
(a) Ocwen Financial Corp. 145,000 3,516
PennCorp Financial Group 212,500 7,185
Peoples Heritage Financial Group 67,000 2,856
Redwood Trust 351,000 8,885
Reliance Group Holdings, Inc. 617,900 7,878
RenaissanceRe Holding, Ltd. 72,000 3,015
Resource Bancshares Mortgage Group 744,000 10,230
(a) Southern Pacific Funding Corp. 807,000 9,987
Sovereign Bancorp 157,500 2,983
(a) Trans Financial, Inc. 142,500 4,898
U.S. Trust Corp. 180,000 4,781
United Companies Financial Corp. 281,300 6,101
W.R. Berkley Corp. 133,500 5,557
Webster Financial Corp. 219,900 13,778
Winston Hotels 400,000 5,600
-------------------------------------------------------------------------
284,462
- --------------------------------------------------------------------------------------------------------
HEALTH CARE--3.7%
ADAC Laboratories 35,000 731
(a) Apria Healthcare Group 493,400 7,771
(a) CONMED Corp. 537,200 12,759
(a) Genesis Health Ventures 330,000 8,003
(a) Hologic, Inc. 242,500 6,275
Integrated Health Services 364,430 11,092
-------------------------------------------------------------------------
46,631
- --------------------------------------------------------------------------------------------------------
MATERIALS
AND PROCESSING--15.3%
AK Steel Holding Corp. 631,000 12,423
AMCOL International 466,000 11,184
Ball Corp. 363,000 13,976
(a) Buckeye Cellulose 125,500 5,498
Carpenter Technology Corp. 233,000 10,980
Del Webb Corp. 277,500 6,001
Elcor Corp. 362,250 8,785
Flowserv Corp. 463,513 12,457
Furon Co. 325,000 12,838
Intermet Corp. 711,500 13,163
(a) Lone Star Technologies 334,500 9,701
(a) Lydall, Inc. 452,700 9,167
MascoTech 396,500 6,864
Mississippi Chemical Corp. 114,100 2,225
(a) Mueller Industries, Inc. 86,500 4,028
Oregon Metallurgical Corp. 474,700 15,250
Quanex Corp. 366,000 10,889
(a) The Shaw Group 355,700 8,670
Trinity Industries 256,500 11,639
(a) Wyman-Gordon Co. 365,200 7,806
-------------------------------------------------------------------------
193,544
</TABLE>
12
<PAGE> 94
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Number of
Common stocks shares Value
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRODUCER DURABLES--4.8%
Blount, Inc. 200,050 $ 10,115
Briggs & Stratton Corp. 241,400 12,342
(a) Electroglas 121,500 2,309
General Cable Corp. 306,600 10,463
Pacific Scientific Co. 207,000 3,286
Stewart & Stevenson Services 480,500 10,451
Watts Industries, Inc. 454,800 11,569
-------------------------------------------------------------------------
60,535
- --------------------------------------------------------------------------------------------------------
TECHNOLOGY--8.7%
(a) Altron, Inc. 205,000 3,229
(a) Applied Magnetics Corp. 195,000 3,291
(a) Benchmark Electronics 191,000 5,372
Breed Technologies, Inc. 190,000 3,836
(a) Burr Brown Corp. 210,500 6,368
(a) ESS Technology, Inc. 382,000 3,820
(a) EXAR Corp. 156,500 3,917
(a) HADCO Corp. 57,000 3,534
(a) HMT Technology Corp. 770,500 10,113
(a) Hutchinson Technology 352,500 8,372
(a) Komag, Inc. 299,100 6,001
(a) Kulicke & Soffa Industries 97,500 2,687
(a) Learning Co. 699,000 12,669
(a) MasTec, Inc. 184,000 4,692
(a) Read-Rite Corp. 462,500 8,845
Scientific-Atlanta 702,500 14,050
(a) Tech-Sym Corp. 154,500 4,683
(a) Vanstar Corp. 297,500 4,091
-------------------------------------------------------------------------
109,570
- --------------------------------------------------------------------------------------------------------
TRANSPORTATION--4.3%
Airborne Freight Corp. 256,400 16,329
(a) America West Airlines 610,500 9,730
Borg-Warner Automotive, Inc. 220,700 10,400
Fleetwood Enterprises 316,900 11,309
Myers Industries 391,890 6,760
-------------------------------------------------------------------------
54,528
- --------------------------------------------------------------------------------------------------------
UTILITIES--.7%
(a) Jones Intercable Inc. 581,400 8,140
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
OTHER--4.5%
(a) Global Industrial Technologies, Inc. 490,200 8,762
Standard & Poor's Depositary Receipts 111,500 10,673
Standard & Poor's MidCap 400 Depositary Receipts 600,200 37,859
-------------------------------------------------------------------------
57,294
-------------------------------------------------------------------------
TOTAL COMMON STOCKS--88.3%
(Cost: $1,000,867) 1,115,197
-------------------------------------------------------------------------
</TABLE>
13
<PAGE> 95
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Principal
amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(B) MONEY MARKET
INSTRUMENTS--9.4%
Yield--5.47% to 5.75%
Due--December 1997 and January 1998
American Honda Finance Corp. $ 17,000 $ 16,955
BI Funding, Inc. 4,000 3,993
CIESCO, L.P. 4,000 3,997
Countrywide Funding Corp. 10,000 9,992
CSW Credit, Inc. 12,000 11,979
Dynamic Funding Corp. 1,000 997
FINOVA Capital Corp. 2,900 2,875
GTE Corp. 15,000 14,979
Other 53,000 52,907
-------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--9.4%
(Cost: $118,677) 118,674
-------------------------------------------------------------------------
TOTAL INVESTMENTS--99.7%
(Cost: $1,144,484) 1,258,914
-------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--.3% 4,230
-------------------------------------------------------------------------
NET ASSETS--100% $1,263,144
-------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) The Fund has entered into exchange-traded Russell 2000 Index futures
contracts in order to take advantage of anticipated market conditions and
effectively invest in equities approximately $55,000,000 of money market
instruments. As a result, approximately 93% 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 $1,144,484,000 for federal income tax
purposes at November 30, 1997, the gross unrealized appreciation was
$170,721,000, the gross unrealized depreciation was $56,291,000 and the net
unrealized appreciation on investments was $114,430,000.
See accompanying Notes to Financial Statements.
14
<PAGE> 96
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER SMALL CAP VALUE FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Small Cap Value 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
Small Cap Value Fund at November 30, 1997, the results of its operations for the
eleven months then ended, the changes in its 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
15
<PAGE> 97
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------
ASSETS
- ----------------------------------------------------
<S> <C>
Investments, at value
(Cost: $1,144,484) $1,258,914
- ----------------------------------------------------
Cash 2,836
- ----------------------------------------------------
Receivable for:
Investments sold 248
- ----------------------------------------------------
Fund shares sold 7,856
- ----------------------------------------------------
Dividends and interest 1,092
- ----------------------------------------------------
TOTAL ASSETS 1,270,946
- ----------------------------------------------------
- ----------------------------------------------------
LIABILITIES AND NET ASSETS
- ----------------------------------------------------
Payable for:
Investments purchased 5,002
- ----------------------------------------------------
Fund shares redeemed 919
- ----------------------------------------------------
Management fee 726
- ----------------------------------------------------
Distribution services fee 302
- ----------------------------------------------------
Administrative services fee 230
- ----------------------------------------------------
Custodian and transfer agent fees and
related expenses 619
- ----------------------------------------------------
Directors' fees and other 4
- ----------------------------------------------------
Total liabilities 7,802
- ----------------------------------------------------
NET ASSETS $1,263,144
- ----------------------------------------------------
- ----------------------------------------------------
ANALYSIS OF NET ASSETS
- ----------------------------------------------------
Paid-in capital $1,113,914
- ----------------------------------------------------
Undistributed net realized gain on
investments 33,934
- ----------------------------------------------------
Net unrealized appreciation on
investments 114,430
- ----------------------------------------------------
Undistributed net investment income 866
- ----------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $1,263,144
- ----------------------------------------------------
- ----------------------------------------------------
THE PRICING OF SHARES
- ----------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share
($736,412 DIVIDED BY 33,737 shares
outstanding) $21.83
- ----------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of net
asset value or 5.75% of offering
price) $23.16
- ----------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($412,479 DIVIDED BY 19,222 shares
outstanding) $21.46
- ----------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($99,526 DIVIDED BY 4,626 shares
outstanding) $21.51
- ----------------------------------------------------
CLASS I SHARES
Net asset value and redemption price
per share
($14,727 DIVIDED BY 667 shares
outstanding) $22.08
- ----------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 98
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Eleven months ended November 30, 1997
(IN THOUSANDS)
<TABLE>
- --------------------------------------------------
NET INVESTMENT INCOME
- --------------------------------------------------
<S> <C>
Dividends $ 6,898
- --------------------------------------------------
Interest 6,006
- --------------------------------------------------
Total investment income 12,904
- --------------------------------------------------
Expenses:
Management fee 5,160
- --------------------------------------------------
Distribution services fee 2,108
- --------------------------------------------------
Administrative services fee 1,643
- --------------------------------------------------
Custodian and transfer agent fees and
related expenses 3,011
- --------------------------------------------------
Professional fees 16
- --------------------------------------------------
Reports to shareholders 89
- --------------------------------------------------
Registration fees 68
- --------------------------------------------------
Directors' fees and other 14
- --------------------------------------------------
Total expenses 12,109
- --------------------------------------------------
NET INVESTMENT INCOME 795
- --------------------------------------------------
- --------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- --------------------------------------------------
Net realized gain on sales of
investments 29,326
- --------------------------------------------------
Net realized gain from futures
transactions 6,305
- --------------------------------------------------
Net realized gain 35,631
- --------------------------------------------------
Change in net unrealized appreciation
on investments 92,608
- --------------------------------------------------
Net gain on investments 128,239
- --------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $129,034
- --------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
- --------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 795 726
- --------------------------------------------------------------------
Net realized gain 35,631 3,470
- --------------------------------------------------------------------
Change in net unrealized appreciation 92,608 20,292
- --------------------------------------------------------------------
Net increase in net assets resulting
from operations 129,034 24,488
- --------------------------------------------------------------------
Distribution from net investment
income -- (658)
- --------------------------------------------------------------------
Distribution from net realized gain -- (5,471)
- --------------------------------------------------------------------
Total dividends to shareholders -- (6,129)
- --------------------------------------------------------------------
Net increase from capital share
transactions 860,888 223,257
- --------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 989,922 241,616
- --------------------------------------------------------------------
- --------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------
Beginning of period 273,222 31,606
- --------------------------------------------------------------------
END OF PERIOD
(including undistributed net investment
income
of $866 and $69, respectively) $ 1,263,144 273,222
- --------------------------------------------------------------------
</TABLE>
17
<PAGE> 99
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND
Kemper Small Cap Value 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 share six years after issuance.
Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses
that 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 are sold to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
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 fixed income securities. 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
18
<PAGE> 100
- --------------------------------------------------------------------------------
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 generally
declares and pays dividends of net investment
income 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 $5,160,000 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 ALLOWED
COMMISSIONS BY KDI
RETAINED ---------------------------
BY KDI TO ALL FIRMS TO AFFILIATES
----------- ------------ -------------
<S> <C> <C> <C>
Eleven months ended
November 30, 1997 $ 584,000 4,828,000 68,000
</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 $ 2,351,000 10,584,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. KVF has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class.
19
<PAGE> 101
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 KDI
ASF PAID BY ---------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Eleven months ended November 30, 1997 $ 1,643,000 2,042,000 5,000
</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 $2,132,000 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 $12,000 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):
Purchases $963,711
Proceeds from sales 184,743
- --------------------------------------------------------------------------------
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, 1997 DECEMBER 31, 1996
------------------ -----------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
SHARES SOLD
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 31,605 $631,847 8,060 $140,448
- -------------------------------------------------------------------------------
Class B 15,839 315,709 6,110 105,279
- -------------------------------------------------------------------------------
Class C 3,966 79,927 1,077 18,688
- -------------------------------------------------------------------------------
Class I 763 15,563 1,043 17,495
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
- -------------------------------------------------------------------------------
Class A -- -- 182 3,250
- -------------------------------------------------------------------------------
Class B -- -- 115 2,031
- -------------------------------------------------------------------------------
Class C -- -- 25 434
- -------------------------------------------------------------------------------
Class I -- -- 13 229
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES REDEEMED
- -------------------------------------------------------------------------------
Class A (6,002) (125,310) (1,764) (29,756)
- -------------------------------------------------------------------------------
Class B (1,879) (35,807) (1,288) (21,940)
- -------------------------------------------------------------------------------
Class C (444) (9,013) (66) (1,102)
- -------------------------------------------------------------------------------
Class I (585) (12,028) (695) (11,799)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONVERSION OF SHARES
- -------------------------------------------------------------------------------
Class A 212 4,601 17 308
- -------------------------------------------------------------------------------
Class B (215) (4,601) (17) (308)
- -------------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS $860,888 $223,257
- -------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 102
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 $2,505,000 for the following
financial futures contracts owned by the Fund.
<TABLE>
<CAPTION>
CONTRACT EXPIRATION LOSS AT
TYPE AMOUNT POSITION MONTH 11/30/97
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Russell 2000 Index $55,061,000 Long Dec. '97 $(1,782,000)
</TABLE>
21
<PAGE> 103
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
ELEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
NOVEMBER 30, ------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.28 14.50 10.85 11.23 11.52
- ---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .05 .14 (.02) -- .06
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain 3.50 4.14 4.64 .02 .23
- ---------------------------------------------------------------------------------------
Total from investment operations 3.55 4.28 4.62 .02 .29
- ---------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income -- .07 -- -- .06
- ---------------------------------------------------------------------------------------
Distribution from net realized gain -- .43 .97 .40 .52
- ---------------------------------------------------------------------------------------
Total dividends -- .50 .97 .40 .58
- ---------------------------------------------------------------------------------------
Net asset value, end of period $ 21.83 18.28 14.50 10.85 11.23
- ---------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.42% 29.60 43.29 .15 2.54
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------
Expenses 1.32% 1.31 1.25 1.25 1.25
- ---------------------------------------------------------------------------------------
Net investment income (loss) .51% .87 (.16) (.03) .53
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------
Expenses 1.32% 1.47 1.83 1.82 2.09
- ---------------------------------------------------------------------------------------
Net investment income (loss) .51% .71 (.74) (.61) (.32)
- ---------------------------------------------------------------------------------------
<CAPTION>
----------------------------------
CLASS B
----------------------------------
ELEVEN MONTHS YEAR SEPT. 11
ENDED ENDED TO
NOVEMBER 30, DEC. 31, DEC. 31,
1997 1996 1995
- ---------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 18.14 14.48 15.75
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.04) .01 (.02)
- ---------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 3.36 4.11 (.41)
- ---------------------------------------------------------------------------
Total from investment operations 3.32 4.12 (.43)
- ---------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income -- .03 --
- ---------------------------------------------------------------------------
Distribution from net realized gain -- .43 .84
- ---------------------------------------------------------------------------
Total dividends -- .46 .84
- ---------------------------------------------------------------------------
Net asset value, end of period $ 21.46 18.14 14.48
- ---------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.30% 28.54 (2.52)
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------
Expenses 2.34% 2.12 2.00
- ---------------------------------------------------------------------------
Net investment income (loss) (.51)% .06 (.99)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------
Expenses 2.34% 2.49 2.39
- ---------------------------------------------------------------------------
Net investment loss (.51)% (.31) (1.38)
- ---------------------------------------------------------------------------
</TABLE>
22
<PAGE> 104
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------- -----------------------------
CLASS C CLASS I
--------------------------------- ----------------------------------
ELEVEN MONTHS YEAR SEPT. 11 ELEVEN MONTHS YEAR NOV. 1,
ENDED ENDED TO ENDED ENDED TO
NOVEMBER 30, DEC. 31, DEC. 31, NOVEMBER 30, DEC. 31, DEC. 31,
1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.17 14.48 15.75 18.40 14.52 14.25
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.03) .01 (.02) .13 .25 --
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 3.37 4.14 (.41) 3.55 4.13 1.11
- --------------------------------------------------------------------------------------------------------------
Total from investment operations 3.34 4.15 (.43) 3.68 4.38 1.11
- --------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income -- .03 -- -- .07 --
- --------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- .43 .84 -- .43 .84
- --------------------------------------------------------------------------------------------------------------
Total dividends -- .46 .84 -- .50 .84
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.51 18.17 14.48 22.08 18.40 14.52
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.38% 28.77 (2.51) 20.00 30.28 8.03
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------
Expenses 2.24% 2.06 1.95 .89 .84 .47
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.41)% .12 (.94) .94 1.34 .28
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------
Expenses 2.24% 2.19 2.35 .89 .84 .90
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.41)% (.01) (1.34) .94 1.34 (.15)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------
<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) $ 1,263,144 273,222 31,606 6,931 4,875
- ------------------------------------------------------------------------------------------
Portfolio turnover rate 83% 23 86 140 79
- ------------------------------------------------------------------------------------------
</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 $.0547
and $.0426, respectively.
- --------------------------------------------------------------------------------
NOTES:
Per share data for the year ended December 31, 1996 were determined based on
average shares outstanding. 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.
23
<PAGE> 105
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C>
(a) Financial Statements:
(1) Included in Part A of the Registration Statement: Financial
Highlights
(2) Financial Statements included in Part B of the Registration
Statement:
Statement of Assets and Liabilities--November 30, 1997
Statement of Operations for the period ended November 30,
1997
Statement of Changes in Net Assets for the year ended
December 31, 1996 and the period from January 1 to November
30, 1997
Notes to Financial Statements
Portfolio of Investments--November 30, 1997
</TABLE>
Schedule I has been omitted as the required information is presented in the
Portfolio of Investments at November 30, 1997.
Schedules II, III, IV and V have been omitted as the required information
is not present.
<TABLE>
<S> <C> <C>
(b) Exhibits:
99.B1a Articles of Incorporation of Registrant*
99.B1b Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1c Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1d Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1e Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1f Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1g Articles of Amendment to Articles of Incorporation of
Registrant*
99.B1h Articles of Amendment to Articles of Incorporation of
Registrant*
99.B1i Articles of Amendment to Articles of Incorporation of
Registrant
99.B1j Articles Supplementary to Articles of Incorporation of
Registrant
99.B2 Bylaws
99.B3 Inapplicable
99.B4 Text of Stock Certificate*
99.B5a Investment Management Agreement (Kemper Contrarian Fund)
99.B5b Investment Management Agreement (Kemper Dreman High Return
Equity Fund)
99.B5c Investment Management Agreement (Kemper Small Cap Value
Fund)
99.B5d Sub-Advisory Agreement (Kemper Dreman High Return Equity
Fund)
99.B6a Underwriting and Distribution Services Agreement
99.B6b Form of Selling Group Agreement*
99.B7 Inapplicable
99.B8 Custody Agreement*
99.B9a Agency Agreement*
99.B9b Supplement to Agency Agreement
99.B9c Administrative Services Agreement
99.B9d Fund Accounting Agreement (Kemper Contrarian Fund)
99.B9e Fund Accounting Agreement (Kemper Dreman High Return Equity
Fund)
99.B9f Fund Accounting Agreement (Kemper Small Cap Value Fund)
99.B10 Inapplicable
99.B11 Consent and Reports of Ernst & Young LLP
99.B12 Inapplicable
</TABLE>
C-1
<PAGE> 106
99.B13 Inapplicable
99.B14 Model Retirement Plans: IRA and SEP-IRA*
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations*
99.B18. Multi-Distribution System Plan*
99.B24. Powers of Attorney
27 Financial Data Schedules
- ---------------
* Incorporated herein by reference to the Post-Effective Amendment to
Registrant's Registration Statement on Form N-1A identified below.
<TABLE>
<CAPTION>
EXHIBIT NO. POST-EFFECTIVE AMENDMENT NO. FILING DATE
----------- ---------------------------- -----------
<S> <C> <C>
B1h, B6b 17 4/22/97
B14 16 4/26/96
B1a, b, c, d, e, f, g, B18 15 2/29/96
B4, B8, B9a, B16 14 9/8/95
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
AS OF JANUARY 21, 1998
-----------------------------------------
FUND CLASS A CLASS B CLASS C CLASS I
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Kemper Contrarian Fund 9,122 7,755 962 --
Kemper-Dreman High Return Equity Fund 94,305 117,552 15,981 1
Kemper Small Cap Value Fund 46,625 48,640 8,445 1
</TABLE>
ITEM 27. INDEMNIFICATION
The Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. The
Registrant's Bylaws provide for the indemnification of Registrant's officers and
directors.
In no event will Registrant indemnify any of its directors, officers,
employees, or agents against any liability to which such person would otherwise
be subject by reason of his willful misfeasance, bad faith, gross negligence in
the performance of his duties, or by reason of his reckless disregard of the
duties involved in the conduct of his or her office.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, 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.
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 directors' evaluation of
the Transaction, Zurich agreed to indemnify the Registrant and the directors who
were not interested persons of ZKI or Scudder (the "Independent Directors") for
and against any liability and expenses based upon any action or omission by the
Independent Directors in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify each
Fund and the Independent Directors for and against any liability and expenses
based upon any misstatements or omissions by Scudder to the Independent
Directors in connection with their consideration of the Transaction.
C-2
<PAGE> 107
Item 28(b)(i) Business or 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 28.
<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 Investment, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zunica Insurance Company of Switzerland
Director, ZKI Holding Corporation
Steven Gluckstern Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zurich Insurance Company of Switzerland
Director, Zurich Holding Company of America
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
Director, ZKI Holding Corporation
Kathryn L. Quirk Director, 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
</TABLE>
C-3
<PAGE> 108
<TABLE>
<S> <C>
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.
Markus Rohrbasser Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zurich Insurance Company of Switzerland
President, Director, Chairman of the Board, ZKI Holding Corporation
Cornelia M. Small Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President, Chief Executive Officer, Scudder Kemper Investments,
Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President & Director, Scudder, Stevens & Clark Overseas Corporationo oo
President & 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
# Socjete Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B
34.564
*** Toronto, Ontario, Canada
XXX Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
</TABLE>
C-4
<PAGE> 109
Item 28(b)(ii) FOR DREMAN VALUE MANAGEMENT, L.L.C.
John E. Peters, President,
Dreman Value Management, LLC
Joseph W. Sullivan, IV, Chief Operating Officer,
Dreman Value Management, LLC
David N. Dreman, Chairman & Chief Investment Officer,
Dreman Value Management, LLC
Nelson P. Woodard, Executive Vice President,
Dreman Value Management, LLC
Dorothy Silverman, Senior Vice President,
Dreman Value Management, LLC
Rock Albers, Senior Vice President,
Dreman Value Management, LLC
Michael M. Hemberger, Vice President,
Dreman Value Management, LLC
Peter B. Seligman, Vice President,
Dreman Value Management, LLC
C-5
<PAGE> 110
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Funds,
Investors Fund Series and Kemper International Bond Fund.
(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>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- ---------------- ----------
<S> <C> <C>
James L. Greenawalt Director, President None
Patrick H. Dudasik Financial Principal, Treasurer
and Chief Financial Officer None
Michael E. Harrington Executive Vice President None
Philip D. Hausken Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Marc L. Hecht Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
</TABLE>
(c) Not applicable.
C-6
<PAGE> 111
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, at the offices of Registrant's investment manager, Scudder
Kemper Investments, Inc., and the Registrant's principal underwriter, Kemper
Distributors, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's custodian and transfer agent, Investors Fiduciary
Trust Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105 or at the
offices of the Registrant's shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
(a) Inapplicable
(b) Inapplicable.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of its latest annual report to shareholders, upon
request and without charge.
C-7
<PAGE> 112
S I G N A T U R E S
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and
State of Illinois, on the 29th day of January, 1998.
KEMPER VALUE FUND, INC.
By /s/ Mark S. Casady
-----------------------
Mark S. Casady
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below on January 29,
1998 on behalf of the following persons in the capacities
indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Mark S. Casady President (Principal
---------------------------------------- Executive Officer)
Mark S. Casady
/s/ James E. Akins* Director
----------------------------------------
/s/ Arthur R. Gottschalk* Director
----------------------------------------
/s/ Daniel Pierce* Director
----------------------------------------
/s/ Frederick T. Kelsey* Director
----------------------------------------
/s/ Fred B. Renwick* Director
----------------------------------------
/s/ John B. Tingleff* Director
----------------------------------------
/s/ Edmond D. Villani* Director
----------------------------------------
/s/ John G. Weithers* Director
----------------------------------------
/s/ Philip J. Collora Treasurer
----------------------------------------
Philip J. Collora
</TABLE>
*Philip J. Collora signs this document pursuant to powers of
attorney filed herewith.
/s/ Philip J. Collora
--------------------------------
Philip J. Collora
<PAGE> 113
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
99.B1a Articles of Incorporation of Registrant*
99.B1b Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1c Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1d Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1e Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1f Articles Supplementary to Articles of Incorporation of
Registrant*
99.B1g Articles of Amendment to Articles of Incorporation of
Registrant*
99.B1h Articles of Amendment to Articles of Incorporation of
Registrant*
99.B1i Articles of Amendment to Articles of Incorporation of
Registrant
99.B1j Articles Supplementary to Articles of Incorporation of
Registrant
99.B2 Bylaws
99.B3 Inapplicable
99.B4 Text of Stock Certificate*
99.B5a Investment Management Agreement (Kemper Contrarian Fund)
99.B5b Investment Management Agreement (Kemper Dreman High Return
Equity Fund)
99.B5c Investment Management Agreement (Kemper Small Cap Value
Fund)
99.B5d Sub-Advisory Agreement (Kemper Dreman High Return Equity
Fund)
99.B6a Underwriting and Distribution Services Agreement
99.B6b Form of Selling Group Agreement*
99.B7 Inapplicable
99.B8 Custody Agreement*
99.B9a Agency Agreement*
99.B9b Supplement to Agency Agreement
99.B9c Administrative Services Agreement
99.B9d Fund Accounting Agreement (Kemper Contrarian Fund)
99.B9e Fund Accounting Agreement (Kemper Dreman High Return Equity
Fund)
99.B9f Fund Accounting Agreement (Kemper Small Cap Value Fund)
99.B10 Inapplicable
99.B11 Consent and Reports of Ernst & Young LLP
99.B12 Inapplicable
99.B13 Inapplicable
99.B14 Model Retirement Plans: IRA and SEP-IRA*
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations*
99.B18. Multi-Distribution System Plan*
99.B24. Powers of Attorney
27 Financial Data Schedules
</TABLE>
<PAGE> 114
* Incorporated herein by reference to the Post-Effective Amendment to
Registrant's Registration Statement on Form N-1A identified below.
<TABLE>
<CAPTION>
EXHIBIT NO. POST-EFFECTIVE AMENDMENT NO. FILING DATE
----------- ---------------------------- -----------
<S> <C> <C>
B1h, B6b 17 4/22/97
B14 16 4/26/96
B1a, b, c, d, e, f, g, B18 15 2/29/96
B4, B8, B9a, B16 14 9/8/95
</TABLE>
<PAGE> 1
EXHIBIT 99.B1I
KEMPER-DREMAN FUND, INC.
ARTICLES OF AMENDMENT
---------------------
Kemper-Dreman Fund, Inc., a Maryland corporation registered
as an open-end investment company under the Investment Company
Act of 1940 having its principal office in the State of Maryland
in Baltimore City (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Article SECOND of the Corporation's charter (the
"Charter") is hereby amended as follows:
Article SECOND: The name of the Corporation is Kemper Value
Fund, Inc.
SECOND: In Article FIFTH of the Charter, the sixty million
(60,000,000) shares classified as Kemper-Dreman Contrarian Fund
Class A Shares shall be redesignated as the Kemper Contrarian
Fund Class A Shares, the sixty million (60,000,000) shares
classified as Kemper-Dreman Contrarian Fund Class B Shares shall
be redesignated as the Kemper Contrarian Fund Class B Shares, the
fifteen million (15,000,000) shares classified as Kemper-Dreman
Contrarian Fund Class C Shares shall be redesignated as the
Kemper Contrarian Fund Class C Shares, the fifteen million
(15,000,000) shares classified as Kemper-Dreman Contrarian Fund
Class I Shares shall be redesignated as the Kemper Contrarian
Fund Class I Shares.
Also in Article FIFTH of the Charter, the sixty million
(60,000,000) shares classified as Kemper-Dreman Small Cap Value
Fund Class A Shares shall be redesignated as the Kemper Small Cap
Value Fund Class A Shares, the sixty million (60,000,000) shares
classified as Kemper-Dreman Small Cap Value Fund Class B Shares
shall be redesignated as the Kemper Small Cap Value Fund Class B
Shares, the fifteen million (15,000,000) shares classified as
Kemper-Dreman Small Cap Value Fund Class C Shares shall be
redesignated as the Kemper Small Cap Value Fund Class C Shares,
the fifteen million (15,000,000) shares classified as Kemper-
Dreman Small Cap Value Fund Class I Shares shall be redesignated
as the Kemper Small Cap Value Fund Class I Shares.
THIRD: The Board of Directors of the Corporation has duly
adopted resolutions on May 21, 1997, approving the foregoing
amendments to the Charter.
<PAGE> 2
FOURTH: Articles FIRST and SECOND of these Articles of
Amendment are limited to changes expressly permitted by section
2-605(a)(4) of the Maryland General Corporation Law to be made
without action by stockholders, and the Corporation is an open-
end company under the Investment Company Act of 1940.
The undersigned President acknowledges these Articles of
Amendment to be the corporate act of the Corporation and states
that to the best of his knowledge, information and belief, the
matters and facts set forth in these Articles with respect to
authorization and approval are true in all material respects and
that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, KEMPER-DREMAN FUND, INC. has caused
these Articles of Amendment to be executed in its name and on its
behalf by its President and witnessed by its Secretary on July
18, 1997.
[SEAL] KEMPER-DREMAN FUND, INC.
Attest: /s/ Philip J. Collora By: /s/ Stephen B. Timbers
-------------------- --------------------------
Philip J. Collora Stephen B. Timbers
Secretary President
<PAGE> 1
EXHIBIT 99.B1J
KEMPER VALUE FUND, INC.
----------------------
ARTICLES SUPPLEMENTARY
----------------------
Kemper Value Fund, Inc., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the Corporation ), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Immediately prior to the filing of these Articles
Supplementary, the Corporation had authority to issue Five Hundred Million
(500,000,000) shares of common stock, with a par value of One Cent ($0.01) per
share, of which:
(a) Sixty Million (60,000,000) have been classified as Kemper
Contrarian Fund Class A Shares, Sixty Million (60,000,000) have been
classified as Kemper Contrarian Fund Class B Shares, Fifteen Million
(15,000,000) have been classified as Kemper Contrarian Fund Class C
Shares, Fifteen Million (15,000,000) have been classified as Kemper
Contrarian Fund Class I Shares;
(b) Sixty Million (60,000,000) have been classified as
Kemper-Dreman High Return Equity Fund Class A Shares, Sixty Million
(60,000,000) have been classified as Kemper-Dreman High Return Equity
Fund Class B Shares, Fifteen Million (15,000,000) have been classified
as Kemper-Dreman High Return Equity Fund Class C Shares, Fifteen
Million (15,000,000) have been classified as Kemper-Dreman High Return
Equity Fund Class I Shares;
(c) Sixty Million (60,000,000) have been classified as Kemper
Small Cap Value Fund Class A Shares, Sixty Million (60,000,000) have
been classified as Kemper Small Cap Value Fund Class B Shares, Fifteen
Million (15,000,000) have been classified as Kemper Small Cap Value
Fund Class C Shares and Fifteen Million (15,000,000) have been
classified as Kemper Small Cap Value Fund Class I Shares;
<PAGE> 2
(d) One Million (1,000,000) have been classified as
Kemper-Dreman Fixed-Income Fund Class A Shares; and
(e) Forty-Nine Million (49,000,000) have been unclassified.
The aggregate par value of such common stock was Five Million Dollars
($5,000,000).
SECOND: In accordance with Section 2-105(c) of the Corporations and
Associations Article of the Annotated Code of Maryland, the Board of Directors
of the Corporation hereby increases the total number of shares of common stock
that the Corporation has the authority to issue to Three Billion
(3,000,000,000) shares of common stock, with a par value of One Cent ($0.01)
per share, to be known as Common Stock. The aggregate par value of such Common
Stock is Thirty Million Dollars ($30,000,000).
THIRD: As of the filing of these Articles Supplementary, the Board of
Directors of the Corporation hereby classifies and reclassifies Three Billion
(3,000,000,000) shares of Common Stock, as follows:
(a) Two Hundred Forty Million (240,000,000) (including all
previously issued and outstanding Kemper Contrarian Fund Class A
Shares) are classified as Kemper Contrarian Fund Class A Shares, Two
Hundred Forty Million (240,000,000) (including all previously issued
and outstanding Kemper Contrarian Fund Class B Shares) are classified
as Kemper Contrarian Fund Class B Shares, Sixty Million (60,000,000)
(including all previously issued and outstanding Kemper Contrarian
Fund Class C Shares) are classified as Kemper Contrarian Fund Class C
Shares, Sixty Million (60,000,000) are classified as Kemper Contrarian
Fund Class I Shares;
(b) Four Hundred Eighty Million (480,000,000) (including all
previously issued and outstanding Kemper-Dreman High Return Equity
Fund Class A Shares) are classified as Kemper-Dreman High Return
Equity Fund Class A Shares, Four Hundred Eighty Million (480,000,000)
(including all previously issued and outstanding Kemper-Dreman High
Return Equity Fund Class B Shares) are classified as Kemper-Dreman
High Return Equity Fund Class B Shares, One Hundred Twenty Million
(120,000,000) (including all previously issued and outstanding
Kemper-Dreman High Return Equity Fund
<PAGE> 3
Class C Shares) are classified as Kemper-Dreman High Return Equity Fund
Class C Shares, One Hundred Twenty Million (120,000,000) (including all
previously issued and outstanding Kemper- Dreman High Return Equity
Fund Class I Shares) are classified as Kemper-Dreman High Return Equity
Fund Class I Shares;
(c) Two Hundred Forty Million (240,000,000) (including all
previously issued and outstanding Kemper Small Cap Value Fund Class A
Shares) are classified as Kemper Small Cap Value Fund Class A Shares,
Two Hundred Forty Million (240,000,000) (including all previously
issued and outstanding Kemper Small Cap Value Fund Class B Shares) are
classified as Kemper Small Cap Value Fund Class B Shares, Sixty
Million (60,000,000) (including all previously issued and outstanding
Kemper Small Cap Value Fund Class C Shares) are classified as Kemper
Small Cap Value Fund Class C Shares and Sixty Million (60,000,000)
(including all previously issued and outstanding Kemper Small Cap
Value Fund Class I Shares) are classified as Kemper Small Cap Value
Fund Class I Shares; and
(d) Two Hundred Forty Million (240,000,000) are classified as
Kemper Mid Cap Value Fund Class A Shares, Two Hundred Forty Million
(240,000,000) are classified as Kemper Mid Cap Value Fund Class B
Shares, Sixty Million (60,000,000) are classified as Kemper Mid Cap
Value Fund Class C Shares and Sixty Million (60,000,000) are
classified as Kemper Mid Cap Value Fund Class I Shares.
FOURTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the Class A Shares of each Fund of the Corporation
as set forth in ARTICLE FIFTH of the Articles of Incorporation of the
Corporation, and in all provisions of the Articles of Incorporation relating to
the stock of the Corporation generally, remain unchanged.
FIFTH: Except as set forth below, the Class B, C and I Shares of each
Fund of the Corporation shall have the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as set forth in ARTICLE FIFTH of the Articles
of Incorporation of the Corporation and shall be subject to all provisions of
the Articles of Incorporation relating to the stock of the Corporation
generally. In addition, the following voting powers and conversion rights shall
apply:
<PAGE> 4
(a) any voting rights with respect to a Rule 12b-1 Plan of the Class
B or Class C Shares of a Fund shall be exercisable by such class only.
(b) the Class B Shares of the Fund shall convert into Class A
Shares of the same Fund within a period of six years.
SIXTH: The Board of Directors of the Corporation has authorized,
classified or reclassified the Class A, B, C and I Shares the authority and
power contained in the Articles of Incorporation of the Corporation.
SEVENTH: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
The undersigned Vice President acknowledges these Articles
Supplementary to be the corporate act of the Corporation and states that to the
best of his knowledge, information and belief, the matters and facts set forth
in these Articles with respect to authorization and approval are true in all
material respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, KEMPER VALUE FUND, INC. has caused these Articles
Supplementary to be executed in its name and on its behalf by its Vice
President and witnessed by its Assistant Secretary on January 1, 1998.
[SEAL]
KEMPER VALUE FUND, INC.
Attest: /s/ Elizabeth C. Werth By: /s/ Philip J. Collora
----------------------- -----------------------
Elizabeth C. Werth Philip J. Collora
Assistant Secretary Vice President
<PAGE> 1
KEMPER VALUE FUND, INC.
BY-LAWS
ARTICLE I.
Offices
Section 1. The principal office of the Corporation shall be
in the City of Baltimore, State of Maryland. The Corporation
shall also have offices at such other places as the Board of
Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II.
Stockholders and Stock Certificates
Section 1. Every stockholder of record shall be entitled to
a stock certificate representing the shares owned by him. Stock
certificates shall be in such form as may be required by law and
as the Board of Directors shall prescribe. Every stock
certificate shall be signed by the Chairman or the President or a
Vice President and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, and sealed with the
corporate seal, which may be a facsimile, either engraved or
printed. Stock certificates may bear the facsimile signatures of
the officers authorized to sign such certificates.
Section 2. Shares of the capital stock of the Corporation
shall be transferable only on the books of the Corporation by the
person in whose name such shares are registered, or by his duly
authorized attorney or representative. In all cases of transfer
by an attorney-in-fact, the original power of attorney, or an
official copy thereof duly certified, shall be deposited and
remain with the Corporation or its duly authorized transfer
agent. In case of transfers by executors, administrators,
guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be
required to be deposited and remain with the Corporation or its
duly authorized transfer agent. No transfer shall be made unless
and until the certificate issued to the transferor shall be
delivered to the Corporation or its duly authorized transfer
agent, properly endorsed.
Section 3. Any person desiring a certificate for shares of
the capital stock of the Corporation to be issued in lieu of one
lost or destroyed shall make an affidavit or affirmation setting
forth the loss or destruction of such stock certificate, and
shall advertise such loss or destruction in such manner as the
<PAGE> 2
Board of Directors may require, and shall, if the Board of
Directors shall so require, give the Corporation a bond or
indemnity, in such form and with such security as may be
satisfactory to the Board, indemnifying the Corporation against
any loss that may result upon the issuance of a new stock
certificate. Upon receipt of such affidavit and proof of
publication of the advertisement of such loss or destruction, and
the bond, if any, required by the Board of Directors, a new stock
certificate may be issued of the same tenor and for the number of
shares as the one alleged to have been lost or destroyed.
Section 4. The Corporation shall be entitled to treat the
holder of record of any share or shares of its capital stock as
the owner thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not
the Corporation shall have express or other notice thereof.
ARTICLE III.
Meetings of Stockholders
Section 1. An Annual Meeting of the stockholders of the
Corporation shall be held in any year in which action by
stockholders is required by the Investment Company Act of 1940.
In any year in which stockholder action is not required by the
Investment Company Act of 1940, no Annual Meeting shall be held
unless called by the Board of Directors of the Corporation.
Section 2. Annual Meetings of the stockholders of the
Corporation for the election of Directors and for the transaction
of general business shall be held at the principal office of the
Corporation, or at such other place within or without the State
of Maryland as the Board of Directors may from time to time
prescribe. A notice of any change in the place of the annual
meeting shall be given to each stockholder not less than ten days
before the election is held.
Section 3. Special meetings of the stockholders may be
called at any time by the Chairman, President or a majority of
the members of the Board of Directors and shall be called by the
Secretary upon the written request of the holders of at least
twenty-five percent of the shares of the capital stock of the
Corporation issued and outstanding and entitled to vote at such
meeting; provided, if the matter proposed to be acted on is
substantially the same as a matter voted on at any special
meeting held during the preceding twelve months, such written
request shall be made by holders of at least a majority of the
capital stock of the Corporation issued and outstanding and
entitled to vote at such meetings. Upon receipt of a written
request from such holders entitled to call a special meeting,
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<PAGE> 3
which shall state the purpose of the meeting and the matter
proposed to be acted on at it, the Secretary shall inform the
holders who made such request of the reasonably estimated cost of
preparing and mailing a notice of a meeting and upon payment of
such costs to the Corporation the Secretary shall issue notice of
such meeting. Special meetings of the stockholders shall be held
at the principal office of the Corporation, or at such other
place within or without the State of Maryland as the Board of
Directors may from time to time direct, or at such place within
or without the State of Maryland as shall be specified in the
notice of such meeting.
Section 4. Notice of the time and place of annual or special
meetings of the stockholders shall be given to each stockholder
entitled to notice of such meeting not less than ten days nor
more than ninety days prior to the date of such meeting. In the
case of special meetings of the stockholders, the notice shall
specify the object or objects of such meeting, and no business
shall be transacted at such meeting other than that mentioned in
the call.
Section 5. The Board of Directors may close the stock
transfer books of the Corporation for a period not exceeding
twenty days preceding the date of any meeting of stockholders, or
the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or for a period
of not exceeding twenty days in connection with the obtaining of
the consent of stockholders for any purpose; provided, however,
that in lieu of closing the stock transfer books as aforesaid,
the Board of Directors may fix in advance a date, not exceeding
ninety days preceding the date of any meeting of stockholders, or
the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to
vote at any such meeting and any adjournment thereof, or entitled
to receive payment of any such dividend, or to any such allotment
of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or to give such
consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of
such dividend or to receive such allotment of rights or to
exercise such rights, or to give such consent, as the case may
be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.
Section 6. At all meetings of the stockholders a quorum
shall consist of the holders of a majority of the outstanding
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<PAGE> 4
shares of the capital stock of the Corporation entitled to vote
at such meeting. In the absence of a quorum no business shall be
transacted except that the stockholders present in person or by
proxy and entitled to vote at such meeting shall have power to
adjourn the meeting from time to time to a date not more than one
hundred twenty days after the original record date without
further notice other than announcement at the meeting. At any
such adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at
the meeting on the date specified in the original notice. Unless
otherwise required by applicable law or by the Fund's Articles of
Incorporation, a majority of all the votes cast at a meeting at
which a quorum is present is sufficient to approve any matter
which properly comes before the meeting, except that a plurality
of all votes cast at such a meeting shall be sufficient for the
election of a director. The holders of such majority shall also
have power to adjourn the meeting to any specific time or times,
and no notice of any such adjourned meeting need be given to
stockholders absent or otherwise.
Section 7. At any meeting of the stockholders of the
Corporation every stockholder having the right to vote shall be
entitled, in person or by proxy appointed by an instrument in
writing subscribed by such stockholder and bearing a date not
more than eleven months prior to said meeting unless such
instrument provides for a longer period, to one vote for each
share of stock having voting power registered in his name on the
books of the Corporation.
ARTICLE IV.
Directors
Section 1. The Board of Directors shall consist of not less
than three nor more than twelve members. The Board of Directors
may by a vote of the entire board increase or decrease the number
of directors without a vote of the stockholders. Directors need
not hold any shares of the capital stock of the Corporation.
Section 2. The directors shall be elected by the
stockholders of the Corporation at an annual meeting, if held, or
at a special meeting if called for that purpose, and shall hold
office until their successors shall be duly elected and shall
qualify.
Section 3. The Board of Directors shall have the control and
management of the business of the Corporation, and in addition to
the powers and authority by these By-Laws expressly conferred
upon them, may exercise, subject to the provisions of the laws of
the State of Maryland and of the Articles of Incorporation of the
Corporation, all such powers of the Corporation and do all such
4
<PAGE> 5
acts and things as are not required by law or by the Articles of
Incorporation to be exercised or done by the stockholders.
Section 4. The Board of Directors shall have power to fill
vacancies occurring on the Board, whether by death, resignation
or otherwise. A vacancy on the Board of Directors resulting from
any cause except an increase in the number of directors may be
filled by a vote of the majority of the remaining members of the
Board, though less than a quorum. A vacancy on the Board of
Directors resulting from an increase in the number of directors
may be filled by a majority of the entire Board of Directors. A
director elected by the Board of Directors to fill a vacancy
shall serve until the next annual meeting of stockholders and
until his successor is elected and qualifies. If less than a
majority of the directors in office shall have been elected by
the stockholders, a meeting of the stockholders shall be called
as required under the Investment Company Act of 1940, as amended.
Section 5. The Board of Directors shall have power to
appoint, and at its discretion to remove or suspend, any
officers, managers, superintendents, subordinates, assistants,
clerks, agents and employees, permanently or temporarily, as the
Board may think fit, and to determine their duties and to fix,
and from time to time to change, their salaries or emoluments,
and to require security in such instances and in such amounts as
it may deem proper.
Section 6. In case of the absence of an officer of the
Corporation, or for any other reason which may seem sufficient to
the Board of Directors, the Board may delegate his powers and
duties for the time being to any other officer of the Corporation
or to any director.
Section 7. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate
one or more committees, each committee to consist of two or more
of the directors of the Corporation which, to the extent provided
in such resolution or resolutions and by applicable law, shall
have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation. Such
committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board
of Directors. Any such committee shall keep regular minutes of
its proceedings, and shall report the same to the Board when
required.
Section 8. The Board of Directors may hold their meetings
and keep the books of the Corporation, except the original or a
duplicate stock ledger and the original or a certified copy of
these By-Laws, outside of the State of Maryland, at such place or
places as they may from time to time determine.
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<PAGE> 6
Section 9. The Board of Directors shall have power to fix,
and from time to time to change the compensation, if any, of the
directors of the Corporation.
ARTICLE V.
Directors Meetings
Section 1. Regular meetings of the Board of directors shall
be held without notice at such times and places as may be from
time to time prescribed by the Board.
Section 2. Special meetings of the Board of Directors may be
called at any time by the Chairman, and shall be called by the
Chairman upon the written request of a majority of the members of
the Board of Directors. Unless notice is waived by all the
members of the Board of Directors, notice of any special meeting
shall be given to each director at least twenty-four hours prior
to the date of such meeting, and such notice shall provide the
time and place of such special meeting.
Section 3. One-third of the entire Board of Directors shall
constitute a quorum for the transaction of business at any
meeting; except that if the number of directors on the Board is
less than six, two members shall constitute a quorum for the
transaction of business at any meeting. The act of a majority of
the directors present at any meeting where there is a quorum
shall be the act of the Board of Directors except as may be
otherwise required by Maryland law or the Investment Company Act
of 1940.
Section 4. The order of business at meetings of the Board of
Directors shall be prescribed from time to time by the Board.
ARTICLE VI.
Officers and Agents
Section 1. At the first meeting of the Board of Directors
after the election of Directors in each year, the Board shall
elect a Chairman, a President and Chief Executive Officer, one or
more Vice Presidents, a Secretary and a Treasurer and may elect
or appoint one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers and agents as the
Board may deem necessary and as the business of the Corporation
may require.
Section 2. The Chairman of the Board shall be elected from
the membership of the Board of Directors, but other officers need
not be members of the Board of Directors. Any two or more offices
may be held by the same person except the offices of President
and Vice President. All officers of the Corporation shall serve
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<PAGE> 7
for one year and until their successors shall have been duly
elected and shall have qualified; provided, however, that any
officer may be removed at any time, either with or without cause,
by action by the Board of Directors.
ARTICLE VII.
Duties of Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at all
meetings of the stockholders and the Board of Directors and shall
be a member ex officio of all standing committees. He shall have
those duties and responsibilities as shall be assigned to him by
the Board of Directors. In the absence, resignation, disability
or death of the President, the Chairman shall exercise all the
powers and perform all the duties of the President until his
return, or until such disability shall be removed or until a new
President shall have been elected.
President
Section 2. The President shall be the Chief Executive
Officer and head of the Corporation, and in the recess of the
Board of Directors shall have the general control and management
of its business and affairs, subject, however, to the regulations
of the Board of Directors.
The President shall, in the absence of the Chairman, preside
at all meetings of the stockholders and the Board of Directors.
In the event of the absence, resignation, disability or death of
the Chairman, the President shall exercise all powers and perform
all duties of the Chairman until his return, or until such
disability shall have been removed or until a new Chairman shall
have been elected.
Vice Presidents
Section 3. The Vice Presidents shall have those duties and
responsibilities as shall be assigned to them by the Chairman or
the President. In the event of the absence, resignation,
disability or death of the Chairman and President, the Vice
President who has been duly authorized to do so by the Chairman
or President, shall exercise all the powers and perform all the
duties of the President or until such disability shall be removed
or until a new President shall have been elected.
The Secretary and Assistant Secretaries
Section 4. The Secretary shall attend all meetings of the
stockholders and shall record all the proceedings thereof in a
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<PAGE> 8
book to be kept for that purpose, and he shall be the custodian
of the corporate seal of the Corporation. In the absence of the
Secretary, an Assistant Secretary or any other person appointed
or elected by the Board of Directors, as is elsewhere in these
Bylaws provided, may exercise the rights and perform the duties
of the Secretary.
Section 5. The Assistant Secretary, or, if there be more
than one Assistant Secretary, then the Assistant Secretaries in
the order of their seniority, shall, in the absence or disability
of the Secretary, perform the duties and exercise the powers of
the Secretary. Any Assistant Secretary elected by the Board shall
also perform such other duties and exercise such other powers as
the Board of Directors shall from time to time prescribe.
The Treasurer and Assistant Treasurers
Section 6. The Treasurer shall keep full and correct
accounts of the receipts and expenditures of the Corporation in
books belonging to the Corporation, and shall deposit all monies
and valuable effects in the name and to the credit of the
Corporation and in such depositories as may be designated by the
Board of Directors, and shall, if the Board shall so direct, give
bond with sufficient security and in such amount as may be
required by the Board of Directors for the faithful performance
of his duties.
He shall disburse funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and Board of
Directors at the regular meetings of the Board, or whenever they
may require it, an account of all his transactions as the chief
fiscal officer of the Corporation and of the financial condition
of the Corporation, and shall present each year before the annual
meeting of the stockholders a full financial report of the
preceding fiscal year.
Section 7. The Assistant Treasurer, or, if there be more
than one Assistant Treasurer, then the Assistant Treasurers in
the order of their seniority, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of
the Treasurer. Any Assistant Treasurer elected by the board shall
also perform such duties and exercise such powers as the Board of
Directors shall from time to time prescribe.
ARTICLE VIII.
Investment Limitations
The following investment limitations may not be changed with
respect to any Portfolio without the approval of a majority of
the outstanding voting securities of the Portfolio. A "majority"
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is defined as the lesser of: (1) at least 67% of the voting
securities of the Portfolio (to be affected by the proposed
change) present a meeting if the holders of the more than 50% of
the outstanding voting securities of the Portfolio are present or
represented by proxy, or (2) more than 50% of the outstanding
voting securities of such Portfolio.
The Portfolios will not:
1. Purchase securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities) if immediately thereafter more
than 5% of its total assets would be invested in the securities
of any one issuer, or purchase more than 10% of an issuer's
outstanding voting securities, except that up to 25% of each
Portfolio's total assets may be invested without regard to these
limitations.
2. Borrow money or issue senior securities, except that each
Portfolio may borrow from banks for temporary purposes in amounts
not in excess of 10% of the value of its total assets at the time
of such borrowing; or mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing in amounts not in
excess of the lesser of the amount borrowed or 10% of the value
of its total assets at the time of such borrowing; provided that
the Portfolios may enter into futures contracts and related
options as described in the prospectus. Optioned securities are
not considered to be pledged for purposes of this limitation.
3. Purchase any securities which would cause more than 25%
of the value of its total assets at the time of purchase to be
invested in the securities of issuers conducting their principal
activities in the same industry.
4. Invest more than 10% of the value of its total assets in
illiquid securities, including, restricted securities and
repurchase agreements with remaining maturities in excess of
seven days, and other securities for which market quotations are
not readily available.
5. Make loans, except that each Portfolio may lend
securities it owns as described herein and enter into repurchase
agreements pursuant to its investment objective and policies.
6. Purchase securities on margin, make short sales of
securities provided that the Portfolios may enter into futures
contracts and related options and make initial and variation
margin deposits in connection therewith.
7. Purchase or sell commodities or commodity contracts
except as stated in the prospectus, or invest in oil, gas or
mineral exploration or development programs, provided that the
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Portfolios may, to the extent appropriate to their investment
objectives, purchase publicly traded securities of companies
engaging in whole or in part in such activities.
In addition to the "Investment Limitations" stated above,
the Portfolios will not: (1) purchase or retain securities of an
issuer if those officers and directors of the Fund or its
investment advisor owning more than 1/2 of 1% of such securities
together own more than 5% of such securities; (2) engage in the
business of underwriting securities issued by others, except that
each Portfolio may acquire securities which are subject to
restrictions on disposition ("restricted securities") within the
meaning of the Securities Act of 1933, but no such purchase will
be made which would result in more than 10% of the value of the
Portfolio's total assets consisting of restricted securities,
repurchase agreements with maturities of greater than seven days,
and other securities without readily available market quotations;
(3) invest for the purpose of exercising control over management
of any company; (4) invest its assets in securities of any
investment company, except by open market purchases at an
ordinary broker's commission, or in connection with a merger,
acquisition of assets, consolidation or reorganization; (5)
invest more than 5% of its total assets in securities of
companies which have (with predecessors) a record of less than
three years' continuous operation; (6) purchase warrants except
warrants acquired as a result of its holdings of common stocks;
(7) purchase an interest in a real estate investment trust.
ARTICLE IX.
Other Restrictions
Section 1. Dealings. The Officers and Directors of the
Corporation, its investment adviser or any sub-adviser shall have
no dealings for or on behalf of the Corporation with themselves
as principal or agent, or with any corporation or partnership in
which they have a financial interest, provided that this Section
shall not prevent:
(a) Officers or Directors of the Corporation from having a
financial interest in the Corporation, in any sponsor, manager,
investment adviser or promoter of the Corporation, or in any
underwriter of securities issued by the Corporation;
(b) The purchase of securities for any Portfolio of the
Corporation, or sale of Securities owned by any Portfolio of the
Corporation through a securities dealer, one or more of whose
partners, officers, directors or security holders is an Officer
or Director of the Corporation, its investment adviser or its
sub-adviser, provided such transactions are handled in a
brokerage capacity only, and provided commissions charged do not
exceed customary brokerage charges for such service;
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(c) The employment of any legal counsel, registrar, transfer
agent, dividend disbursing agent or custodian having a partner,
officer, director or security holder who is an Officer or
Director of the Corporation; provided only customary fees are
charged for services rendered to or for the benefit of the
Corporation;
(d) The purchase for any Portfolio of the Corporation of
securities issued by an issuer having an officer, director or
security holder who is an Officer or Director of the Corporation
or of any manager of the Corporation, unless the retention of
such securities in the Portfolio of the Corporation would be a
violation of these By-Laws or the Articles of Incorporation of
the Corporation.
Section 2. Claims Against Portfolio Assets. Each Portfolio
of the Corporation shall provide in any loan agreement and any
other agreement to pledge, mortgage or hypothecate any of its
assets that such loan shall be repaid solely by the Portfolio
which borrowed funds, that to the extent such loan may be secured
only by the assets of the Portfolio which obtained the loan, no
creditor of such Portfolio shall have any rights to any assets of
the Corporation other than the specific assets which secure the
agreement.
ARTICLE X.
Checks, Drafts, Notes, Etc.
Section 1. All checks shall bear the signature of such
person or persons as the Board of Directors may from time to time
direct.
Section 2. All notes and other similar obligations and
acceptances of drafts by the Corporation shall be signed by such
person or persons as the Board of Directors may from time to time
direct.
Section 3. Any officer of the Corporation or any other
employee, as the Board of Directors may from time to time direct,
shall have full power to endorse for deposit all checks and all
negotiable paper drawn payable to his or their order or to the
order of the Corporation.
ARTICLE XI.
Corporate Seal
Section 1. The corporate seal of the Corporation shall have
inscribed thereon the name of the Corporation, the year of its
organization, and the words "Corporate Seal, Maryland." Such seal
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may be used by causing it or a facsimile thereof to be impressed
or affixed or otherwise reproduced.
ARTICLE XII.
Determination of Net Asset Value and Redemption
Section 1. The Board of Directors shall have power to fix an
initial offering price for the shares of any series which shall
yield to the corporation not less than the par value thereof, at
which price the shares of the Common Stock of the corporation
shall be offered for sale, and to determine from time to time
thereafter the offering price which shall yield to the
corporation not less than the par value thereof from sales of the
shares of its Common Stock; provided, however, that no shares of
the Common Stock of the corporation shall be issued or sold for a
consideration which shall yield to the corporation less than the
net asset value of shares of such series determined as
hereinafter provided, as of the business day on which such shares
are sold, or at such other times set by the Board of Directors,
except in the case of shares of such Common Stock issued in
payment of a dividend properly declared and payable.
The net asset value of the property and assets of any series
of the corporation shall be determined at such times as the Board
of Directors may direct, by deducting from the total appraised
value of all of the property and assets of the corporation,
determined in the manner hereinafter provided, all debts,
obligations and liabilities of the corporation (including, but
without limitation of the generality of any of the foregoing, any
or all debts, obligations, liabilities or claims of any and every
kind and nature, whether fixed, accrued, or unmatured, and any
reserves or charges, determined in accordance with generally
accepted accounting principles, for any or all thereof, whether
for taxes, including estimated taxes or unrealized book profits,
expenses, contingencies or otherwise).
In determining the total appraised value of all the property
and assets of the corporation or belonging to any series thereof:
(a) Securities owned shall be valued at market value or, in
the absence of readily available market quotations, at fair value
as determined in good faith by or as directed by the Board of
Directors in accordance with applicable statutes and regulations.
(b) Dividends declared but not yet received, or rights, in
respect of securities which are quoted ex-dividend or ex-rights,
shall be included in the value of such securities as determined
by or pursuant to the direction of the Board of Directors on the
day the particular securities are first quoted ex-dividend or
ex-rights, and on each succeeding day until the said dividends or
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rights are received and become part of the assets of the
corporation.
(c) The value of any other assets of the corporation (and
any of the assets mentioned in paragraphs (a) or (b), in the
discretion of the Board of Directors in the event of a national
financial emergency, as hereinafter defined) shall be determined
in such manner as may be approved from time to time by or
pursuant to the direction of the Board of Directors.
The net asset value of each share of the Common Stock of the
corporation shall be determined by dividing the total market
value of the property and assets of the relevant series of the
corporation by the total number of shares of its Common Stock
then issued and outstanding for such series, including any shares
sold by the corporation up to and including the date as of which
such net asset value is to be determined whether or not
certificates therefor have actually been issued. In case the net
asset value of each share so determined shall include a fraction
of one cent, such net asset value of each share shall be adjusted
to the nearest full cent.
For the purposes of these Articles of Incorporation,a
"national financial emergency" is defined as the whole or any
part of any period (i) during which the New York Stock Exchange
is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of
which disposal by the corporation of securities owned by such
series is not reasonably practicable or it is not reasonably
practicable for the corporation fairly to determine the value of
the net assets of such series,or (iv) during any other period
when the Securities and Exchange Commission (or any succeeding
governmental authority) may for the protection of security
holders of the corporation by order permit suspension of the
right of redemption or postponement of the date of payment on
redemption; provided that applicable rules and regulations of the
Securities and Exchange Commission (or any succeeding
governmental authority) shall govern as to whether the conditions
prescribed in (ii), (iii), or (iv) exist. The Board of Directors
may, in its discretion, declare the suspension described in (iv)
above at an end, and such other suspension relating to a natural
financial emergency shall terminate, as the case may be, on the
first business day on which said Stock Exchange shall have
reopened or the period specified in (ii) or (iii) shall have
expired (as to which in the absence of an official ruling by said
Commission or succeeding authority, the determination of the
Board of Directors shall be conclusive).
Section 2. To the extent permitted by law, and except in the
case of a national financial emergency, the corporation shall
redeem shares of its Common Stock from its stockholders upon
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<PAGE> 14
request of the holder thereof received by the corporation or its
designated agent during business hours of any business day,
provided that such request must be accompanied by surrender of
outstanding certificate or certificates for such shares in form
for transfer, together with such proof of the authenticity of
signatures as may reasonably be required on such shares (or, on
such request in the event no certificate is outstanding) by, or
pursuant to the direction of the Board of Directors of the
corporation, and accompanied by proper stock transfer stamps.
Shares redeemed upon any such request shall be purchased by the
corporation at the net asset value of such shares determined in
the manner provided in Paragraph (1) of this Article Seventh, as
of the close of business on the business day during which such
request was received in good order by the corporation.
Payments for shares of its Common Stock so redeemed by the
corporation shall be made from the assets of the applicable
series in cash, except payment for such shares may, at the option
of the Board of Directors, or such officer or officers as they
may duly authorize for the purpose in their complete discretion,
be made from the assets of that series in kind or partially in
cash and partially in kind. In case of any payment in kind the
Board of Directors, or their delegate, shall have absolute
discretion as to what security or securities of such series shall
be distributed in kind and the amount of the same; and the
securities shall be valued for purposes of distribution at the
value at which they were appraised in computing the current net
asset value of the series of the Fund's shares, provided that any
stockholder who cannot legally acquire securities so distributed
in kind by reason of the prohibitions of the Investment Company
Act of 1940 shall receive cash.
Payment for shares of its Common Stock so redeemed by the
corporation shall be made by the corporation as provided above
within seven days after the date which such shares are deposited;
provided, however, that if payment shall be made by delivery of
assets of the corporation, as provided above, any securities to
be delivered as part of such payment shall be delivered as
promptly as any necessary transfers of such securities on the
books of the several corporations whose securities are to be
delivered may be made, but not necessarily within such seven day
period.
The right of any holder of shares of the Common Stock of the
corporation to receive dividends thereon and all other rights of
such stockholder with respect to the shares so redeemed by the
corporation shall cease and determine from and after the time as
of which the purchase price of such shares shall be fixed, as
provided above, except the right of such stockholder to receive
payment for such shares as provided for herein.
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<PAGE> 15
ARTICLE XIII.
Dividends
Section 1. Dividends upon the shares of the capital stock of
the Corporation may, subject to the provisions of the Articles of
Incorporation of the Corporation, if any, be declared by the
Board of Directors. Dividends may be paid in cash, in property,
or in shares of the capital stock of the Corporation.
Section 2. Before payment of any dividend there may be set
aside out of any funds of the Corporation available for dividends
such sum or sums as the Board of Directors may, from time to
time, in their absolute discretion, think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purpose as the Board of Directors shall deem to be for
the best interests of the Corporation, and the Board of Directors
may abolish any such reserve in the manner in which it was
created.
ARTICLE XIV.
Indemnification
Section 1. The corporation shall indemnify its directors and
officers to the fullest extent allowed, and in the manner
provided, by Maryland law, including the advancing of expenses
incurred in connection therewith. Such indemnification shall be
in addition to any other right or claim to which any director or
officer may otherwise be entitled. The corporation may purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or who,
while a director, officer, employee or agent of the corporation,
is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan, against any
liability asserted against and incurred by such person in any
such capacity or arising out of such person's position, whether
or not the corporation would have had the power to indemnify such
liability.
Section 2. Nothing contained in this Article XIV protects or
purports to protect, or may be interpreted or construed to
protect, any director or officer against liability to the
corporation or its stockholders to which he or she 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 or her office.
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<PAGE> 16
ARTICLE XV.
Fiscal Year
Section 1. The fiscal year of the Corporation shall begin on
December 1 of each year, and end on November 30 of each year.
ARTICLE XVI.
Notices
Section 1. Whenever under the provisions of these By-Laws
notice is required to be given to any director or stockholder,
such notice is deemed given when it is personally delivered, left
at the residence or usual place of business of the director or
stockholder, or mailed to such director or stockholder at such
address as shall appear on the books of the Corporation and such
notice, if mailed, shall be deemed to be given at the time it
shall be so deposited in the United States mail postage prepaid.
In the case of directors, such notice may also be given orally by
telephone or by telegraph or cable.
Section 2. Any notice required to be given under these
By-Laws may be waived in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated
therein.
ARTICLE XVII.
Amendments
Section 1. Except as otherwise provided in Article VIII, these
By-Laws may be amended, altered or repealed by the affirmative
vote of the holders of a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote
thereon, or by a majority of the Board of Directors, as the case
may be.
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<PAGE> 1
EXHIBIT 99.B5A
INVESTMENT MANAGEMENT AGREEMENT
Kemper Value Fund, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Contrarian Fund
Ladies and Gentlemen:
KEMPER VALUE FUND, INC. (the "Corporation") has been established
as a Maryland corporation to engage in the business of an
investment company. Pursuant to the Corporation's Articles of
Incorporation, as amended from time-to-time (the "Articles"), the
Board of Directors is authorized to issue the Corporation's
shares (the "Shares"), in separate series, or funds. The Board of
Directors has authorized Kemper Contrarian Fund (the "Fund").
Series may be abolished and dissolved, and additional series
established, from time to time by action of the Directors.
The Corporation, 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 Corporation on behalf of
the Fund agrees with you as follows:
1. Delivery of Documents. The Corporation 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
Corporation's Registration Statement on Form N-1A, as amended
from time to time, (the "Registration Statement") filed by the
Corporation 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 Corporation. The Corporation
has also furnished you with copies properly certified or
<PAGE> 2
authenticated of each of the following additional documents
related to the Corporation and the Fund:
(a) The Articles, as amended to date.
(b) By-Laws of the Corporation as in effect on the date
hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the
shareholders of the Fund selecting you as investment manager and
approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Corporation 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 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 Corporation's Board of
Directors. 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 Corporation. You shall also
make available to the Corporation promptly upon request all of
the Fund's investment records and ledgers as are necessary to
assist the Corporation 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
Corporation are being conducted in a manner consistent with
applicable laws and regulations.
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<PAGE> 3
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 Corporation's Board of Directors
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 Corporation's officers or Board of Directors 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 Corporation 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 Corporation's Board of Directors
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
3
<PAGE> 4
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 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 Corporation as it may
reasonably request in the conduct of the Fund's business, subject
to the direction and control of the Corporation's Board of
Directors. 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 Directors, officers and
executive employees of the Corporation (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 Corporation, 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 Directors 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
Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues
and expenses incurred by the Fund in connection with membership
4
<PAGE> 5
in investment company trade organizations; fees and expenses of
the Fund's accounting agent for which the Corporation 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 Corporation business) of Directors, officers and employees of
the Corporation 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 Directors and officers of the
Corporation; 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 Corporation 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 Corporation 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 .75 of
1 percent of the average daily net assets as defined below of the
Fund for such month; provided that, for any calendar month during
which the average of such values exceeds $250,000,000, the fee
payable for that month based on the portion of the average of
such values in excess of $250,000,000 shall be 1/12 of .72 of 1
percent of such portion; provided that, for any calendar month
5
<PAGE> 6
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 .70 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 .68 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 .65 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 .64 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 .63 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 .62 of 1 percent of such
portion; over (b) 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
Articles 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.
6
<PAGE> 7
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 Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by
you have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with
procedures believed by you to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in
a manner believed by you to be equitable. The Fund recognizes
that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the
Corporation 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 Corporation, 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 April 1, 1998, and continue in force
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (a) by the
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<PAGE> 8
vote of a majority of the Directors 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 Directors of the Corporation, 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 Corporation's Board of Directors on 60 days' written notice
to you, or by you on 60 days' written notice to the Corporation.
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 Directors
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. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or limit
any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the
definitions of "affiliated person," "assignment" and "majority of
the outstanding voting securities"), as from time to time
amended, shall be applied, subject, however, to such exemptions
as may be granted by the SEC by any rule, regulation or order.
8
<PAGE> 9
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
Corporation 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 Corporation, whereupon this
letter shall become a binding contract effective as of the date
of this Agreement.
Yours very truly,
KEMPER VALUE FUND, INC., on behalf of
Kemper Contrarian Fund
By: /s/ John E. Neal
----------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Lynn S. Birdsong
----------------------------------
Vice President
9
<PAGE> 1
EXHIBIT 99.B5B
INVESTMENT MANAGEMENT AGREEMENT
Kemper Value Fund, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper-Dreman High Return Equity Fund
Ladies and Gentlemen:
KEMPER VALUE FUND, INC. (the "Corporation") has been established
as a Maryland corporation to engage in the business of an
investment company. Pursuant to the Corporation s Articles of
Incorporation, as amended from time-to-time (the "Articles"), the
Board of Directors is authorized to issue the Corporation's
shares (the "Shares"), in separate series, or funds. The Board of
Directors has authorized Kemper-Dreman High Return Equity Fund
(the "Fund"). Series may be abolished and dissolved, and
additional series established, from time to time by action of the
Directors.
The Corporation, 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 Corporation on behalf of
the Fund agrees with you as follows:
1. Delivery of Documents. The Corporation 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
Corporation s Registration Statement on Form N-1A, as amended
from time to time, (the "Registration Statement") filed by the
Corporation 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 Corporation. The Corporation
has also furnished you with copies properly certified or
<PAGE> 2
authenticated of each of the following additional documents
related to the Corporation and the Fund:
(a) The Articles, as amended to date.
(b) By-Laws of the Corporation as in effect on the date
hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the
shareholders of the Fund selecting you as investment manager and
approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Corporation 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 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 Corporation's Board of
Directors. 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 Corporation. You shall also
make available to the Corporation promptly upon request all of
the Fund s investment records and ledgers as are necessary to
assist the Corporation 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
Corporation are being conducted in a manner consistent with
applicable laws and regulations.
2
<PAGE> 3
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 Corporation's Board of Directors
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 Corporation's officers or Board of Directors 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 Corporation 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 Corporation's Board of Directors
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
3
<PAGE> 4
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 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 Corporation as it may
reasonably request in the conduct of the Fund's business, subject
to the direction and control of the Corporation s Board of
Directors. 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 Directors, officers and
executive employees of the Corporation (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 Corporation, 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' Directors 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
Corporation; telephone, telex, facsimile, postage and other
4
<PAGE> 5
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 Corporation 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 Corporation business) of Directors, officers and employees of
the Corporation 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 Directors and officers of the
Corporation; 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 Corporation 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 Corporation 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 .75 of
1 percent of the average daily net assets as defined below of the
Fund for such month; provided that, for any calendar month during
which the average of such values exceeds $250,000,000, the fee
5
<PAGE> 6
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 .72 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 .70 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 .68 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 .65 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 .64 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 .63 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 .62 of 1 percent of such
portion; over (b) 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
Articles 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
6
<PAGE> 7
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 Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by
you have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with
procedures believed by you to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in
a manner believed by you to be equitable. The Fund recognizes
that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the
Corporation 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 Corporation, 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.
7
<PAGE> 8
8. Duration and Termination of This Agreement. This Agreement
shall remain in force until April 1, 1998, and continue in force
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (a) by the
vote of a majority of the Directors 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 Directors of the Corporation, 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 Corporation's Board of Directors on 60 days' written notice
to you, or by you on 60 days' written notice to the Corporation.
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 Directors
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. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or limit
any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the
definitions of "affiliated person," "assignment" and "majority of
8
<PAGE> 9
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
Corporation 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 Corporation, whereupon this
letter shall become a binding contract effective as of the date
of this Agreement.
Yours very truly,
KEMPER VALUE FUND, INC., on behalf of
Kemper-Dreman High Return Equity Fund
By: /s/ John E. Neal
----------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Lynn S. Birdsong
---------------------------------
Vice President
9
<PAGE> 1
EXHIBIT 99.B5C
INVESTMENT MANAGEMENT AGREEMENT
Kemper Value Fund, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Small Cap Value Fund
Ladies and Gentlemen:
KEMPER VALUE FUND, INC. (the "Corporation") has been established
as a Maryland corporation to engage in the business of an
investment company. Pursuant to the Corporation's Articles of
Incorporation, as amended from time-to-time (the "Articles"), the
Board of Directors is authorized to issue the Corporation's
shares (the "Shares"), in separate series, or funds. The Board of
Directors has authorized Kemper Small Cap Value Fund (the
"Fund"). Series may be abolished and dissolved, and additional
series established, from time to time by action of the Directors.
The Corporation, 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 Corporation on behalf of
the Fund agrees with you as follows:
1. Delivery of Documents. The Corporation 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
Corporation's Registration Statement on Form N-1A, as amended
from time to time, (the "Registration Statement") filed by the
Corporation 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 Corporation. The Corporation
has also furnished you with copies properly certified or
authenticated of each of the following additional documents
related to the Corporation and the Fund:
<PAGE> 2
(a) The Articles, as amended to date.
(b) By-Laws of the Corporation as in effect on the date
hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the
shareholders of the Fund selecting you as investment manager and
approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Corporation 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 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 Corporation's Board of
Directors. 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 Corporation. You shall also
make available to the Corporation promptly upon request all of
the Fund's investment records and ledgers as are necessary to
assist the Corporation 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
Corporation 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,
2
<PAGE> 3
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 Corporation's Board of Directors
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 Corporation's officers or Board of Directors 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 Corporation 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 Corporation's Board of Directors
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
3
<PAGE> 4
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 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 Corporation as it may
reasonably request in the conduct of the Fund's business, subject
to the direction and control of the Corporation's Board of
Directors. 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 Directors, officers and
executive employees of the Corporation (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 Corporation, 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 Directors 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
Corporation; 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 Corporation is
responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend
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<PAGE> 5
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 Corporation business) of Directors, officers and employees of
the Corporation 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 Directors and officers of the
Corporation; 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 Corporation 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 Corporation 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 .75 of
1 percent of the average daily net assets as defined below of the
Fund for such month; provided that, for any calendar month during
which the average of such values exceeds $250,000,000, the fee
payable for that month based on the portion of the average of
such values in excess of $250,000,000 shall be 1/12 of .72 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 .70 of 1 percent of such portion; provided that, for any
5
<PAGE> 6
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 .68 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 .65 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 .64 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 .63 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 .62 of 1 percent of such
portion; over (b) 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
Articles 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
6
<PAGE> 7
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 Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by
you have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with
procedures believed by you to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in
a manner believed by you to be equitable. The Fund recognizes
that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the
Corporation 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 Corporation, 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 April 1, 1998, and continue in force
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (a) by the
vote of a majority of the Directors 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 Directors of the Corporation, or by
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<PAGE> 8
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 Corporation's Board of Directors on 60 days' written notice
to you, or by you on 60 days' written notice to the Corporation.
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 Directors
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. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or limit
any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the
definitions of "affiliated person," "assignment" and "majority of
the outstanding voting securities"), as from time to time
amended, shall be applied, subject, however, to such exemptions
as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, provided that nothing herein
shall be construed in a manner inconsistent with the 1940 Act, or
in a manner which would cause the Fund to fail to comply with the
requirements of Subchapter M of the Code.
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<PAGE> 9
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the
Corporation 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 Corporation, whereupon this
letter shall become a binding contract effective as of the date
of this Agreement.
Yours very truly,
KEMPER VALUE FUND, INC., on behalf of
Kemper Small Cap Value Fund
By: /s/ John E. Neal
----------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Lynn S. Birdsong
----------------------------------
Vice President
9
<PAGE> 1
EXHIBIT 99.B5D
SUB-ADVISORY AGREEMENT
AGREEMENT made this 31st day of December, 1997, by and between
SCUDDER KEMPER INVESTMENTS, INC., a Delaware corporation (the
"Adviser") and DREMAN VALUE MANAGEMENT, L.L.C., formerly known as
CONTRARIAN INVESTMENT MANAGEMENT, L.L.C., a Delaware limited
liability company (the "Sub-Adviser").
WHEREAS, KEMPER VALUE FUND, INC., formerly known as KEMPER-DREMAN
FUND, INC., a Maryland corporation (the "Fund") is a management
investment company registered under the Investment Company Act of
1940 ("the Investment Company Act");
WHEREAS, the Fund has retained the Adviser to render to it
investment advisory and management services with regard to the
Fund, including the series known as the Kemper-Dreman High Return
Equity Fund (the "High Return Series"), pursuant to an Investment
Management Agreement (the "Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-
Adviser to render investment advisory and management services for
the High Return Series and the Sub-Adviser is willing to render
such services;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. Appointment of Sub-Adviser.
(a) The Adviser hereby employs the Sub-Adviser to manage
the investment and reinvestment of the assets of the High Return
Series in accordance with the applicable investment objectives,
policies and limitations and subject to the supervision of the
Adviser and the Board of Directors of the Fund for the period and
upon the terms herein set forth, and to place orders for the
purchase or sale of portfolio securities for the High Return
Series account with brokers or dealers selected by the Sub-
Adviser; and, in connection therewith, the Sub-Adviser is
authorized as the agent of the High Return Series to give
instructions to the Custodian of the Fund as to the deliveries of
securities and payments of cash for the account of the High
Return Series. In connection with the selection of such brokers
or dealers and the placing of such orders, the Sub-Adviser is
directed to seek for the High Return Series best execution of
orders. Subject to such policies as the Board of Directors of the
Fund determines and subject to satisfying the requirements of
Section 28(e) of the Securities Exchange Act of 1934, the Sub-
<PAGE> 2
Adviser shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely
by reason of its having caused the High Return Series to pay a
broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith that
such amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such broker or
dealer viewed in terms of either that particular transaction or
the Sub-Adviser's overall responsibilities with respect to the
clients of the Sub-Adviser as to which the Sub-Adviser exercises
investment discretion. The Adviser recognizes that all research
services and research that the Sub-Adviser receives are available
for all clients of the Sub-Adviser, and that the High Return
Series and other clients of the Sub-Adviser may benefit thereby.
The investment of funds shall be subject to all applicable
restrictions of the Articles of Incorporation and By-Laws of the
Fund as may from time to time be in force.
(b) The Sub-Adviser accepts such employment and agrees
during the period of this Agreement to render such investment
management services, to furnish related office facilities and
equipment and clerical, bookkeeping and administrative services
for the High Return Series, and to assume the other obligations
herein set forth for the compensation herein provided. The Sub-
Adviser shall assume and pay all of the costs and expenses of
performing its obligations under this Agreement. The Sub-Adviser
shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided
or authorized, shall have no authority to act for or represent
the Fund, the High Return Series or the Adviser in any way or
otherwise be deemed an agent of the Fund, the High Return Series
or the Adviser.
(c) The Sub-Adviser will keep the Adviser, for itself and
on behalf of the Fund, informed of developments materially
affecting the Fund or the High Return Series and shall, on the
Sub-Adviser's own initiative and as reasonably requested by the
Adviser, for itself and on behalf of the Fund, furnish to the
Adviser from time to time whatever information the Adviser
reasonably believes appropriate for this purpose.
(d) The Sub-Adviser shall provide the Adviser with such
investment portfolio accounting and shall maintain and provide
such detailed records and reports as the Adviser may from time to
time reasonably request, including without limitation, daily
processing of investment transactions and periodic valuations of
investment portfolio positions as required by the Adviser,
monthly reports of the investment portfolio and all investment
transactions and the preparation of such reports and compilation
of such data as may be required by the Adviser to comply with the
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<PAGE> 3
obligations imposed upon it under the Management Agreement. Sub-
Adviser agrees to install in its offices computer equipment or
software, as provided by the Adviser, for use by the Sub-Adviser
in performing its duties under this Sub-Advisory Agreement,
including inputting on a daily basis that day's portfolio
transactions in the High Return Series.
(e) The Sub-Adviser shall maintain and enforce adequate
security procedures with respect to all materials, records,
documents and data relating to any of its responsibilities
pursuant to this Agreement including all means for the effecting
of securities transactions.
(f) The Sub-Adviser agrees that it will provide to the
Adviser or the Fund promptly upon request reports and copies of
such of its investment records and ledgers with respect to the
High Return Series as appropriate to assist the Adviser and the
Fund in monitoring compliance with the Investment Company Act and
the Investment Advisers Act of 1940 (the "Advisers Act"), as well
as other applicable laws. The Sub-Adviser will furnish the Fund s
Board of Directors such periodic and special reports with respect
to the High Return Series as the Adviser or the Board of
Directors may reasonably request, including statistical
information with respect to the High Return Series's securities.
(g) In compliance with the requirements of Rule 31a-3 under
the Investment Company Act, the Sub-Adviser hereby agrees that
any records that it maintains for the Fund are the property of
the Fund and further agrees to surrender promptly any such
records upon the Fund's or the Adviser's request, although the
Sub-Adviser may, at the Sub-Adviser's own expense, make and
retain copies of such records. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the
Investment Company Act any records with respect to the Sub-
Adviser's duties hereunder required to be maintained by Rule 31a-
1 under the Investment Company Act to the extent that the Sub-
Adviser prepares and maintains such records pursuant to this
Agreement and to preserve the records required by Rule 204-2
under the Advisers Act for the period specified in that Rule.
(h) The Sub-Adviser agrees that it will immediately notify
the Adviser and the Fund in the event that the Sub-Adviser: (i)
becomes subject to a statutory disqualification that prevents the
Sub-Adviser from serving as an investment adviser pursuant to
this Agreement; or (ii) is or expects to become the subject of an
administrative proceeding or enforcement action by the United
States Securities and Exchange Commission ("SEC") or other
regulatory authority.
(i) The Sub-Adviser agrees that it will immediately
forward, upon receipt, to the Adviser, for itself and as agent
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<PAGE> 4
for the Fund, any correspondence from the SEC or other regulatory
authority that relates to the High Return Series.
(j) The Sub-Adviser acknowledges that it is an "investment
adviser" to the Fund within the meaning of the Investment Company
Act and the Advisers Act.
(k) The Sub-Adviser shall be responsible for maintaining an
appropriate compliance program to ensure that the services
provided by it under this Agreement are performed in a manner
consistent with applicable laws and the terms of this Agreement.
Sub-Adviser agrees to provide such reports and certifications
regarding its compliance program as the Adviser or the Fund shall
reasonably request from time to time. Furthermore, the Sub-
Adviser shall maintain and enforce a Code of Ethics which in form
and substance is consistent with industry norms as changed from
time to time. Sub-Adviser agrees to allow the Board of Directors
of the Fund to review its Code of Ethics upon request. Sub-
Adviser agrees to report to the Adviser on a quarterly basis any
violations of the Code of Ethics of which its senior management
becomes aware.
2. Compensation.
For the services and facilities described herein, the Adviser
will pay to the Sub-Adviser, 15 days after the end of each
calendar month, a sub-advisory fee computed by applying the
annual rates set forth in Appendix A to the applicable average
daily net assets of the High Return Series.
For the month and year in which this Agreement becomes effective
or terminates, there shall be an appropriate proration on the
basis of the number of days that the Agreement is in effect
during the month and year, respectively.
The Adviser further agrees that notwithstanding Appendix A the
minimum amounts payable to Sub-Adviser during the following
calendar years that Sub-Adviser serves under this Agreement shall
be $1.0 million in 1997 and $8 million in each of 2000, 2001, and
2002 for services rendered during each of those years. The
payments, if any, made under the foregoing sentence shall be made
by January 15 of the year immediately following the calendar year
to which such payment relates.
3. Net Asset Value. The net asset value for the High Return
Series shall be calculated as the Board of Directors of the Fund
may determine from time to time in accordance with the provisions
of the Investment Company Act. On each day when net asset value
is not calculated, the net asset value of the High Return Series
shall be deemed to be the net asset value as of the close of
business on the last day on which such calculation was made for
the purpose of the foregoing computations.
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<PAGE> 5
4. Duration and Termination.
(a) This Agreement shall become effective with respect to
the High Return Series on the date hereof and shall remain in
full force until December 31, 2002, unless sooner terminated or
not annually approved as hereinafter provided. Notwithstanding
the foregoing, this Agreement shall continue in force through
December 31, 2002, and from year to year thereafter, only as long
as such continuance is specifically approved at least annually
and in the manner required by the Investment Company Act and the
rules and regulations thereunder, with the first annual renewal
to be coincident with the next renewal of the Management
Agreement.
(b) This Agreement shall automatically terminate in the
event of its assignment or in the event of the termination of the
Management Agreement. In addition, Adviser has the right to
terminate this Agreement upon immediate notice if the Sub-Adviser
becomes statutorily disqualified from performing its duties under
this Agreement or otherwise is legally prohibited from operating
as an investment adviser.
(c) This Agreement may be terminated at any time, without
the payment by the Fund of any penalty, by the Board of Directors
of the Fund, or by vote of a majority of the outstanding voting
securities of the High Return Series, or by the Adviser. The Fund
may effect termination of this Agreement by action of the Board
of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the High Return Series on sixty
(60) days written notice to the Adviser and the Sub-Adviser. The
Adviser may effect termination of this Agreement on sixty (60)
days written notice to the Sub-Adviser.
(d) Sub-Adviser may not terminate this Agreement prior to
July 30, 2000. Sub-Adviser may terminate this Agreement effective
on or after July 30, 2000 upon ninety (90) days written notice to
the Adviser.
(e) The terms "assignment" 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.
(f) Termination of this Agreement shall not affect the
right of the Sub- Adviser to receive payments on any unpaid
balance of the compensation described in Section 2 earned prior
to such termination.
(g) The provisions of Section 9 shall survive the
termination of this Agreement.
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<PAGE> 6
5. Representations and Warranties. The Sub-Adviser hereby
represents and warrants as follows:
(a) The Sub-Adviser is registered with the SEC as an
investment adviser under the Advisers Act, and such registration
is current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(b) The Sub-Adviser has all requisite authority to enter
into, execute, deliver and perform the Sub-Adviser's obligations
under this Agreement;
(c) Sub-Adviser's performance of its obligations under this
Agreement does not conflict with any law, regulation or order to
which the Sub-Adviser is subject; and
(d) The Sub-Adviser has reviewed the portion of (i) the
registration statement filed with the SEC, as amended from time
to time for the Fund ("Registration Statement"), and (ii) the
Fund s prospectus and supplements thereto, in each case in the
form received from the Adviser with respect to the disclosure
about the Sub-Adviser and the High Return Series of which the
Sub-Adviser has knowledge (the "Sub-Adviser and High Return
Information") and except as advised in writing to the Adviser
such Registration Statement, prospectus and any supplement
contain, as of its date, no untrue statement of any material fact
of which Sub-Adviser has knowledge and do not omit any statement
of a material fact of which Sub-Adviser has knowledge which was
required to be stated therein or necessary to make the statements
contained therein not misleading.
6. Covenants. The Sub-Adviser hereby covenants and agrees that,
so long as this Agreement shall remain in effect:
(a) Sub-Adviser shall maintain the Sub-Adviser's
registration as an investment adviser under the Advisers Act, and
such registration shall at all times remain current, complete and
in full compliance with all material applicable provisions of the
Advisers Act and the rules and regulations thereunder;
(b) The Sub-Adviser's performance of its obligations under
this Agreement shall not conflict with any law, regulation or
order to which the Sub-Adviser is then subject;
(c) The Sub-Adviser shall at all times comply with the
Advisers Act and the Investment Company Act, and all rules and
regulations thereunder, and all other applicable laws and
regulations, and the Registration Statement, prospectus and any
supplement and with any applicable procedures adopted by the
Fund's Board of Directors, provided that such procedures are
substantially similar to those applicable to similar funds for
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<PAGE> 7
which the Board of Directors of the Fund is responsible and that
such procedures are identified in writing to the Sub-Adviser;
(b) The Sub-Adviser shall promptly notify Adviser and the
Fund upon the occurrence of any event that might disqualify or
prevent the Sub-Adviser from performing its duties under this
Agreement. The Sub-Adviser further agrees to notify Adviser of
any changes that would cause the Registration Statement or
prospectus for the Fund to contain any untrue statement of a
material fact or to omit to state a material fact which is
required to be stated therein or is necessary to make the
statements contained therein not misleading, in each case
relating to Sub-Adviser and High Return Information; and
(c) For the entire time this Agreement is in effect and for
a period of two years thereafter, the Sub-Adviser shall maintain
a claims made bond issued by a reputable fidelity insurance
company against larceny and embezzlement, covering each officer
and employee of Sub-Adviser, at a minimum level of $2 million
which provide coverage for acts or alleged acts which occurred
during the period of this Agreement.
7. Use of Names.
(a) The Sub-Adviser acknowledges and agrees that the names
Kemper Value Fund, Kemper, and Zurich, and abbreviations or logos
associated with those names, are the valuable property of Adviser
and its affiliates; that the Fund, Adviser and their affiliates
have the right to use such names, abbreviations and logos; and
that the Sub-Adviser shall use the names Kemper Value Fund,
Kemper and Zurich, and associated abbreviations and logos, only
in connection with the Sub-Adviser s performance of its duties
hereunder. Further, in any communication with the public and in
any marketing communications of any sort, Sub-Adviser agrees to
obtain prior written approval from Adviser before using or
referring to Kemper Value Fund, Kemper, Zurich, or Kemper-Dreman
High Return Equity Fund or any abbreviations or logos associated
with those names; provided that nothing herein shall be deemed to
prohibit the Sub-Adviser from referring to the performance of the
Kemper-Dreman High Return Equity Fund in the Sub-Adviser s
marketing material as long as such marketing material does not
constitute "sales literature" or "advertising" for the High
Return Series, as those terms are used in the rules, regulations
and guidelines of the SEC and the National Association of
Securities Dealers, Inc.
(b) Adviser acknowledges that "Dreman" is distinctive in
connection with investment advisory and related services provided
by the Sub-Adviser, the "Dreman" name is a property right of the
Sub-Adviser, and the Dreman name as used in the name of the
High Return Series is understood to be used by the Fund upon the
conditions hereinafter set forth; provided that the Fund may use
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<PAGE> 8
such name only so long as the Sub-Adviser shall be retained as
the investment sub-adviser of the High Return Series pursuant to
the terms of this Agreement.
(c) Adviser acknowledges that the Fund and its agents may
use the "Dreman" name in the name of the High Return Series for
the period set forth herein in a manner not inconsistent with the
interests of the Sub-Adviser and that the rights of the Fund and
its agents in the "Dreman" name are limited to their use as a
component of the High Return Series name and in connection with
accurately describing the activities of the High Return Series,
including use with marketing and other promotional and
informational material relating to the High Return Series. In the
event that the Sub-Adviser shall cease to be the investment sub-
adviser of the High Return Series, then the Fund at its own or
the Adviser's expense, upon the Sub-Adviser's written request:
(i) shall cease to use the Sub-Adviser's name as part of the name
of the High Return Series or for any other commercial purpose
(other than the right to refer to the High Return Series's former
name in the Fund s Registration Statement, proxy materials and
other Fund documents to the extent required by law and, for a
reasonable period the use of the name in informing others of the
name change); and (ii) shall use its best efforts to cause the
Fund's officers and directors to take any and all actions which
may be necessary or desirable to effect the foregoing and to
reconvey to the Sub-Adviser all rights which the Fund may have to
such name. Adviser agrees to take any and all reasonable actions
as may be necessary or desirable to effect the foregoing and Sub-
Adviser agrees to allow the Fund and its agents a reasonable time
to effectuate the foregoing.
(d) The Sub-Adviser hereby agrees and consents to the use
of the Sub- Adviser s name upon the foregoing terms and
conditions.
8. Standard of Care. Except as may otherwise be required by
law, and except as may be set forth in paragraph 9, the Sub-
Adviser shall not be liable for any error of judgment or of law
or for any loss suffered by the Fund, the High Return Series or
the Adviser in connection with the matters to which this
Agreement relates, except loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the
Sub-Adviser in the performance of its obligations and duties or
by reason of its reckless disregard of its obligations and duties
under this Agreement.
9. Indemnifications.
(a) The Sub-Adviser agrees to indemnify and hold harmless
Adviser and the Fund against any losses, expenses, claims,
damages or liabilities (or actions or proceedings in respect
thereof), to which Adviser or the Fund may become subject arising
8
<PAGE> 9
out of or based on the breach or alleged breach by the Sub-
Adviser of any provisions of this Agreement; provided, however,
that the Sub-Adviser shall not be liable under this paragraph in
respect of any loss, expense, claim, damage or liability to the
extent that a court having jurisdiction shall have determined by
a final judgment, or independent counsel agreed upon by the Sub-
Adviser and the Adviser or the Fund, as the case may be, shall
have concluded in a written opinion, that such loss, expense,
claim, damage or liability resulted primarily from the Adviser s
or the Fund's willful misfeasance, bad faith or gross negligence
or by reason of the reckless disregard by the Adviser or the Fund
of its duties. The foregoing indemnification shall be in addition
to any rights that the Adviser or the Fund may have at common law
or otherwise. The Sub-Adviser's agreements in this paragraph
shall, upon the same terms and conditions, extend to and inure to
the benefit of each person who may be deemed to control the
Adviser or the Fund and their affiliates, directors, officers,
employees and agents. The Sub-Adviser s agreement in this
paragraph shall also extend to any of the Fund's, High Return
Series's, and Adviser's successors or the successors of the
aforementioned affiliates, directors, officers, employees or
agents.
(b) The Adviser agrees to indemnify and hold harmless the
Sub-Adviser against any losses, expenses, claims, damages or
liabilities (or actions or proceedings in respect thereof), to
which the Sub-Adviser may become subject arising out of or based
on the breach or alleged breach by the Adviser of any provisions
of this Agreement or the Management Agreement, or any wrongful
action or alleged wrongful action by the Adviser or its
affiliates in the distribution of the Fund's shares, or any
wrongful action or alleged wrongful action by the Fund other than
wrongful action or alleged wrongful action that was caused by the
breach by Sub-Adviser of the provisions of this Agreement;
provided, however, that the Adviser shall not be liable under
this paragraph in respect of any loss, expense, claim, damage or
liability to the extent that a court having jurisdiction shall
have determined by a final judgment, or independent counsel
agreed upon by the Adviser and the Sub-Adviser shall have
concluded in a written opinion, that such loss, expense, claim,
damage or liability resulted primarily from the Sub-Adviser s
willful misfeasance, bad faith or gross negligence or by reason
of the reckless disregard by the Sub-Adviser of its duties. The
foregoing indemnification shall be in addition to any rights that
the Sub-Adviser may have at common law or otherwise. The
Adviser's agreements in this paragraph shall, upon the same terms
and conditions, extend to and inure to the benefit of each person
who may be deemed to control the Sub-Adviser, be controlled by
the Sub-Adviser or be under common control with the Sub-Adviser
and to each of the Sub-Adviser's and each such person's
respective affiliates, directors, officers, employees and agents.
The Adviser s agreements in this paragraph shall also extend to
9
<PAGE> 10
any of the Sub-Adviser's successors or the successors of the
aforementioned affiliates, directors, officers, employees or
agents.
(c) Promptly after receipt by a party indemnified under
paragraphs 9(a) and 9(b) above of notice of the commencement of
any action, proceeding, or investigation for which
indemnification will be sought, such indemnified party shall
promptly notify the indemnifying party in writing; but the
omission so to notify the indemnifying party shall not relieve it
from any liability which it may otherwise have to any indemnified
party unless such omission results in actual material prejudice
to the indemnifying party. In case any action or proceeding shall
be brought against any indemnified party, and it shall notify the
indemnifying part of the commencement thereof, the indemnifying
party shall be entitled to participate in and, individually or
jointly with any other indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of any
action or proceeding, the indemnifying party shall not be liable
to the indemnified party for any legal or other expenses
subsequently incurred by the indemnified party in connection with
the defense thereof other than reasonable costs of investigation.
If the indemnifying party does not elect to assume the defense of
any action or proceeding, the indemnifying party on a monthly
basis shall reimburse the indemnified party for the reasonable
legal fees and other costs of defense thereof. Regardless of
whether or not the indemnifying party shall have assumed the
defense of any action or proceeding, the indemnified party shall
not settle or compromise the action or proceeding without the
prior written consent of the indemnifying party, which shall not
be unreasonably withheld.
10. Survival. 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. Notices. 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. Governing Law. This Agreement shall be construed in
accordance with applicable federal law and the laws of the State
of New York.
13. Miscellaneous.
(a) The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
10
<PAGE> 11
of the provisions hereof or otherwise affect their construction
or effect.
(b) Terms not defined herein shall have the meaning set
forth in the Fund's prospectus.
(c) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused
this Agreement to be executed as of the day and year first above
written.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Lynn S. Birdsong
--------------------------------
Title: Vice President
-----------------------------
DREMAN VALUE MANAGEMENT, L.L.C.
By: /s/ David N. Dreman
--------------------------------
Title:
-----------------------------
11
<PAGE> 12
APPENDIX A
INVESTMENT MANAGEMENT SUB-ADVISORY FEE
<TABLE>
<CAPTION>
Applicable Average
Daily Net Assets
(Thousands) Annual Rate
------------------ -----------
<S> <C>
$ 0 - $ 250,000 .240 of 1%
$ 250,000 - $ 1,000,000 .230 of 1%
$ 1,000,000 - $ 2,500,000 .224 of 1%
$ 2,500,000 - $ 5,000,000 .218 of 1%
$ 5,000,000 - $ 7,500,000 .208 of 1%
$ 7,500,000 - $10,000,000 .205 of 1%
$10,000,000 - $12,500,000 .202 of 1%
Over $12,500,000 .198 of 1%
</TABLE>
<PAGE> 1
EXHIBIT 99.B6A
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 31st day of December, 1997, between KEMPER
VALUE FUND, INC., a Maryland corporation (the "Fund"), and KEMPER
DISTRIBUTORS, INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as agent for the
distribution of shares of beneficial interest (hereinafter called
"shares") of the Fund in jurisdictions wherein shares of the Fund
may legally be offered for sale; provided, however, that the Fund
in its absolute discretion may (a) issue or sell shares directly
to holders of shares of the Fund upon such terms and conditions
and for such consideration, if any, as it may determine, whether
in connection with the distribution of subscription or purchase
rights, the payment or reinvestment of dividends or
distributions, or otherwise; or (b) issue or sell shares at net
asset value to the shareholders of any other investment company,
for which KDI shall act as exclusive distributor, who wish to
exchange all or a portion of their investment in shares of such
other investment company for shares of the Fund. KDI shall
appoint various financial service firms ("Firms") to provide
distribution services to investors. The Firms shall provide such
office space and equipment, telephone facilities, personnel,
literature distribution, advertising and promotion as is
necessary or beneficial for providing information and
distribution services to existing and potential clients of the
Firms. KDI may also provide some of the above services for the
Fund.
KDI accepts such appointment as distributor and principal
underwriter and agrees to render such services and to assume the
obligations herein set forth for the compensation herein
provided. KDI shall for all purposes herein provided be deemed to
be an independent contractor and, unless expressly provided
herein or otherwise authorized, shall have no authority to act
for or represent the Fund in any way. KDI, by separate agreement
with the Fund, may also serve the Fund in other capacities. The
services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar
services or other services to others so long as its services
hereunder are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI
will, pursuant to separate written contracts, appoint various
Firms to provide advertising, promotion and other distribution
<PAGE> 2
services contemplated hereunder directly to or for the benefit of
existing and potential shareholders who may be clients of such
Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell
such part of the authorized shares of the Fund remaining unissued
as from time to time shall be effectively registered under the
Securities Act of 1933 ("Securities Act"), at prices determined
as hereinafter provided and on terms hereinafter set forth, all
subject to applicable federal and state laws and regulations and
to the Articles of Incorporation of the Fund.
2. KDI shall sell shares of the Fund to or through qualified
Firms in such manner, not inconsistent with the provisions hereof
and the then effective registration statement (and related
prospectus) of the Fund under the Securities Act, as KDI may
determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the
Fund without the prior consent of the Fund. In addition to sales
made by it as agent of the Fund, KDI may, in its discretion, also
sell shares of the Fund as principal to persons with whom it does
not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or
sold by KDI shall be so offered or sold at a price per share
determined in accordance with the then current prospectus. The
price the Fund shall receive for all shares purchased from it
shall be the net asset value used in determining the public
offering price applicable to the sale of such shares. Any excess
of the sales price over the net asset value of the shares of the
Fund sold by KDI as agent shall be retained by KDI as a
commission for its services hereunder. KDI may compensate Firms
for sales of shares at the commission levels provided in the
Fund's prospectus from time to time. KDI may pay other
commissions, fees or concessions to Firms, and may pay them to
others in its discretion, in such amounts as KDI shall determine
from time to time. KDI shall be entitled to receive and retain
any applicable contingent deferred sales charge as described in
the Fund's prospectus. KDI shall also receive any distribution
services fee payable by the Fund as provided in Section 8 hereof.
KDI will require each Firm to conform to the provisions hereof
and the Registration Statement (and related prospectus) at the
time in effect under the Securities Act with respect to the
public offering price or net asset value, as applicable, of the
Fund's shares, and neither KDI nor any such Firms shall withhold
the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively
registered under the Securities Act for sale as herein
contemplated such shares as KDI shall reasonably request and as
- 2 -
<PAGE> 3
the Securities and Exchange Commission shall permit to be so
registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares
whenever, in its sole discretion, it deems such action to be
desirable.
4. The Fund will execute any and all documents and furnish any
and all information that may be reasonably necessary in
connection with the qualification of its shares for sale
(including the qualification of the Fund as a dealer where
necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required
without its consent to comply with any requirement which in its
opinion is unduly burdensome). The Fund will furnish to KDI from
time to time such information with respect to the Fund and its
shares as KDI may reasonably request for use in connection with
the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various
Firms to issue and deliver on behalf of the Fund such
confirmations of sales made by it pursuant to this agreement as
may be required. At or prior to the time of issuance of shares,
KDI will pay or cause to be paid to the Fund the amount due the
Fund for the sale of such shares. Certificates shall be issued or
shares registered on the transfer books of the Fund in such names
and denominations as KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the
extent that it shall have received purchase orders therefor. KDI
will not make, or authorize Firms or others to make (a) any short
sales of shares of the Fund; or (b) any sales of such shares to
any director or officer of the Fund or to any officer or director
of KDI or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Fund, or to
any corporation or association, unless such sales are made in
accordance with the then current prospectus relating to the sale
of such shares. KDI, as agent of and for the account of the Fund,
may repurchase the shares of the Fund at such prices and upon
such terms and conditions as shall be specified in the current
prospectus of the Fund. In selling or reacquiring shares of the
Fund for the account of the Fund, KDI will in all respects
conform to the requirements of all state and federal laws and the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., relating to such sale or reacquisition, as the
case may be, and will indemnify and save harmless the Fund from
any damage or expense on account of any wrongful act by KDI or
any employee, representative or agent of KDI. KDI will observe
and be bound by all the provisions of the Articles of
Incorporation of the Fund (and of any fundamental policies
adopted by the Fund pursuant to the Investment Company Act of
1940, notice of which shall have been given to KDI) which at the
- 3 -
<PAGE> 4
time in any way require, limit, restrict, prohibit or otherwise
regulate any action on the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of
its operations not specifically assumed or otherwise to be
provided by KDI under this Agreement. The Fund will pay or cause
to be paid expenses (including the fees and disbursements of its
own counsel) of any registration of the Fund and its shares under
the United States securities laws and expenses incident to the
issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent.
KDI will pay all expenses (other than expenses which one or more
Firms may bear pursuant to any agreement with KDI) incident to
the sale and distribution of the shares issued or sold hereunder,
including, without limiting the generality of the foregoing, all
(a) expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other
literature, advertising and selling aids in connection with the
offering of the shares for sale (except that such expenses need
not include expenses incurred by the Fund in connection with the
preparation, typesetting, printing and distribution of any
registration statement or prospectus, report or other
communication to shareholders in their capacity as such), (b)
expenses of advertising in connection with such offering and (c)
expenses (other than the Fund's auditing expenses) of qualifying
or continuing the qualification of the shares for sale and, in
connection therewith, of qualifying or continuing the
qualification of the Fund as a dealer or broker under the laws of
such states as may be designated by KDI under the conditions
herein specified. No transfer taxes, if any, which may be payable
in connection with the issue or delivery of shares sold as herein
contemplated or of the certificates for such shares shall be
borne by the Fund, and KDI will indemnify and hold harmless the
Fund against liability for all such transfer taxes.
8. For the services and facilities described herein in
connection with Class B shares and Class C shares of each series
of the Fund, the Fund will pay to KDI at the end of each calendar
month a distribution services fee computed at the annual rate of
.75% of average daily net assets attributable to the Class B
shares and Class C shares of each such series. For the month and
year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month
and year, respectively. The foregoing fee shall be in addition to
and shall not be reduced or offset by the amount of any
contingent deferred sales charge received by KDI under Section 2
hereof.
The net asset value shall be calculated in accordance with the
provisions of the Fund's current prospectus. On each day when net
- 4 -
<PAGE> 5
asset value is not calculated, the net asset value of a share
of any class of any series of the Fund shall be deemed to be the net
asset value of such a share as of the close of business on the last
previous day on which such calculation was made. The distribution
services fee for any class of a series of the Fund shall be based
upon average daily net assets of the series attributable to the class
and such fee shall be charged only to such class.
9. KDI shall prepare reports for the Board of Directors of the
Fund on a quarterly basis in connection with the Fund's
distribution plan for Class B shares and Class C shares showing
amounts paid to the various Firms and such other information as
from time to time shall be reasonably requested by the Board of
Directors.
10. To the extent applicable, this Agreement constitutes the
plan for the Class B shares and Class C shares of each series of
the Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940; and this Agreement and plan shall be approved and
renewed in accordance with Rule 12b-1 for such Class B shares and
Class C shares separately.
This Agreement shall become effective on the date hereof and
shall continue until April 1, 1998; and shall continue from year
to year thereafter only so long as such continuance is approved
in the manner required by the Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment
of any penalty by the Fund or by KDI on sixty (60) days written
notice to the other party. The Fund may effect termination with
respect to any class of any series of the Fund by a vote of (i) a
majority of the Board of Directors, (ii) a majority of the
directors who are not interested persons of the Fund and who have
no direct or indirect financial interest in this Agreement or in
any agreement related to this Agreement, or (iii) a majority of
the outstanding voting securities of the class. Without prejudice
to any other remedies of the Fund, the Fund may terminate this
Agreement at any time immediately upon KDI's failure to fulfill
any of its obligations hereunder.
This Agreement may not be amended to increase the amount to be
paid to KDI by the Fund for services hereunder with respect to a
class of any series of the Fund without the vote of a majority of
the outstanding voting securities of such class. All material
amendments to this Agreement must in any event be approved by a
vote of the Board of Directors of the Fund including the
directors who are not interested persons of the Fund and who have
no direct or indirect financial interest in this Agreement or in
- 5 -
<PAGE> 6
any agreement related to this Agreement, cast in person at a
meeting called for such purpose.
The terms "assignment", "interested" and "vote of a majority of
the outstanding voting securities" shall have the meanings set
forth in the Investment Company Act of 1940 and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of KDI
to receive payments on any unpaid balance of the compensation
described in Section 8 earned prior to such termination.
11. KDI will not use or distribute, or authorize the use,
distribution or dissemination by Firms or others in connection
with the sale of Fund shares any statements other than those
contained in the Fund's current prospectus, except such
supplemental literature or advertising as shall be lawful under
federal and state securities laws and regulations. KDI will
furnish the Fund with copies of all such material.
12. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
13. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
14. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Maryland.
15. 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.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement
to be executed as of the day and year first above written.
KEMPER VALUE FUND, INC.
By: /s/ John E. Neal
----------------------------
Title: Vice President
-------------------------
ATTEST:
/s/ Philip J. Collora
-------------------------
Title: Secretary
-------------------
KEMPER DISTRIBUTORS, INC.
By: /s/ James L. Greenwalt
----------------------------
Title: President
-------------------------
ATTEST:
/s/ Charles R. Manzoni
-------------------------
Title: Secretary
-------------------
- 7 -
<PAGE> 1
EXHIBIT 99.B9B
SUPPLEMENT TO AGENCY AGREEMENT
Supplement to Agency Agreement ("Supplement") made as of
June 1, 1997 and between the registered investment company
executing this document (the "Fund") and Investors Fiduciary
Trust Company ("Agent").
WHEREAS, the Fund and Agent are parties to an Agency
Agreement ("Agency Agreement"), as supplemented from time to
time;
WHEREAS, Section 5.A. of the Agency Agreement provides that
the fees payable by the Fund to Agent thereunder shall be as set
forth in a separate schedule to be agreed to by the Fund and
Agent; and
WHEREAS, the parties desire to reflect in this Supplement
the revised fee schedule for the Agency Agreement as in effect as
of the date hereof;
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein provided, the parties agree as follows:
1. The revised fee schedule for services provided by Agent
to the Fund under the Agency Agreement as in effect as of the
date hereof is set forth in Exhibit A attached hereto.
2. This Supplement shall become a part of the Agency
Agreement and subject to its terms and shall supersede all
previous fee schedules under such agreement as of the date
hereof.
IN WITNESS WHEREOF, the Fund and Agent have duly executed
this Supplement as of the day and year first set forth above.
KEMPER-DREMAN FUND,INC.
By: /s/ Philip J. Collora
--------------------------------
Title: Vice President
-----------------------------
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Stephen R. Hilliard
-------------------------------
Title: EVP/CFO
----------------------------
<PAGE> 2
EXHIBIT 9B
EXHIBIT A
FEE SCHEDULE (MULTIPLE CLASSES OF SHARES)
<TABLE>
<CAPTION>
TRANSFER AGENCY FUNCTION FEE PAYABLE BY FUND
CLASS A, C AND I CLASS B
<S> <C> <C>
1. Annual open shareholder
account fee (per year per
account).
a. Non-daily dividend series. $6.00 $6.00
b. Daily dividend series. $8.00 $8.00
2. Annual closed shareholder account
fee (per year per account). $6.00 $6.00
3. Contingent deferred sales charge Not
account fee (per year per open Applicable $2.25
account).
4. Establishment of new shareholder
account (per new account). $4.00 $4.00
5. Payment of dividend (per dividend
per account). $ .40 $ .40
6. Automated transaction (per
transaction).** $ .50 $ .50
7. Non-monetary transactions fee (per
year per open account). $2.00 $2.00
8. All other shareholder inquiry,
correspondence and research trans-
actions (per transaction). $1.25 $1.25
</TABLE>
The out-of-pocket expenses of IFTC will be reimbursed by Fund in
accordance with the provisions of Section 5 of the Agency
Agreement. All fees will be subject to offset by earnings
allowances under the Custody Agreement between Fund and IFTC.
-----------------
* The new shareholder account fee is not applicable to Class A
Share accounts established in connection with a conversion
from Class B Shares.
** Automated transaction includes, without limitation, money
market series purchases and redemptions, ACH purchases,
systematic exchanges and conversions from Class B Shares to
Class A Shares.
<PAGE> 1
EXHIBIT 99.B9C
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this 1st day of April, 1997, by and between
KEMPER-DREMAN FUND, INC., a Maryland corporation (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 provide information and
administrative services for the benefit of the Fund and its
shareholders. In this regard, KDI shall appoint various broker-
dealer firms and other service or administrative firms ("Firms")
to provide related services and facilities for persons who are
investors in the Fund ("investors"). The Firms shall provide
such office space and equipment, telephone facilities, personnel
or other services as may be necessary or beneficial for providing
information and services to investors in the Fund. 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 and its special features, assistance to investors in
changing dividend and investment options, account designations
and addresses, and such other administrative services as the Fund
or KDI may reasonably request. Firms may include affiliates of
KDI. KDI may also provide some of the above services for the
Fund directly.
KDI accepts such appointment and agrees during such period to
render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all
purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.
KDI, by separate agreement with the Fund, may also serve the Fund
in other capacities. In carrying out its duties and
responsibilities hereunder, KDI will appoint various Firms to
provide administrative and other services described herein
directly to or for the benefit of investors in the Fund. Such
Firms shall at all times be deemed to be independent contractors
retained by KDI and not the Fund. KDI and not the Fund will be
responsible for the payment of compensation to such Firms for
such services.
2. For the administrative services and facilities described in
Section 1, the Fund will pay to KDI at the end of each calendar
month an administrative service fee computed at an annual rate of
<PAGE> 2
up to 0.25 of 1% of the average daily net assets of the Fund
(except assets attributable to Class I Shares). The current fee
schedule is set forth as Appendix I hereto. The administrative
service fee will be calculated separately for each class of each
series of the Fund as an expense of each such class; provided,
however, no administrative service fee shall be payable with
respect to Class I Shares. For the month and year in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration on the basis of the number of days that the
Agreement is in effect during such month and year, respectively.
The services of 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.
The net asset value for each share of the Fund shall be
calculated in accordance with the provisions of the Fund's
current prospectus. On each day when net asset value is not
calculated, the net asset value of a share of the Fund shall be
deemed to be the net asset value of such a share as of the close
of business on the last day on which such calculation was made
for the purpose of the foregoing computations.
3. The Fund shall assume and pay all charges and expenses of
its operations not specifically assumed or otherwise to be
provided by KDI under this Agreement.
4. This Agreement 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. Termination of this Agreement
shall not affect the right of KDI to receive payments on any
unpaid balance of the compensation described in Section 2 hereof
earned prior to such termination. This Agreement may not be
amended for any class of any series of the Fund to increase the
amount to be paid to KDI for services hereunder above .25 of 1%
of the average daily net assets of such class without the vote of
a majority of the outstanding voting securities of such class.
All material amendments to this Agreement must in any event be
approved by vote of the Board of the Fund.
5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
6. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
2
<PAGE> 3
7. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Illinois.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement
to be executed as of the day and year first above written.
KEMPER-DREMAN FUND, INC. KEMPER DISTRIBUTORS, INC.
By: /s/ John E. Neal By: /s/ James L. Greenawalt
---------------------------- --------------------------
Title: Vice President Title: President
------------------------- -----------------------
3
<PAGE> 4
APPENDIX I
KEMPER-DREMAN FUND, INC.
FEE SCHEDULE FOR ADMINISTRATIVE
SERVICES AGREEMENT
Pursuant to Section 2 of the Administrative Services Agreement to
which this Appendix is attached, the Fund and KDI agree that the
administrative service fee will be computed at an annual rate of
.25 of 1% (the "Fee Rate") based upon assets with respect to
which a Firm provides administrative services.
Dated: April 1, 1997
KEMPER-DREMAN FUND, INC. KEMPER DISTRIBUTORS, INC.
By: /s/ John E. Neal By: James L. Greenawalt
-------------------------- ---------------------------
Title: Vice President Title: President
------------------------- ------------------------
<PAGE> 1
EXHIBIT 99.B9D
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between
Kemper Value Fund, Inc. (the "Fund"), on behalf of Kemper
Contrarian Fund (hereinafter called the "Portfolio"), a
registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza,
Chicago, Illinois 60606 and Scudder Fund Accounting
Corporation, with its principal place of business in Boston,
Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value
which service FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein
made, the Fund and FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this
Agreement to calculate the net asset value of the Portfolio
as provided in the prospectus of the Portfolio and in
connection therewith shall:
a. Maintain and preserve all accounts, books, financial
records and other documents as are required of the Fund
under Section 31 of the Investment Company Act of 1940
(the "1940 Act") and Rules 31a-1, 31a-2 and 31a-3
thereunder, applicable federal and state laws and any
other law or administrative rules or procedures which
may be applicable to the Fund on behalf of the
Portfolio, other than those accounts, books and
financial records required to be maintained by the
Fund's investment adviser, custodian or transfer agent
and/or books and records maintained by all other
service providers necessary for the Fund to conduct its
business as a registered open-end management investment
company. All such books and records shall be the
property of the Fund and shall at all times during
regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly
authorized officers of the Fund. All such books and
records shall at all times during regular business
hours be open for inspection, upon request of duly
authorized officers of the Fund, by employees or agents
of the Fund and employees and agents of the Securities
and Exchange Commission.
b. Record the current day's trading activity and such
other proper bookkeeping entries as are necessary for
determining that day's net asset value and net income.
<PAGE> 2
c. Render statements or copies of records as from time to
time are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent
public accountants or by any other auditors employed or
engaged by the Fund or by any regulatory body with
jurisdiction over the Fund.
e. Compute the Portfolio's public offering price and/or
its daily dividend rates and money market yields, if
applicable, in accordance with Section 3 of the
Agreement and notify the Fund and such other persons as
the Fund may reasonably request of the net asset value
per share, the public offering price and/or its daily
dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time
to time (hereinafter referred to as the "Registration
Statement"); (b) the resolutions of the Board of Directors
of the Fund at the time in force and applicable, as they may
from time to time be delivered to FUND ACCOUNTING, and (c)
Proper Instructions from such officers of the Fund or other
persons as are from time to time authorized by the Board of
Directors of the Fund to give instructions with respect to
computation and determination of the net asset value. FUND
ACCOUNTING may use one or more external pricing services,
including broker-dealers, provided that an appropriate
officer of the Fund shall have approved such use in advance.
Section 3. Computation of Net Asset Value, Public Offering
Price, Daily Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset
value, including net income, in a manner consistent with the
specific provisions of the Registration Statement. Such
computation shall be made as of the time or times specified
in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and
money market yields, if applicable, in accordance with the
methodology set forth in the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making
the necessary computations FUND ACCOUNTING shall be entitled
to receive, and may rely upon, information furnished it by
means of Proper Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be
recorded on the books of the Portfolio;
2
<PAGE> 3
b. The source of quotations to be used for such securities
as may not be available through FUND ACCOUNTING's
normal pricing services;
c. The value to be assigned to any asset for which no
price quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be
entitled to rely upon, as conclusive proof of any fact or
matter required to be ascertained by it hereunder, a
certificate, letter or other instrument signed by an
authorized officer of the Fund or any other person
authorized by the Fund's Board of Directors.
FUND ACCOUNTING shall be entitled to receive and act upon
advice of Counsel for the Fund at the reasonable expense of
the Portfolio and shall be without liability for any action
taken or thing done in good faith in reliance upon such
advice.
FUND ACCOUNTING shall be entitled to receive, and may rely
upon, information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate,
letter or other instrument or telephone call reasonably
believed by FUND ACCOUNTING to be genuine and to have been
properly made or signed by any authorized officer of the
Fund or person certified to FUND ACCOUNTING as being
authorized by the Board of Directors. The Fund, on behalf
of the Portfolio, shall cause oral instructions to be
confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical
or electronic devices as from time to time agreed to by an
authorized officer of the Fund and FUND ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to
the appropriate person(s) within FUND ACCOUNTING a copy of
the Registration Statement as in effect from time to time.
FUND ACCOUNTING may conclusively rely on the Fund's most
recently delivered Registration Statement for all purposes
under this Agreement and shall not be liable to the
Portfolio or the Fund in acting in reliance thereon.
3
<PAGE> 4
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence
in the performance of its duties hereunder. The Fund agrees
that FUND ACCOUNTING shall not be liable under this
Agreement for any error of judgment or mistake of law made
in good faith and consistent with the foregoing standard of
care, provided that nothing in this Agreement shall be
deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its
shareholders to which FUND ACCOUNTING would otherwise be
subject by reason of willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its
services pursuant to this Agreement such compensation as may
from time to time be agreed upon in writing by the two
parties. FUND ACCOUNTING shall be entitled, if agreed to by
the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all
other reasonable out-of-pocket, expenses as incurred,
including, without limitation, reasonable attorneys' fees
and reasonable fees for pricing services.
Section 8. Amendment and Termination
This Agreement 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 an instrument in writing delivered or mailed
to the other party. Such termination shall take effect not
sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date
is to be no earlier than four months from the effective date
hereof. Upon termination, FUND ACCOUNTING will turn over to
the Fund or its designee and cease to retain in FUND
ACCOUNTING files, records of the calculations of net asset
value and all other records pertaining to its services
hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such
records and documents which it determines appropriate or for
its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are
not to be deemed to be exclusive, and it is understood that
FUND ACCOUNTING may perform fund accounting services for
4
<PAGE> 5
others. In acting under this Agreement, FUND ACCOUNTING
shall be an independent contractor and not an agent of the
Fund or the Portfolio.
Section 10. Notices
Any notice shall be sufficiently given when delivered or
mailed to the other party at the address of such party set
forth below or to such other person or at such other address
as such party may from time to time specify in writing to
the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Kemper Value Fund, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING
without the consent of the Fund as authorized or approved by
resolution of its Board of Directors.
In connection with the operation of this Agreement, the Fund
and FUND ACCOUNTING may agree from time to time on such
provisions interpretive of or in addition to the provisions
of this Agreement as in their joint opinions may be
consistent with this Agreement. Any such interpretive or
additional provisions shall be in writing, signed by both
parties and annexed hereto, but no such provisions shall be
deemed to be an amendment of this Agreement.
This Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof, and supersedes
any and all prior understandings.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized and its seal to be hereunder affixed as of the date
first written above.
[SEAL] KEMPER VALUE FUND, INC.
on behalf of Kemper Contrarian Fund
By:
--------------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:
--------------------------------
Vice President
6
<PAGE> 1
EXHIBIT 99.B9E
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between
Kemper Value Fund, Inc. (the "Fund"), on behalf of Kemper-Dreman
High Return Equity Fund (hereinafter called the "Portfolio"), a
registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza,
Chicago, Illinois 60606 and Scudder Fund Accounting
Corporation, with its principal place of business in Boston,
Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value
which service FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein
made, the Fund and FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this
Agreement to calculate the net asset value of the Portfolio
as provided in the prospectus of the Portfolio and in
connection therewith shall:
a. Maintain and preserve all accounts, books, financial
records and other documents as are required of the Fund
under Section 31 of the Investment Company Act of 1940
(the "1940 Act") and Rules 31a-1, 31a-2 and 31a-3
thereunder, applicable federal and state laws and any
other law or administrative rules or procedures which
may be applicable to the Fund on behalf of the
Portfolio, other than those accounts, books and
financial records required to be maintained by the
Fund's investment adviser, custodian or transfer agent
and/or books and records maintained by all other
service providers necessary for the Fund to conduct its
business as a registered open-end management investment
company. All such books and records shall be the
property of the Fund and shall at all times during
regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly
authorized officers of the Fund. All such books and
records shall at all times during regular business
hours be open for inspection, upon request of duly
authorized officers of the Fund, by employees or agents
of the Fund and employees and agents of the Securities
and Exchange Commission.
<PAGE> 2
b. Record the current day's trading activity and such
other proper bookkeeping entries as are necessary for
determining that day's net asset value and net income.
c. Render statements or copies of records as from time to
time are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent
public accountants or by any other auditors employed or
engaged by the Fund or by any regulatory body with
jurisdiction over the Fund.
e. Compute the Portfolio's public offering price and/or
its daily dividend rates and money market yields, if
applicable, in accordance with Section 3 of the
Agreement and notify the Fund and such other persons as
the Fund may reasonably request of the net asset value
per share, the public offering price and/or its daily
dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time
to time (hereinafter referred to as the "Registration
Statement"); (b) the resolutions of the Board of Directors
of the Fund at the time in force and applicable, as they may
from time to time be delivered to FUND ACCOUNTING, and (c)
Proper Instructions from such officers of the Fund or other
persons as are from time to time authorized by the Board of
Directors of the Fund to give instructions with respect to
computation and determination of the net asset value. FUND
ACCOUNTING may use one or more external pricing services,
including broker-dealers, provided that an appropriate
officer of the Fund shall have approved such use in advance.
Section 3. Computation of Net Asset Value, Public Offering
Price, Daily Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset
value, including net income, in a manner consistent with the
specific provisions of the Registration Statement. Such
computation shall be made as of the time or times specified
in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and
money market yields, if applicable, in accordance with the
methodology set forth in the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making
the necessary computations FUND ACCOUNTING shall be entitled
to receive, and may rely upon, information furnished it by
means of Proper Instructions, including but not limited to:
2
<PAGE> 3
a. The manner and amount of accrual of expenses to be
recorded on the books of the Portfolio;
b. The source of quotations to be used for such securities
as may not be available through FUND ACCOUNTING's
normal pricing services;
c. The value to be assigned to any asset for which no
price quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be
entitled to rely upon, as conclusive proof of any fact or
matter required to be ascertained by it hereunder, a
certificate, letter or other instrument signed by an
authorized officer of the Fund or any other person
authorized by the Fund's Board of Directors.
FUND ACCOUNTING shall be entitled to receive and act upon
advice of Counsel for the Fund at the reasonable expense of
the Portfolio and shall be without liability for any action
taken or thing done in good faith in reliance upon such
advice.
FUND ACCOUNTING shall be entitled to receive, and may rely
upon, information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate,
letter or other instrument or telephone call reasonably
believed by FUND ACCOUNTING to be genuine and to have been
properly made or signed by any authorized officer of the
Fund or person certified to FUND ACCOUNTING as being
authorized by the Board of Directors. The Fund, on behalf
of the Portfolio, shall cause oral instructions to be
confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical
or electronic devices as from time to time agreed to by an
authorized officer of the Fund and FUND ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to
the appropriate person(s) within FUND ACCOUNTING a copy of
the Registration Statement as in effect from time to time.
FUND ACCOUNTING may conclusively rely on the Fund's most
recently delivered Registration Statement for all purposes
under this Agreement and shall not be liable to the
Portfolio or the Fund in acting in reliance thereon.
3
<PAGE> 4
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence
in the performance of its duties hereunder. The Fund agrees
that FUND ACCOUNTING shall not be liable under this
Agreement for any error of judgment or mistake of law made
in good faith and consistent with the foregoing standard of
care, provided that nothing in this Agreement shall be
deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its
shareholders to which FUND ACCOUNTING would otherwise be
subject by reason of willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its
services pursuant to this Agreement such compensation as may
from time to time be agreed upon in writing by the two
parties. FUND ACCOUNTING shall be entitled, if agreed to by
the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all
other reasonable out-of-pocket, expenses as incurred,
including, without limitation, reasonable attorneys' fees
and reasonable fees for pricing services.
Section 8. Amendment and Termination
This Agreement 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 an instrument in writing delivered or mailed
to the other party. Such termination shall take effect not
sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date
is to be no earlier than four months from the effective date
hereof. Upon termination, FUND ACCOUNTING will turn over to
the Fund or its designee and cease to retain in FUND
ACCOUNTING files, records of the calculations of net asset
value and all other records pertaining to its services
hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such
records and documents which it determines appropriate or for
its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are
not to be deemed to be exclusive, and it is understood that
FUND ACCOUNTING may perform fund accounting services for
4
<PAGE> 5
others. In acting under this Agreement, FUND ACCOUNTING
shall be an independent contractor and not an agent of the
Fund or the Portfolio.
Section 10. Notices
Any notice shall be sufficiently given when delivered or
mailed to the other party at the address of such party set
forth below or to such other person or at such other address
as such party may from time to time specify in writing to
the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Kemper Value Fund, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING
without the consent of the Fund as authorized or approved by
resolution of its Board of Directors.
In connection with the operation of this Agreement, the Fund
and FUND ACCOUNTING may agree from time to time on such
provisions interpretive of or in addition to the provisions
of this Agreement as in their joint opinions may be
consistent with this Agreement. Any such interpretive or
additional provisions shall be in writing, signed by both
parties and annexed hereto, but no such provisions shall be
deemed to be an amendment of this Agreement.
This Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof, and supersedes
any and all prior understandings.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized and its seal to be hereunder affixed as of the date
first written above.
[SEAL] KEMPER VALUE FUND, INC.
on behalf of Kemper-Dreman
High Return Equity Fund
By:
--------------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:
--------------------------------
Vice President
6
<PAGE> 1
EXHIBIT 99.B9F
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between
Kemper Value Fund, Inc. (the "Fund"), on behalf of Kemper Small
Cap Value Fund (hereinafter called the "Portfolio"), a registered
open-end management investment company with its principal place
of business in 222 South Riverside Plaza, Chicago, Illinois
60606 and Scudder Fund Accounting Corporation, with its
principal place of business in Boston, Massachusetts (hereinafter
called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value
which service FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein
made, the Fund and FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this
Agreement to calculate the net asset value of the Portfolio
as provided in the prospectus of the Portfolio and in
connection therewith shall:
a. Maintain and preserve all accounts, books, financial
records and other documents as are required of the Fund
under Section 31 of the Investment Company Act of 1940
(the "1940 Act") and Rules 31a-1, 31a-2 and 31a-3
thereunder, applicable federal and state laws and any
other law or administrative rules or procedures which
may be applicable to the Fund on behalf of the
Portfolio, other than those accounts, books and
financial records required to be maintained by the
Fund's investment adviser, custodian or transfer agent
and/or books and records maintained by all other
service providers necessary for the Fund to conduct its
business as a registered open-end management investment
company. All such books and records shall be the
property of the Fund and shall at all times during
regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly
authorized officers of the Fund. All such books and
records shall at all times during regular business
hours be open for inspection, upon request of duly
authorized officers of the Fund, by employees or agents
of the Fund and employees and agents of the Securities
and Exchange Commission.
<PAGE> 2
b. Record the current day's trading activity and such
other proper bookkeeping entries as are necessary for
determining that day's net asset value and net income.
c. Render statements or copies of records as from time to
time are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent
public accountants or by any other auditors employed or
engaged by the Fund or by any regulatory body with
jurisdiction over the Fund.
e. Compute the Portfolio's public offering price and/or
its daily dividend rates and money market yields, if
applicable, in accordance with Section 3 of the
Agreement and notify the Fund and such other persons as
the Fund may reasonably request of the net asset value
per share, the public offering price and/or its daily
dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time
to time (hereinafter referred to as the "Registration
Statement"); (b) the resolutions of the Board of Directors
of the Fund at the time in force and applicable, as they may
from time to time be delivered to FUND ACCOUNTING, and (c)
Proper Instructions from such officers of the Fund or other
persons as are from time to time authorized by the Board of
Directors of the Fund to give instructions with respect to
computation and determination of the net asset value. FUND
ACCOUNTING may use one or more external pricing services,
including broker-dealers, provided that an appropriate
officer of the Fund shall have approved such use in advance.
Section 3. Computation of Net Asset Value, Public Offering
Price, Daily Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset
value, including net income, in a manner consistent with the
specific provisions of the Registration Statement. Such
computation shall be made as of the time or times specified
in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and
money market yields, if applicable, in accordance with the
methodology set forth in the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making
the necessary computations FUND ACCOUNTING shall be entitled
to receive, and may rely upon, information furnished it by
means of Proper Instructions, including but not limited to:
2
<PAGE> 3
a. The manner and amount of accrual of expenses to be
recorded on the books of the Portfolio;
b. The source of quotations to be used for such securities
as may not be available through FUND ACCOUNTING's
normal pricing services;
c. The value to be assigned to any asset for which no
price quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be
entitled to rely upon, as conclusive proof of any fact or
matter required to be ascertained by it hereunder, a
certificate, letter or other instrument signed by an
authorized officer of the Fund or any other person
authorized by the Fund's Board of Directors.
FUND ACCOUNTING shall be entitled to receive and act upon
advice of Counsel for the Fund at the reasonable expense of
the Portfolio and shall be without liability for any action
taken or thing done in good faith in reliance upon such
advice.
FUND ACCOUNTING shall be entitled to receive, and may rely
upon, information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate,
letter or other instrument or telephone call reasonably
believed by FUND ACCOUNTING to be genuine and to have been
properly made or signed by any authorized officer of the
Fund or person certified to FUND ACCOUNTING as being
authorized by the Board of Directors. The Fund, on behalf
of the Portfolio, shall cause oral instructions to be
confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical
or electronic devices as from time to time agreed to by an
authorized officer of the Fund and FUND ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to
the appropriate person(s) within FUND ACCOUNTING a copy of
the Registration Statement as in effect from time to time.
FUND ACCOUNTING may conclusively rely on the Fund's most
recently delivered Registration Statement for all purposes
under this Agreement and shall not be liable to the
Portfolio or the Fund in acting in reliance thereon.
3
<PAGE> 4
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence
in the performance of its duties hereunder. The Fund agrees
that FUND ACCOUNTING shall not be liable under this
Agreement for any error of judgment or mistake of law made
in good faith and consistent with the foregoing standard of
care, provided that nothing in this Agreement shall be
deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its
shareholders to which FUND ACCOUNTING would otherwise be
subject by reason of willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its
services pursuant to this Agreement such compensation as may
from time to time be agreed upon in writing by the two
parties. FUND ACCOUNTING shall be entitled, if agreed to by
the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all
other reasonable out-of-pocket, expenses as incurred,
including, without limitation, reasonable attorneys' fees
and reasonable fees for pricing services.
Section 8. Amendment and Termination
This Agreement 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 an instrument in writing delivered or mailed
to the other party. Such termination shall take effect not
sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date
is to be no earlier than four months from the effective date
hereof. Upon termination, FUND ACCOUNTING will turn over to
the Fund or its designee and cease to retain in FUND
ACCOUNTING files, records of the calculations of net asset
value and all other records pertaining to its services
hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such
records and documents which it determines appropriate or for
its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are
not to be deemed to be exclusive, and it is understood that
FUND ACCOUNTING may perform fund accounting services for
4
<PAGE> 5
others. In acting under this Agreement, FUND ACCOUNTING
shall be an independent contractor and not an agent of the
Fund or the Portfolio.
Section 10. Notices
Any notice shall be sufficiently given when delivered or
mailed to the other party at the address of such party set
forth below or to such other person or at such other address
as such party may from time to time specify in writing to
the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Kemper Value Fund, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING
without the consent of the Fund as authorized or approved by
resolution of its Board of Directors.
In connection with the operation of this Agreement, the Fund
and FUND ACCOUNTING may agree from time to time on such
provisions interpretive of or in addition to the provisions
of this Agreement as in their joint opinions may be
consistent with this Agreement. Any such interpretive or
additional provisions shall be in writing, signed by both
parties and annexed hereto, but no such provisions shall be
deemed to be an amendment of this Agreement.
This Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof, and supersedes
any and all prior understandings.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized and its seal to be hereunder affixed as of the date
first written above.
[SEAL] KEMPER VALUE FUND, INC.
on behalf of Kemper Small Cap
Value Fund
By:
-------------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:
--------------------------------
Vice President
6
<PAGE> 1
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
incorporation by reference of our reports on Kemper Contrarian Fund,
Kemper-Dreman High Return Equity Fund and Kemper Small Cap Value Fund, dated
January 20, 1998 in the Registration Statement of Kemper Value Fund, Inc. on
Form N-1A and the related Prospectus filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 21 to the Registration
Statement under the Securities Act of 1933 (File No. 33-18477) and in this
Amendment No. 23 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-5385).
ERNST & YOUNG LLP
Chicago, Illinois
January 28, 1998
<PAGE> 2
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 seven 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 bases, 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 statment 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 its net assests 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
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Kemper-Dreman High Return Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper-Dreman High Return Equity Fund as of
November 30, 1997, and 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 responsiblity of the Fund's managment. Our responsibility is to
express an opinion on these financial statments and financial highlights based
on our audits. The financial highlights for each of the seven 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 resonable 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 investmensts 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-Dreman High Return Equity Fund at November 30, 1997, the results of its
operations for the eleven months then ended, the changes in its 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 30, 1998
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Kemper Small Cap Value fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Small Cap Value 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 three 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
Small Cap Value Fund at November 30, 1997, the results of its operations for
the eleven months then ended, the changes in its 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
<PAGE> 1
EXHIBIT 99.B24
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ James S. Akins Director January 21, 1998
----------------------
<PAGE> 2
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ Arthur R. Gottschalk Director January 21, 1998
------------------------
<PAGE> 3
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ Frederick T. Kelsey Director January 21, 1998
-----------------------
<PAGE> 4
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ Daniel Pierce Director January 21, 1998
----------------------
<PAGE> 5
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ Fred B. Renwick Director January 21, 1998
----------------------
<PAGE> 6
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ John B. Tingleff Director January 21, 1998
----------------------
<PAGE> 7
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ Edmond D. Villani Director January 21, 1998
----------------------
<PAGE> 8
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Kathryn L. Quirk, Caroline Pearson, and Philip J. Collora and
each of them, any of whom may act without the joinder of the
others, as such person's attorney-in-fact to sign and file on
such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with the
Securities and Exchange Commission or any other regulatory
authority as may be desirable or necessary in connection with the
public offering of shares of Kemper Value Fund, Inc.
Signature Title Date
/s/ John G. Weithers Director January 21, 1998
--------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> KEMPER CONTRARIAN FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 156,494
<INVESTMENTS-AT-VALUE> 176,191
<RECEIVABLES> 792
<ASSETS-OTHER> 1,501
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,497
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 372
<TOTAL-LIABILITIES> 372
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,431
<SHARES-COMMON-STOCK> 4,605
<SHARES-COMMON-PRIOR> 2,771
<ACCUMULATED-NII-CURRENT> 121
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,566
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,697
<NET-ASSETS> 178,115
<DIVIDEND-INCOME> 2,216
<INTEREST-INCOME> 1,175
<OTHER-INCOME> 0
<EXPENSES-NET> (2,093)
<NET-INVESTMENT-INCOME> 1,298
<REALIZED-GAINS-CURRENT> 14,815
<APPREC-INCREASE-CURRENT> 11,557
<NET-CHANGE-FROM-OPS> 27,670
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 791
<DISTRIBUTIONS-OF-GAINS> (309)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,605
<NUMBER-OF-SHARES-REDEEMED> (623)
<SHARES-REINVESTED> 52
<NET-CHANGE-IN-ASSETS> 100,523
<ACCUMULATED-NII-PRIOR> 85
<ACCUMULATED-GAINS-PRIOR> 285
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 903
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,093
<AVERAGE-NET-ASSETS> 129,779
<PER-SHARE-NAV-BEGIN> 16.93
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> 4.25
<PER-SHARE-DIVIDEND> (.20)
<PER-SHARE-DISTRIBUTIONS> (.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.13
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATION INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> KEMPER CONTRARIAN FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 156,494
<INVESTMENTS-AT-VALUE> 176,191
<RECEIVABLES> 792
<ASSETS-OTHER> 1,504
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,437
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 372
<TOTAL-LIABILITIES> 372
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,431
<SHARES-COMMON-STOCK> 3,352
<SHARES-COMMON-PRIOR> 1,688
<ACCUMULATED-NII-CURRENT> 421
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,566
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,697
<NET-ASSETS> 178,115
<DIVIDEND-INCOME> 2,216
<INTEREST-INCOME> 1,175
<OTHER-INCOME> 0
<EXPENSES-NET> (2,093)
<NET-INVESTMENT-INCOME> 1,298
<REALIZED-GAINS-CURRENT> 14,815
<APPREC-INCREASE-CURRENT> 11,557
<NET-CHANGE-FROM-OPS> 27,670
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 169
<DISTRIBUTIONS-OF-GAINS> (207)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,064
<NUMBER-OF-SHARES-REDEEMED> (419)
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 100,523
<ACCUMULATED-NII-PRIOR> 85
<ACCUMULATED-GAINS-PRIOR> 285
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 903
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,093
<AVERAGE-NET-ASSETS> 129,779
<PER-SHARE-NAV-BEGIN> 16.92
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 4.22
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> (.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.08
<EXPENSE-RATIO> 2.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 13
<NAME> KEMPER CONTRARIAN FUND - CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 156,494
<INVESTMENTS-AT-VALUE> 176,191
<RECEIVABLES> 792
<ASSETS-OTHER> 1,501
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,487
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 372
<TOTAL-LIABILITIES> 372
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,431
<SHARES-COMMON-STOCK> 281
<SHARES-COMMON-PRIOR> 123
<ACCUMULATED-NII-CURRENT> 421
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,566
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,697
<NET-ASSETS> 178,115
<DIVIDEND-INCOME> 2,216
<INTEREST-INCOME> 1,175
<OTHER-INCOME> 0
<EXPENSES-NET> (2,093)
<NET-INVESTMENT-INCOME> 1,298
<REALIZED-GAINS-CURRENT> 14,815
<APPREC-INCREASE-CURRENT> 11,557
<NET-CHANGE-FROM-OPS> 27,670
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> (17)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 212
<NUMBER-OF-SHARES-REDEEMED> (55)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 100,523
<ACCUMULATED-NII-PRIOR> 85
<ACCUMULATED-GAINS-PRIOR> 285
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 903
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,093
<AVERAGE-NET-ASSETS> 129,779
<PER-SHARE-NAV-BEGIN> 16.90
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 4.20
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> (.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.06
<EXPENSE-RATIO> 2.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 21
<NAME> KEMPER-DREMAN HIGH RETURN EQUITY FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 2,552,932
<INVESTMENTS-AT-VALUE> 2,833,815
<RECEIVABLES> 19,587
<ASSETS-OTHER> 52,929
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,956,331
<PAYABLE-FOR-SECURITIES> 19,023
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,987
<TOTAL-LIABILITIES> 24,610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,451,365
<SHARES-COMMON-STOCK> 41,258
<SHARES-COMMON-PRIOR> 14,549
<ACCUMULATED-NII-CURRENT> 15,293
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 134,190
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 330,883
<NET-ASSETS> 2,931,721
<DIVIDEND-INCOME> 24,258
<INTEREST-INCOME> 36,552
<OTHER-INCOME> 0
<EXPENSES-NET> (28,094)
<NET-INVESTMENT-INCOME> 32,716
<REALIZED-GAINS-CURRENT> 134,870
<APPREC-INCREASE-CURRENT> 245,096
<NET-CHANGE-FROM-OPS> 416,682
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,529)
<DISTRIBUTIONS-OF-GAINS> (1,754)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,843
<NUMBER-OF-SHARES-REDEEMED> (6,529)
<SHARES-REINVESTED> 395
<NET-CHANGE-IN-ASSETS> 2,193,887
<ACCUMULATED-NII-PRIOR> 373
<ACCUMULATED-GAINS-PRIOR> 2,964
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28,094
<AVERAGE-NET-ASSETS> 1,825,644
<PER-SHARE-NAV-BEGIN> 26.52
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> 6.89
<PER-SHARE-DIVIDEND> (.37)
<PER-SHARE-DISTRIBUTIONS> (.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.52
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> KEMPER-DREMAN HIGH RETURN EQUITY FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 2,552,832
<INVESTMENTS-AT-VALUE> 2,983,815
<RECEIVABLES> 19,587
<ASSETS-OTHER> 52,929
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,956,331
<PAYABLE-FOR-SECURITIES> 19,023
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,587
<TOTAL-LIABILITIES> 24,610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,451,365
<SHARES-COMMON-STOCK> 38,969
<SHARES-COMMON-PRIOR> 11,172
<ACCUMULATED-NII-CURRENT> 15,253
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 134,150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 330,853
<NET-ASSETS> 2,931,721
<DIVIDEND-INCOME> 24,258
<INTEREST-INCOME> 36,552
<OTHER-INCOME> 0
<EXPENSES-NET> (28,094)
<NET-INVESTMENT-INCOME> 32,716
<REALIZED-GAINS-CURRENT> 134,870
<APPREC-INCREASE-CURRENT> 249,096
<NET-CHANGE-FROM-OPS> 416,682
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,064)
<DISTRIBUTIONS-OF-GAINS> (1,598)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,055
<NUMBER-OF-SHARES-REDEEMED> (3,452)
<SHARES-REINVESTED> 193
<NET-CHANGE-IN-ASSETS> 2,193,887
<ACCUMULATED-NII-PRIOR> 373
<ACCUMULATED-GAINS-PRIOR> 2,964
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28,094
<AVERAGE-NET-ASSETS> 1,825,644
<PER-SHARE-NAV-BEGIN> 26.44
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> 6.94
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> (.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.37
<EXPENSE-RATIO> 2.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE ANS RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 23
<NAME> KEMPER-DREMAN HIGH RETURN EQUITY FUND - CLASS C
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 2,552,932
<INVESTMENTS-AT-VALUE> 2,883,815
<RECEIVABLES> 19,587
<ASSETS-OTHER> 52,929
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,996,331
<PAYABLE-FOR-SECURITIES> 19,023
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,587
<TOTAL-LIABILITIES> 24,610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,451,365
<SHARES-COMMON-STOCK> 6,609
<SHARES-COMMON-PRIOR> 1,682
<ACCUMULATED-NII-CURRENT> 15,293
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 134,190
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 330,883
<NET-ASSETS> 2,931,721
<DIVIDEND-INCOME> 24,258
<INTEREST-INCOME> 36,552
<OTHER-INCOME> 0
<EXPENSES-NET> (28,094)
<NET-INVESTMENT-INCOME> 32,716
<REALIZED-GAINS-CURRENT> 134,870
<APPREC-INCREASE-CURRENT> 249,096
<NET-CHANGE-FROM-OPS> 416,692
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (839)
<DISTRIBUTIONS-OF-GAINS> (259)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,473
<NUMBER-OF-SHARES-REDEEMED> (572)
<SHARES-REINVESTED> 26
<NET-CHANGE-IN-ASSETS> 2,193,887
<ACCUMULATED-NII-PRIOR> 373
<ACCUMULATED-GAINS-PRIOR> 2,964
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,094
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29,094
<AVERAGE-NET-ASSETS> 1,825,644
<PER-SHARE-NAV-BEGIN> 26.45
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> 6.83
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> (.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.38
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS CONTAINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 24
<NAME> KEMPER-DREMAN HIGH RETURN EQUITY FUND - CLASS I
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 2,552,932
<INVESTMENTS-AT-VALUE> 2,863,815
<RECEIVABLES> 19,587
<ASSETS-OTHER> 52,929
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,956,391
<PAYABLE-FOR-SECURITIES> 19,023
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,587
<TOTAL-LIABILITIES> 24,610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,451,365
<SHARES-COMMON-STOCK> 834
<SHARES-COMMON-PRIOR> 454
<ACCUMULATED-NII-CURRENT> 15,293
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 134,180
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 330,893
<NET-ASSETS> 2,931,721
<DIVIDEND-INCOME> 24,258
<INTEREST-INCOME> 36,552
<OTHER-INCOME> 0
<EXPENSES-NET> (28,094)
<NET-INVESTMENT-INCOME> 32,716
<REALIZED-GAINS-CURRENT> 134,870
<APPREC-INCREASE-CURRENT> 249,096
<NET-CHANGE-FROM-OPS> 416,682
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (371)
<DISTRIBUTIONS-OF-GAINS> (47)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 952
<NUMBER-OF-SHARES-REDEEMED> (586)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 2,193,987
<ACCUMULATED-NII-PRIOR> 373
<ACCUMULATED-GAINS-PRIOR> 2,964
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29,094
<AVERAGE-NET-ASSETS> 1,825,644
<PER-SHARE-NAV-BEGIN> 26.49
<PER-SHARE-NII> .75
<PER-SHARE-GAIN-APPREC> 6.81
<PER-SHARE-DIVIDEND> (.48)
<PER-SHARE-DISTRIBUTIONS> (.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.51
<EXPENSE-RATIO> .83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 051
<NAME> KEMPER SMALL CAP VALUE FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 1,144,484
<INVESTMENTS-AT-VALUE> 1,258,914
<RECEIVABLES> 9,196
<ASSETS-OTHER> 2,836
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,270,946
<PAYABLE-FOR-SECURITIES> 5,002
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,800
<TOTAL-LIABILITIES> 7,802
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,113,914
<SHARES-COMMON-STOCK> 33,737
<SHARES-COMMON-PRIOR> 7,922
<ACCUMULATED-NII-CURRENT> 866
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33,934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114,430
<NET-ASSETS> 1,263,144
<DIVIDEND-INCOME> 6,898
<INTEREST-INCOME> 6,006
<OTHER-INCOME> 0
<EXPENSES-NET> (12,109)
<NET-INVESTMENT-INCOME> 795
<REALIZED-GAINS-CURRENT> 35,631
<APPREC-INCREASE-CURRENT> 92,608
<NET-CHANGE-FROM-OPS> 129,034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,617
<NUMBER-OF-SHARES-REDEEMED> (6,002)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 989,922
<ACCUMULATED-NII-PRIOR> 69
<ACCUMULATED-GAINS-PRIOR> (1,695)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,109
<AVERAGE-NET-ASSETS> 763,517
<PER-SHARE-NAV-BEGIN> 18.28
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 3.50
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.83
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 052
<NAME> KEMPER SMALL CAP VALUE FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 1,144,484
<INVESTMENTS-AT-VALUE> 1,258,914
<RECEIVABLES> 9,196
<ASSETS-OTHER> 2,836
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,270,546
<PAYABLE-FOR-SECURITIES> 5,002
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,800
<TOTAL-LIABILITIES> 7,802
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,113,914
<SHARES-COMMON-STOCK> 19,222
<SHARES-COMMON-PRIOR> 12,566
<ACCUMULATED-NII-CURRENT> 666
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33,934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114,430
<NET-ASSETS> 1,263,144
<DIVIDEND-INCOME> 6,898
<INTEREST-INCOME> 6,006
<OTHER-INCOME> 0
<EXPENSES-NET> (12,109)
<NET-INVESTMENT-INCOME> 795
<REALIZED-GAINS-CURRENT> 35,631
<APPREC-INCREASE-CURRENT> 92,608
<NET-CHANGE-FROM-OPS> 129,034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,839
<NUMBER-OF-SHARES-REDEEMED> (2,094)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 983,922
<ACCUMULATED-NII-PRIOR> 69
<ACCUMULATED-GAINS-PRIOR> (1,695)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,109
<AVERAGE-NET-ASSETS> 763,517
<PER-SHARE-NAV-BEGIN> 18.14
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 3.36
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.46
<EXPENSE-RATIO> 2.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 53
<NAME> KEMPER SMALL CAP VALUE FUND - CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 1,144,484
<INVESTMENTS-AT-VALUE> 1,259,914
<RECEIVABLES> 9,196
<ASSETS-OTHER> 2,836
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,270,946
<PAYABLE-FOR-SECURITIES> 5,002
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,800
<TOTAL-LIABILITIES> 7,902
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,113,914
<SHARES-COMMON-STOCK> 4,626
<SHARES-COMMON-PRIOR> 1,104
<ACCUMULATED-NII-CURRENT> 866
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33,934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114,430
<NET-ASSETS> 1,263,144
<DIVIDEND-INCOME> 6,898
<INTEREST-INCOME> 6,006
<OTHER-INCOME> 0
<EXPENSES-NET> (12,109)
<NET-INVESTMENT-INCOME> 795
<REALIZED-GAINS-CURRENT> 35,631
<APPREC-INCREASE-CURRENT> 92,608
<NET-CHANGE-FROM-OPS> 129,034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,966
<NUMBER-OF-SHARES-REDEEMED> (444)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 989,922
<ACCUMULATED-NII-PRIOR> 69
<ACCUMULATED-GAINS-PRIOR> (1,695)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,109
<AVERAGE-NET-ASSETS> 763,517
<PER-SHARE-NAV-BEGIN> 18.17
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 3.37
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.91
<EXPENSE-RATIO> 2.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 054
<NAME> KEMPER SMALL CAP VALUE FUND - CLASS I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 1,144,484
<INVESTMENTS-AT-VALUE> 1,258,914
<RECEIVABLES> 9,196
<ASSETS-OTHER> 2,836
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,270,946
<PAYABLE-FOR-SECURITIES> 5,002
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,800
<TOTAL-LIABILITIES> 7,802
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,113,914
<SHARES-COMMON-STOCK> 667
<SHARES-COMMON-PRIOR> 499
<ACCUMULATED-NII-CURRENT> 866
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33,934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114,430
<NET-ASSETS> 1,263,144
<DIVIDEND-INCOME> 6,598
<INTEREST-INCOME> 6,006
<OTHER-INCOME> 0
<EXPENSES-NET> (12,109)
<NET-INVESTMENT-INCOME> 795
<REALIZED-GAINS-CURRENT> 35,631
<APPREC-INCREASE-CURRENT> 92,608
<NET-CHANGE-FROM-OPS> 129,034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 763
<NUMBER-OF-SHARES-REDEEMED> (585)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 999,922
<ACCUMULATED-NII-PRIOR> 69
<ACCUMULATED-GAINS-PRIOR> (1,695)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,109
<AVERAGE-NET-ASSETS> 763,517
<PER-SHARE-NAV-BEGIN> 18.40
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 3.55
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.08
<EXPENSE-RATIO> .89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
