1
 
                            SCHEDULE 14A INFORMATION
 
          PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 (AMENDMENT NO.   )
 
Filed by the Registrant [X]
 
Filed by a Party other than the Registrant [ ]
 
Check the appropriate box:
 
   
                                            
    
   
[ ]  Preliminary Proxy Statement               [ ]  Confidential, for Use of the Commission
                                               Only (as permitted by Rule 14a-6(e)(2))
    
   
[X]  Definitive Proxy Statement
    
   
[ ]  Definitive Additional Materials
    
   
[ ]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12


    
 
   
                                                                              
Kemper Aggressive Growth     Kemper Small Capitalization  Kemper Securities Trust      Kemper Global Income Fund
  Fund                         Equity Fund                Kemper Global                Kemper Target Equity Fund
Kemper Income & Capital      Kemper Technology Fund         International Series       Kemper Value Plus Growth
  Preservation Fund          Kemper US Government         Kemper International Fund      Fund
Kemper National Tax Free       Securities Fund            Kemper Portfolios            Kemper Horizon Fund
  Income Series              Kemper Diversified Income    Kemper State Tax Free        Kemper Europe Fund
Kemper Growth Fund             Fund                         Income Series              Kemper Asian Growth Fund
Kemper Total Return Fund     Kemper High Yield Series     Kemper Value Series, Inc.    Kemper Blue Chip Fund
                             Kemper Equity Trust


    
 
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                (Name of Registrant as Specified In Its Charter)
 
   
    
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[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
     (1)  Title of each class of securities to which transaction applies:
 
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     (2)  Aggregate number of securities to which transaction applies:
 
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     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ]  Fee paid previously with preliminary materials.
 
[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
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   2
 
   
                                                                October 23, 1998
    
   
Kemper
    
   
Important News
    
   
Important News
    
 
   
                                                    for Kemper Fund Shareholders
    
 
   
While we encourage you to read the full text of the enclosed Proxy Statement,
here's a brief overview of some matters affecting your Fund that will be the
subject of a shareholder vote.
    
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                                      Q&A
                             QUESTIONS AND ANSWERS
 
Q WHAT IS HAPPENING?
 
   
A Zurich Insurance Company ("Zurich"), which is the majority owner of your
Fund's investment manager, Scudder Kemper Investments, Inc. ("Scudder Kemper"),
has combined its businesses with the financial services businesses of B.A.T
Industries p.l.c. ("B.A.T"). The resulting company, Zurich Financial Services
("Zurich Financial Services"), has become Zurich's parent company. Although this
transaction will have virtually no effect on the operations of Scudder Kemper or
your Fund, we are asking the Fund's shareholders to approve a new investment
management agreement to assure that there is no interruption in the services
Scudder Kemper provides to your Fund. The following pages give you additional
information about Zurich Financial Services, the new investment management
agreement and certain other matters. THE BOARD MEMBERS OF YOUR FUND, INCLUDING
THOSE WHO ARE NOT AFFILIATED WITH THE FUND, SCUDDER KEMPER OR ZURICH, RECOMMEND
THAT YOU VOTE FOR APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT.
    
 
Q WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT MANAGEMENT AGREEMENT?
 
A As a result of the Zurich-B.A.T transaction, the former shareholders of B.A.T
indirectly own a 43% interest in Zurich through a new holding company, Allied
Zurich p.l.c. This change in ownership of Zurich may be deemed to have caused a
"change in control" of Scudder Kemper, even though Scudder Kemper's operations
will not change as a result. The Investment Company Act of 1940, which regulates
investment companies such as your Fund, requires that fund shareholders approve
a new investment management agreement whenever there is a change in control of a
fund's investment manager (even in the most technical sense). Pursuant to an
exemptive order issued by the Securities and Exchange Commission, your Fund
entered into a new investment management agreement, subject to receipt of
shareholder approval within 150 days. Accordingly, we are seeking shareholder
approval of the new investment management agreement with your Fund.
 
   
Q HOW WILL THE ZURICH-B.A.T TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
    
 
   
A We do not expect the transaction to affect you as a Fund shareholder. Your
Fund and your Fund's investment objectives will not change as a result of the
transaction. You will still own the same shares in the same Fund. The new
investment management agreement is substantially identical to the former
investment management agreement, except for the dates of execution and
termination. Similarly, the other service arrangements between your Fund and
Scudder Kemper or affiliates of Scudder Kemper will not be affected by the
transaction. If shareholders do not approve the new investment management
agreement, the agreement will terminate and the Board Members of your Fund will
take such action as they deem to be in the best interests of your Fund and its
shareholders.
    
 
KEMPER LOGO
KEMPER LOGO
   3
 
   
Q WILL THE INVESTMENT MANAGEMENT FEES INCREASE?
    
 
A No, the investment management fee rates paid by your Fund will remain the
same.
 
   
Q WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
    
 
   
A Shareholders of certain Funds are being asked to vote for approval of a
new sub-advisory agreement on the same terms as the former sub-advisory
agreement. In addition, in order to save your Fund the expense of a subsequent
meeting, a vote is also being sought for the modification or elimination of
certain policies and the elimination of the shareholder approval requirement as
to certain other matters, in order to simplify and modernize matters relating to
the Fund's policies and objective(s).
    
 
   
Q HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
    
 
A After careful consideration, the Board Members of your Fund, including those
who are not affiliated with the Fund, Scudder Kemper or Zurich, recommend that
you vote FOR the Proposals on the enclosed proxy card(s).
 
Q WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
 
A No, Zurich or its affiliates will bear these costs.
 
Q WHOM DO I CALL FOR MORE INFORMATION?
 
   
A Please call Shareholder Communications Corporation, your Fund's information
agent, at (800) 248-2116.
    
                              ABOUT THE PROXY CARD
 
                   Because each Fund must vote separately, you are being sent a
                   proxy card for each Fund account that you have.
   
                   Please vote all applicable issues shown on each proxy card
                   that you receive.
    
 
   
 Please vote on each applicable issue using blue or black ink to mark an X in
 one of the three boxes provided on each proxy card. On Item 3, mark For All
 Applicable Proposals Except As Noted Below, Against All or Abstain All. If you
 wish to vote against a particular proposal in Item 3, you should mark the For
 All Applicable Proposals Except As Noted Below box and print the proposal
 number on the line provided. On all other applicable Items, mark -- For,
 Against or Abstain. Then sign, date and return each of your proxy cards in the
 accompanying postage-paid envelope. All registered owners of an account, as
 shown in the address on the proxy card, must sign the proxy card. If you are
 signing for a corporation, trust or estate, please indicate your title or
 position.
    
 
 We appreciate your continuing support and look forward to serving your future
 investment needs.
 THANK YOU FOR MAILING YOUR
 PROXY CARD PROMPTLY!
 
PROXY CARD SAMPLE
   4
 
                         KEMPER AGGRESSIVE GROWTH FUND
                            KEMPER ASIAN GROWTH FUND
   
                             KEMPER BLUE CHIP FUND
    
                         KEMPER DIVERSIFIED INCOME FUND
                               KEMPER EUROPE FUND
                           KEMPER GLOBAL INCOME FUND
                               KEMPER GROWTH FUND
                            KEMPER HIGH YIELD SERIES
                              KEMPER HORIZON FUND
                  KEMPER INCOME AND CAPITAL PRESERVATION FUND
                           KEMPER INTERNATIONAL FUND
                     KEMPER NATIONAL TAX FREE INCOME SERIES
                               KEMPER PORTFOLIOS
                    KEMPER SMALL CAPITALIZATION EQUITY FUND
                      KEMPER STATE TAX-FREE INCOME SERIES
                           KEMPER TARGET EQUITY FUND
                             KEMPER TECHNOLOGY FUND
                            KEMPER TOTAL RETURN FUND
                     KEMPER U.S. GOVERNMENT SECURITIES FUND
                            KEMPER VALUE+GROWTH FUND
                           KEMPER VALUE SERIES, INC.
 
                           222 South Riverside Plaza
                            Chicago, Illinois 60606
 
                              KEMPER EQUITY TRUST
                            KEMPER SECURITIES TRUST
 
                            Two International Place
                          Boston, Massachusetts 02110
 
                    KEMPER GLOBAL/INTERNATIONAL SERIES, INC.
 
                                345 Park Avenue
                            New York, New York 10154
 
   
                                                                October 23, 1998
    
 
Dear Shareholders:
 
     Zurich Insurance Company, the majority owner of Scudder Kemper Investments,
Inc., has combined its businesses with the financial services businesses of
B.A.T Industries p.l.c. The resulting company, Zurich Financial Services, has
become the parent company of Zurich and the majority owner of Scudder Kemper. As
a result of this transaction, we are asking the shareholders of each of the
funds for which Scudder Kemper acts as investment manager, including your Fund,
to approve a new investment management agreement with Scudder Kemper.
 
     The Zurich-B.A.T transaction should not affect you as a Fund shareholder.
Your Fund shares will not change, the advisory fee rates and expenses paid by
your Fund will not increase and the investment objectives of your Fund will
remain the same.
 
   
     Shareholders are also being asked to approve certain other matters that
have been set forth in the Notice of Meetings. AFTER CAREFUL REVIEW, THE MEMBERS
OF YOUR FUND'S BOARD HAVE APPROVED THE NEW INVESTMENT MANAGEMENT AGREEMENT. THE
BOARD MEMBERS OF YOUR FUND BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE
NOTICE OF MEETINGS FOR YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE
ENCLOSED MATERIALS CAREFULLY AND THEN VOTE FOR ALL PROPOSALS.
    
   5
 
     Because all of the funds for which Scudder Kemper acts as investment
manager are holding shareholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
 
     Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote.
 
Respectfully,
 
/s/ Daniel Pierce
   
Daniel Pierce
    
   
Chairman
    
   
    
 
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
   6
 
                         KEMPER AGGRESSIVE GROWTH FUND
                            KEMPER ASIAN GROWTH FUND
                         KEMPER DIVERSIFIED INCOME FUND
                              KEMPER EQUITY TRUST
                               KEMPER EUROPE FUND
                           KEMPER GLOBAL INCOME FUND
                    KEMPER GLOBAL/INTERNATIONAL SERIES, INC.
                               KEMPER GROWTH FUND
                            KEMPER HIGH YIELD SERIES
                              KEMPER HORIZON FUND
                  KEMPER INCOME AND CAPITAL PRESERVATION FUND
                           KEMPER INTERNATIONAL FUND
                     KEMPER NATIONAL TAX FREE INCOME SERIES
                               KEMPER PORTFOLIOS
                            KEMPER SECURITIES TRUST
                    KEMPER SMALL CAPITALIZATION EQUITY FUND
                      KEMPER STATE TAX-FREE INCOME SERIES
                           KEMPER TARGET EQUITY FUND
                             KEMPER TECHNOLOGY FUND
                            KEMPER TOTAL RETURN FUND
                     KEMPER U.S. GOVERNMENT SECURITIES FUND
                            KEMPER VALUE+GROWTH FUND
                           KEMPER VALUE SERIES, INC.
 
                   NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
 
   
     Please take notice that Special Meetings of Shareholders (each a "Special
Meeting") of each Kemper Trust/Corporation listed above (each Trust is a
"Trust," collectively, the "Trusts" and each Corporation is a "Corporation,"
collectively, the "Corporations"), or, if applicable, each of its series that is
listed on Appendix 1 to the Proxy Statement (each such series is referred to
herein as a "Fund" and, collectively, where applicable, with those
Trusts/Corporations that do not have any series, the "Funds"), will be held
jointly at the offices of Scudder Kemper Investments, Inc., 13th Floor, Two
International Place, Boston, Massachusetts 02110, on December 17, 1998, at 11:00
a.m., Eastern time, for the following purposes:
    
 
        PROPOSAL 1:    To approve a new investment management agreement for each
                       Fund with Scudder Kemper Investments, Inc.;
 
   
        PROPOSAL 2:    (For shareholders of KEUF, KGIF, KIF, KWF4, KDFSF and
                       KDHRF only) To approve a new sub-advisory agreement for
                       each Fund with either Scudder Investments (U.K.) Limited
                       or Dreman Value Management, L.L.C.; and
    
 
        PROPOSAL 3:    To modify or eliminate certain policies and to eliminate
                       the shareholder approval requirement as to certain other
                       matters.
 
   
     The appointed proxies will vote in their discretion on any other business
as may properly come before a Special Meeting or any adjournments thereof.
    
 
     Holders of record of shares of each Fund at the close of business on
September 22, 1998 are entitled to vote at the Special Meeting and at any
adjournments thereof.
 
     In the event that the necessary quorum to transact business or the vote
required to approve a Proposal is not obtained at the Special Meeting with
respect to one or more Funds, the persons named as proxies may propose one or
more adjournments of the Special Meeting in accordance with applicable law, to
permit further solicitation of proxies. Any such adjournment as to a matter will
require the affirmative vote of the holders of a majority of the concerned
Fund's shares present in person or by proxy at the Special Meeting. The persons
named as proxies will vote in favor of such
   7
 
adjournment those proxies which they are entitled to vote in favor of the
Proposals and will vote against any such adjournment those proxies to be voted
against the Proposals.
 
                                   By Order of the Boards of Trustees/Directors,
 
                                                           /s/ Philip J. Collora
                                                               Philip J. Collora
                                                                       Secretary
 
   
October 23, 1998
    
 
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL
MEETINGS. IF YOU CAN ATTEND THE SPECIAL MEETINGS AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
   8
 
                         KEMPER AGGRESSIVE GROWTH FUND
                            KEMPER ASIAN GROWTH FUND
                         KEMPER DIVERSIFIED INCOME FUND
                               KEMPER EUROPE FUND
                           KEMPER GLOBAL INCOME FUND
                               KEMPER GROWTH FUND
                            KEMPER HIGH YIELD SERIES
                              KEMPER HORIZON FUND
                  KEMPER INCOME AND CAPITAL PRESERVATION FUND
                           KEMPER INTERNATIONAL FUND
                     KEMPER NATIONAL TAX FREE INCOME SERIES
                               KEMPER PORTFOLIOS
                    KEMPER SMALL CAPITALIZATION EQUITY FUND
                      KEMPER STATE TAX-FREE INCOME SERIES
                           KEMPER TARGET EQUITY FUND
                             KEMPER TECHNOLOGY FUND
                            KEMPER TOTAL RETURN FUND
                     KEMPER U.S. GOVERNMENT SECURITIES FUND
                            KEMPER VALUE+GROWTH FUND
                           KEMPER VALUE SERIES, INC.
 
                           222 South Riverside Plaza
                            Chicago, Illinois 60606
 
                              KEMPER EQUITY TRUST
                            KEMPER SECURITIES TRUST
 
                            Two International Place
                          Boston, Massachusetts 02110
 
                    KEMPER GLOBAL/INTERNATIONAL SERIES, INC.
 
                                345 Park Avenue
                            New York, New York 10154
 
                             JOINT PROXY STATEMENT
 
GENERAL
 
   
     This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees/Directors (the "Board") of each of the Kemper
Trusts/Corporations listed above (each Trust is a "Trust," collectively, the
"Trusts" and each Corporation is a "Corporation," collectively, the
"Corporations") for use at the Special Meeting of Shareholders of each
Trust/Corporation, or, if applicable, its series that are listed on Appendix 1
hereto (each such series is referred to herein as a "Fund" and, collectively,
where applicable, with those Trusts/Corporations that do not have any series,
the "Funds"), to be held jointly at the offices of Scudder Kemper Investments,
Inc. ("Scudder Kemper"), 13th Floor, Two International Place, Boston,
Massachusetts 02110, on December 17, 1998 at 11:00 a.m., Eastern time, and at
any and all adjournments thereof (the "Special Meeting").
    
 
   
     In the descriptions of the Proposals below, the Trusts/Corporations and
Funds are referred to by the acronyms listed in Appendix 1. The word "fund" is
sometimes used to mean investment companies or series thereof in general, and
not the Funds whose proxy statement this is. In addition, in this Proxy
Statement, for simplicity, actions are described as being taken by a Fund that
is a series of a Trust or Corporation, although all actions are actually taken
by the respective Trust or Corporation on behalf of the applicable series.
    
 
   
     This Proxy Statement, the Notice of Special Meetings and the proxy cards
are first being mailed to shareholders on or about October 26, 1998 or as soon
as practicable thereafter. Any shareholder giving a proxy has the power to
revoke it by mail (addressed to the Secretary at the principal executive office
of the Funds, c/o Scudder Kemper Investments, Inc., at the address for each Fund
    
   9
 
shown at the beginning of this Proxy Statement) or in person at the Special
Meeting, by executing a superseding proxy or by submitting a notice of
revocation to the Fund. All properly executed proxies received in time for the
Special Meeting will be voted as specified in the proxy or, if no specification
is made, in favor of the Proposals referred to in the Proxy Statement.
 
   
     The presence at any shareholders' meeting, in person or by proxy, of the
holders of 30%, in the case of each Fund other than those Funds in KVS, or
one-third, in the case of each Fund in KVS, of the shares of a Fund entitled to
be cast shall be necessary and sufficient to constitute a quorum for the
transaction of business. In the event that the necessary quorum to transact
business or the vote required to approve any Proposal is not obtained at the
Special Meeting with respect to one or more Funds, the persons named as proxies
may propose one or more adjournments of the Special Meeting in accordance with
applicable law to permit further solicitation of proxies with respect to the
Proposal that did not receive the vote necessary for its passage or to obtain a
quorum. Any such adjournment as to a matter will require the affirmative vote of
the holders of a majority of the concerned Fund's shares present in person or by
proxy at the Special Meeting. The persons named as proxies will vote in favor of
such adjournment those proxies which they are entitled to vote in favor of that
Proposal and will vote against any such adjournment those proxies to be voted
against that Proposal. For purposes of determining the presence of a quorum for
transacting business at a Special Meeting, abstentions and broker "non-votes"
will be treated as shares that are present but which have not been voted. Broker
non-votes are proxies received by a Fund from brokers or nominees when the
broker or nominee has neither received instructions from the beneficial owner or
other persons entitled to vote nor has discretionary power to vote on a
particular matter. Accordingly, shareholders are urged to forward their voting
instructions promptly.
    
 
     Each Proposal requires the affirmative vote of a "majority of the
outstanding voting securities" of a Fund. The term "majority of the outstanding
voting securities," as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), and as used in this Proxy Statement, means: the affirmative
vote of the lesser of (1) 67% of the voting securities of each Fund present at
the meeting if more than 50% of the outstanding voting securities of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding voting
securities of each Fund.
 
     Abstentions will have the effect of a "no" vote on each Proposal. Broker
non-votes will have the effect of a "no" vote on each Proposal, each of which
requires the approval of a specified percentage of the outstanding shares of
each Fund, if such vote is determined on the basis of obtaining the affirmative
vote of more than 50% of the outstanding voting securities of the Fund. Broker
non-votes will not constitute "yes" or "no" votes, and will be disregarded in
determining the voting securities "present" if such vote is determined on the
basis of the affirmative vote of 67% of the voting securities of the Fund
present at the Special Meeting with respect to each Proposal.
 
     Shareholders of each Fund will vote separately with respect to each
Proposal.
 
     Holders of record of the shares of each Fund at the close of business on
September 22, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table provided in Appendix 2 hereto sets forth the number
of shares outstanding for each Fund as of June 30, 1998.
 
     Appendix 3 sets forth the beneficial owners of at least 5% of a Fund's
shares. To the best of each Trust's/Corporation's knowledge, as of June 30,
1998, no person owned beneficially more than 5% of any Fund's outstanding
shares, except as stated in Appendix 3.
 
     Appendix 4 hereto sets forth the number of shares of each Fund owned
directly or beneficially by the Trustees/Directors of the relevant Board.
 
   
     Each Fund provides periodic reports to all of its shareholders which
highlight relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for each Fund and a copy of any more recent semi-annual report, without
charge, by calling 800-621-1048 or writing the Fund, c/o Scudder Kemper
Investments, Inc., at the address for each Fund shown at the beginning of this
Proxy Statement.
    
 
                                        2
   10
 
   
                               TABLE OF PROPOSALS
    
 
   


                                                                                         PAGE
                                                                                         ----
                                                                             
Proposal 1:   Approval of a New Investment Management Agreement For Each Fund With
              Scudder Kemper Investments, Inc.
              All Funds..............................................................      5
Proposal 2:   Approval of a New Sub-Advisory Agreement for Each Fund With Either
              Scudder Investments (U.K.) Limited or Dreman Value Management, L.L.C.
              KEUF, KGIF, KIF, KWF4, KDFSF and KDHRF.................................     15
Proposal 3:   Approval of the Modification or Elimination of Certain Policies and the
              Elimination of the Shareholder Approval Requirement as to Certain Other
              Matters
              ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO AMEND INVESTMENT
              OBJECTIVES AND INVESTMENT POLICIES
              3.0   Investment Objectives
                    All Funds (except for KUSGIF, KSCRVF, KCF, KDHRF and KSCVF)......     21
              3.1   Investment Policies
                    KAGF, KAAGF, KBCF, KCATF, KCRF, KDIF, KEUF, KFLTF, KGF, KGIF,
                    KGSF, KHYF, KHYOF, KICPF, KIF, KIMBF, KMBF, KNYTF, KOHTF, KRF I,
                    KRF II, KRF III, KRF IV, KRF V, KRF VI, KRF VII, KSCF, KTEC,
                    KTRF, KUSMF, KVGF, KWF4..........................................     22
              REVISION OF FUNDAMENTAL POLICIES MANDATED BY THE 1940 ACT
              3.2   Diversification
                    (a)  KAGF, KBCF, KCRF, KDFSF, KDIF, KEUF, KGBF, KGF, KGSF, KH20P,
                         KH10P, KH5P, KHYF, KHYOF, KICPF, KIF, KIGIF, KIMBF, KMBF,
                         KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI, KRF VII,
                         KSCF, KSCRVF, KTEC, KTRF, KUSGIF, KUSMF, KVGF, KCF, KDHRF,
                         KSCVF, KWF4.................................................     22
                    (b)  KAGGF, KCATF, KFLTF, KGIF, KNYTF, KOHTF.....................     23
              3.3   Borrowing
                    All Funds (except for KEMGF, KEMIF, KGBCF, KIGIF, KLAF, KDFSF and
                    KUSGIF)..........................................................     23
              3.4   Senior Securities
                    All Funds (except for KDFSF and KGIS)............................     24
              3.5   Concentration
                    (a)  All Funds (except for KDFSF, the KGIS Funds and KCRF).......     24
                    (b)  KCRF........................................................     25
              3.6   Underwriting of Securities
                    All Funds (except for KDFSF and the KGIF Funds)..................     25
              3.7   Investment in Real Estate
                    All Funds (except for KDFSF and the KGIF Funds)..................     25
              3.8   Purchase of Commodities
                    All Funds (except for KDFSF, the KGIF Funds and KUSGIF)..........     25
              3.9   Lending
                    All Funds........................................................     26
              ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO CHANGE OTHER
              FUNDAMENTAL POLICIES

    
 
                                        3
   11
 
   


                                                                                         PAGE
                                                                                         ----
                                                                             
              3.10  Margin Purchases and Short Sales
                    KAGF, KAGGF, KBCF, KCATF, KCRF, KDIF, KEUF, KFLTF, KGF, KGIF,
                    KH20P, KH10P, KH5P, KHYF, KHYOF, KICPF, KIF, KIMBF, KMBF, KNYTF,
                    KOHTF, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI, KRF VII,
                    KSCF, KSCRVF, KTEC, KTRF, KUSMF, KVGF, KCF, KDHRF, KSCVF, KWF4...
                                                                                          27
              3.11  Purchase of Securities of Related Issuers
                    KCRF, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI, KUSMF.......     27
              3.12  Pledging of Assets
                    KAGF, KAGGF, KBCF, KCATF, KDHRF, KDIF, KEUF, KFLTF, KGF, KGIF,
                    KGSF, KH20P, KH10P, KH5P, KHYF, KICPF, KIF, KIMBF, KMBF, KNYTF,
                    KOHTF, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI, KRF VII,
                    KSCF, KSCRVF, KTEC, KTRF, KVGF, KCF, KSCVF, KWF4.................     28
              3.13  Restricted and Illiquid Securities
                    KCRF, KUSMF, KCF, KDHRF, KSCVF...................................     28
              3.14  Purchases of Securities
                    KAGF, KAGGF, KBCF, KCRF, KEUF, KGF, KGIF, KH20P, KH10P, KH5P,
                    KICPF, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VII, KRF VII,
                    KSCF, KTEC, KTRF, KUSMF, KVGF, KWF4..............................     29
              3.15  Purchases of Options and Warrants
                    KAGF, KBCF, KCATF, KCRF, KDIF, KEUF, KFLTF, KGF, KGIF, KGSF,
                    KHYF, KICPF, KIF, KIMBF, KMBF, KNYTF, KOHTF, KRF I, KRF II, KRF
                    III, KRF IV, KRF V, KRF VI, KSCF, KTEC, KTRF, KUSMF, KVGF,
                    KWF4.............................................................     29
              3.16  Investment for the Purpose of Exercising Control or Management
                    KCRF, KRF I, KRF II, KRF III, KRF VI, KRF V, KRFS VI, KUSMF......     29
              3.17  Investment in Mineral Exploration
                    KCRF, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI, KUSMF, KCF,
                    KDHRF, KSCVF.....................................................     30
              3.18  Investment in Issuers With Short Histories
                    KCRF, KUSMF......................................................     30
              3.19  Investment in Non-U.S. Dollar Denominated Securities
                    KHYF.............................................................     30
              3.20  Investment in other Investment Companies
                    KCRF, KUSMF......................................................     30
              3.21  Investment other than in Accordance with Objectives and Policies
                    KCATF, KCRF, KFLTF, KICPF, KIMBF, KMBF, KNYTF, KOHTF, KUSMF......     30

    
 
                                        4
   12
 
                          PROPOSAL 1: APPROVAL OF NEW
                        INVESTMENT MANAGEMENT AGREEMENT
 
INTRODUCTION
 
   
     Scudder Kemper acts as the investment manager to each Fund pursuant to an
investment management agreement entered into by each Fund and Scudder Kemper.
The investment management agreement in effect between each Fund and Scudder
Kemper prior to the consummation of the transaction between Zurich Insurance
Company ("Zurich") and B.A.T Industries p.l.c. ("B.A.T") (the "Zurich-B.A.T
Transaction" or the "Transaction"), which is described below, is referred to in
this Proxy Statement as a "Former Investment Management Agreement,"
collectively, the "Former Investment Management Agreements." The investment
management agreement currently in effect between each Fund and Scudder Kemper,
which is also described below, was executed as of the consummation of the
Zurich-B.A.T Transaction and is referred to in this Proxy Statement as a "New
Investment Management Agreement," collectively, the "New Investment Management
Agreements" and, together with the Former Investment Management Agreements, the
"Investment Management Agreements." (Scudder Kemper is sometimes referred to in
this Proxy Statement as the "Investment Manager.")
    
 
   
     The information set forth in this Proxy Statement and the accompanying
materials concerning the Transaction, Scudder Kemper, Zurich, B.A.T and their
respective affiliates has been provided to the Funds by Scudder Kemper based
upon information that Scudder Kemper received from Zurich and its affiliates.
    
 
     On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") entered into
an agreement with Zurich pursuant to which Scudder and Zurich agreed to form an
alliance. On December 31, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc. ("Kemper"), a Zurich subsidiary, became part
of Scudder. Scudder's name was changed to Scudder Kemper Investments, Inc. The
transaction between Scudder and Zurich (the "Scudder-Zurich Transaction")
resulted in the termination of each Fund's investment management agreement with
Kemper. Consequently, the Former Investment Management Agreement between each
Fund and Scudder Kemper was approved by each Trust's/Corporation's Board and by
each Fund's shareholders.
 
   
     The Zurich-B.A.T Transaction.  On December 22, 1997, Zurich and B.A.T
entered into a definitive agreement (the "Merger Agreement") pursuant to which
businesses of Zurich (including Zurich's almost 70% ownership interest in
Scudder Kemper) were to be combined with the financial services businesses of
B.A.T. On October 12, 1997, Zurich and B.A.T had confirmed that they were
engaged in discussions concerning a possible business combination; on October
16, 1997, Zurich and B.A.T announced that they had entered into an Agreement in
Principle, dated as of October 15, 1997 (the "Agreement in Principle"), to merge
B.A.T's financial services businesses with Zurich's businesses. The Merger
Agreement superseded the Agreement in Principle.
    
 
   
     In order to effect this combination, Zurich and B.A.T first reorganized
their respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services business
from its tobacco-related businesses by spinning off to its shareholders a new
British company, Allied Zurich p.l.c., 22 Arlington Street, London, England,
SW1A 1RW, United Kingdom, which held B.A.T's financial services businesses.
    
 
   
     Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
p.l.c. contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. These transactions were
completed on September 7, 1998. As a result, upon the completion of the
Transaction, the former Zurich shareholders became the owners (through Zurich
Allied AG) of 57% of the voting stock of Zurich Financial Services, and former
B.A.T shareholders initially became the
    
 
                                        5
   13
 
owners (through Allied Zurich p.l.c.) of 43% of the voting stock of Zurich
Financial Services. Zurich Financial Services now owns Zurich and the financial
services businesses previously owned by B.A.T.
 
     Below is a simplified chart showing the corporate structure of Zurich
Financial Services after these transactions:
 
                     [ZURICH FINANCIAL SERVICES FLOW CHART]
 
     Corporate Governance.  At the closing of the Zurich-B.A.T Transaction, the
parties entered into a Governing Agreement that establishes the corporate
governance structure for Zurich Allied AG, Allied Zurich p.l.c. and Zurich
Financial Services.
 
   
     The Board of Directors of Zurich Financial Services consists of ten
members, five of whom were initially selected by Zurich and five by B.A.T. Mr.
Rolf Huppi, Zurich's Chairman and Chief Executive Officer, became Chairman and
Chief Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of his position on the Board of Directors, as Chairman, Mr. Huppi will
have a tie-breaking vote on all matters except recommendations of the Audit
Committee, recommendations of the Remuneration Committee in respect of the
remuneration of the Chairman and the CEO, appointment and removal of the
Chairman and CEO, appointments to the Nominations, Audit and
    
 
                                        6
   
Remuneration Committees and nominations to the Board of Directors not made
through the Nominations Committee.
    
 
                                        7
   14
 
   
     The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of Scudder
Kemper, who is responsible for Global Asset Management for Zurich Financial
Services), and three were B.A.T executives.
    
 
   
     The Board of Directors of Zurich Allied AG initially consists of 11
members, eight of whom were Zurich directors and three of whom were proposed by
B.A.T. The Board of Directors of Allied Zurich p.l.c. also initially consists of
11 members, eight of whom were B.A.T directors and three of whom were proposed
by Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich
p.l.c. will have identical membership.
    
 
     Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
 
     The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
 
   
     The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers Group
of Insurance companies; Eagle Star Reinsurance Company Ltd., UK ("Eagle Star")
(which Zurich Financial Services has agreed to sell to GE Capital);
Allied-Dunbar, one of the leading U.K. unit-linked life insurance and pensions
companies; and Threadneedle Asset Management, which was formed initially to
manage the investment assets of Eagle Star and Allied-Dunbar, and which, at
December 31, 1997, had $58.8 billion under management. Overall, at year-end
1997, the financial services businesses of B.A.T had $79 billion in assets under
management, including $18 billion in third party assets.
    
 
     Zurich has informed the Funds that the financial services businesses of
B.A.T do not include any of B.A.T's tobacco businesses and that, after careful
review, Zurich has concluded that the tobacco-related liabilities connected with
B.A.T's tobacco business should not adversely affect Zurich or the present
Zurich subsidiaries, including Scudder Kemper.
 
     Governance arrangements that were put in place at the time of the
acquisition of Zurich's 70% interest in Scudder Kemper (which are discussed
below under "Investment Manager") remain unaffected by the Transaction. These
arrangements preclude the making of certain major decisions affecting Scudder
Kemper without the approval of Scudder Kemper directors elected by the non-
Zurich shareholders of Scudder Kemper.
 
   
     Consummation of the Zurich-B.A.T Transaction may be deemed to have
constituted an "assignment," as that term is defined in the 1940 Act, of each
Fund's Former Investment Management Agreement with Scudder Kemper. As required
by the 1940 Act, each of the Former Investment Management Agreements provided
for its automatic termination in the event of its assignment. Accordingly, a New
Investment Management Agreement between each Fund and Scudder Kemper was
approved by the Board members of each Fund and is now being proposed for
approval by shareholders of each Fund. Scudder Kemper has received an exemptive
order from the Securities and Exchange Commission (the "SEC" or the
"Commission") permitting each Fund to obtain shareholder approval of its New
Investment Management Agreement within 150 days after the consummation of the
Transaction, which occurred on September 7, 1998 (and, consequently, within 150
days after the termination of its Former Investment Management Agreement),
instead of before the consummation of the Transaction. Pursuant to the exemptive
order, each Fund's investment management fees are being held in escrow until the
earlier of shareholder approval of the Fund's New Investment Management
Agreement or the expiration of the 150 day period. A copy of the master form of
New Investment Management Agreement is attached hereto as Exhibit A. THE NEW
INVESTMENT MANAGEMENT AGREEMENT FOR EACH FUND IS SUBSTANTIALLY IDENTICAL TO THE
CORRE-
    
 
                                        7
   15
 
   
SPONDING FORMER INVESTMENT MANAGEMENT AGREEMENT, EXCEPT FOR THE DATES OF
EXECUTION AND TERMINATION. In addition, the Boards were advised that the
portfolio managers for each Fund will not change as a result of the Transaction,
although, since the announcement of the Transaction, the lead portfolio manager
of KGIF has been replaced by another member of the Fund's portfolio management
team. The material terms of the Investment Management Agreements are described
under "Description of the Investment Management Agreements" below.
    
 
BOARD'S RECOMMENDATION
 
   
     On either July 17, 1998 or July 21, 1998, the Board of each
Trust/Corporation met and the Board members of each Trust/Corporation, including
the Board members who are not parties to such agreement or "interested persons"
(as defined in the 1940 Act) (the "Non-Interested Trustees/ Directors" or
"Non-Interested Board members") of any such party, voted to approve the New
Investment Management Agreements and to recommend approval to the shareholders
of each applicable Fund.
    
 
     For information about the Boards' deliberations and the reasons for their
recommendation, please see "Board's Evaluation" below.
 
BOARD'S EVALUATION
 
     Each Board met on either July 17, 1998 or July 21, 1998 to consider the
Transaction and its effects on the Funds. Each Board met with senior management
personnel of Scudder Kemper. Each Board had the assistance of legal counsel, who
prepared among other things, an analysis of the Board's fiduciary obligations.
As a result of its review and consideration of the Transaction and the proposed
new investment management agreement, each Board voted unanimously to approve the
applicable New Investment Management Agreement and to recommend it to the
shareholders of the respective Fund for their approval.
 
     In connection with its review, Scudder Kemper represented to each Board
that: the Transaction will have no effect on the operational management of any
Fund; the Transaction will not result in any change in the management or
operations of Scudder Kemper; there will not be any increase in the advisory fee
or any change in any other provision, other than the term, of any Investment
Management Agreement as a result of the Transaction; the Transaction will not
adversely affect Scudder Kemper's financial condition; and the Transaction
should expand Scudder Kemper's global asset management capabilities and enhance
Scudder Kemper's research capabilities, particularly with respect to the United
Kingdom and Europe.
 
     In connection with its deliberations, each Board obtained certain
assurances from Zurich, including the following:
 
     - Zurich has provided to the Board such information as is reasonably
       necessary to evaluate the New Investment Management and other agreements.
 
     - Zurich looks upon Scudder Kemper as the core of Zurich's global asset
       management strategy. With that focus, Zurich will devote to Scudder
       Kemper and its affairs all attention and resources that are necessary to
       provide for the Funds top quality investment management, shareholder,
       administrative and product distribution services.
 
     - The Transaction will not result in any change in any Fund's investment
       objectives or policies.
 
     - The Transaction will not result in any change in the management or
       operations of Scudder Kemper or its subsidiaries.
 
     - The Transaction is not expected to result in any adverse change in the
       investment management or operations of any Fund; and Zurich neither plans
       nor proposes, for the foreseeable future, to make any material change in
       the manner in which investment advisory services or other
 
                                        8
   16
 
       services are rendered to any Fund which has the potential to have a
       material adverse effect upon the Fund.
 
     - Zurich is committed to the continuance, without interruption, of services
       to the Funds of the type and quality currently provided by Scudder Kemper
       and its subsidiaries, or superior thereto.
 
     - Zurich plans to maintain or enhance Scudder Kemper's facilities and
       organization.
 
     - In order to retain and attract key personnel, Zurich intends for Scudder
       Kemper to maintain overall compensation policies and practices at market
       levels or better.
 
     - Zurich intends to maintain the distinct brand identity of the Kemper and
       Scudder Funds and is committed to strengthening and enhancing both brands
       and the distribution channels for both families of Funds, while
       maintaining their separate brand identity.
 
     - Zurich will promptly advise the Boards of decisions materially affecting
       the Scudder Kemper organization as they relate to a Fund. Neither this,
       nor any of the other above commitments will be altered by Zurich without
       the applicable Board's prior consideration.
 
   
     Zurich assured the Boards that it intends to comply with Section 15(f) of
the 1940 Act, which provides a non-exclusive safe harbor for an investment
adviser to an investment company or any of the investment adviser's affiliated
persons (as defined in the 1940 Act) to receive any amount or benefit in
connection with a change in control of the investment adviser so long as two
conditions are met. First, for a period of three years after the transaction, at
least 75% of the board members of the investment company must not be "interested
persons" of the investment company's investment adviser or its predecessor
adviser. On or prior to the consummation of the Transaction, each of the Boards
was in compliance with this provision of Section 15(f). Second, an "unfair
burden" must not be imposed upon the investment company as a result of such
transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the transaction whereby
the investment adviser, or any interested person of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from the
investment company or its shareholders (other than fees for bona fide investment
advisory or other services) or from any person in connection with the purchase
or sale of securities or other property to, from or on behalf of the investment
company (other than bona fide ordinary compensation as principal underwriter for
such investment company). Zurich has advised the Boards that it is not aware of
any express or implied term, condition, arrangement or understanding that would
impose an "unfair burden" on the Funds as a result of the Transaction. Zurich
has agreed that it, and its affiliates, will take no action that would have the
effect of imposing an "unfair burden" on the Funds as a result of the
Transaction. In furtherance thereof, Zurich has undertaken to pay the costs of
preparing and distributing proxy materials to and of holding the meetings of the
Funds' shareholders as well as other fees and expenses in connection with the
Transaction, including the fees and expenses of legal counsel to the Funds and
the Non-Interested Board members.
    
 
     The Board also considered whether tobacco-related liability connected with
B.A.T's tobacco business could adversely affect the Adviser and the services
provided to the Fund. (See "Corporate Governance" in the "Introduction" above.)
 
     In evaluating the New Investment Management Agreements, each Board took
into account that the fees and expenses payable by each Fund under its New
Investment Management Agreement are the same as under its Former Investment
Management Agreement, that the services provided to each Fund are the same and
that the other terms are, except for the dates of execution and termination,
substantially similar. The Boards also took into consideration that the
portfolio managers and research personnel would continue their functions with
Scudder Kemper after the Transaction. The Boards noted that, in previously
approving the Former Investment Management Agreements, the Boards had considered
a number of factors, including the nature and quality of services provided by
Scudder
                                        9
   17
 
   
Kemper; investment performance, both that of each Fund itself and relative to
that of competitive investment companies; investment management fees and expense
ratios of each Fund and competitive investment companies; Scudder Kemper's
profitability from managing each Fund; fall-out benefits to Scudder Kemper from
its relationship to each Fund, including revenues derived from services provided
to the Fund by affiliates of Scudder Kemper; and the potential benefits to
Scudder Kemper and to each Fund and its shareholders of receiving research
services from broker/dealer firms in connection with the allocation of portfolio
transactions to such firms.
    
 
     The Boards discussed the Transaction with the senior management of Scudder
Kemper and Zurich and among themselves. The Boards considered that Zurich is a
large, well-established company with substantial resources, and, as noted above,
has undertaken to devote such resources to Scudder Kemper as are necessary to
provide the Funds with top quality services.
 
     As a result of their review and consideration of the Transaction and the
New Investment Management Agreements, at their meetings the Boards of each
Trust/Corporation voted to approve the New Investment Management Agreements and
to recommend their approval to the shareholders of each Fund.
 
DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENTS
 
     Except as disclosed below, all Former and New Investment Management
Agreements are substantially identical. Under the Investment Management
Agreements, Scudder Kemper provides each Fund with continuing investment
management services. The Investment Manager also determines which securities
should be purchased, held, or sold, and what portion of each Fund's assets
should be held uninvested, subject to each Trust's/Corporation's Charter,
By-Laws, investment policies and restrictions, the provisions of the 1940 Act,
and such policies and instructions as the Trustees/Directors may have
determined.
 
     Each Investment Management Agreement provides that the Investment Manager
will provide portfolio management services, place portfolio transactions in
accordance with policies expressed in each Fund's registration statement, pay
each Fund's office rent, and render significant administrative services on
behalf of each Fund (not otherwise provided by third parties) necessary for each
Fund's operating as an open-end investment company, including, but not limited
to, preparing reports to and meeting materials for each Trust's/Corporation's
Board and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of various third-party and affiliated service providers to each Fund
(such as each Fund's transfer and pricing agents, fund accounting agent,
custodian, accountants and others) and other persons in any capacity deemed
necessary or desirable to Fund operations; preparing and making filings with 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 each Fund's transfer agent; assisting in the preparation and filing
of each Fund's federal, state and local tax returns; preparing and filing each
Fund's federal excise tax returns pursuant to Section 4982 of the Internal
Revenue Code of 1986, as amended; 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 each
Fund under applicable federal and state securities laws; maintaining or causing
to be maintained for each Fund all books, records and reports and any other
information required under the 1940 Act, to the extent such books, records and
reports and other information are not maintained by each Fund's custodian or
other agents of each Fund; assisting in establishing accounting policies of each
Fund; assisting in the resolution of accounting issues that may arise with
respect to each Fund's operations and consulting with each Fund's independent
accountants, legal counsel and other agents as necessary in connection
therewith; establishing and monitoring each Fund's operating expense budgets;
reviewing each Fund's bills; processing the payment of bills that have been
approved by an authorized person; assisting each Fund in determining the amount
of dividends and distributions available to be paid by
                                       10
   18
 
each 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 each Fund in the conduct of its business, subject to the
direction and control of each Trust's/Corporation's Board.
 
     Under each Investment Management Agreement, each Fund is responsible for
other expenses, including organizational expenses (including out-of-pocket
expenses, but not including the Investment Manager's overhead or employee
costs); brokers' commissions or other costs of acquiring or disposing of any
portfolio securities of each Fund; legal, auditing and accounting expenses;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; taxes and governmental fees;
the fees and expenses of each Fund's transfer agent; expenses of preparing share
certificates and any other expenses, including clerical expenses, of issuance,
offering, distribution, sale, redemption or repurchase of shares; the expenses
of and fees for registering or qualifying securities for sale; the fees and
expenses of Non-Interested Trustees/Directors; the cost of printing and
distributing reports, notices and dividends to current shareholders; and the
fees and expenses of each Fund's custodians, subcustodians, accounting agent,
dividend disbursing agents and registrars. Each Fund may arrange to have third
parties assume all or part of the expenses of sale, underwriting and
distribution of shares of each Fund. Each Fund is also responsible for expenses
of shareholders' and other meetings and its expenses incurred in connection with
litigation and the legal obligation it may have to indemnify officers and
Trustees/Directors of each Trust/Corporation with respect thereto. Each Fund is
also responsible for the maintenance of books and records which are required to
be maintained by each Fund's custodian or other agents of each
Trust/Corporation; telephone, telex, facsimile, postage and other communications
expenses; any fees, dues and expenses incurred by each Fund in connection with
membership in investment company trade organizations; expenses of printing and
mailing prospectuses and statements of additional information of each Fund and
supplements thereto to current shareholders; costs of stationery; fees payable
to the Investment Manager and to any other Fund advisors or consultants;
expenses relating to investor and public relations; interest charges, bond
premiums and other insurance expense; freight, insurance and other charges in
connection with the shipment of each Fund's portfolio securities; and other
expenses.
 
     The Investment Manager is responsible for the payment of the compensation
and expenses of all Trustees/Directors, officers and executive employees of each
Fund (including each Fund's share of payroll taxes) affiliated with the
Investment Manager and making available, without expense to each Fund, the
services of such Trustees/Directors, officers and employees as may duly be
elected officers of each Trust/Corporation, subject to their individual consent
to serve and to any limitations imposed by law. Each Fund is responsible for the
fees and expenses (specifically including travel expenses relating to Fund
business) of Trustees/Directors not affiliated with the Investment Manager.
Under each Investment Management Agreement, the Investment Manager also pays
each Fund's share of payroll taxes. During each Fund's most recent fiscal year,
no compensation, direct or otherwise (other than through fees paid to the
Investment Manager), was paid or became payable by each Trust/ Corporation to
any of its officers or Trustees/Directors who were affiliated with the
Investment Manager.
 
     In return for the services provided by the Investment Manager as investment
manager and the expenses it assumes under each Investment Management Agreement,
each Fund (other than KAGGF and KSCF) pays the Investment Manager a management
fee which is accrued daily and payable monthly. KSCF and KAGGF each pays a base
annual management fee rate of .65% of average daily net assets, subject to
upward or downward adjustment on the basis of the investment performance of the
Class A Shares of the Fund compared with the performance of the Standard &
Poor's 500 Stock Index. The management fee rate for each Fund under the
Investment Management Agreements is set forth in Appendix 5 hereto. As of the
end of each Fund's last fiscal year, each Fund had net assets and
 
                                       11
   19
 
paid an aggregate management fee to the Investment Manager during such period as
also set forth in Appendix 5 hereto.
 
   
     The Investment Management Agreement for each of KMBF, KCATF and KGSF
provides that the Investment Manager will reimburse the Fund should operating
expenses of the Fund exceed on an annual basis the following levels: for KMBF
and KGSF, 1% of average daily net assets; and for KCATF, 1.5% of the first $30
million of average daily net assets and 1% of average daily net assets over $30
million. For this purpose, operating expenses include the investment management
fee but exclude interest, taxes, extraordinary expenses, brokerage commissions
and transaction costs and distribution fees. The investment management fee and
the expense limitation are computed based upon average daily net assets of each
series.
    
 
     Each Investment Management Agreement further provides that the Investment
Manager shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with matters to which such agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Manager in the performance of its
duties or from reckless disregard by the Investment Manager of its obligations
and duties under such agreement. Each Investment Management Agreement also
provides that purchase and sale opportunities, which are suitable for more than
one client of the Investment Manager, will be allocated by the Investment
Manager in an equitable manner. Lastly, each Investment Management Agreement
contains a provision stating that it supersedes all prior agreements.
 
     Each Investment Management Agreement may be terminated without penalty upon
sixty (60) days' written notice by either party. Each Fund may agree to
terminate its Investment Management Agreement either by the vote of a majority
of the outstanding voting securities of the Fund, or by a vote of the Board.
Each Investment Management Agreement may also be terminated at any time without
penalty by the vote of a majority of the outstanding voting securities of the
Fund or by a vote of the Board if a court establishes that the Investment
Manager or any of its officers or directors has taken any action resulting in a
breach of the Investment Manager's covenants under the Investment Management
Agreement. As stated above, each Investment Management Agreement automatically
terminates in the event of its assignment.
 
     Scudder Kemper or one of its predecessors has acted as the Investment
Manager for each Fund as of the date set forth in the table in Appendix 6
hereto. Also shown in Appendix 6 is the date of each Former Investment
Management Agreement, the date when each Former Investment Management Agreement
was last approved by the shareholders of each Fund, the date when each New
Investment Management Agreement was last approved by the Trustees/Directors of
each Fund and the date to which each New Investment Management Agreement was
last continued. Each Former Investment Management Agreement was last submitted
to shareholders (or, in some cases, to a Fund's sole shareholder) prior to its
becoming effective, as required by the 1940 Act, in connection with the
Scudder-Zurich Transaction.
 
THE NEW INVESTMENT MANAGEMENT AGREEMENTS
 
   
     The New Investment Management Agreement for each Fund, which is currently
in effect, is dated the date of the consummation of the Transaction, which
occurred on September 7, 1998. Each New Investment Management Agreement was to
be in effect for an initial term ending on April 1, 1999 for KEUF and for each
series of KTEF, KVS, KHF, KGIS, KST and KET and on March 1, 1999 for all other
Funds, and to be continued thereafter from year to year only if specifically
approved at least annually by the vote of "a majority of the outstanding voting
securities" of each Fund, or by the Board and, in either event, the vote of a
majority of the Non-Interested Trustees/Directors, cast in person at a meeting
called for such purpose. At meetings held on September 18, 1998 and September
22, 1998, the Board of each Fund, including a majority of the Non-Interested
Trustees/Directors, approved the continuance of each New Investment Management
Agreement through September 30, 1999. In the event that shareholders of a Fund
do not approve the New Investment Management Agreement, it
    
 
                                       12
   20
 
will terminate. In such event, each Board will take such action as it deems to
be in the best interests of the Fund and its shareholders.
 
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT MANAGEMENT AGREEMENTS
 
     The New Investment Management Agreements are substantially identical to the
Former Investment Management Agreements, except for the dates of execution and
termination.
 
INVESTMENT MANAGER
 
   
     Scudder Kemper, an indirect subsidiary of Zurich which resulted from the
combination of the businesses of Scudder and Kemper in connection with the
Scudder-Zurich Transaction, is one of the largest and most experienced
investment counsel firms in the United States. Scudder was established in 1919
as a partnership and was restructured as a Delaware corporation in 1985. Scudder
launched its first fund in 1928. Kemper launched its first fund in 1948. Since
December 31, 1997, Scudder Kemper has served as investment adviser to both
Scudder and Kemper funds. As of August 31, 1998, Scudder Kemper has more than
$241.1 billion in assets under management. The principal source of Scudder
Kemper's income is professional fees received from providing continuing
investment advice. Scudder Kemper provides investment counsel for many
individuals and institutions, including insurance companies, endowments,
industrial corporations and financial and banking organizations.
    
 
   
     Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office (and the home offices of Zurich
Financial Services and Zurich Allied AG) is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of the Investment Manager, with the
balance owned by the Investment Manager's officers and employees.
    
 
   
     As stated above, Scudder Kemper is a Delaware corporation. Rolf Huppi* is
the Chairman of the Board and Director, Edmond D. Villani(#) is the President,
Chief Executive Officer and Director, Stephen R. Beckwith(#) is the Treasurer
and Chief Financial Officer, Kathryn L. Quirk(#) is the General Counsel, Chief
Compliance Officer and Secretary, Lynn S. Birdsong(#) is a Corporate Vice
President and Director, Cornelia M. Small(#) is a Corporate Vice President and
Director, Laurence Cheng* is a Director, and, effective November 1, 1998, each
of Gunther Gose* and William H. Bolinder(+) is a Director of the Investment
Manager. The principal occupation of each of Edmond D. Villani, Stephen R.
Beckwith, Kathryn L. Quirk, Lynn S. Birdsong and Cornelia M. Small is serving as
a Managing Director of the Investment Manager; the principal occupation of Rolf
Huppi is serving as an officer of Zurich; the principal occupation of Laurence
Cheng is serving as a senior partner of Capital Z Partners, an investment fund;
the principal occupation of Gunther Gose is serving as the Chief Financial
Officer of Zurich Financial Services; the principal occupation of William H.
Bolinder is serving as a member of the Group Executive Board of Zurich Financial
Services. Appendix 7 includes information regarding each Trustee/Director and
Officer of each Trust/Corporation who is associated with Scudder Kemper.
    
 
     The outstanding voting securities of the Investment Manager are held of
record 36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of
Zurich; 32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by
Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and
Edmond D. Villani, in their capacity as representatives (the "Manage-
 
- ------------------------------
 
   
* Mythenquai 2, Zurich, Switzerland
    
 
(#) 345 Park Avenue, New York, New York
 
   
(+) 1400 American Lane, Schaumburg, Illinois
    
                                       13
   21
 
ment Representatives") of the Investment Manager's management holders and
retiree holders pursuant to a Second Amended and Restated Security Holders
Agreement (the "Security Holders Agreement") among the Investment Manager,
Zurich, ZHCA, ZKIH, the Management Representatives, the management holders, the
retiree holders and Edmond D. Villani, as trustee of Scudder Kemper Investments,
Inc. Executive Defined Contribution Plan Trust (the "Plan Trust"); and 9.66% by
the Plan Trust. There are no outstanding non-voting securities of the Investment
Manager.
 
     In connection with the Scudder-Zurich Transaction (described above),
pursuant to which Zurich acquired a two-thirds interest in Scudder for $866.7
million in cash in December, 1997, Daniel Pierce, a Trustee/Director of each
Trust/Corporation, sold 85.4% of his holdings in Scudder to Zurich for cash.
 
     Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
Investment Manager consists of four directors designated by ZHCA and ZKIH and
three directors designated by Management Representatives.
 
     The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
 
     Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including each Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
 
   
     Kemper Service Company ("KSC") is the transfer agent and dividend-paying
agent for each Fund of KGIS, KSCRVF, KUSGIF and KDFSF. Investors Fiduciary Trust
Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, is each
other Fund's transfer agent and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company ("KSC"), an affiliate of Scudder
Kemper, serves as Shareholder Service Agent of each Fund for which IFTC serves
as transfer and dividend-paying agent and, as such, performs all of IFTC's
duties as transfer agent and dividend-paying agent. IFTC receives as transfer
agent, and pays to KSC, annual account fees plus account set up, maintenance,
transaction and out-of-pocket expense reimbursement. Scudder Fund Accounting
Corporation ("SFAC"), a subsidiary of Scudder Kemper, computes net asset value
for each Fund. Currently, SFAC receives no fee for its services to each Fund,
other than KDFSF, KEMGF, KEMIF, KGBCF, KIGIF, KLAF, KUSGIF and KSCRVF; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services from those Funds that currently do not pay it a fee for its
services. Kemper Distributors, Inc. ("KDI"), 222 South Riverside Plaza, Chicago,
Illinois 60606, a subsidiary of Scudder Kemper, provides information and
administrative services for shareholders of each Fund. KDI is also the principal
underwriter and distributor of each Fund's shares and acts as agent of each Fund
in the sale of its shares. For the Class B shares and Class C shares of each
Fund, KDI receives a Rule 12b-1 distribution fee of 0.75% of average daily net
assets of each such class. The table provided in Appendix 8 sets forth for each
Fund (or class thereof, where appropriate) the respective fees paid to KSC (fees
received from each Fund by IFTC and remitted to KSC), SFAC and KDI (including
administration fees and Rule 12b-1 fees) during the last fiscal year of each
Fund. Also
    
 
                                       14
   22
 
   
set forth in Appendix 8 as to each Fund during its most recent fiscal year is
information regarding the commissions paid to KDI.
    
 
   
     KSC, SFAC and KDI will continue to provide transfer agency, fund accounting
and underwriting, administrative and distribution services, respectively, to the
Funds, as described above, under the current arrangements if the New Investment
Management Agreements are approved.
    
 
     Exhibit B sets forth (as of each fund's last fiscal year end, unless
otherwise noted) the fees and other information regarding investment companies
advised by Scudder Kemper that have similar investment objectives to any of the
Funds. (See Appendix 5 for information regarding the management fee rate, net
assets and aggregate management fee paid for each Fund.)
 
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
 
   
     To the maximum extent feasible, Scudder Kemper or, where applicable, a
sub-adviser to a Fund, places orders for portfolio transactions through Scudder
Investor Services, Inc. ("SIS"), Two International Place, Boston, Massachusetts
02110, which in turn places orders on behalf of the Funds with issuers,
underwriters or other brokers and dealers. SIS is a corporation registered as a
broker/dealer and a subsidiary of Scudder Kemper. SIS does not receive any
commissions, fees or other remuneration from the Funds for this service. In
selecting brokers and dealers with which to place portfolio transactions for a
Fund, Scudder Kemper (or a sub-adviser) may consider sales of shares of the
Funds and of other Kemper funds. When it can be done consistently with the
policy of obtaining the most favorable net results, Scudder Kemper (or a
sub-adviser) may place such orders with brokers and dealers who supply research,
market and statistical information to a Fund or to Scudder Kemper. Scudder
Kemper (or a sub-adviser, as applicable) is authorized when placing portfolio
transactions for a Fund to pay a brokerage commission (to the extent applicable)
in excess of that which another broker might charge for executing the same
transaction on account of the receipt of research, market or statistical
information. Allocation of portfolio transactions is supervised by Scudder
Kemper.
    
 
         THE BOARD MEMBERS OF EACH TRUST/CORPORATION RECOMMEND THAT THE
          SHAREHOLDERS OF EACH FUND VOTE IN FAVOR OF THIS PROPOSAL 1.
 
                          PROPOSAL 2: APPROVAL OF NEW
                             SUB-ADVISORY AGREEMENT
 
   
       (FOR SHAREHOLDERS OF KEUF, KGIF, KIF, KWF4, KDFSF AND KDHRF ONLY)
    
 
   
     KEUF, KGIF, KIF and KWF4 each uses the investment management services of
Scudder Investments (U.K.) Limited ("SIL"), a subsidiary of Scudder Kemper, with
respect to investments in foreign securities pursuant to the sub-advisory
agreements between Scudder Kemper and SIL described below.
    
 
   
     Immediately prior to the consummation of the Scudder-Zurich Transaction,
Zurich Investment Management Limited ("ZIML"), which was an indirect subsidiary
of Zurich and an affiliate of Kemper, provided the sub-advisory services now
provided by SIL to each of KEUF, KGIF, KIF and KWF4, pursuant to sub-advisory
agreements dated December 1, 1996. Subsequent to the execution of the
transaction agreement relating to the Scudder-Zurich Transaction, Zurich agreed
to cause ownership of ZIML to be transferred by Zurich to Scudder Kemper (the
"Transfer"). Prior to the consummation of the Scudder-Zurich Transaction,
shareholders of each of KEUF, KGIF, KIF and KWF4 approved two new sub-advisory
agreements relating to their Fund: (a) a sub-advisory agreement between Scudder
Kemper and ZIML, to be dated as of the date of the consummation of the
Scudder-Zurich Transaction, (the "First Sub-Advisory Agreement") to replace the
Fund's current sub-advisory agreement upon its termination as a result of the
Scudder-Zurich Transaction, and (b) a sub-advisory agreement between Scudder
Kemper and the successor to ZIML resulting from the Transfer (which is SIL), to
be dated as of the date of the Transfer, to replace the Fund's First Sub-
    
 
                                       15
   23
 
   
Advisory Agreement upon its termination as a result of the Transfer. The
Transfer occurred on May 21, 1998. The sub-advisory agreements between SIL and
Scudder Kemper applicable to each of KEUF, KGIF, KIF and KWF4 that were in
effect immediately prior to the Transaction (the "Former SIL Sub-Advisory
Agreements") were dated May 21, 1998.
    
 
   
     Each of KDFSF and KDHRF uses the investment management services of Dreman
Value Management, L.L.C. ("DVM"), pursuant to the sub-advisory agreements
between Scudder Kemper and DVM described below. DVM was formed in April 1997 and
is controlled by David N. Dreman. Prior to the consummation of the
Scudder-Zurich Transaction, DVM provided investment management services for
KDHRF pursuant to a sub-advisory agreement with Zurich Kemper Value Advisors,
Inc. ("ZKVA"), a former wholly-owned subsidiary of Kemper, which agreement
terminated upon the consummation of the Scudder-Zurich Transaction. Prior to
such termination, the Board of Kemper Value Series, Inc. and the shareholders of
KDHRF each approved a sub-advisory agreement between Scudder Kemper and DVM (a
"Former DVM Sub-Advisory Agreement"), which became effective on December 31,
1997. DVM commenced providing sub-advisory services for KDFSF when the Fund
commenced operations, which occurred after the consummation of the
Scudder-Zurich Transaction, pursuant to a sub-advisory agreement between Scudder
Kemper and DVM, approved by the Board of Kemper Equity Trust on January 21, 1998
and dated March 2, 1998 (also a "Former DVM Sub-Advisory Agreement").
    
 
   
     Each Former SIL Sub-Advisory Agreement and each Former DVM Sub-Advisory
Agreement provides that such agreement shall automatically terminate in the
event of the termination (due to assignment or otherwise) of the Fund's
currently effective investment management agreement. As discussed in Proposal 1,
consummation of the Transaction may be deemed to have constituted an
"assignment," as that term is defined in the 1940 Act, of each Fund's Former
Investment Management Agreement and may therefore have caused a termination of
each Former SIL Sub-Advisory Agreement and each Former DVM Sub-Advisory
Agreement. (See Proposal 1 for more information regarding each Former Investment
Management Agreement.) Accordingly, new sub-advisory agreements between SIL and
Scudder Kemper, with respect to each of KEUF, KGIF, KIF and KWF4, (each a "New
SIL Sub-Advisory Agreement" and, together with the Former SIL Sub-Advisory
Agreements, the "SIL Sub-Advisory Agreements") and between DVM and Scudder
Kemper, with respect to each of KDFSF and KDHRF, (each a "New DVM Sub-Advisory
Agreement" and, together with the Former DVM Sub-Advisory Agreements, the "DVM
Sub-Advisory Agreements") were approved by the Board members of each applicable
Trust/Corporation and are now being proposed for approval by shareholders of
each of KEUF, KGIF, KIF, KWF4, KDFSF and KDHRF, respectively.
    
 
     As with the New Investment Management Agreements, prior to approval by
shareholders of each applicable New SIL Sub-Advisory Agreement or New DVM
Sub-Advisory Agreement, any payments otherwise due under such sub-advisory
agreements will be held in escrow subject to shareholder approval.
 
     EACH NEW SIL SUB-ADVISORY AGREEMENT AND NEW DVM SUB-ADVISORY AGREEMENT IS
SUBSTANTIALLY IDENTICAL TO ITS CORRESPONDING FORMER AGREEMENT, EXCEPT FOR THE
DATES OF EXECUTION AND, IN THE CASE OF THE SIL SUB-ADVISORY AGREEMENTS,
TERMINATION. The material terms of each SIL Sub-Advisory Agreement and DVM
Sub-Advisory Agreement are fully described under "The SIL Sub-Advisory
Agreements" and "The DVM Sub-Advisory Agreements," respectively, below. A form
of New SIL Sub-Advisory Agreement is attached hereto as Exhibit C. A form of New
DVM Sub-Advisory Agreement is attached hereto as Exhibit D.
 
     The Board of each applicable Trust/Corporation met on either July 17, 1998
or July 21, 1998 and each Board, including a majority of its Non-Interested
Trustees/Directors, voted to approve the corresponding New SIL Sub-Advisory
Agreement or New DVM Sub-Advisory Agreement. In considering whether to approve
such agreements, each Board considered similar factors to those it considered in
approving the applicable Fund's New Investment Management Agreement, to the
extent applicable. (See Proposal 1 for more information regarding each Board's
Evaluation.)
 
                                       16
   24
 
DESCRIPTION OF THE SIL SUB-ADVISORY AGREEMENTS
 
   
     Under the terms of each SIL Sub-Advisory Agreement, SIL renders investment
advisory and management services with regard to that portion of the Fund's
portfolio as may be allocated to SIL by Scudder Kemper from time to time for
management of foreign securities, including foreign currency transactions and
related investments. For its services, SIL receives from Scudder Kemper (not
from the Funds) a monthly fee at the annual rate of .35%, in the case of KIF,
KEUF and KWF4, and .30%, in the case of KGIF, on the portion of the average
daily net assets allocated by Scudder Kemper to SIL for management. Scudder
Kemper (or its predecessor) paid to SIL (or its predecessor) during the fiscal
year ended July 31, 1998 for KWF4, October 31, 1997 for KIF, November 30, 1997
for KEUF and December 31, 1997 for KGIF, $95,000, $1,959,000, $43,000 and
$345,000, respectively, for its sub-advisory services to each Fund.
    
 
     Each SIL Sub-Advisory Agreement provides that SIL will not be liable for
any error of judgment or mistake of law or for any loss suffered by any Fund in
connection with matters to which the SIL Sub-Advisory Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of SIL in the performance of its duties or from reckless disregard by SIL
of its obligations and duties under the SIL Sub-Advisory Agreement.
 
     Each SIL Sub-Advisory Agreement continues in effect from year to year so
long as its continuation is approved at least annually (a) by a majority of the
Board members who are not parties to such agreement or interested persons of any
such party except in their capacity as Board members of the applicable Trust and
(b) by the shareholders of the applicable Fund or the applicable Board. Each SIL
Sub-Advisory Agreement may be terminated at any time for a Fund upon 60 days'
notice by Scudder Kemper, SIL or the applicable Board or by a majority vote of
the outstanding voting securities of the applicable Fund, and will terminate
automatically upon assignment or upon the termination of the Fund's investment
management agreement.
 
   
SIL
    
 
   
     Scudder Investments (U.K.) Limited is located at 1 South Place, London EC2M
2ZS England. The names, addresses and principal occupations of the directors of
SIL are as follows:
    
 
   
                                        
Edmond D. Villani                          Director, SIL, and Chief Executive
345 Park Avenue                            Officer of Scudder Kemper
New York, NY 10154
Stephen R. Beckwith                        Director, SIL, and Chief Financial
345 Park Avenue                            Officer of Scudder Kemper
New York, NY 10154
Kathryn L. Quirk                           Director, SIL, and General Counsel,
345 Park Avenue                            Secretary and Chief Compliance Officer of
New York, NY 10154                         Scudder Kemper
Lynn S. Birdsong                           Director, SIL, and Managing Director of
345 Park Avenue                            Scudder Kemper
New York, NY 10154
Dennis H. Ferro                            Director, SIL, and Managing Director,
1 South Place                              Equities
London, UK EC2M 2ZS
Richard D. W. Haas, Director               Director, SIL, and Head of Finance
1 South Place
London, UK EC2M 2ZS
Joon Yew Tan                               Director, SIL, Company Secretary and Head
1 South Place                              of Compliance
London, UK ECZM 225


    
 
   
     In addition to acting as sub-adviser for KEUF, KGIF, KIF and KWF4, SIL also
provides sub-advisory services to Kemper Global Income Portfolio and Kemper
International Portfolio (each a "Portfolio"),
    
 
                                       17
   25
 
   
each a series of Investors Fund Series, and receives from Scudder Kemper for
such services a monthly fee at the annual rate of .30% and .35%, respectively,
on the portion of the applicable Portfolio's average daily net assets allocated
by Scudder Kemper to SIL for management.
    
 
THE NEW SIL SUB-ADVISORY AGREEMENTS
 
   
     The New SIL Sub-Advisory Agreement for each of KEUF, KGIF, KIF and KWF4,
which is currently in effect, is dated the date of the consummation of the
Transaction, which occurred on September 7, 1998. Each New SIL Sub-Advisory
Agreement was to be in effect for an initial term ending on April 1, 1999 for
each of KEUF and KWF4 and March 1, 1999 for each of KGIF and KIF, and to be
continued in effect from year to year thereafter, but only as long as such
continuance is specially approved at least annually by the vote of a "majority
of the outstanding voting securities" of the applicable Fund, or the applicable
Board, including, in either event, the vote of a majority of the applicable
Board's Trustees who are not parties to the agreement or interested persons of
any such party, cast in person at a meeting called for such a purpose. At
meetings held on September 18, 1998 and September 22, 1998, the Board of each
applicable Fund, including a majority of the Non-Interested Trustees, approved
the continuance of each New SIL Sub-Advisory Agreement through September 30,
1999. In the event that shareholders of KEUF, KGIF, KIF or KWF4 do not approve
such Fund's New SIL Sub-Advisory Agreement, it will terminate. In such event,
each applicable Board will take such action as it deems to be in the best
interests of the Fund and its shareholders.
    
 
DIFFERENCES BETWEEN THE FORMER AND NEW SIL SUB-ADVISORY AGREEMENTS
 
   
     The New SIL Sub-Advisory Agreements are substantially identical to the
Former SIL Sub-Advisory Agreements, except for the dates of execution and
termination.
    
 
DESCRIPTION OF DVM SUB-ADVISORY AGREEMENTS
 
   
     Each DVM Sub-Advisory Agreement provides that DVM shall manage the
investment and reinvestment of the applicable Fund's assets in accordance with
the investment objectives, policies and limitations and subject to the
supervision of Scudder Kemper and the applicable Board. In connection therewith,
each DVM Sub-Advisory Agreement provides that DVM will furnish related office
facilities and equipment and clerical, bookkeeping and administrative services
for the applicable Fund. Under each DVM Sub-Advisory Agreement, DVM agrees to
assume and pay all costs and expenses of performing its obligations under the
agreement, and Scudder Kemper agrees to pay to DVM a monthly fee at the annual
rates described in the form of New DVM Sub-Advisory Agreement attached hereto as
Exhibit D applied to the average daily net assets of the applicable Fund.
Scudder Kemper (or its predecessor or its predecessor's affiliate) paid to DVM
during the fiscal year ended November 30, 1997 $2,557,487 for the sub-advisory
services it provided to KDHRF during that period. KDFSF did not commence
operations until March 9, 1998.
    
 
     In addition, Scudder Kemper has guaranteed minimum payments to DVM during
certain calendar years, also as described in the form of New DVM Sub-Advisory
Agreement attached hereto as Exhibit D.
 
     Each DVM Sub-Advisory Agreement may be terminated at any time without the
payment by the applicable Fund of any penalty, by the applicable Board or by
vote of a majority of the outstanding voting securities of the applicable Fund,
or by Scudder Kemper, in each case upon sixty (60) days' written notice; and it
automatically terminates in the event of its assignment or in the event of the
termination of the applicable Fund's investment management agreement. Scudder
Kemper also has the right to terminate each DVM Sub-Advisory Agreement upon
immediate notice if DVM becomes statutorily disqualified from performing its
duties under the DVM Sub-Advisory Agreement or otherwise is legally prohibited
from operating as an investment adviser. DVM may not terminate any DVM
Sub-Advisory Agreement prior to the third anniversary of the date of the
Agreement, with
 
                                       18
   26
 
   
respect to KDFSF, or July 30, 2000, with respect to KDHRF, and thereafter
termination requires ninety (90) days' written notice.
    
 
     Each DVM Sub-Advisory Agreement provides that DVM shall not be liable for
any error of judgment or of law or for any loss suffered by Kemper Equity Trust
or Kemper Value Series, Inc., as applicable, or the applicable Fund in
connection with the matters to which the DVM Sub-Advisory Agreement relates,
except loss resulting from willful misfeasance, bad faith or gross negligence on
the part of DVM in the performance of its obligations and duties under the DVM
Sub-Advisory Agreement.
 
   
DVM
    
 
   
     Dreman Value Management, L.L.C., Ten Exchange Place, Suite 2101, Jersey
City, New Jersey, 07302, is controlled by David N. Dreman. Mr. Dreman owns 10%
of DVM's shares of beneficial interest but has 100% of the voting control.
Between 1% and 5% of the equity interest in DVM is held by certain other senior
executives listed below and the remaining 85% to 89% of the equity interest in
DVM is held by Cheryl Hershberg and Holly Dreman as trustees of an irrevocable
trust created under the laws of the State of New York, for the benefit of David
N. Dreman, Jr. and Meredith W. Dreman. The trust has no voting rights with
respect to directing or managing DVM other than the right to vote to dissolve
DVM or to amend its operating agreement. The names, addresses and principal
occupations of the principal executive officers of DVM are as follows:
    
 
   
                                        
David N. Dreman                            Chairman, DVM
Three Harding Road
Red Bank, NJ 07701
Joseph W. Sullivan                         Chief Executive Officer, DVM
7 Combes Drive
Manhasset, NY 11030
Nelson P. Woodard                          Managing Director, DVM
7 Navesink Court
Long Branch, NJ 07740
Theodore C. Dutcher                        Senior Vice President, DVM
9100 Vance Street
Westminster, CO 80022
Dorothy Silverman                          Senior Vice President, DVM
396 Brighton Avenue
Long Branch, NJ 07740
John R. Dorfman                            Senior Vice President, DVM
24 Burnside Road
Newton Highlands, MA 02161
Eric A. Lufkin                             Senior Vice President, DVM
19 Hill Road
Atlantic Highlands, NJ 07716
Kenneth Holz                               Vice President, DVM
1000 Central Avenue
Westfield, NJ 07090
Peter B. Seligman                          Vice President, DVM
9 Post Road
Rumson, NJ 07760
Joseph Geoghegan                           Vice President, DVM
173 Boyd Avenue
Jersey City, NJ 07304


    
 
                                       19
   27
 
   
     In addition to acting as sub-adviser for KDFSF and KDHRF, DVM also provides
sub-advisory services to Kemper-Dreman Financial Services Portfolio and
Kemper-Dreman High Return Equity Portfolio (each a "Portfolio"), each a series
of Investors Fund Series, and receives from Scudder Kemper for such services to
each Portfolio a monthly fee at an equivalent rate to that applicable to KDFSF
and KDHRF.
    
 
THE NEW DVM SUB-ADVISORY AGREEMENTS
 
   
     The New DVM Sub-Advisory Agreement for each of KDFSF and KDHRF, which is
currently in effect, is dated the date of the consummation of the Transaction,
which occurred on September 7, 1998. The New DVM Sub-Advisory Agreement
applicable to KDFSF will be in effect until February 1, 2003 and the New DVM
Sub-Advisory Agreement applicable to KDHRF will be in effect until December 31,
2002, in each case unless sooner terminated or not annually approved as
described below. Notwithstanding the foregoing, each New DVM Sub-Advisory
Agreement shall continue in effect through February 1, 2003, with respect to
KDFSF, and December 31, 2002, with respect to KDHRF, and year to year
thereafter, but only as long as such continuance is specifically approved at
least annually and in the manner required by the 1940 Act and the rules and
regulations thereunder with the first annual renewal to be coincident with the
next renewal of the applicable Fund's investment management agreement. Each new
DVM Sub-Advisory Agreement was last continued until September 30, 1999 by the
applicable Board on September 22, 1998. In the event that shareholders of either
of KDFSF or KDHRF do not approve such Fund's New DVM Sub-Advisory Agreement, it
will terminate. In such event, each applicable Board will take such action as it
deems to be in the best interests of the Fund and its shareholders.
    
 
DIFFERENCES BETWEEN THE FORMER AND NEW DVM SUB-ADVISORY AGREEMENTS
 
   
     The New DVM Sub-Advisory Agreements are substantially identical to the
Former DVM Sub-Advisory Agreements, except for the dates of execution.
    
 
     THE BOARD MEMBERS OF EACH APPLICABLE TRUST/CORPORATION RECOMMEND THAT
   THE SHAREHOLDERS OF EACH APPLICABLE FUND VOTE IN FAVOR OF THIS PROPOSAL 2.
 
           PROPOSAL 3: APPROVAL OF THE MODIFICATION OR ELIMINATION OF
            CERTAIN POLICIES AND THE ELIMINATION OF THE SHAREHOLDER
                APPROVAL REQUIREMENT AS TO CERTAIN OTHER MATTERS
 
     The 1940 Act requires an investment company to adopt policies governing
certain specified activities, which can be changed only by a shareholder vote.
Policies that cannot be changed or eliminated without a shareholder vote are
referred to in this Proxy Statement as "fundamental" policies. The purposes of
this Proposal are to eliminate the requirement of shareholder approval to change
policies except where required by the 1940 Act and to provide the maximum
permitted flexibility in those policies that do require shareholder approval.
Management has advised the Boards that some of the Funds' fundamental policies
that are not required to be such under the 1940 Act were adopted in the past as
a result of now rescinded regulatory requirements and no longer serve any useful
purpose. Management believes that other fundamental policies, as well as the
classification of each Fund's investment objective(s) as fundamental, are
unnecessary because the provisions of the 1940 Act or federal tax law, together
with the disclosure requirements of the federal securities laws, provide
adequate safeguards for a Fund and its shareholders. The Proposal is described
in more detail below.
 
     This Proposal is sub-divided into the following three sections:
 
     (1) Elimination of Shareholder Approval Requirement to Amend Investment
Objectives and Investment Policies.  Certain of the Funds listed below currently
require shareholder approval to amend "investment objectives and policies." The
first section of this Proposal seeks shareholder
                                       20
   28
 
approval of the elimination of the shareholder approval requirement for amending
(a) "investment objectives," and (b) "investment policies" which are not
otherwise specifically identified as fundamental. Eliminating the shareholder
approval requirement for amending the investment objective (or objectives) of a
Fund is intended to enhance the Fund's investment flexibility in the event of
changing circumstances. Additionally, management believes that currently it is
not possible to determine precisely which policies are fundamental on the basis
of the language in the Funds' Prospectuses and Statements of Additional
Information, thus creating uncertainty and restricting the Funds' investment
flexibility and their ability to respond to changing regulatory and industry
conditions.
 
     (2) Revision of Fundamental Policies Mandated by the 1940 Act.  Each of the
fundamental policies proposed for revision relates to an activity that the 1940
Act requires be governed by a fundamental policy. Each proposed revision is, in
general, intended to provide the Funds' Boards with the maximum flexibility
permitted under the 1940 Act, and to promote simplicity among the Funds'
policies.
 
     (3) Elimination of Shareholder Approval Requirement to Change Other
Fundamental Policies. This Proposal seeks to eliminate certain policies that are
specifically designated as fundamental but which are not required to be
fundamental under the 1940 Act. The Boards of the Funds anticipate adopting
certain of these policies as non-fundamental. Any policy that is not designated
as fundamental can be modified or eliminated by the Board, and, as indicated
below, management intends to recommend to the Boards the elimination of several
of them as being inappropriate or unnecessary under current conditions.
 
     Each proposed policy is identified in bold-type below together with a list
of Funds whose shareholders' vote is required.
 
   
     Each Fund's current fundamental policies are set forth in Exhibit E.
Changes in fundamental policies that are approved by shareholders, as well as
changes in non-fundamental policies that are adopted by a Board, will be
reflected in each Fund's Prospectus and other disclosure documents. Any change
in the method of operation of a Fund will require prior Board approval. Except
as specifically indicated below, the Board of each Fund does not presently
intend to change the investment objective(s) or the investment policies of that
Fund.
    
 
   
     Approval of each item of this Proposal with respect to any Fund requires
the affirmative vote of a majority of the outstanding voting securities, as
defined above, of that Fund. If the shareholders of any Fund fail to approve the
proposed modification or elimination of polices or the elimination of the
shareholder approval requirement as to a matter, the current policy or approval
requirement will remain in effect.
    
 
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO AMEND INVESTMENT OBJECTIVES
AND INVESTMENT POLICIES
 
Investment Objectives
 
PROPOSAL 3.0:  IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THE
INVESTMENT OBJECTIVE(S) OF THAT FUND WILL NOT BE CLASSIFIED AS FUNDAMENTAL.
 
This proposal applies to all Funds (except for KUSGIF, KSCRVF, KCF, KDHRF and
KSCVF, which currently do not classify investment objectives as fundamental).
 
     Management believes that leaving the power to modify investment objectives
up to the discretion of the Board would strengthen each Fund's ability to
respond to changing circumstances. The Board of each Fund does not presently
intend to modify any investment objective, and would disclose any changes to
applicable shareholders by amending the particular Fund's Prospectus and
Statement of Additional Information.
 
                                       21
   29
 
Investment Policies
 
PROPOSAL 3.1:  IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THE
"INVESTMENT POLICIES" OF THAT FUND WILL NOT BE CLASSIFIED AS FUNDAMENTAL EXCEPT
AS OTHERWISE PROVIDED IN THIS PROXY STATEMENT.
 
This proposal applies to:
 
KAGF
KCRF
KFLTF
KGSF
KICPF
KMBF
KNYTF
KRF I
KRF IV
KRF VII
KTRF
KVGF
KAGGF
KDIF
KGF
KHYF
KIF
   
KOHTF
    
KRF II
KRF V
KSCF
   
KWF4
    
   
KBCF
    
KCATF
KEUF
KGIF
KHYOF
KIMBF
   
KRF III
    
KRF VI
KTEC
KUSMF
 
     This proposal is intended to provide the Funds with clarity of disclosure
and the investment flexibility necessary to respond to changing circumstances by
eliminating the shareholder approval requirement for amending "investment
policies" which are not specifically identified as fundamental. The Funds'
Prospectuses currently contain a statement that characterizes the "investment
policies" of a Fund as fundamental. Management believes that this current
statement is overbroad and, therefore, creates difficulty for portfolio managers
in operating a Fund and for current or potential shareholders of a Fund in
determining which policies of the Fund are fundamental. The current statement
also unnecessarily restricts a Fund's flexibility and may make it more difficult
to respond to changing conditions. Management believes that removing the
fundamental characterization of all policies not otherwise specifically
identified as fundamental is consistent with industry standards and would allow
the Board of a Fund to modify its investment policies in light of changes in the
investment management industry, market conditions and the regulatory
environment, but only consistent with applicable law, the Fund's investment
objective and its clearly-identified fundamental policies.
 
REVISION OF FUNDAMENTAL POLICIES MANDATED BY THE 1940 ACT
 
Diversification
 
PROPOSAL 3.2(a): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND,
THAT FUND WILL REMAIN A "DIVERSIFIED" FUND UNDER THE 1940 ACT, BUT WILL NOT BE
SUBJECT TO ADDITIONAL REQUIREMENTS THAT ARE MORE RESTRICTIVE THAN THE 1940 ACT.
 
This proposal applies to:
 
KAGF
KDIF
KGF
KH10P
KHYOF
KIGIF
KRF I
KRF IV
KRF VII
KTEC
KUSMF
KDHRF
   
KBCF
    
KCRF
KEUF
KGSF
KH5P
KICPF
KIMBF
KRF II
KRF V
KSCF
KTRF
KVGF
KSCVF
KDFSF
KGBCF
KH20P
KHYF
KIF
KMBF
KRF III
KRF VI
KSCRVF
KUSGIF
KCF
KWF4
 
                                       22
   30
 
   
     Each Fund is currently classified as a diversified open-end investment
company, or as a diversified series of an open-end investment company. Under the
1940 Act, a "diversified" Fund may not, with respect to 75% of the value of its
total assets, invest more than 5% of the value of its total assets in securities
issued by any one issuer or purchase more than 10% of the outstanding voting
securities of any one issuer, except in each case in U.S. Government securities
or securities issued by other investment companies. Currently, each Fund also
has adopted additional diversification policies. Each of KEUF, KAGF and KSCRVF,
with respect to 75% of the value of its total assets, may not invest more than
5% of the value of its total assets in the securities of any one issuer, and
with respect to 100% of the value of its total assets, may not purchase more
than 10% of the securities of any one issuer. Each of KCF, KDHRF, KSCVF, KDIF,
KHYF and KHYOF, with respect to 75% of the value of its total assets, may not
purchase more than 10% of the securities of any one issuer or invest more than
5% of the value of its total assets in the securities of any one issuer. Each of
the Funds' policies includes an exception for U.S. Government securities and the
policy for each of KAGF, KBCF, KGF, KGSF, KHYOF, KIMBF, KMBF, KSCF, KTEC, KTRF
and KVGF also includes an exception for investments in a master fund within a
master/feeder fund structure.
    
 
   
     Under their current diversification policies, KBCF, KCRF, KGF, KGSF, KH20P,
KH10P, KH5P, KICPF, KIF, KIMBF, KMBF, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF
VI, KRF VII, KSCF, KTEC, KTRF, KUSMF, KVGF and KWF4, each may not invest more
than 5% of its total assets in the securities of any one issuer. Except for
KIMBF, KMBF and KGSF, each of these Funds' policies also contains a separate
restriction prohibiting the purchase of more than 10% of the securities of any
one issuer.
    
 
     Accordingly, the elimination of the additional diversification policies for
a Fund means that the Fund must comply with only the 1940 Act diversification
requirements. As a result, the elimination of the additional diversification
policies that apply to 75% of the value of a Fund's total assets will not
represent a substantive change to that Fund's diversification requirements.
However, the elimination of the additional diversification policies that apply
to 100% of the value of a Fund's total assets will cause that Fund to have less
restrictive diversification requirements.
 
   
PROPOSAL 3.2(b): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND,
THAT FUND WILL REMAIN A "NON-DIVERSIFIED" FUND UNDER THE 1940 ACT BUT WILL
ELIMINATE AS FUNDAMENTAL THE CURRENT DIVERSIFICATION POLICIES.
    
 
This proposal applies to:
 
KAGGF
KGIF
KNYTF
   
KCATF
    
   
KOHTF
    
   
KFLTF
    
   
    
 
     Each Fund has elected to be classified as a non-diversified open-end
investment company, or as a non-diversified series of an open-end investment
company. Consequently, the Funds have no diversification requirements under the
1940 Act. However, the Funds currently have diversification policies that
restrict each Fund, with respect to 50% of the value of its total assets, from
investing more than 5% of the value of its total assets in the securities of any
one issuer, and with respect to the other 50% of its total assets, from
investing more than 25% of the value of its total assets in the securities of
any one issuer. These diversification policies reflect the requirements of the
Internal Revenue Code of 1986, as amended, for a fund to qualify for the
favorable tax status as a "regulated investment company." Whether or not this
proposal is approved by shareholders, all Funds intend to continue to meet these
requirements.
 
Borrowing
 
   
     PROPOSAL 3.3: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND,
THAT FUND MAY NOT BORROW MONEY, EXCEPT AS PERMITTED UNDER THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY
HAVING JURISDICTION, FROM TIME TO TIME.
    
 
                                       23
   31
 
     This proposal applies to all Funds (except for KEMGF, KEMIF, KGBCF, KIGIF,
KLAF, KDFSF and KUSGIF, which currently have the proposed fundamental policy set
forth immediately above).
 
   
     The current policy of each Fund prohibits borrowing money, except as a
temporary measure for extraordinary or emergency purposes, in which case KAGF,
KAGGF, KBCF, KCRF, KEUF, KFLTF, KGIF, KH20P, KH10P, KH5P, KHYOF, KNYTF, KOHTF,
KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI, KRF VII, KSCRVF, KUSMF, KHYOF and
KWF4, may each borrow up to one-third of the value of its total assets; KCF,
KDHRF, KSCVF and KCATF may borrow up to 10% of the value of its total assets;
and KDIF, KGF, KGSF, KHYF, KICPF, KIF, KIMBF, KMBF, KTEC, KSCF, KTRF, and KVGF
may each borrow up to 5% of the value of its total assets. Additionally, KAGF,
KAGGF, KBCF, KCRF, KEUF, KGIF, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI,
KRF VII, KUSMF and KWF4 are restricted from borrowing for leverage or from
making investments while borrowings are outstanding. Each of KH20P, KH10P and
KH5P may not make investments while borrowings are in excess of 5% of its total
assets. KHYOF may borrow for leverage but not in excess of 20% of its total
assets including the amount borrowed.
    
 
     The proposed policy would permit each Fund to engage in borrowing in a
manner and to the full extent permitted by applicable law. The 1940 Act requires
borrowings to have 300% asset coverage, which means, in effect, that a Fund
would be permitted to borrow up to an amount equal to 50% of its total assets
under the proposed borrowing policy. Additionally, under the proposed policy,
each Fund would not be limited to borrowing for temporary or emergency purposes,
could borrow for leverage, and could purchase securities for investment while
borrowings are outstanding. However, the Boards have no current intention of
authorizing any of these practices. If a Board authorized a Fund to borrow for
leverage, such borrowings would increase the Fund's volatility and the risk of
loss in a declining market.
 
Senior Securities
 
   
PROPOSAL 3.4: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT ISSUE SENIOR SECURITIES, EXCEPT AS PERMITTED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY
AUTHORITY HAVING JURISDICTION, FROM TIME TO TIME.
    
 
This proposal applies to all Funds (except for KDFSF and the KGIS Funds, which
currently have the proposed fundamental policy set forth immediately above).
 
     The current policy of each Fund prohibits the issuance of senior securities
(i.e., securities which are obligations or instruments evidencing indebtedness)
except as permitted under the 1940 Act. The proposed policy re-words the current
policy without making any material changes.
 
Concentration
 
   
PROPOSAL 3.5(a): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND,
THAT FUND MAY NOT CONCENTRATE ITS INVESTMENTS IN A PARTICULAR INDUSTRY, AS THAT
TERM IS USED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND AS
INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY HAVING JURISDICTION, FROM TIME
TO TIME.
    
 
This proposal applies to all Funds (except for KDFSF and the KGIS Funds, which
currently have the proposed fundamental policy set forth immediately above, and
except for KCRF; see Proposal 3.5(b) below).
 
     While the 1940 Act does not define what constitutes "concentration" in an
industry, the staff of the Commission takes the position that investment of more
than 25% of a fund's assets in an industry constitutes concentration. If a fund
concentrates in an industry, it must at all times have more than 25% of its
assets invested in that industry, and if its policy is not to concentrate, as is
the case with each of the Funds, it may not invest more than 25% of its assets
in the applicable industry, unless, in either case, the fund discloses the
specific conditions under which it will change from concentrating to not
concentrating or vice versa.
                                       24
   32
 
     Each Fund's current policy in effect prohibits the purchase of securities
if it would result in more than 25% of the Fund's total assets being invested in
the same industry. For each of the Funds, there are exceptions for U.S.
Government securities, state securities, and/or for investment in a master fund
within a master/feeder fund structure. In some cases, what constitutes an
industry for the purposes of this restriction is included in the policy itself.
A fund is permitted to adopt reasonable definitions of what constitutes an
industry, or it may use standard classifications recognized by the Commission,
or some combination thereof. Because a fund may create its own reasonable
industry classifications, management believes that it is not necessary to
include such matters in the fundamental policy of a Fund.
 
   
PROPOSAL 3.5(b): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF THE FUND,
THE FUND WILL NOT CONCENTRATE ITS INVESTMENTS IN A PARTICULAR INDUSTRY, AS THAT
TERM IS USED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND AS
INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY HAVING JURISDICTION, FROM TIME
TO TIME, EXCEPT THAT THE FUND INTENDS TO INVEST MORE THAN 25% OF ITS NET ASSETS
IN INSTRUMENTS ISSUED BY BANKS.
    
 
This proposal applies to KCRF.
 
     The Fund currently concentrates more than 25% of its net assets in
instruments issued by banks. The proposed concentration policy has been
re-worded without making any material changes.
 
Underwriting of Securities
- -----------------------------
 
   
PROPOSAL 3.6: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT ENGAGE IN THE BUSINESS OF UNDERWRITING SECURITIES ISSUED BY OTHERS,
EXCEPT TO THE EXTENT THAT A FUND MAY BE DEEMED TO BE AN UNDERWRITER IN
CONNECTION WITH THE DISPOSITION OF PORTFOLIO SECURITIES.
    
 
   
This proposal applies to all Funds (except for KDFSF and the KGIS Funds, which
currently have the proposed fundamental policy set forth above).
    
 
     The proposed underwriting policy has been re-worded without making any
material changes.
 
Investment In Real Estate
- ----------------------------
 
   
PROPOSAL 3.7: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT PURCHASE OR SELL REAL ESTATE, WHICH TERM DOES NOT INCLUDE
SECURITIES OF COMPANIES WHICH DEAL IN REAL ESTATE OR MORTGAGES OR INVESTMENTS
SECURED BY REAL ESTATE OR INTERESTS THEREIN, EXCEPT THAT THE FUND RESERVES
FREEDOM OF ACTION TO HOLD AND TO SELL REAL ESTATE ACQUIRED AS A RESULT OF THE
FUND'S OWNERSHIP OF SECURITIES.
    
 
   
This proposal applies to all Funds (except for KDFSF and the KGIS Funds, which
currently have the proposed fundamental policy set forth above).
    
 
   
     The proposed real estate policy re-words the current policies without
making any material changes. The policies of KBCF, KGIF, KGSF, KH20P, KH10P,
KH5P, KRF I, KRF II, KRF III, KRF IV, KRF V, KRF VI, KRF VII and KWF4 currently
also prohibit investment in real estate limited partnerships. Additionally, the
policies of KSCRVF, KCF, KDHRF and KSCVF currently prohibit investment in
mortgage loans. Management intends to recommend to the Boards of the Funds the
adoption of each of the foregoing policies as non-fundamental policies.
    
 
Purchase of Commodities
- -----------------------------
 
   
PROPOSAL 3.8:  IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT PURCHASE PHYSICAL COMMODITIES OR CONTRACTS RELATING TO PHYSICAL
COMMODITIES.
    
 
   
This proposal applies to all Funds (except KDFSF, the KGIS Funds and KUSGIF,
which currently have the proposed fundamental policy set forth immediately
above).
    
 
                                       25
   33
 
     The Funds' current policies prohibit the purchase or sale of commodities or
commodity contracts. These policies may contain exceptions for financial futures
contracts and options on such contracts, foreign currency transactions, and, in
the case of KCF, KDHRF and KSCVF, investments in oil, gas or mineral exploration
or development programs. Under the proposed policy, each Fund would be
prohibited from purchasing only physical commodities or contracts relating to
physical commodities.
 
Lending
 
   
PROPOSAL 3.9:  IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT MAKE LOANS EXCEPT AS PERMITTED UNDER THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY HAVING
JURISDICTION, FROM TIME TO TIME.
    
 
This proposal applies to all Funds.
 
     Each Fund's current lending policy prohibits making loans to others. There
may be no exceptions to this restriction, as is the case with KCATF, or there
may be exceptions for loans of portfolio securities and to the extent the entry
into repurchase agreements, the purchase of debt securities or interests in
indebtedness and/or the making of time or demand deposits with banks in
accordance with the Fund's investment objectives and policies are deemed to be
loans. The proposed policy, unlike the current policy, does not specify the
particular types of lending in which each Fund is permitted to engage; instead,
the proposed policy permits each Fund to lend in a manner and to an extent
permitted by applicable law. The proposed change would, therefore, permit each
Fund, subject to the receipt of any necessary regulatory approval and Board
authorization, to enter into lending arrangements, including lending agreements
under which the Funds advised by Scudder Kemper could for temporary purposes
lend money directly to and borrow money directly from each other through a
credit facility. Each of the Funds believes that the flexibility provided by
this policy change could possibly reduce the Fund's borrowing costs and enhance
its ability to earn higher rates of interest on short-term lendings in the event
that the Board determines that such arrangements are warranted in light of the
Fund's particular circumstances.
 
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO CHANGE OTHER
   
FUNDAMENTAL POLICIES
    
 
   
     Certain of the policies listed below (Margin Purchases and Short Sales,
Purchase of Securities of Related Issuers, Pledging of Assets, Restricted and
Illiquid Securities, Purchases of Securities, Investment in Issuers with Short
Histories and Investment in Investment Companies) were initially adopted by the
Funds due to state securities regulatory policies that are no longer in effect.
Others reflected industry conditions at the time. Management believes that each
of these policies should be eliminated as a fundamental policy in the interest
of simplicity and flexibility. Except as otherwise stated, if shareholders
approve the elimination of these policies as fundamental, management will
recommend to the Boards that they eliminate these policies entirely as being
unnecessary.
    
 
                                       26
   34
 
Margin Purchases and Short Sales
 
PROPOSAL 3.10: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON MARGIN PURCHASES AND SHORT
SALES.
 
This proposal applies to:
 
KAGF
KCRF
KFLTF
KH20P
KHYF
   
KIF
    
   
    
KOHTF
KRF II
KRF V
KSCF
KTRF
KVGF
KSCVF
KAGGF
KDIF
KGF
KH10P
KHYOF
   
KIMBF
    
   
    
KRF III
KRF VI
   
KSCRVF
    
   
    
KCF
KWF4
   
KBCF
    
KCATF
KEUF
KGIF
KH5P
KICPF
KMBF
KNYTF
KRF I
KRF IV
KRF VII
KTEC
KUSMF
   
KDHRF
    
   
    
 
Each Fund is currently either prohibited from (1) making purchases on margin
and/or making short sales, unless the Fund has the right to obtain securities
equivalent in kind and amount to those sold and unless not more than 10% of the
Fund's total assets is held as collateral for such sales at any one time, or (2)
making margin purchases and short sales, except to obtain short-term credits
necessary for clearance of transactions, and in the case of margin deposits, in
connection with financial futures and options transactions. If elimination of
this restriction is approved by shareholders, each Fund's potential use of
margin transactions beyond transactions in futures and options and for the
clearance of purchases and sales of securities, including the use of margin in
ordinary securities transactions, would be generally limited by the current
position taken by the staff of the SEC that margin transactions with respect to
securities are prohibited under Section 18 of the 1940 Act because they create
senior securities. "Margin transactions" involve the purchase of securities with
money borrowed from a broker, with cash or eligible securities being used as
collateral against the loan. Each Fund's ability to engage in margin
transactions is also limited by its borrowing policies, which permit a Fund to
borrow money only as permitted by applicable law.
 
Purchase of Securities of Related Issuers
 
PROPOSAL 3.11: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PURCHASE OF SECURITIES OF
RELATED ISSUERS.
 
This proposal applies to:
 
KCRF
KRF III
KRF VI
KRF I
KRF IV
KUSMF
KRF II
KRF V
 
   
     The current policy of each Fund prohibits the purchase of securities of
issuers any of whose officers, directors, trustees or security holders is an
officer, trustee or director of the Fund or an officer, director, trustee or
security holder of Scudder Kemper if one or more of such individuals owns more
than 1/2 of one percent of the shares or securities of such issuer or own
collectively more than 5% of the shares or securities of such issuer.
Transactions between each Fund and an affiliated person of the Fund are
currently regulated under the 1940 Act.
    
 
                                       27
   35
 
Pledging of Assets
- --------------------
 
PROPOSAL 3.12: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PLEDGING OF ASSETS.
 
This proposal applies to:
 
KAGF
KDIF
KGF
KH20P
KHYF
   
KIMBF
    
   
    
KRF III
KRF VI
   
KSCRVF
    
   
    
KDHRF
KAGGF
KEUF
KGIF
KH10P
KICPF
KMBF
KNYTF
KRF I
KRF IV
KRF VII
KTEC
KVGF
KSCVF
   
KBCF
    
KCATF
KFLTF
KGSF
KH5P
   
KIF
    
   
    
KOHTF
KRF II
KRF V
KSCF
KTRF
KCF
KWF4
 
     Each Fund is currently prohibited from pledging, mortgaging or
hypothecating assets, except in order to secure borrowings, and in the case of
KCF, KDHRF, KSCVF and KSCRVF, in connection with options and futures contracts.
Funds may pledge securities having a market value not exceeding 7 1/2%, 10%, 15%
or up to the amount of the borrowing of the value of a Fund's assets and, in
certain cases, except in connection with writing covered call options and the
purchase or sale of futures contracts and options on futures contracts.
 
Restricted and Illiquid Securities
- ------------------------------------
 
PROPOSAL 3.13: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PURCHASE OF RESTRICTED AND
ILLIQUID SECURITIES.
 
This proposal applies to:
 
KCRF, KUSMF, KCF, KDHRF, KSCVF
 
     Each Fund is currently prohibited from entering into repurchase agreements
or purchasing securities if, as a result, more than 10% of the Fund's total
assets would be invested in illiquid securities, restricted securities or
repurchase agreements maturing in more than seven days. KCRF and KUSMF is each
also prohibited from investing more than 5% of its total assets in securities
restricted as to disposition under the federal securities laws, except for
commercial paper exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended. Under the 1940 Act and applicable interpretations of
the SEC, each Fund is currently prohibited from investing more than 15% of its
net assets in illiquid securities, including restricted securities which are
deemed to be illiquid.
 
                                       28
   36
 
Purchases of Securities
- -------------------------
 
PROPOSAL 3.14: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PURCHASE OF A SPECIFIED
PERCENTAGE OF AN ISSUER'S SECURITIES.
 
This proposal applies to:
 
KAGF
KEUF
KH20P
KICPF
KRF III
KRF VI
KTEC
KVGF
KAGGF
KGF
KH10P
KRF I
KRF IV
KRF VII
KTRF
KWF4
   
KBCF
    
KCRF
KGIF
KH5P
KRF II
KRF V
KSCF
KUSMF
 
     Each Fund is prohibited with respect to 100% of its assets from purchasing
more than 10% of the securities of a single issuer. Additionally, each Fund
(except for KAGGF and KGIF) is a "diversified" fund and is therefore limited to
purchasing, with respect to 75% of its assets, not more than 10% of the voting
securities of a single issuer.
 
Purchases of Options and Warrants
- ----------------------------------------
 
PROPOSAL 3.15: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON PURCHASES OF OPTIONS AND
WARRANTS.
 
This proposal applies to:
 
KAGF
KDIF
KGF
KHYF
   
KBCF
    
   
KIMBF
    
   
    
KRF III
KRF VI
KTRF
KVGF
KCATF
KEUF
KGIF
KICPF
KMBF
KNYTF
KRF I
KRF IV
   
KSCF
    
   
    
KWF4
KCRF
KFLTF
KGSF
   
KIF
    
   
    
KOHTF
KRF II
KRF V
KTEC
KUSMF
 
     The Funds are currently prohibited from or limited in writing, purchasing
or selling options. Some Funds are prohibited from writing, purchasing or
selling options on more than 25% of a Fund's net assets and are restricted from
investing more than 5% of the Fund's net assets on premiums on put and call
options. Some Funds' policies contain exceptions for purchases and sales of
options on financial contracts. Several Funds have absolute restrictions on such
transactions.
 
Investment for the Purpose of Exercising Control or Management
- --------------------------------------------------------------------------
 
PROPOSAL 3.16: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT FOR THE PURPOSE OF
EXERCISING CONTROL OR MANAGEMENT.
 
This proposal applies to:
 
KCRF
KRF III
KRF VI
KRF I
KRF IV
KUSMF
KRF II
KRF V
 
     The Funds are currently prohibited from investing for the purpose of
exercising control or management of another issuer. The Funds do not intend to
invest for this purpose.
 
                                       29
   37
 
Investment in Mineral Exploration
- --------------------------------------
 
PROPOSAL 3.17: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN MINERAL
EXPLORATION PROGRAMS.
 
This proposal applies to:
 
KCRF
KRF III
KRF VI
KDHRF
KRF I
KRF IV
KUSMF
KSCVF
KRF II
KRF V
KCF
 
     The Funds are currently prohibited from investing in oil, gas or other
mineral exploration or development programs, although they may invest in the
securities of issuers which invest in or sponsor such programs.
 
Investment in Issuers With Short Histories
- -----------------------------------------------
 
PROPOSAL 3.18: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN ISSUERS WITH SHORT
HISTORIES.
 
This proposal applies to:
                         KCRF                     KUSMF
 
     The Fund is currently prohibited from investing more than 5% of its total
assets in securities of issuers which, with their predecessors, have a record of
less than three years of continuous operation.
 
Investment in Non-U.S. Dollar Denominated Securities
- --------------------------------------------------------------
 
PROPOSAL 3.19: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN NON-U.S. DOLLAR
DENOMINATED SECURITIES.
 
This proposal applies to:
                                      KHYF
 
     The Fund is currently prohibited as a fundamental policy from investing
more than 25% of its assets in fixed income securities which are payable in
currencies other than U.S. dollars. Management intends to recommend to the Board
the adoption of this policy as non-fundamental.
 
Investment in other Investment Companies
- -------------------------------------------------
 
PROPOSAL 3.20: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN OTHER INVESTMENT
COMPANIES.
 
This proposal applies to:
                         KCRF                     KUSMF
 
     The Funds are currently prohibited from purchasing securities of other
investment companies, except in connection with a merger, consolidation,
reorganization or acquisition of assets. The 1940 Act limits a fund's ability to
invest in other investment companies.
 
Investment other than in Accordance with Objectives and Policies
- ---------------------------------------------------------------------------
 
PROPOSAL 3.21: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT OTHER THAN IN
ACCORDANCE WITH ITS OBJECTIVES AND POLICIES.
 
This proposal applies to:
 
KCATF
   
KICPF
    
   
    
KOHTF
KUSMF
KCRF
   
KIMBF
    
   
    
KFLTF
KMBF
   
KNYTF
    
   
    
 
                                       30
   38
 
     The Funds are currently prohibited from purchasing securities or from the
making of investments other than in accordance with their respective investment
objectives and policies. Management believes that this policy is not meaningful.
 
         THE BOARD MEMBERS OF EACH TRUST/CORPORATION RECOMMEND THAT THE
          SHAREHOLDERS OF EACH FUND VOTE IN FAVOR OF THIS PROPOSAL 3.
 
                                       31
   39
 
                             ADDITIONAL INFORMATION
 
GENERAL
 
   
     The cost of preparing, printing and mailing the enclosed proxy card and
Proxy Statement and all other costs incurred in connection with the solicitation
of proxies, including any additional solicitation made by letter, telephone or
telegraph, will be paid by Zurich or its affiliates. In addition to solicitation
by mail, certain officers and representatives of each Trust/Corporation,
officers and employees of Scudder Kemper and certain financial services firms
and their representatives, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegram or personally.
    
 
     Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
shareholders of each Fund may receive a telephone call from a representative of
SCC if their votes have not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from shareholders of each Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Trustees/Directors believe that these procedures are reasonably
designed to ensure that the identity of the shareholder casting the vote is
accurately determined and that the voting instructions of the shareholder are
accurately determined.
 
   
     In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the shareholder's instructions on
the Proposals. The SCC representative, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement. SCC will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
    
 
   
     If a shareholder wishes to participate in the Special Meeting, but does not
wish to give a proxy by telephone, the shareholder may still submit the proxy
card originally sent with the Proxy Statement or attend in person. Should
shareholders require additional information regarding the proxy or replacement
proxy cards, they may contact SCC toll-free at 1-800-248-2116. Any proxy given
by a shareholder, whether in writing or by telephone, is revocable until voted
at the Special Meeting.
    
 
PROPOSALS OF SHAREHOLDERS
 
     Shareholders wishing to submit proposals for inclusion in a proxy statement
for a shareholder meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of the Trust/Corporation, c/o Scudder
Kemper Investments, Inc., at the address for each Trust/Corporation shown at the
beginning of this Proxy Statement, within a reasonable time before the
solicitation of proxies for such meeting. The timely submission of a proposal
does not guarantee its inclusion.
 
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
 
   
     No Board member is aware of any matters that will be presented for action
at a Special Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other
    
 
                                       32
   40
 
matters in accordance with their best judgment in the interest of each
Trust/Corporation and/or Fund.
 
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
 
By order of the Boards of Trustees/Directors,
 
/s/ Philip J. Collora
Philip J. Collora
Secretary
 
                                       33
   41
 
                      (This page intentionally left blank)
   42
 
                                                                       EXHIBIT A
 
                                 MASTER FORM OF
 
                      NEW INVESTMENT MANAGEMENT AGREEMENT
 
         (Underscored items in brackets are applicable to Massachusetts
                             business trusts only.)
 
         (Items in brackets that are not underscored are applicable to
                          Maryland corporations only.)
 
   
     (BOLD ITEMS IN BRACKETS APPLY TO ALL FUNDS OTHER THAN KAGGF AND KSCF.)
    
 
   
     (BOLD AND UNDERSCORED ITEMS IN BRACKETS APPLY TO KAGGF AND KSCF ONLY.)
    
 
                      (Name of Trust)(Name of Corporation)
 
       222 SOUTH RIVERSIDE PLAZA/TWO INTERNATIONAL PLACE/345 PARK AVENUE
              CHICAGO, ILLINOIS 60606/BOSTON, MASSACHUSETTS 02110/
                            NEW YORK, NEW YORK 10154
 
                                                               SEPTEMBER 7, 1998
 
Scudder Kemper Investments, Inc.
Two International Place/345 Park Avenue
Boston, Massachusetts 02110/New York, New York 10154
 
                        INVESTMENT MANAGEMENT AGREEMENT
                            [NAME OF SERIES, IF ANY]
 
Ladies and Gentlemen:
 
     [Name of (Trust)(Corporation)] (the ("Trust")("Corporation")) has been
established as a (Massachusetts business trust)(Maryland corporation) to engage
in the business of an investment company. Pursuant to the
(Trust's)(Corporation's)(Declaration of Trust)(Articles of Incorporation), as
amended from time-to-time (the ("Declaration")("Articles")), the Board of
(Trustees)(Directors) is authorized to issue the (Trust's shares of beneficial
interest)(Corporation's shares of common stock), par value $
- --------- per share, (the "Shares"), in separate series, or funds. The Board of
(Trustees)(Directors) has authorized [NAME OF FUND] (the "Fund"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the (Trustees)(Directors).
 
     The (Trust)(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 (Trust)(Corporation) on
behalf of the Fund agrees with you as follows:
 
          1.  Delivery of Documents.  The (Trust)(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 (Trust's)(Corporation's) Registration Statement on Form
     N-1A, as amended from time to time, (the "Registration Statement") filed by
     the (Trust)(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 (Trust)(Corporation). The (Trust)(Corporation) has
     also furnished you with copies properly
 
                                       A-1
   43
 
     certified or authenticated of each of the following additional documents
     related to the Trust and the Fund:
 
             (a) The (Declaration)(Articles), as amended to date.
 
             (b) By-Laws of the Trust as in effect on the date hereof (the
        "By-Laws").
 
             (c) Resolutions of the (Trustees)(Directors) of the
        (Trust)(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)(Common Stock) relating to the Fund, as applicable.
 
          The (Trust)(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 (Trust's)(Corporation's) Board of (Trustees)
     (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 (Trust)(Corporation). You shall also make
     available to the (Trust)(Corporation) promptly upon request all of the
     Fund's investment records and ledgers as are necessary to assist the
     (Trust)(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
     (Trust)(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, foreign currency dealers, futures
     commission merchants or others pursuant to your determinations and all in
     accordance with Fund policies as expressed in the Registration Statement.
     You shall determine what portion of the Fund's portfolio shall be invested
     in securities and other assets and what portion, if any, should be held
     uninvested.
 
          You shall furnish to the (Trust's)(Corporation's) Board of (Trustees)
     (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
     (Trust's)(Corporation's) officers or Board of (Trustees)(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
     (Trust)(Corporation) administrative
 
                                       A-2
   44
 
     services on behalf of the Fund necessary for operating as an open end
     investment company and not provided by persons not parties to this
     Agreement including, but not limited to, preparing reports to and meeting
     materials for the (Trust's)(Corporation's) Board of (Trustees)(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 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 (Trust)(Corporation) as it may reasonably request
     in the conduct of the Fund's business, subject to the direction and control
     of the (Trust's)(Corporation's) Board of (Trustees)(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 (Trustees)(Directors), officers and executive employees of
     the (Trust)(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 (Trust)(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 (Trustees) (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 (Trust)(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
                                       A-3
   45
 
     accounting agent for which the (Trust)(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 (Trust)(Corporation) business) of (Trustees)(Directors),
     officers and employees of the (Trust)(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
     (Trustees)(Directors) and officers of the (Trust)(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 (Trust)(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 (Trust)(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
     ------- OVER) (A BASE ANNUAL INVESTMENT MANAGEMENT FEE, PAYABLE MONTHLY, AT
     THE RATE OF .65 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE FUND. THIS
     BASE FEE IS SUBJECT TO UPWARD OR DOWNWARD ADJUSTMENT ON THE BASIS OF THE
     INVESTMENT PERFORMANCE OF THE CLASS A SHARES OF THE FUND AS COMPARED WITH
     THE PERFORMANCE OF THE STANDARD & POOR'S 500 STOCK INDEX (THE "INDEX"). THE
     TRUST WILL PAY AN ADDITIONAL MONTHLY FEE AT AN ANNUAL RATE OF
     -------% OF SUCH AVERAGE DAILY NET ASSETS FOR EACH PERCENTAGE POINT
     (FRACTIONS TO BE PRORATED) BY WHICH THE PERFORMANCE OF THE CLASS A SHARES
     OF THE FUND EXCEEDS THAT OF THE INDEX FOR THE IMMEDIATELY PRECEDING TWELVE
     MONTHS; PROVIDED THAT SUCH ADDITIONAL MONTHLY FEE SHALL NOT EXCEED 1/12 OF
     -------% OF THE AVERAGE DAILY NET ASSETS. CONVERSELY, THE COMPENSATION
     PAYABLE BY THE TRUST WILL BE REDUCED BY AN ANNUAL RATE OF
     -------% OF SUCH AVERAGE DAILY NET ASSETS FOR EACH PERCENTAGE POINT
     (FRACTIONS TO BE PRORATED) BY WHICH THE PERFORMANCE OF THE CLASS A SHARES
     OF THE FUND FALLS BELOW THAT OF THE INDEX, PROVIDED THAT SUCH REDUCTION IN
     THE MONTHLY FEE SHALL NOT EXCEED 1/12 OF
     -------% OF THE AVERAGE NET ASSETS. THE TOTAL FEE ON AN ANNUAL BASIS CAN
     RANGE FROM
     -------% TO
     -------% OF AVERAGE DAILY NET ASSETS. THE TRUST'S INVESTMENT PERFORMANCE
     DURING ANY TWELVE MONTH PERIOD IS MEASURED BY THE PERCENTAGE DIFFERENCE
     BETWEEN (a) THE OPENING NET ASSET VALUE OF ONE CLASS A SHARE OF THE FUND
     AND (b) THE SUM OF THE CLOSING NET ASSET VALUE OF ONE CLASS A SHARE OF THE
     FUND PLUS THE VALUE OF ANY INCOME AND CAPITAL GAIN DIVIDENDS ON SUCH SHARE
     DURING THE PERIOD TREATED AS IF REINVESTED IN CLASS A SHARES OF THE FUND AT
     THE TIME OF DISTRIBUTION. THE PERFORMANCE OF THE INDEX IS MEASURED BY THE
     PERCENTAGE CHANGE IN THE INDEX BETWEEN THE BEGINNING AND THE END OF THE
     TWELVE MONTH PERIOD WITH CASH DISTRIBUTIONS ON THE SECURITIES WHICH
     COMPRISE THE INDEX BEING TREATED AS REINVESTED IN THE INDEX AT THE END OF
     EACH MONTH FOLLOWING THE PAYMENT OF THE DIVIDEND. EACH MONTHLY CALCULATION
     OF THE INCENTIVE PORTION OF THE FEE MAY BE ILLUSTRATED AS FOLLOWS: IF OVER
     THE PRECEDING TWELVE MONTH PERIOD THE TRUST'S ADJUSTED NET ASSET VALUE
                                       A-4
   46
 
     APPLICABLE TO ONE CLASS A SHARE WENT FROM $10.00 TO $
     ------- (
     -------% APPRECIATION), AND THE INDEX, AFTER ADJUSTMENT, WENT FROM 100 TO
     104 (OR ONLY 4%), THE ENTIRE INCENTIVE COMPENSATION WOULD HAVE BEEN EARNED
     BY YOU. ON THE OTHER HAND, IF THE INDEX ROSE FROM 100 TO
     ------- (
     -------%), NO INCENTIVE FEE WOULD HAVE BEEN PAYABLE. A RISE IN THE INDEX
     FROM 100 TO
     ------- (
     -------%) WOULD HAVE RESULTED IN THE MINIMUM MONTHLY FEE OF 1/12 OF
     -------%. SINCE THE COMPUTATION IS NOT CUMULATIVE FROM YEAR TO YEAR, AN
     ADDITIONAL MANAGEMENT FEE MAY BE PAYABLE WITH RESPECT TO A PARTICULAR YEAR,
     ALTHOUGH THE TRUST'S PERFORMANCE OVER SOME LONGER PERIOD OF TIME MAY BE
     LESS FAVORABLE THAN THAT OF THE INDEX. CONVERSELY, A LOWER MANAGEMENT FEE
     MAY BE PAYABLE IN A YEAR IN WHICH THE PERFORMANCE OF THE FUND'S CLASS A
     SHARES IS LESS FAVORABLE THAN THAT OF THE INDEX, ALTHOUGH THE PERFORMANCE
     OF THE FUND'S CLASS A SHARES OVER A LONGER PERIOD OF TIME MIGHT BE BETTER
     THAN THAT OF THE INDEX. THESE MANAGEMENT FEES WILL BE REDUCED BY) any
     compensation waived by you from time to time (as more fully described
     below). You shall be entitled to receive during any month such interim
     payments of your fee hereunder as you shall request, provided that no such
     payment shall exceed 75 percent of the amount of your fee then accrued on
     the books of the Fund and unpaid.
 
          The "average daily net assets" of the Fund shall mean the average of
     the values placed on the Fund's net assets as of 4:00 p.m. (New York time)
     on each day on which the net asset value of the Fund is determined
     consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the
     Fund lawfully determines the value of its net assets as of some other time
     on each business day, as of such time. The value of the net assets of the
     Fund shall always be determined pursuant to the applicable provisions of
     the (Declaration)(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.
 
          [FOR KMBF, KCATF AND KGSF ONLY: You agree that your gross compensation
     for any fiscal year shall not be greater than an amount which, when added
     to other expenses of the Fund, shall cause the aggregate expenses of the
     Fund to equal  _____ % of average daily net assets. [KMBF AND KGSF: 1% of
     average daily net assets; KCATF: 1.5% of average daily net assets up to $30
     million and 1% of average daily net assets over $30 million.] Except to the
     extent that such amount has been reflected in reduced payments to you, you
     shall refund to the Fund the amount of any payment received in excess of
     the limitation pursuant to this section 5 as promptly as practicable after
     the end of such fiscal year, provided that you shall not be required to pay
     the Fund an amount greater than the fee paid to you in respect of such year
     pursuant to this Agreement. As used in this section 5, "expenses" shall
     mean those expenses included in the applicable expense limitation having
     the broadest specifications thereof, and "expense limitation" means a limit
     on the maximum annual expenses which may be incurred by an investment
     company determined (i) by multiplying a fixed percentage by the average, or
     by multiplying more than one such percentage by different specified amounts
     of the average, of the values of an investment company's net assets for a
     fiscal year or (ii) by multiplying a fixed percentage by an investment
     company's net investment income for a fiscal year.]
 
          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
                                       A-5
   47
 
     commission. You or your agent shall arrange for the placing of all orders
     for the purchase and sale of portfolio securities and other investments for
     the Fund's account with brokers or dealers selected by you in accordance
     with Fund policies as expressed in the Registration Statement. If any
     occasion should arise in which you give any advice to clients of yours
     concerning the Shares of the Fund, you shall act solely as investment
     counsel for such clients and not in any way on behalf of the Fund.
 
          Your services to the Fund pursuant to this Agreement are not to be
     deemed to be exclusive and it is understood that you may render investment
     advice, management and services to others. In acting under this Agreement,
     you shall be an independent contractor and not an agent of the
     (Trust)(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
     (Trust)(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
     (Trust)(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 September 30, 1999, and continue in force from year
     to year thereafter, but only so long as such continuance is specifically
     approved at least annually (a) by the vote of a majority of the (Trustees)
     (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 Trustees of the
     (Trust)(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
     (Trust's)(Corporation's) Board of (Trustees)(Directors) on 60 days' written
     notice to you, or by you on 60 days' written notice to the
     (Trust)(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 (Trustees) (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.
 
                                       A-6
   48
 
          (10. Limitation of Liability for Claims.  The Declaration, a copy of
     which, together with all amendments thereto, is on file in the Office of
     the Secretary of the Commonwealth of Massachusetts, provides that the name
     "[Name of Trust]" refers to the Trustees under the Declaration collectively
     as Trustees and not as individuals or personally, and that no shareholder
     of the Fund, or Trustee, officer, employee or agent of the Trust, shall be
     subject to claims against or obligations of the Trust or of the Fund to any
     extent whatsoever, but that the Trust estate only shall be liable.
 
          You are hereby expressly put on notice of the limitation of liability
     as set forth in the Declaration and you agree that the obligations assumed
     by the Trust on behalf of the Fund pursuant to this Agreement shall be
     limited in all cases to the Fund and its assets, and you shall not seek
     satisfaction of any such obligation from the shareholders or any
     shareholder of the Fund or any other series of the Trust, or from any
     Trustee, officer, employee or agent of the Trust. You understand that the
     rights and obligations of each Fund, or series, under the Declaration are
     separate and distinct from those of any and all other series.)
 
          (11)(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.
 
     This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the (Trust)(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 (Trust)(Corporation), whereupon this letter shall become a
binding contract effective as of the date of this Agreement.
 
                         Yours very truly,
 
                         [NAME OF (TRUST)(CORPORATION)], on behalf of
                         [NAME OF FUND]
 
                         By:
                         -----------------------------------------------------
                            Vice President
 
     The foregoing Agreement is hereby accepted as of the date hereof.
 
                         SCUDDER KEMPER INVESTMENTS, INC.
 
                         By:
                         -----------------------------------------------------
                            President
 
                                       A-7
   49
 
                      (This page intentionally left blank)
   50
 
                                                                       EXHIBIT B
 
                    INVESTMENT OBJECTIVES AND ADVISORY FEES
               FOR FUNDS NOT INCLUDED IN THIS PROXY STATEMENT AND
                  ADVISED BY SCUDDER KEMPER INVESTMENTS, INC.
 
                                 SCUDDER FUNDS+
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
MONEY MARKET FUNDS
 Government Money Market Series           High level of current income consistent with  0.250% of net assets++     $   83,870,139
                                          preservation of capital and liquidity.
 Money Market Series                      High level of current income consistent with  0.250% of net assets++     $1,041,528,715
                                          preservation of capital and liquidity.
 Scudder Cash Investment Trust            Stability of capital while maintaining        0.500% to $250 million     $1,182,012,567
                                          liquidity of capital and providing current    0.450% next $250 million
                                          income.                                       0.400% next $500 million
                                                                                        0.350% thereafter++
 Scudder U.S. Treasury Money Fund         Safety, liquidity, and stability of capital   0.500% of net assets++     $  388,528,203
                                          and, consistent therewith, current income.
TAX FREE MONEY MARKET FUNDS
 Scudder California Tax Free Money Fund   Stability of capital and the maintenance of   0.500% of net assets       $      218,236
                                          a constant net asset value of $1.00 per
                                          share while providing California taxpayers
                                          income exempt from both California personal
                                          and regular federal income tax.
 Scudder New York Tax Free Money Fund     Stability of capital while providing New      0.500% of net assets++     $   92,514,040
                                          York taxpayers income exempt from New York
                                          state and New York City personal income
                                          taxes and regular federal income tax.
 Scudder Tax Free Money Fund              Income exempt from regular federal income     0.500% to $500 million     $  283,055,833
                                          tax and stability of principal through        0.480% thereafter++
                                          investments in municipal securities.
 Tax Free Money Market Series             High level of current income exempt from      0.250% of net assets++     $  270,225,034
                                          federal income tax, consistent with
                                          preservation of capital and liquidity.
TAX FREE FUNDS
 Scudder California Tax Free Fund         To provide California taxpayers with income   0.625% to $200 million     $  324,448,844
                                          exempt from both California personal income   0.600% thereafter
                                          tax and regular federal income tax primarily
                                          through investment in California municipal
                                          securities.
 Scudder High Yield Tax Free Fund         High level of income, exempt from regular     0.650% to $300 million     $  336,690,734
                                          federal income tax, from an actively managed  0.600% thereafter
                                          portfolio consisting primarily of
                                          investment-grade municipal securities.
 Scudder Limited Term Tax Free Fund       As high a level of income exempt from         0.600% of net assets++     $  116,876,371
                                          regular federal income tax as is consistent
                                          with a high degree of principal stability.
 Scudder Managed Municipal Bonds          Income exempt from regular federal income     0.550% to $200 million     $  728,308,005
                                          tax primarily through investments in high-    0.500% next $500 million
                                          grade, long term municipal securities.        0.475% thereafter
 Scudder Massachusetts Limited Term Tax   As high a level of income exempt from         0.600% of net assets++     $   79,526,656
   Free Fund                              Massachusetts state personal income tax and
                                          regular federal income tax as is consistent
                                          with a high degree of price stability
                                          through investments primarily in
                                          investment-grade municipal securities.

    
 
                                       B-1
   51
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
 Scudder Massachusetts Tax Free Fund      To provide Massachusetts taxpayers income     0.600% to $400 million     $  373,905,826
                                          exempt from both Massachusetts personal       0.525% thereafter*
                                          income tax and regular federal income tax
                                          through investment primarily in investment-
                                          grade municipal securities with long term
                                          maturities.
 Scudder Medium Term Tax Free Fund        High level of income free from regular        0.600% to $500 million     $  656,951,039
                                          federal income taxes and limited principal    0.500% thereafter
                                          fluctuation through investment primarily in
                                          high-grade, intermediate term municipal
                                          bonds.
 Scudder New York Tax Free Fund           To provide New York taxpayers income exempt   0.625% to $200 million     $  195,731,396
                                          from New York state and New York City         0.600% thereafter
                                          personal income taxes and regular federal
                                          income tax through investment primarily in
                                          New York municipal securities.
 Scudder Ohio Tax Free Fund               To provide Ohio taxpayers income exempt from  0.600% of net assets++     $   94,450,782
                                          both Ohio personal income tax and regular
                                          federal income tax through investment
                                          primarily in investment-grade municipal
                                          securities.
 Scudder Pennsylvania Tax Free Fund       To provide Pennsylvania taxpayers income      0.600% of net assets++     $   78,695,405
                                          exempt from both Pennsylvania personal
                                          income tax and regular federal income tax
                                          through investment primarily in investment-
                                          grade municipal securities.
TAX MANAGED FUNDS
 Scudder Tax Managed Growth Fund          Long term growth of capital on an after-tax   0.800% of net assets                N/A**
                                          basis primarily through equity investment in
                                          established, medium- to large-sized U.S.
                                          companies with leading competitive
                                          positions.
 Scudder Tax Managed Small Company Fund   Long term capital growth on an after-tax      0.900% of net assets                N/A**
                                          basis primarily through investment primarily
                                          in undervalued stocks of small U.S.
                                          companies.
U.S. INCOME FUNDS
 Scudder Corporate Bond Fund              A high level of current income through        0.650% of net assets                N/A**
                                          investment primarily in investment-grade
                                          corporate debt securities.
 Scudder GNMA Fund                        High current income primarily from U.S.       0.650% to $200 million     $  392,444,820
                                          Government guaranteed mortgage-backed Ginnie  0.600% next $300 million
                                          Mae securities.                               0.550% thereafter
 Scudder High Yield Bond Fund             A high level of current income and,           0.700% of net assets++     $  176,221,237
                                          secondarily, capital appreciation through
                                          investment primarily in below investment-
                                          grade domestic debt securities.
 Scudder Income Fund                      A high level of income, consistent with the   0.650% to $200 million     $  695,255,717
                                          prudent investment of capital, through a      0.600% next $300 million
                                          flexible investment program emphasizing       0.550% thereafter
                                          high-grade bonds.
 Scudder Short Term Bond Fund             High level of income consistent with a high   0.600% to $500 million     $1,165,531,162
                                          degree of principal stability by investing    0.500% next $500 million
                                          primarily in high quality short-term bonds    0.450% next $500 million
                                                                                        0.400% next $500 million
                                                                                        0.375% next $1 billion
                                                                                        0.350% thereafter
 Scudder Zero Coupon 2000 Fund            As high an investment return over a selected  0.600% of net assets++     $   20,453,972
                                          period as is consistent with investment in
                                          U.S. Government securities and the
                                          minimization of reinvestment risk.

    
 
                                       B-2
   52
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
GLOBAL INCOME FUNDS
 Scudder Emerging Markets Income Fund     High current income and, secondarily, long    1.000% of net assets       $  323,628,082
                                          term capital appreciation by investing
                                          primarily in high-yielding debt securities
                                          issued by governments and corporations in
                                          emerging markets.
 Scudder Global Bond Fund                 Total return with an emphasis on current      0.750% to $1 billion       $  135,113,465
                                          income by investing primarily in high-grade   0.700% thereafter++
                                          bonds denominated in foreign currencies and
                                          the U.S. dollar. As a secondary objective,
                                          the Fund will seek capital appreciation.
 Scudder International Bond Fund          Income primarily by investing in a managed    0.850% to $1 billion       $  145,818,767
                                          portfolio of high-grade international bonds   0.800% thereafter++
                                          and, secondarily, protection and possible
                                          enhancement of principal value by actively
                                          managing currency, bond market and maturity
                                          exposure and by security selection.
ASSET ALLOCATION FUNDS
 Scudder Pathway Balanced Portfolio       Balance of growth and income by investing in  There will be no fee as    $  192,145,173
                                          a mix of Scudder money market, bond and       the Manager will receive
                                          equity mutual funds.                          a fee from the
                                                                                        underlying funds.
 Scudder Pathway Conservative Portfolio   Current income and, secondarily, long term    There will be no fee as    $   16,971,681
                                          growth of capital by investing substantially  the Manager will receive
                                          in Scudder bond mutual funds, but will have   a fee from the
                                          some exposure to Scudder equity mutual        underlying funds.
                                          funds.
 Scudder Pathway Growth Portfolio         Long term growth of capital by investing      There will be no fee as    $   49,574,256
                                          predominantly in Scudder equity mutual funds  the Manager will receive
                                          designed to provide long term growth.         a fee from the
                                                                                        underlying funds.
 Scudder Pathway International Portfolio  Maximize total return, consisting of capital  There will be no fee as    $   11,728,045
                                          appreciation plus dividend income and         the Manager will receive
                                          interest by investing in a select mix of      a fee from the
                                          established international and global Scudder  underlying funds.
                                          Funds.
U.S. GROWTH AND INCOME FUNDS
 Scudder Balanced Fund                    A balance of growth and income from a         0.700% of net assets++     $  158,711,908
                                          diversified portfolio of equity and
                                          fixed-income securities and long term
                                          preservation of capital through a
                                          quality-oriented investment approach
                                          designed to reduce risk.
 Scudder Dividend & Growth Fund           High current income and long term growth of   0.750% of net assets                N/A**
                                          capital through investment in income paying
                                          equity securities.
 Scudder Growth and Income Fund           Long term growth of capital, current income   0.600% to $500 million     $6,833,584,122
                                          and growth of income.                         0.550% next $500 millio n
                                                                                        0.500% next $500 millio n
                                                                                        0.475% next $500 millio n
                                                                                        0.450% next $1 billion
                                                                                        0.425% next $1.5 billio n
                                                                                        0.405% next $1.5 billio n
                                                                                        0.3875% next $4 billion
                                                                                        0.370% over $10 billion *
U.S. GROWTH FUNDS
 Classic Growth Fund                      Long term growth of capital with reduced      0.700% of net assets++     $   53,225,783
                                          share price volatility compared to other
                                          growth mutual funds.
 Scudder 21st Century Growth Fund         Long term growth of capital by investing      1.000% of net assets++     $   23,296,176
                                          primarily in the securities of emerging
                                          growth companies poised to be leaders in the
                                          21st century.

    
 
                                       B-3
   53
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
 Scudder Development Fund                 Long term growth of capital by investing      1.000% to $500 million     $  845,405,075
                                          primarily in securities of small and medium   0.950% next $500 million
                                          size growth companies.                        0.900% thereafter
 Scudder Financial Services Fund          Long term growth of capital by investing      0.750% of net assets++     $   36,926,469@
                                          primarily in common stocks and other equity
                                          securities of companies in a group of
                                          related industries.
 Scudder Health Care Fund                 Long term growth of capital by investing      0.850% of next assets++    $   40,923,873@
                                          primarily in common stocks and other equity
                                          securities of companies in a group of
                                          related industries.
 Scudder Large Company Growth Fund        Long term growth of capital through           0.700% of net assets       $  288,064,975
   (formerly Scudder Quality Growth       investment primarily in the equity
   Fund)                                  securities of seasoned, financially strong
                                          U.S. growth companies.
 Scudder Large Company Value Fund         Maximize long term capital appreciation       0.750% to $500 million     $2,212,733,138
   (formerly Scudder Capital Growth       through a value driven investment program.    0.650% next $500 millio n
   Fund)                                                                                0.600% next $500 millio n
                                                                                        0.550% next $500 millio n
                                                                                        0.500% next $1.0
                                                                                        billion*
 Scudder Micro Cap Fund                   Long term growth of capital by investing      0.750% of net assets       $   91,627,404
                                          primarily in a diversified portfolio of U.S.
                                          micro-cap common stocks.
 Scudder Real Estate Investment Fund      Long term capital growth and current income   0.800% of net assets++     $   20,435,489
                                          by investing primarily in equity securities
                                          of companies in the real estate industry.
 Scudder S&P 500 Index Fund               Investment results that, before expenses,     0.150% of net assets++     $   16,912,276
                                          correspond to the total return of common
                                          stocks publicly traded in the United States,
                                          as represented by the Standard & Poor's 500
                                          Composite Stock Price Index.
 Scudder Small Company Value Fund         Long term growth of capital by investing      0.750% of net assets       $  123,398,822
                                          primarily in undervalued stocks of small
                                          U.S. companies.
 Scudder Technology Fund                  Long term growth of capital by investing      0.850% of net assets++     $   37,159,344@
                                          primarily in common stocks and other equity
                                          securities of companies in a group of
                                          related industries.
 Value Fund                               Long term growth of capital through           0.700% to $500 million     $  297,979,779
                                          investment in undervalued equity securities.  0.650% over $500
                                                                                        million*
GLOBAL GROWTH FUNDS
 Global Discovery Fund                    Above-average capital appreciation over the   1.100% of net assets       $  349,121,954
                                          long term by investing primarily in the
                                          equity securities of small companies located
                                          throughout the world.
 Scudder Emerging Markets Growth Fund     Long term growth of capital primarily         1.25% of net assets++      $  219,624,481
                                          through equity investment in emerging
                                          markets around the globe.
 Scudder Global Fund                      Long term growth of capital through a         1.000% to $500 million     $1,766,207,742
                                          diversified portfolio of marketable           0.950% next $500 million
                                          securities, primarily equity securities,      0.900% next $500 million
                                          including common stock, preferred stocks and  0.850% over $1.5 billion
                                          debt securities convertible into common
                                          stocks.
 Scudder Gold Fund                        Maximum return (principal change and income)  1.000% of net assets       $  132,131,545
                                          consistent with investing in a portfolio of
                                          gold-related equity securities and gold.
 Scudder Greater Europe Growth Fund       Long term growth of capital through           1.00% to $1 billion        $  195,514,335
                                          investments primarily in the equity           0.90% thereafter*
                                          securities of European companies.

    
 
                                       B-4
   54
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
 Scudder International Fund               Long term growth of capital primarily from    0.900% to $500 million     $2,884,919,345
                                          foreign equity securities.                    0.850% next $500 million
                                                                                        0.800% next $1 billion
                                                                                        0.750% next $1 billion
                                                                                        0.700% thereafter
 Scudder International Growth and Income  Long term growth of capital and current       1.000% of net assets++     $   48,880,164
   Fund                                   income primarily from foreign equity
                                          securities.
 Scudder International Growth Fund        Long term capital appreciation through        1.000% of net assets                N/A**
                                          investment primarily in the equity
                                          securities of foreign companies with high
                                          growth potential.
 Scudder International Value Fund         Long term capital appreciation through        1.000% of net assets                N/A**
                                          investment primarily in undervalued foreign
                                          equity securities.
 Scudder Latin America Fund               Long term capital appreciation through        1.250% to $1 billion       $  882,555,049
                                          investment primarily in the securities of     1.150% thereafter
                                          Latin American issuers.
 Scudder Pacific Opportunities Fund       Long term growth of capital primarily         1.100% of net assets       $  147,276,692
                                          through investment in the equity securities
                                          of Pacific Basin companies, excluding Japan.
 The Japan Fund, Inc.                     Long term capital appreciation through        0.850% to $100 million     $  265,181,931
                                          investment primarily in equity securities,    0.750% next $200 million
                                          (including American Depository Receipts) of   0.700% next $300 million
                                          Japanese companies.                           0.650% thereafter
CLOSED-END FUNDS
 The Argentina Fund, Inc.                 Long term capital appreciation through        Adviser:                   $  135,327,320
                                          investment primarily in equity securities of  1.100% of net assets
                                          Argentine issuers.                            Sub-Adviser:
                                                                                        Paid by Adviser. 0.100%
                                                                                        of net assets
 The Brazil Fund, Inc.                    Long term capital appreciation through        1.200% to $150 million     $  429,429,751
                                          investment primarily in equity securities of  1.050% next $150 million
                                          Brazilian issuers.                            1.000% next $200 million
                                                                                        0.900% thereafter
                                                                                        Administrator: Receives
                                                                                        an annual fee of $50,000
 The Korea Fund, Inc.                     Long term capital appreciation through        Adviser:                   $  406,244,000
                                          investment primarily in equity securities of  1.150% to $50 million
                                          Korean companies.                             1.100% next $50 million
                                                                                        1.000% next $250 million
                                                                                        0.950% next $400 million
                                                                                        0.900% thereafter
                                                                                        Sub-Adviser -- Daewoo:
                                                                                        Paid by Adviser.
                                                                                        0.2875% to $50 million
                                                                                        0.275% next $50 million
                                                                                        0.250% next $250 million
                                                                                        0.2375% next $400
                                                                                        million
                                                                                        0.225% thereafter
 Montgomery Street Income Securities,     High level of current income consistent with  0.500% to $150 million     $  207,315,702
   Inc.                                   prudent investment risks through a            0.450% next $50 million
                                          diversified portfolio primarily of debt       0.400% thereafter
                                          securities.
 Scudder Global High Income Fund, Inc.    High level of current income and,             1.200% of net assets       $   80,721,844
   (formerly The Latin America Dollar     secondarily, capital appreciation through
   Income Fund, Inc.)                     investment principally in dollar-denominated
                                          Latin American debt instruments.
 Scudder New Asia Fund, Inc.              Long term capital appreciation through        1.250% to $75 million      $   98,866,168
                                          investment primarily in equity securities of  1.150% next $125 million
                                          Asian companies.                              1.100% thereafter

    
 
                                       B-5
   55
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
 Scudder New Europe Fund, Inc.            Long term capital appreciation through        1.250% to $75 million      $  320,293,393
                                          investment primarily in equity securities of  1.150% next $125 million
                                          companies traded on smaller or emerging       1.100% thereafter
                                          European markets and companies that are
                                          viewed as likely to benefit from changes and
                                          developments throughout Europe.
 Scudder Spain and Portugal Fund, Inc.    Long term capital appreciation through        Adviser:                   $  112,909,567
                                          investment primarily in equity securities of  1.000% of net assets
                                          Spanish & Portuguese issuers.                 Administrator:
                                                                                        0.200% of net assets
INSURANCE PRODUCTS
 Scudder Variable Life Investment Fund    Balance of growth and income, as well as      0.475% of net assets       $  118,373,215
   Balanced Portfolio                     long term preservation of capital, from a
                                          diversified portfolio of equity and fixed
                                          income securities.
 Scudder Variable Life Investment Fund    High level of income from a high quality      0.475% of net assets       $   81,387,032
   Bond Portfolio                         portfolio of bonds.
 Scudder Variable Life Investment Fund    Maximize long term capital growth from a      0.475% to $500 million     $  676,317,582
   Capital Growth Portfolio               portfolio consisting primarily of equity      0.450% next $500 million
                                          securities.                                   0.425% on assets
                                                                                        over $1.0 billion***
 Scudder Variable Life Investment Fund    Above-average capital appreciation over the   0.975% of net assets++     $   20,115,141
   Global Discovery Portfolio             long term by investing primarily in the
                                          equity securities of small companies located
                                          throughout the world.
 Scudder Variable Life Investment Fund    Long term growth of capital, current income   0.475% of net assets       $  163,603,606
   Growth and Income Portfolio            and growth of income from a portfolio
                                          consisting primarily of common stocks and
                                          securities convertible into common stocks.
 Scudder Variable Life Investment Fund    Long term growth of capital principally from  0.875% to $500 million     $  427,237,880
   International Portfolio                a diversified portfolio of foreign equity     0.725% thereafter
                                          securities.
 Scudder Variable Life Investment Fund    Stability of capital and current income from  0.370% of net assets       $  102,576,377
   Money Market Portfolio                 a portfolio of money market instruments.
AARP FUNDS
 AARP Balanced Stock and Bond Fund        Long term capital growth and income,          0.350% to $2 billion       $  638,356,257
                                          consistent with a share price more stable     0.330% next $2 billion
                                          than other balanced mutual funds, through     0.300% next $2 billion
                                          investment in a combination of stocks, bonds  0.280% next $2 billion
                                          and cash reserves.                            0.260% next $3 billion
                                                                                        0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.190% of net assets
 AARP Bond Fund for Income                High level of current income, consistent      0.350% to $2 billion       $   58,324,146
                                          with greater share price stability than       0.330% next $2 billion
                                          other long term bond mutual funds, through    0.300% next $2 billion
                                          investment primarily in investment-grade      0.280% next $2 billion
                                          debt securities.                              0.260% next $3 billion
                                                                                        0.250% next $3 billion
                                                                                        0.240% thereafter++
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.280% of net assets
 AARP Capital Growth Fund                 Long term capital growth, consistent with a   0.350% to $2 billion       $1,228,379,954
                                          share price more stable than other growth     0.330% next $2 billion
                                          funds, through investment in a combination    0.280% next $2 billion
                                          of common stocks and securities convertible   0.260% next $3 billion
                                          into common stocks.                           0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.320% of net assets
 AARP Diversified Growth Portfolio        Long term growth of capital through           There will be no fee as    $   61,796,818
                                          investment primarily in AARP stock mutual     the manager will receive
                                          funds.                                        a fee from the
                                                                                        underlying funds.

    
 
                                       B-6
   56
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
 AARP Diversified Income with Growth      Current income with modest long term          There will be no fee as    $   43,446,418
   Portfolio                              appreciation through investment primarily in  the manager will receive
                                          AARP bond mutual funds.                       a fee from the
                                                                                        underlying funds.
 AARP Global Growth Fund                  Long term capital growth, consistent with a   0.350% to $2 billion       $  148,029,373
                                          share price more stable than other global     0.330% next $2 billion
                                          funds, through investment primarily in        0.300% next $2 billion
                                          common stocks of established corporations in  0.280% next $2 billion
                                          a wide variety of developed countries.        0.260% next $3 billion
                                                                                        0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.550% of net assets
 AARP GNMA and U.S. Treasury Fund         High level of current income, consistent      0.350% to $2 billion       $4,583,980,460
                                          with greater share price stability than       0.330% next $2 billion
                                          other GNMA mutual funds, through investment   0.300% next $2 billion
                                          primarily in high quality U.S.                0.280% next $2 billion
                                          Government-guaranteed GNMA securities and     0.260% next $3 billion
                                          U.S. Treasury obligations.                    0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.120% of net assets
 AARP Growth and Income Fund              Long term capital growth and income,          0.350% to $2 billion       $6,606,012,897
                                          consistent with a share price more stable     0.330% next $2 billion
                                          than other growth and income mutual funds,    0.300% next $2 billion
                                          through investment primarily in common        0.280% next $2 billion
                                          stocks with above-average dividend yields     0.260% next $3 billion
                                          and securities convertible into common        0.250% next $3 billion
                                          stocks.                                       0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.190% of net assets
 AARP High Quality Short Term Bond Fund   High level of current income, consistent      0.350% to $2 billion       $  454,869,518
                                          with greater share price stability than       0.330% next $2 billion
                                          other short-term bond mutual funds, through   0.300% next $2 billion
                                          investment primarily in a portfolio of high   0.280% next $2 billion
                                          quality, short-term securities.               0.260% next $3 billion
                                                                                        0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.190% of net assets
 AARP High Quality Money Fund             Current income consistent with maintaining    0.350% to $2 billion       $  471,310,867
                                          stability and safety of principal and a       0.330% next $2 billion
                                          constant net asset value of $1.00 per share   0.300% next $2 billion
                                          while offering liquidity, through investment  0.280% next $2 billion
                                          in high quality securities.                   0.260% next $3 billion
                                                                                        0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.100% of net assets
 AARP High Quality Tax Free Money Fund    Current income free from federal income       0.350% to $2 billion       $  102,613,893
                                          taxes consistent with maintaining stability   0.330% next $2 billion
                                          and safety of principal and a constant net    0.300% next $2 billion
                                          asset value of $1.00 per share while          0.280% next $2 billion
                                          offering liquidity, through investment in     0.260% next $3 billion
                                          high-quality municipal securities.            0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.100% of net assets

    
 
                                       B-7
   57
 
   


                  FUND                                     OBJECTIVE                            FEE RATE             NET ASSETS
                  ----                                     ---------                            --------             ----------
                                                                                                          
 AARP Insured Tax Free General Bond Fund  High level of current income free from        0.350% to $2 billion       $1,712,008,168
                                          federal income taxes, consistent with         0.330% next $2 billion
                                          greater share price stability than other      0.300% next $2 billion
                                          insured tax-free general bond mutual funds,   0.280% next $2 billion
                                          through investment primarily in high quality  0.260% next $3 billion
                                          municipal securities covered by insurance.    0.250% next $3 billion
                                                                                        0.240% thereafter
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.190% of net assets
 AARP International Growth and Income     Long term capital growth, consistent with a   0.350% to $2 billion       $   20,259,062
   Fund                                   share price more stable than other            0.330% next $2 billion
                                          international mutual funds, through           0.300% next $2 billion
                                          investment primarily in a diversified         0.280% next $2 billion
                                          portfolio of foreign common stocks with       0.260% next $3 billion
                                          above-average dividend yields and foreign     0.250% next $3 billion
                                          securities convertible into common stocks.    0.240% thereafter++
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.600% of net assets
 AARP Small Company Stock Fund            Long term growth of capital, consistent with  0.350% to $2 billion       $   50,271,473
                                          a share price more stable than other small    0.330% next $2 billion
                                          company stock mutual funds, through           0.300% next $2 billion
                                          investment primarily in common stocks of      0.280% next $2 billion
                                          small U.S. companies.                         0.260% next $3 billion
                                                                                        0.250% next $3 billion
                                                                                        0.240% thereafter++
                                                                                        INDIVIDUAL FUND FEE
                                                                                        0.550% of net assets
 AARP U.S. Stock Index Fund               Long term capital growth and income,          0.350% to $2 billion       $   38,085,073
                                          consistent with greater share price           0.330% next $2 billion
                                          stability than an S&P 500 Index mutual fund,  0.300% next $2 billion
                                          by taking an indexing approach to investing   0.280% next $2 billion
                                          in common stocks, emphasizing higher          0.260% next $3 billion
                                          dividend stocks while maintaining investment  0.250% next $3 billion
                                          characteristics otherwise similar to the S&P  0.240% thereafter++
                                          500 Index.                                    INDIVIDUAL FUND FEE
                                                                                        0.000% of net assets

    
 
- ------------------------------
  + The information provided below is shown as of the end of each Fund's last
    fiscal year, unless otherwise noted.
 
 ++ Subject to waivers and/or expense limitations.
 
   
  * The addition of this breakpoint is effective October 1, 1998.
    
 
 ** Fee information is not available for Scudder Dividend & Growth Fund, which
    commenced operations on June 1, 1998; Scudder Tax Managed Growth Fund and
    Scudder Tax Managed Small Company Fund, each of which commenced operations
    on July 31, 1998; Scudder Corporate Bond Fund, which commenced operations on
    August 31, 1998; or Scudder International Growth Fund and Scudder
    International Value Fund, each of which commenced operations on September 1,
    1998.
 
   
 *** The addition of this breakpoint is expected to be effective October 1,
     1998.
    
 
 @ Net asset information is provided for the semi-annual period ended May 31,
   1998.
 
                                       B-8
   58
 
   
                                KEMPER FUNDS(+)
    
 
   


               TRUST/FUND                                   OBJECTIVE                            FEE RATE            NET ASSETS
               ----------                                   ---------                            --------            ----------
                                                                                                          
INCOME FUNDS
 Kemper Adjustable Rate U.S. Government    High current income consistent with low       0.550% to $250 million    $   81,967,000
   Fund                                    volatility of principal.                      0.520% next $750 million
                                                                                         0.500% next $1.5 billion
                                                                                         0.480% next $2.5 billion
                                                                                         0.450% next $2.5 billion
                                                                                         0.430% next $2.5 billion
                                                                                         0.410% next $2.5 billion
                                                                                         0.400% thereafter
 Kemper Short-Intermediate Government      High current income and preservation of       0.550% to $250 million    $  171,400,000
   Fund                                    capital, with equal emphasis, from a          0.520% next $750 million
                                           portfolio primarily consisting of short-and   0.500% next $1.5 billion
                                           intermediate-term U.S. Government             0.480% next $2.5 billion
                                           securities.                                   0.450% next $2.5 billion
                                                                                         0.430% next $2.5 billion
                                                                                         0.410% next $2.5 billion
                                                                                         0.400% thereafter
TAX-FREE INCOME FUNDS
 Kemper Michigan Tax-Free Income Fund      High level of current income exempt from      0.550% to $250 million    $    3,091,000
                                           federal and Michigan income taxes through a   0.520% next $750 million
                                           non-diversified portfolio of municipal        0.500% next $1.5 billion
                                           securities.                                   0.480% next $2.5 billion
                                                                                         0.450% next $2.5 billion
                                                                                         0.430% next $2.5 billion
                                                                                         0.410% next $2.5 billion
                                                                                         0.400% thereafter**
 Kemper New Jersey Tax-Free Income Fund    High level of current income exempt from      0.550% to $250 million    $    5,304,000
                                           federal and New Jersey income taxes through   0.520% next $750 million
                                           a professionally managed non-diversified      0.500% next $1.5 billion
                                           portfolio of municipal securities.            0.480% next $2.5 billion
                                                                                         0.450% next $2.5 billion
                                                                                         0.430% next $2.5 billion
                                                                                         0.410% next $2.5 billion
                                                                                         0.400% thereafter**
 Kemper Pennsylvania Tax-Free Income Fund  High level of current income exempt from      0.550% to $250 million    $    6,304,000
                                           federal and state of Pennsylvania income      0.520% next $750 million
                                           taxes through a professionally managed non-   0.500% next $1.5 billion
                                           diversified portfolio of municipal            0.480% next $2.5 billion
                                           securities.                                   0.450% next $2.5 billion
                                                                                         0.430% next $2.5 billion
                                                                                         0.410% next $2.5 billion
                                                                                         0.400% thereafter**
 Kemper Texas Tax-Free Income Fund         A high level of current interest income       0.550% to $250 million    $   12,469,000
                                           exempt from federal income taxes through a    0.520% next $750 million
                                           professionally managed non-diversified        0.500% next $1.5 billion
                                           portfolio of municipal securities.            0.480% next $2.5 billion
                                                                                         0.450% next $2.5 billion
                                                                                         0.430% next $2.5 billion
                                                                                         0.410% next $2.5 billion
                                                                                         0.400% thereafter
CLOSED-END FUNDS
 The Growth Fund of Spain, Inc.            Long-term capital appreciation by investing   1.000% of net assets(2)   $  315,059,000
                                           primarily in equity securities of Spanish
                                           companies.
 Kemper High Income Trust                  Highest current income obtainable consistent  0.850% of net assets(2)   $  222,919,000
                                           with reasonable risk with capital gains
                                           secondary.
 Kemper Intermediate Government Trust      High current income consistent with           0.800% of net assets(2)   $  267,218,000
                                           preservation of capital by investing in U.S.
                                           and foreign government securities.
 Kemper Multi-Market Income Trust          High current income consistent with prudent   0.850% of net assets(2)   $  217,508,000
                                           total return asset management by investing
                                           in a diversified portfolio of investment
                                           grade tax-exempt securities.

    
 
                                       B-9
   59
 
   


               TRUST/FUND                                   OBJECTIVE                            FEE RATE            NET ASSETS
               ----------                                   ---------                            --------            ----------
                                                                                                          
 Kemper Municipal Income Trust             High level of current income exempt from      0.550% of net assets(2)   $  686,179,000
                                           federal income tax.
 Kemper Strategic Income Fund              High current income by investing its assets   0.850% of net assets(2)   $   53,129,000
                                           in a combination of lower-rated corporate
                                           fixed-income securities, fixed-income
                                           securities of emerging market and other
                                           foreign issuers and, fixed-income securities
                                           of the U.S. Government and its agencies and
                                           instrumentalities and private
                                           mortgage-backed issuers.
 Kemper Strategic Municipal Income Trust   High level of current income exempt from      0.600% of net assets(2)   $  130,895,000
                                           federal income tax by investing in a
                                           diversified portfolio of tax-exempt
                                           municipal securities.
ANNUITY PRODUCTS
 Kemper Blue Chip Portfolio                Growth of capital and income.                 0.650% of net assets      $   18,421,000
 Kemper Contrarian Value Portfolio         High rate of return.                          0.750% of net assets      $  162,380,000
 Kemper Global Blue Chip Portfolio         Long-term growth of capital through           1.000% to $250 million              N/A*
                                           diversified worldwide portfolio of            0.950% next $750 million
                                           marketable securities, primarily equity       0.900% thereafter
                                           securities.
 Kemper Global Income Portfolio            High current income consistent with prudent   0.750% of net assets      $    2,145,000
                                           total return asset management.
 Kemper Government Securities Portfolio    High current income consistent with           0.550% of net assets      $   86,682,000
                                           preservation of capital from a portfolio
                                           consisting primarily of U.S. Government
                                           securities.
 Kemper Growth Portfolio                   Maximum appreciation of capital.              0.600% of net assets      $  563,016,000
 Kemper High Yield Portfolio               High level of current income by investing in  0.600% of net assets      $  391,664,000
                                           fixed income securities.
 Kemper Horizon 10+ Portfolio              A balance between growth of capital and       0.600% of net assets      $   22,553,000
                                           income consistent with moderate risk.
 Kemper Horizon 20+ Portfolio              Growth of capital and, secondarily, income.   0.600% of net assets      $   16,659,000
 Kemper Horizon 5 Portfolio                Income consistent with preservation of        0.600% of net assets      $   14,258,000
                                           capital, and secondarily, growth.
 Kemper International Growth and Income    Long-term growth of capital and current       1.000% of net assets                N/A*
   Portfolio                               income, primarily from foreign equity
                                           securities.
 Kemper International Portfolio            Total return, a combination of capital        0.750% of net assets      $  200,046,000
                                           growth and income, principally through an
                                           internationally diversified portfolio of
                                           equity securities.
 Kemper Investment Grade Bond Portfolio    High current income by investing primarily    0.600% of net assets      $   15,504,000
                                           in a diversified portfolio of investment
                                           grade debt securities.
 Kemper Money Market Portfolio             Maximum current income to the extent          0.500% of net assets      $  100,143,000
                                           consistent with stability of principal from
                                           a portfolio of high quality money market
                                           instruments.
 Kemper Small Cap Growth Portfolio         Maximum capital appreciation from a           0.650% of net assets      $  137,415,000
                                           portfolio primarily consisting of growth
                                           stocks of small companies.
 Kemper Small Cap Value Portfolio          Long-term capital appreciation from a         0.750% of net assets      $   76,108,000
                                           portfolio primarily of value stocks of
                                           smaller companies.
 Kemper Total Return Portfolio             High total return through a combination of    0.550% of net assets      $  786,996,000
                                           income and capital appreciation.
 Kemper Value+Growth Portfolio             Growth of capital through professional        0.750% of net assets      $   69,094,000
                                           management of a portfolio of growth and
                                           value stocks.

    
 
                                      B-10
   60
 
   


               TRUST/FUND                                   OBJECTIVE                            FEE RATE            NET ASSETS
               ----------                                   ---------                            --------            ----------
                                                                                                          
 Kemper-Dreman Financial Services          Long-term capital appreciation by investing   0.750% to $250 million              N/A*
   Portfolio                               primarily in common stocks and other equity   0.720% next $750 million
                                           securities of companies in the financial      0.700% next $1.5 billion
                                           services industry believed by the investment  0.680% next $2.5 billion
                                           manger to be undervalued.                     0.650% next $2.5 billion
                                                                                         0.640% next $2.5 billion
                                                                                         0.630% next $2.5 billion
                                                                                         0.620% thereafter
 Kemper-Dreman High Return Equity          High rate of total return.                    0.750% to $250 million              N/A*
   Portfolio                                                                             0.720% next $750 million
                                                                                         0.700% next $1.5 billion
                                                                                         0.680% next $2.5 billion
                                                                                         0.650% next $2.5 billion
                                                                                         0.640% next $2.5 billion
                                                                                         0.630% next $2.5 billion
                                                                                         0.620% thereafter
MONEY MARKET FUNDS
 Government Securities Portfolio (Cash     Maximum current income to the extent          0.220% to $500 million    $  810,001,000
   Account Trust)                          consistent with stability of capital from a   0.200% next $500 million
                                           portfolio of U.S. Government obligations.     0.175% next $1 billion
                                                                                         0.160% next $1 billion
                                                                                         0.150% thereafter(1)**
 Government Securities Portfolio (Cash     Maximum current income to the extent          0.220% to $500 million    $  391,861,000
   Equivalent Fund)                        consistent with stability of capital from a   0.200% next $500 million
                                           portfolio of U.S. Government obligations.     0.175% next $1 billion
                                                                                         0.160% next $1 billion
                                                                                         0.150% thereafter(4)
 Government Securities Portfolio           Maximum current income to the extent          0.150% of net             $  312,194,000
   (Investors Cash Trust)                  consistent with stability of capital by       assets(5)**
                                           investing in U.S. Government obligations and
                                           repurchase agreements.
 Investors Florida Municipal Cash Fund     Maximum current income exempt from federal    0.220% to $500 million    $    7,611,000
                                           income taxes to the extent consistent with    0.200% next $500 million
                                           stability of capital.                         0.175% next $1 billion
                                                                                         0.160% next $1 billion
                                                                                         0.150% thereafter(3)**
 Investors Michigan Municipal Cash Fund    Maximum current income exempt from federal    0.22% to $500 million               N/A*
                                           and Michigan income taxes to the extent       0.20% next $500 million
                                           consistent with stability of capital          0.175% next $1 billion
                                                                                         0.16% next $1 billion
                                                                                         0.15% thereafter
 Investors New Jersey Municipal Cash Fund  Maximum current income exempt from federal    0.220% to $500 million    $    4,665,000
                                           and New Jersey income taxes to the extent     0.200% next $500 million
                                           consistent with stability of capital.         0.175% next $1 billion
                                                                                         0.160% next $1 billion
                                                                                         0.150% thereafter(3)**
 Investors Pennsylvania Municipal Cash     Maximum current income exempt from federal    0.220% to $500 million    $    3,195,000
   Fund                                    and Pennsylvania income taxes to the extent   0.200% next $500 million
                                           consistent with stability of capital.         0.175% next $1 billion
                                                                                         0.160% next $1 billion
                                                                                         0.150% thereafter(3)**
 Money Market Portfolio (Cash Account      Maximum current income to the extent          0.220% to $500 million    $2,004,420,000
   Trust)                                  consistent with stability of capital from a   0.200% next $500 million
                                           portfolio primarily of commercial paper and   0.175% next $1 billion
                                           bank obligations.                             0.160% next $1 billion
                                                                                         0.150% thereafter(1)**
 Money Market Portfolio (Cash Equivalent   Maximum current income to the extent          0.220% to $500 million    $  851,592,000
   Fund)                                   consistent with stability of capital from a   0.200% next $500 million
                                           portfolio primarily of commercial paper and   0.175% next $1 billion
                                           bank obligations.                             0.160% next $1 billion
                                                                                         0.150% thereafter(4)
 Tax-Exempt Portfolio (Cash Account        Maximum current income exempt from federal    0.220% to $500 million    $  370,036,000
   Trust)                                  income taxes to the extent consistent with    0.200% next $500 million
                                           stability of capital from a portfolio of      0.175% next $1 billion
                                           municipal securities.                         0.160% next $1 billion
                                                                                         0.150% thereafter(1)**

    
 
                                      B-11
   61
 
   


               TRUST/FUND                                   OBJECTIVE                            FEE RATE            NET ASSETS
               ----------                                   ---------                            --------            ----------
                                                                                                          
 Tax-Exempt Portfolio (Cash Equivalent     Maximum current income that is exempt from    0.220% to $500 million    $  333,427,000
   Fund)                                   federal income taxes to the extent            0.200% next $500 million
                                           consistent with stability of capital from a   0.175% next $1 billion
                                           portfolio of municipal securities.            0.160% next $1 billion
                                                                                         0.150% thereafter
 Treasury Portfolio (Investors Cash        Maximum current income to the extent          0.150% of net             $   74,290,000
   Trust)                                  consistent with stability of capital by       assets(5)**
                                           investing in U.S. Government obligations and
                                           repurchase agreements.
 Zurich Government Money Fund              Maximum current income to the extent          0.500% to $215 million    $  686,871,000
                                           consistent with stability of principal from   0.375% next $335 million
                                           a portfolio of U.S. Government obligations.   0.300% next $250 million
                                                                                         0.250% thereafter(6)
 Zurich Money Market Fund                  Maximum current income to the extent          0.500% to $215 million    $4,538,627,000
                                           consistent with stability of principal from   0.375% next $335 million
                                           a portfolio primarily consisting of           0.300% next $250 million
                                           commercial paper and bank obligations.        0.250% thereafter(6)
 Zurich Tax-Free Money Fund                Maximum current income to the extent          0.500% to $215 million    $  815,894,000
                                           consistent with stability of principal from   0.375% next $335 million
                                           a portfolio of municipal securities.          0.300% next $250 million
                                                                                         0.250% thereafter(6)
 Zurich YieldWise Money Fund               Maximum current income to the extent          0.500% to $215 million    $1,071,728,000
                                           consistent with stability of principal by     0.375% next $335 million
                                           investing in high-quality short-term money    0.300% next $250 million
                                           market instruments                            0.250% thereafter**
 Tax-Exempt New York Money Market Fund     Maximum current income exempt from federal,   0.220% to $500 million    $  104,198,000
                                           New York State and New York City income       0.200% next $500 million
                                           taxes to the extent consistent with           0.175% next $1 billion
                                           stability of capital.                         0.160% next $1 billion
                                                                                         0.150% thereafter(3)**
 Tax-Exempt California Money Market Fund   Maximum current income exempt from federal    0.220% to $500 million    $  117,432,000
                                           and California income taxes to the extent     0.200% next $500 million
                                           consistent with stability of capital.         0.175% next $1 billion
                                                                                         0.160% next $1 billion
                                                                                         0.150% thereafter

    
 
- ------------------------------
   
  + The information provided below is shown as of the end of each Fund's last
    fiscal year, unless otherwise noted.
    
 
  * Fee information is not available for Investors Michigan Municipal Cash Fund,
    which commenced operations on April 6, 1998; Kemper-Dreman High Return
    Equity Portfolio, which commenced operations on May 1, 1998; Kemper-Dreman
    Financial Services Portfolio, which commenced operations on May 4, 1998; or
    Kemper Global Blue Chip Portfolio and Kemper International Growth and Income
    Portfolio, each of which commenced operations on May 5, 1998.
 
 ** Subject to waivers and/or reimbursements.
 
  (1) Payable in the aggregate for each of the Government Securities Portfolio,
      Money Market Portfolio and Tax-Exempt Portfolio series of Cash Account
      Trust.
 
  (2) Based on average weekly net assets.
 
  (3) Payable in the aggregate for each of the Investors Florida Municipal Cash
      Fund, Investors New Jersey Municipal Cash Fund, Investors Pennsylvania
      Municipal Cash Fund and Tax-Exempt New York Money Market Fund series of
      Investors Municipal Cash Fund.
 
  (4) Payable in the aggregate for each of the Government Securities Portfolio
      and Money Market Portfolio series of Cash Equivalent Fund.
 
  (5) Payable in the aggregate for each of the Government Securities Portfolio
      and Treasury Portfolio series of Investors Cash Trust.
 
  (6) Payable in the aggregate for each of the Zurich Government Money Fund,
      Zurich Money Market Fund and Zurich Tax-Free Money Fund series of Zurich
      Money Funds.
 
                                      B-12
   62
 
                                                                       EXHIBIT C
 
                                FORM OF NEW SIL
 
                             SUB-ADVISORY AGREEMENT
 
   
              [BOLDED LANGUAGE IN BRACKETS APPLIES TO KWF4 ONLY.]
    
 
   
    [Underlined language in brackets applies to each Fund, other than KWF4.]
    
 
AGREEMENT made this 7th day of September, 1998, by and between SCUDDER KEMPER
INVESTMENTS, INC., a Delaware corporation (the "Adviser") and SCUDDER
INVESTMENTS (U.K.) LIMITED, an English corporation (the "Sub-Adviser").
 
     WHEREAS, KEMPER  __________ FUND, a Massachusetts business trust (the
"Fund") is a management investment company registered under the Investment
Company Act of 1940;
 
     [WHEREAS, THE FUND IS AUTHORIZED TO ISSUE SHARES IN A SEPARATE SERIES WITH
EACH REPRESENTING THE INTERESTS IN A SEPARATE PORTFOLIO OF SECURITIES AND OTHER
ASSETS;]
 
     WHEREAS, the Fund has retained the Adviser to render to it investment
advisory and management services with regard to the [Fund's sole series][SERIES
OF THE FUND KNOWN AS THE KEMPER WORLDWIDE 2004 FUND] (the "initial 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 with respect to that portion
of the portfolio of the Fund's initial series allocated to the Sub-Adviser by
the Adviser for management, including services related to foreign securities,
foreign currency transactions and related investments, 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.  The Adviser hereby employs the Sub-Adviser to manage the
     investment and reinvestment of the assets of the initial series of the Fund
     allocated by the Adviser in its sole discretion to the Sub-Adviser for
     management, including services related to foreign securities, foreign
     currency transactions and related investments, in accordance with the
     applicable investment objectives, policies and limitations and subject to
     the supervision of the Adviser and the Board of Trustees of the Fund for
     the period and upon the terms herein set forth, and to place orders for the
     purchase or sale of portfolio securities for the Fund's account with
     brokers or dealers selected by the Sub-Adviser; and, in connection
     therewith, the Sub-Adviser is authorized as the agent of the Fund to give
     instructions to the Custodian of the Fund as to the deliveries of
     securities and payments of cash for the account of the Fund. In connection
     with the selection of such brokers or dealers and the placing of such
     orders, the Sub-Adviser is directed to seek for the Fund best execution of
     orders. Subject to such policies as the Board of Trustees of the Fund
     determines and subject to satisfying the requirements of Section 28(e) of
     the Securities Exchange Act of 1934, the Sub-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 Fund to
     pay a broker or dealer an amount of commission for effecting a securities
     transaction in excess of the amount of commission another broker or dealer
     would have charged for effecting that transaction, if the 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 Fund and other clients of the Sub-Adviser
 
                                       C-1
   63
 
     may benefit thereby. The investment of funds shall be subject to all
     applicable restrictions of the Agreement and Declaration of Trust and
     By-Laws of the Fund as may from time to time be in force.
 
          The Sub-Adviser accepts such employment and agrees during such period
     to render such investment management services, to furnish related office
     facilities and equipment and clerical, bookkeeping and administrative
     services for the Fund, to permit any of its officers or employees to serve
     without compensation as trustees or officers of the Fund if elected to such
     positions and to assume the obligations herein set forth for the
     compensation herein provided. The 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 or the Adviser in any way or otherwise be deemed an
     agent of the Fund or the Adviser. It is understood and agreed that the
     Sub-Adviser, by separate agreements with the Fund, may also serve the Fund
     in other capacities.
 
          The Sub-Adviser will keep the Fund and the Adviser informed of
     developments materially affecting the Fund and shall, on the Sub-Adviser's
     own initiative and as reasonably requested by the Adviser or the Fund,
     furnish to the Fund and the Adviser from time to time whatever information
     the Adviser reasonably believes appropriate for this purpose. The
     Sub-Adviser agrees that, in the performance of the duties required of it by
     this Agreement, it will comply with the Investment Advisers Act of 1940 and
     the Investment Company Act of 1940, and all rules and regulations
     thereunder, and all applicable laws and regulations and with any applicable
     procedures adopted by the Fund's Board of Trustees and identified in
     writing to the Sub-Adviser.
 
          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 cash positions, 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 obligations imposed upon it under the Management Agreement.
 
          The Sub-Adviser shall provide adequate security with respect to all
     materials, records, documents and data relating to any of its
     responsibilities pursuant to this Agreement including any means for the
     effecting of securities transactions.
 
          The Sub-Adviser agrees that it will make available to the Adviser and
     the Fund promptly upon their request copies of all of its investment
     records and ledgers with respect to the Fund to assist the Adviser and the
     Fund in monitoring compliance with the Investment Company Act of 1940 and
     the Investment Advisers Act of 1940, as well as other applicable laws. The
     Sub-Adviser will furnish the Fund's Board of Trustees such periodic and
     special reports with respect to the Fund's portfolio as the Adviser or the
     Board of Trustees may reasonably request.
 
          In compliance with the requirements of Rule 31a-3 under the Investment
     Company Act of 1940, 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 to the Fund copies of any such records upon the Fund's
     request. The Sub-Adviser further agrees to preserve for the periods
     prescribed by Rule 31a-2 under the Investment Company Act of 1940 any
     records with respect to the Sub-Adviser's duties hereunder required to be
     maintained by Rule 31a-1 under such 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 Investment Advisers
     Act of 1940 for the period specified in that Rule.
 
          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
 
                                       C-2
   64
 
     become the subject of an administrative proceeding or enforcement action by
     the United States Securities and Exchange Commission, the Investment
     Management Regulatory Organization ("IMRO") or other regulatory authority.
 
          The Sub-Adviser represents that it is an investment adviser registered
     under the Investment Advisers Act of 1940 and other applicable laws and it
     is regulated by IMRO and will treat the Fund as a Non-Private Customer as
     defined by IMRO. The Sub-Adviser agrees to maintain the completeness and
     accuracy of its registration on Form ADV in accordance with all legal
     requirements relating to that Form. The Sub-Adviser acknowledges that it is
     an "investment adviser" to the Fund within the meaning of the Investment
     Company Act of 1940 and the Investment Advisers Act of 1940.
 
          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. Furthermore, the Sub-Adviser shall maintain and
     enforce a Code of Ethics that is in form and substance satisfactory to the
     Adviser. 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.
 
          2.  In the event that there are, from time to time, one or more
     additional series of the Fund with respect to which the Adviser desires to
     retain the Sub-Adviser to render investment advisory and management
     services hereunder, the Adviser shall notify the Sub-Adviser in writing. If
     the Sub-Adviser is willing to render such services, it shall notify the
     Adviser in writing whereupon such additional series shall become subject to
     this Agreement.
 
          3.  For the services and facilities described in Section 1, the
     Adviser will pay to the Sub-Adviser, at the end of each calendar month, a
     sub-advisory fee computed at an annual rate of  ___ % of that portion of
     the average daily net assets of the initial series of the Fund that is
     allocated by the Adviser to the Sub-Adviser for management.
 
          For the month and year in which this Agreement becomes effective or
     terminates, there shall be an appropriate proration on the basis of the
     number of days that the Agreement is in effect during the month and year,
     respectively.
 
          4.  The services of the Sub-Adviser under this Agreement are not to be
     deemed exclusive, and the Sub-Adviser shall be free to render similar
     services or other services to others so long as its services hereunder are
     not impaired thereby.
 
          5.  The Sub-Adviser shall arrange, if desired by the Fund, for
     officers or employees of the Sub-Adviser to serve, without compensation
     from the Fund, as trustees, officers or agents of the Fund if duly elected
     or appointed to such positions and subject to their individual consent and
     to any limitations imposed by law.
 
          6.  The net asset value for each series of the Fund subject to this
     Agreement shall be calculated as the Board of Trustees of the Fund may
     determine from time to time in accordance with the provisions of the
     Investment Company Act of 1940. On each day when net asset value is not
     calculated, the net asset value of a series shall be deemed to be the net
     asset value of such series as of the close of business on the last day on
     which such calculation was made for the purpose of the foregoing
     computations.
 
          7.  Subject to applicable statutes and regulations, it is understood
     that certain trustees, officers or agents of the Fund are or may be
     interested in the Sub-Adviser as officers, directors, agents, shareholders
     or otherwise, and that the officers, directors, shareholders and agents of
     the Sub-Adviser may be interested in the Fund otherwise than as a trustee,
     officer or agent.
 
          8.  The Sub-Adviser shall not be liable for any error of judgment or
     of law or for any loss suffered by the Fund 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
 
                                       C-3
   65
 
     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.  This Agreement shall become effective with respect to the initial
     series of the Fund on the date hereof and shall remain in full force until
     September 30, 1999, unless sooner terminated as hereinafter provided. This
     Agreement shall continue in force from year to year thereafter with respect
     to each such series, but only as long as such continuance is specifically
     approved for each series at least annually in the manner required by the
     Investment Company Act of 1940 and the rules and regulations thereunder;
     provided, however, that if the continuation of this Agreement is not
     approved for a series, the Sub-Adviser may continue to serve in such
     capacity for such series in the manner and to the extent permitted by the
     Investment Company Act of 1940 and the rules and regulations thereunder.
    
 
          This Agreement shall automatically terminate in the event of its
     assignment or in the event of the termination of the Management Agreement
     and may be terminated at any time with respect to any series subject to
     this Agreement without the payment of any penalty by the Adviser or by the
     Sub-Adviser on sixty (60) days' written notice to the other party. The Fund
     may effect termination with respect to any such series without payment of
     any penalty by action of the Board of Trustees or by vote of a majority of
     the outstanding voting securities of such series on sixty (60) days'
     written notice to the Adviser and the Sub-Adviser.
 
          This Agreement may be terminated with respect to any series at any
     time without the payment of any penalty by the Board of Trustees of the
     Fund, by vote of a majority of the outstanding voting securities of such
     series or by the Adviser in the event that it shall have been established
     by a court of competent jurisdiction that the Sub-Adviser or any officer or
     director of the Sub-Adviser has taken any action which results in a breach
     of the covenants of the Sub-Adviser set forth herein.
 
          The terms "assignment" and "vote of a majority of the outstanding
     voting securities" shall have the meanings set forth in the Investment
     Company Act of 1940 and the rules and regulations thereunder.
 
          Termination of this Agreement shall not affect the right of the
     Sub-Adviser to receive payments on any unpaid balance of the compensation
     described in Section 3 earned prior to such termination.
 
          10.  If any provision of this Agreement shall be held or made invalid
     by a court decision, statute, rule or otherwise, the remainder shall not be
     thereby affected.
 
          11.  Any notice under this Agreement shall be in writing, addressed
     and delivered or mailed, postage prepaid, to the other party at such
     address as such other party may designate for the receipt of such notice.
 
          12.  This Agreement shall be construed in accordance with applicable
     federal law and the laws of the Commonwealth of Massachusetts.
 
          13.  This Agreement is the entire contract between the parties
     relating to the subject matter hereof and supersedes all prior agreements
     between the parties relating to the subject matter hereof.
 
                                       C-4
   66
 
          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:
                         Title:
 
                         SCUDDER INVESTMENTS (U.K.) LIMITED
 
                         -------------------------------------------------------
                         By:
                         Title:
 
                                       C-5
   67
 
                      (This page intentionally left blank)
   68
 
                                                                       EXHIBIT D
 
                                    FORM OF
 
                         NEW DVM SUB-ADVISORY AGREEMENT
 
   
  [Underlined language in brackets applies to Kemper-Dreman Financial Services
                                  Fund only.]
    
 
   
  [Language in plain text and in brackets applies to Kemper-Dreman High Return
                               Equity Fund only.]
    
 
     AGREEMENT made this 7th day of September, 1998, 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 EQUITY TRUST, a Massachusetts business trust,]
[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 Financial Services Fund (the "Financial Services
Series")][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 [Financial Services
Series][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 [Financial Services
     Series][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 [Trustees][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 [Financial Services Series][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 [Financial Services Series][High Return Series] to give instructions to
     the Custodian [and Accounting Agent] of the Fund as to the deliveries of
     securities and payments of cash for the account of the [Financial Services
     Series][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 [Financial Services Series][High Return Series]
     best execution of orders. Subject to such policies as the Board of
     [Trustees][Directors] of the Fund determines and subject to satisfying the
     requirements of Section 28(e) of the Securities Exchange Act of 1934, the
     Sub-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 [Financial Services Series][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
 
                                       D-1
   69
 
     services and research that the Sub-Adviser receives are available for all
     clients of the Sub-Adviser, and that the [Financial Services Series][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 [Agreement and Declaration of Trust][Articles of Incorporation] and
     By-Laws of the Fund as may from time to time be in force [to the extent the
     same are provided the Sub-Adviser].
 
          (b) The Sub-Adviser accepts such employment and agrees during the
     period of this Agreement to render such investment management services [in
     accordance with the applicable investment objectives, policies and
     limitations set out in the Fund's prospectus and Statement of Additional
     Information, as amended from time to time, to the extent the same are
     provided the Sub-Adviser], to furnish related office facilities and
     equipment and clerical, bookkeeping and administrative services for the
     [Financial Services Series][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 [Financial Services Series][High
     Return Series] or the Adviser in any way or otherwise be deemed an agent of
     the Fund, the [Financial Services Series][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
     [Financial Services Series][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 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 [Financial Services Series][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 [Financial Services Series][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
     [Trustees][Directors] such periodic and special reports with respect to the
     [Financial Services Series][High Return Series] as the Adviser or the Board
     of [Trustees][Directors] may reasonably request, including statistical
     information with respect to the [Financial Services Series's][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
                                       D-2
   70
 
     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 for the Fund, any
     correspondence from the SEC or other regulatory authority that relates to
     the [Financial Services Series][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 [Trustees][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.][the unpaid
balance of a fee equal to 1/12 of .240 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 .230 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 .224 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 .218 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 .208 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 .205 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 .202 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 .198 of 1 percent of such portion.]
 
                                       D-3
   71
 
     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 [Financial Services
Series][High Return Series] shall be calculated as the Board of
[Trustees][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 [Financial Services
Series][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.
 
     4.  Duration and Termination.
 
          (a) This Agreement shall become effective with respect to the
     [Financial Services Series][High Return Series] on the date hereof and
     shall remain in full force until [February 1, 2003][December 31, 2002],
     unless sooner terminated or not annually approved as hereinafter provided.
     Notwithstanding the foregoing, this Agreement shall continue in force
     through [February 1, 2003][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, the 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 [Trustees][Directors] of the
     Fund, or by vote of a majority of the outstanding voting securities of the
     [Financial Services Series][High Return Series], or by the Adviser. The
     Fund may effect termination of this Agreement by action of the Board of
     [Trustees][Directors] of the Fund or by vote of a majority of the
     outstanding voting securities of the [Financial Services Series][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 [the third
     anniversary of the date of this Agreement][July 30, 2000]. Sub-Adviser may
     terminate this Agreement effective on or after [the third anniversary of
     the date of this Agreement][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.]
 
                                       D-4
   72
 
     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) The 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 [Financial Services
     Series][High Return Series] of which the Sub-Adviser has knowledge (the
     "Sub-Adviser and [Financial Services][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) The 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 [Trustees][Directors], provided that such
     procedures are substantially similar to those applicable to similar funds
     for which the Board of [Trustees][Directors] of the Fund is responsible and
     that such procedures are identified in writing to the Sub-Adviser;
 
          (d) 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 [Financial Services][High Return] Information; and
 
          (e) 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.
 
                                       D-5
   73
 
     7.  Use of Names.
 
          (a) The Sub-Adviser acknowledges and agrees that the names [Kemper
     Equity Trust][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 Equity Trust][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 Equity Trust][Kemper Value Fund],
     Kemper, Zurich, or [Kemper-Dreman Financial Services Fund][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
     Financial Services Fund][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 [Financial
     Services Series][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 [Financial Services Series][High Return
     Series] is understood to be used by the Fund upon the conditions
     hereinafter set forth; provided that the Fund may use such name only so
     long as the Sub-Adviser shall be retained as the investment sub-adviser of
     the [Financial Services Series][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 [Financial Services Series][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
     [Financial Services Series][High Return Series] name and in connection with
     accurately describing the activities of the [Financial Services
     Series][High Return Series] , including use with marketing and other
     promotional and informational material relating to the [Financial Services
     Series][High Return Series]. In the event that the Sub-Adviser shall cease
     to be the investment sub-adviser of [Financial Services Series][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 [Financial Services Series][High Return
     Series] or for any other commercial purpose (other than the right to refer
     to the [Financial Services Series's][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 [trustees][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
[Financial Services Series][High Return Series] or the Adviser in connection
with the matters to which this Agreement relates, except loss resulting from
willful
 
                                       D-6
   74
 
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 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,
     trustees][directors], officers, employees and agents. The Sub-Adviser's
     agreement in this paragraph shall also extend to any of the Fund's,
     [Financial Services Series'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 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 party
     of the commencement thereof, the indemnifying party shall be entitled to
     participate in and, individually or jointly with any other
                                       D-7
   75
 
     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 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:
 
    -----------------------------------
 
Title:
 
     ----------------------------------
 
DREMAN VALUE MANAGEMENT, L.L.C.
 
By:
 
    -----------------------------------
 
Title:
 
     ----------------------------------
 
                                       D-8
   76
 
                                  [APPENDIX A
                     INVESTMENT MANAGEMENT SUBADVISORY FEE
 


     APPLICABLE AVERAGE
      DAILY NET ASSETS
         (THOUSANDS)                          ANNUAL RATE
     ------------------                       -----------
                                           
        $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%]

   77
 
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   78
 
     (8)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (9)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
KGSF may not, as a fundamental policy:
 
     (1)  Purchase any securities other than obligations issued or guaranteed by
the United States Government or its agencies, some of which may be subject to
repurchase agreements, except that the Fund may engage in options and financial
futures transactions, and except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (2)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the Fund's total assets would be invested in
securities of that issuer, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (3)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (4)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts; or in
real estate (including real estate limited partnerships), although it may invest
in securities which are secured by real estate and securities of issuers which
invest or deal in real estate including real estate investment trusts.
 
     (5)  Borrow money, except from banks for temporary purposes and then in
amounts not in excess of 5% of the value of the Fund's assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of 7 1/2% of the
value of the Fund's assets at the time of such borrowing. (This borrowing
provision is not for investment leverage, but solely to facilitate management of
the portfolio by enabling the Fund to meet redemption requests where the
liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient.) Borrowings may take the form of a sale of portfolio securities
accompanied by a simultaneous agreement as to their repurchase.
 
     (6)  Make loans, except that the Fund may purchase or hold debt obligations
in accordance with the investment restrictions set forth in paragraph 1 above
and may enter into repurchase agreements for such securities, and may lend its
portfolio securities against collateral consisting of cash, or securities issued
or guaranteed by the U.S. Government or its agencies, which is equal at all
times to at least 100% of the value of the securities loaned.
 
     (7)  Act as an underwriter of securities, except to the extent the Fund may
be deemed to be an underwriter in connection with the disposition of portfolio
securities, and except that all or substantially all of the assets of the Fund
may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
 
KHYF may not, as a fundamental policy:
 
     (1)  With respect to 75% of the Fund's total assets, purchase securities of
any issuer (other than securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities) if, as a result, (a) more than 5% of
the Fund's total assets would be invested in securities of that issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.
 
                                       E-2
   79
 
     (2)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objectives and policies are not prohibited and it may
lend its securities as discussed under "Investment Objectives, Policies and Risk
Factors -- Additional Investment Information" in the prospectus.
 
     (3)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (4)  Invest more than 25% of the Fund's total assets in fixed income
securities which are payable in currencies other than United States Dollars.
(Investments in such securities may involve risks which differ from investments
in securities of U.S. issuers, such as future political and economic
developments, the possible imposition of governmental restrictions and taxes, as
well as currency fluctuation.)
 
     (5)  Engage in margin purchases except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with financial futures and options transactions;
nor may the Fund make short sales of securities or maintain a short position
unless, at all times when a short position is open, the Fund owns an equal
amount of such securities or securities convertible into or exchangeable for
securities, without payment of additional consideration, which are equal in
amount to and of the same issue as the securities sold short and such securities
are not subject to outstanding call options, and unless not more than 10% of the
Fund's net assets is held as collateral for such sales at any one time.
(Management does not intend to make such sales except for the purpose of
deferring realization of gain or loss for federal income tax purposes.)
 
     (6)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (7)  Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (9)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (10)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
KICPF may not, as a fundamental policy:
 
     (1)  Invest in securities other than those specified under "Investment
Objectives, Policies and Risk Factors" in the prospectus. This restriction does
not prevent the Fund from holding common stocks or other corporate securities
not qualifying as debt obligations if such securities are acquired through
conversion provisions of debt securities or from corporate reorganizations. Nor
does it prevent the holding of debt securities whose quality rating is reduced
by the rating services below those specified under "Investment Objectives,
Policies and Risk Factors" after purchase by the Fund.
 
                                       E-3
   80
 
     (2)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States or Canadian governments, their agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total assets
would be invested in securities of that issuer.
 
     (3)  Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one class.
 
     (4)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives,
Policies and Risk Factors -- Additional Investment Information" in the
prospectus.
 
     (5)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (6)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (7)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (8)  Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry.
 
     (9)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (10)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (11)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
KUSMF may not, as a fundamental policy:
 
     (1)  Purchase securities or make investments other than in accordance with
its investment objective and policies.
 
     (2)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's net assets would be invested in
securities of that issuer.
 
     (3)  Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one class.
 
     (4)  Invest more than 5% of the Fund's total assets in securities of
issuers (other than obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities) which with their predecessors have a record of
less than three years continuous operation.
 
     (5)  Enter into repurchase agreements if more than 10% of the Fund's net
assets valued at the time of the transaction would be subject to repurchase
agreements maturing in more than seven days.
 
                                       E-4
   81
 
     (6)  Make loans to others (except through the purchase of debt obligations
or repurchase agreements or by lending its portfolio securities in accordance
with its investment objective and policies).
 
     (7)  Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the value of
its total assets (any such borrowings under this section will not be
collateralized). If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three business days, reduce its
indebtedness to the extent necessary. [The Fund will not borrow for leverage
purposes, and while borrowings are outstanding securities will not be
purchased.]
 
     (8)  Concentrate more than 25% of the Fund's net assets in any one
industry.
 
     (9)  Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of Kemper Portfolios or its investment adviser
owns beneficially more than 1/2 of 1% of the securities of such issuer and
together they own more than 5% of the securities of such issuer.
 
     (10)  Invest more than 5% of the Fund's total assets in securities
restricted as to disposition under the federal securities laws (except
commercial paper issued under Section 4(2) of the Securities Act of 1933) and no
more than 10% of its assets will be invested in securities which are considered
illiquid. [Repurchase agreements maturing in more than 7 days are considered
illiquid for purposes of this restriction.]
 
     (11)  Invest for the purpose of exercising control or management of another
issuer.
 
     (12)  Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers which
invest in or sponsor such programs.
 
     (13)  Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
     (16)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and option transactions.
 
     (17)  Write (sell) put or call options, combinations thereof or similar
options except that the Fund may write covered call options on up to 100% of the
Fund's net assets and may write secured put options on up to 50% of the Fund's
net assets; nor may the Fund purchase put or call options if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Fund may buy or sell
options on financial futures contracts.
 
     (18)  Invest in commodities or commodity futures contracts although the
Fund may buy or sell financial futures contracts and options on such contracts;
or in real estate, although it may invest in securities which are secured by
real estate and securities of issuers which invest or deal in real estate.
 
KHYOF may not, as a fundamental policy:
 
     (1)  With respect to 75% of the Fund's total assets, purchase securities of
any issuer (other than securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities) if, as a result, (a) more than 5% of
the Fund's total assets would be invested in securities of that issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer, except
 
                                       E-5
   82
 
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (2)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objectives and policies are not prohibited and it may
lend its securities as discussed under "Investment Objectives, Policies and Risk
Factors -- Additional Investment Information" in the prospectus.
 
     (3)  Borrow money except (i) for leverage purposes, but not for more than
20% of the Fund's total assets, including the amount borrowed, and (ii) as a
temporary measure for extraordinary or emergency purposes, and then only in an
amount up to one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately selling any
portfolio securities. The maximum amount that the Fund may borrow is one-third
of the value of its assets (including the amount borrowed). If, for any reason,
the current value of the Fund's total assets falls below an amount equal to
three times the amount of its indebtedness from money borrowed, the Fund will,
within three days (not including Sundays and holidays), reduce its indebtedness
to the extent necessary.
 
     (4)  Engage in margin purchases except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with financial futures and options transactions;
nor may the Fund make short sales of securities or maintain a short position
unless, at all times when a short position is open, the Fund owns an equal
amount of such securities or securities convertible into or exchangeable for
securities, without payment of additional consideration, which are equal in
amount to and of the same issue as the securities sold short and such securities
are not subject to outstanding call options, and unless not more than 10% of the
Fund's net assets is held as collateral for such sales at any one time.
(Management does not intend to make such sales except for the purpose of
deferring realization of gain or loss for federal income tax purposes.)
 
     (5)  Concentrate more than 25% of the value of its assets in any one
industry, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund. Water,
communications, electric and gas utilities shall each be considered a separate
industry.
 
     (6)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (7)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (8)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
                                       E-6
   83
 
                              KEMPER HORIZON FUND
                          KEMPER HORIZON 20+ PORTFOLIO
                          KEMPER HORIZON 10+ PORTFOLIO
                          KEMPER HORIZON 5+ PORTFOLIO
 
As a matter of fundamental policy, the Fund may not:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of its assets would be invested in
securities of that issuer. To the extent a Portfolio invests in loan
participations, the Portfolio, as a non-fundamental policy, considers both the
lender and the borrower to be an issuer of such loan participation.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that it may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objective and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Portfolio's total assets falls below an amount equal to three times the amount
of its indebtedness from money borrowed, the Portfolio will, within three days
(not including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not purchase securities or make investments while
borrowings are in excess of 5% of its total assets.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction
number (4) above. (The collateral arrangements with respect to options,
financial futures and delayed delivery transactions and any margin payments in
connection therewith are not deemed to be pledges or other encumbrances.)
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the
Portfolio may make margin deposits in connection with options and financial
futures transactions.
 
     (7)  Make short sales of securities or maintain a short position for its
account unless at all times when a short position is open it owns an equal
amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 10% of the Portfolio's total assets is held as collateral for such
sales at any one time.
 
     (8)  Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
its total assets would be invested in any one industry. To the extent a
Portfolio invests in loan participations, the Portfolio, as a non-fundamental
policy, considers both the lender and the borrower to be an issuer of such loan
participation.
 
     (9)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnership interests), although it may invest in securities that
are secured by real estate and securities of issuers that invest or deal in real
estate.
 
     (10)  Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
 
     (11)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
                                       E-7
   84
 
                           KEMPER VALUE SERIES, INC.
                             KEMPER CONTRARIAN FUND
                     KEMPER-DREMAN HIGH RETURN EQUITY FUND
                          KEMPER SMALL CAP VALUE FUND
                            KEMPER SECURITIES TRUST
                      KEMPER SMALL CAP RELATIVE VALUE 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)  For KCF, KDHRF and KSCVF, borrow money or issue senior securities,
except that each Fund may borrow from banks from 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 future contracts and related options as
described in the prospectus. Optioned securities are not considered to be
pledged for purposes of this limitation.
 
     (3)  For KSCRVF, borrow money or issue senior securities, except that the
Fund may borrow from banks for temporary purposes in amounts not in excess of
one-third ( 1/3) 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 or in connection with options and futures contracts.
 
     (4)  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.
 
     (5)  For KCF, KDHRF and KSCVF, 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.
 
     (6)  Make loans, except that each Fund may lend securities it owns as
described herein and enter into repurchase agreement pursuant to its investment
objective and policies.
 
     (7)  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.
 
     (8)  Purchase or sell commodities or commodity contracts, except futures
contracts and options thereon as stated in the prospectus, or, for KCF, KDHRF
and KSCVF only, 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.
 
     (9)  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.
 
                                       E-8
   85
 
                         KEMPER AGGRESSIVE GROWTH FUND
   
                             KEMPER BLUE CHIP FUND
    
                               KEMPER GROWTH FUND
                           KEMPER VALUE + GROWTH FUND
                    KEMPER SMALL CAPITALIZATION EQUITY FUND
                             KEMPER TECHNOLOGY FUND
                            KEMPER TOTAL RETURN FUND
 
KAGGF may not, as a fundamental policy:
 
     (1)  With respect to 50% of its total assets, purchase securities of any
issuer (other than obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities) if, as a result, more than 5% of the total value
of the Fund's assets would be invested in securities of that issuer, except that
all or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
 
     (3)  Invest more than 25% of its total assets in a single issuer (other
than obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities), except that all or substantially all of the assets of the
Fund may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
 
     (4)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (5)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (6)  Pledge, hypothecate, mortgage or otherwise encumber its assets except
to secure borrowings permitted by restriction number 5 above. (The collateral
arrangements with respect to options, financial futures, foreign currency
transactions and delayed delivery transactions and any margin payments in
connection therewith are not deemed to be pledges or other encumbrances.)
 
     (7)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (8)  Make short sales of securities or maintain a short position for the
account of the Fund unless at all times when a short position is open it owns an
equal amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 10% of the Fund's total assets is held as collateral for such
sales at any one time.
 
     (9)  Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
the Fund's total assets would be invested in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
                                       E-9
   86
 
     (10)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities that are secured by real estate and securities of issuers
that invest or deal in real estate.
 
     (11)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (12)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
     (13)  Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Fund or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and together
own more than 5% of the securities of such issuer.
 
     (14)  Invest in interests in oil, gas, or other mineral exploration or
development programs, although it may invest in the securities of issuers which
invest in or sponsor such programs.
 
     (15)  Invest more than 5% of the Fund's total assets in securities of
issuers which with their predecessors have a record of less than three years
continuous operation and equity securities of issuers which are not readily
marketable.
 
     (16)  Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
 
     (17)  Invest more than 5% of its total assets in restricted securities,
excluding restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amounts of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.
 
     (18)  Purchase or sell real property (including limited partnership
interests but excluding readily marketable interests in real estate investment
trusts and readily marketable securities of companies which invest in real
estate).
 
     (19)  Invest more than 10% of its total assets in securities of real estate
investment trusts.
 
   
KBCF may not, as a fundamental policy:
    
 
   
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer, except that all or substantially all of the assets
of the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
    
 
   
     (2)  Purchase more than 10% of any class of voting securities of any
issuer, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
    
 
   
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objective and policies.
    
 
   
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption
    
 
                                      E-10
   87
 
   
requests without immediately selling any portfolio securities. If, for any
reason, the current value of the Fund's total assets falls below an amount equal
to three times the amount of its indebtedness from money borrowed, the Fund
will, within three days (not including Sundays and holidays), reduce its
indebtedness to the extent necessary. The Fund will not borrow for leverage
purposes and will not purchase securities or make investments while borrowings
are outstanding.
    
 
   
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction
number (4) above. (The collateral arrangements with respect to options,
financial futures and delayed delivery transactions and any margin payments in
connection therewith are not deemed to be pledges or other encumbrances.)
    
 
   
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
    
 
   
     (7)  Make short sales of securities or maintain a short position for the
account of the Fund unless at all times when a short position is open it owns an
equal amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 10% of the Fund's total assets is held as collateral for such
sales at any one time.
    
 
   
     (8)  Write (sell) put or call options, combinations thereof or similar
options; nor may it purchase put or call options if more than 5% of the Fund's
net assets would be invested in premiums on put and call options, combinations
thereof or similar options; however, the Fund may buy or sell options on
financial futures contracts.
    
 
   
     (9)  Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
the Fund's total assets would be invested in any one industry, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
    
 
   
     (10)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnership interests), although it may invest in securities
which are secured by real estate and securities of issuers which invest or deal
in real estate.
    
 
   
     (11)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
    
 
   
     (12)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
    
 
   
     (13)  Invest more than 5% of the Fund's total assets in securities of
issuers which with their predecessors have a record of less than three years
continuous operation and equity securities of issuers which are not readily
marketable.
    
 
   
     (14)  Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
    
 
   
     (15)  Purchase or sell real property (including limited partnership
interests but excluding readily marketable interests in real estate investment
trusts and readily marketable securities of companies which invest in real
estate).
    
 
                                      E-11
   88
 
   
     (16)  Invest more than 5% of its total assets in restricted securities,
excluding restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amounts of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.
    
 
KGF and the KVGF, each may not, as a fundamental policy:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the Fund's total assets would be invested in
securities of that issuer, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (2)  Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment objective
and substantially similar investment policies as the Fund. All debt securities
and all preferred stocks are each considered as one class.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
 
     (4)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (5)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (6)  Write (sell) put or call options, combinations thereof or similar
options; nor may it purchase put or call options if more than 5% of the Fund's
net assets would be invested in premiums on put and call options, combinations
thereof or similar options; however, the Fund may buy or sell options on
financial futures contracts.
 
     (7)  Invest 25% or more of its total assets in any one industry, except
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (9)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (10)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
                                      E-12
   89
 
KSCF may not, as a fundamental policy:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the Fund's total assets would be invested in
securities of that issuer, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (2)  Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment objective
and substantially similar investment policies as the Fund. All debt securities
and all preferred stocks are each considered as one class.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
 
     (4)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (5)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (6)  Write (sell) put or call options, combinations thereof or similar
options; nor may it purchase put or call options if more than 5% of the Fund's
net assets would be invested in premiums on put and call options, combinations
thereof or similar options; however, the Fund may buy or sell options on
financial futures contracts.
 
     (7)  Invest 25% or more of its total assets in any one industry, except
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (9)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (10)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
KTEC may not, as a fundamental policy:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the Fund's total assets would be invested in
securities of that issuer, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
                                      E-13
   90
 
     (2)  Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment objective
and substantially similar investment policies as the Fund. All debt securities
and all preferred stocks are each considered as one class.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Objectives and
Policies" in the prospectus.
 
     (4)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (5)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (6)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (7)  Invest 25% or more of its total assets in any one industry, except
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (9)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (10)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
KTRF may not, as a fundamental policy:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the Fund's total assets would be invested in
securities of that issuer, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (2)  Purchase more than 10% of any class of securities of any issuer,
except that all or substantially all of the assets of the Fund may be invested
in another registered investment company having the same investment objective
and substantially similar investment policies as the Fund. All debt securities
and all preferred stocks are each considered as one class.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase
 
                                      E-14
   91
 
agreements and short-term obligations in accordance with its objective and
policies are not prohibited and the Fund may lend its portfolio securities as
described under "Investment Objectives and Policies" in the prospectus.
 
     (4)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowings secured thereby.
 
     (5)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (6)  Write (sell) put or call options, combinations thereof or similar
options; nor may it purchase put or call options if more than 5% of the Fund's
net assets would be invested in premiums on put and call options, combinations
thereof or similar options; however, the Fund may buy or sell options on
financial futures contracts.
 
     (7)  Invest 25% or more of its total assets in any one industry, except
that all or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment objective and
substantially similar investment policies as the Fund. Water, communications,
electric and gas utilities shall each be considered a separate industry.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (9)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (10)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
                                      E-15
   92
 
                               KEMPER PORTFOLIOS
                           KEMPER CASH RESERVES FUND
 
The Fund may not, as a fundamental policy:
 
     (1)  Purchase securities or make investments other than in accordance with
its investment objective and policies.
 
     (2)  Purchase securities of any issuer (other than obligations, of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's net assets would be invested in
securities of that issuer.
 
     (3)  Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one class.
 
     (4)  Invest more than 5% of the Fund's total assets in securities of
issuers (other than obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities) which with their predecessors have a record of
less than three years continuous operation.
 
     (5)  Enter into repurchase agreements if more than 10% of the Fund's net
assets valued at the time of the transaction would be subject to repurchase
agreements maturing in more than seven days.
 
     (6)  Make loans to others (except through the purchase of debt obligations
or repurchase agreements or by lending its portfolio securities in accordance
with its investment objective and policies).
 
     (7)  Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the value of
its total assets (any such borrowings under this section will not be
collateralized). If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three business days, reduce its
indebtedness to the extent necessary. [The Fund will not borrow for leverage
purposes, and while borrowings are outstanding securities will not be
purchased.]
 
     (8)  Concentrate more than 25% of the Fund's net assets in any one
industry; provided, however, that the Fund intends, under normal conditions, to
invest more than 25% of its net assets in instruments issued by banks in
accordance with its investment objective and policies.
 
     (9)  Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of Kemper Portfolios or investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and together
they own more than 5% of the securities of such issuer.
 
     (10)  Invest more than 5% of the Fund's total assets in securities
restricted as to disposition under the federal securities laws (except
commercial paper issued under Section 4(2) of the Securities Act of 1933) and no
more than 10% of its assets will be invested in securities which are considered
illiquid. [Repurchase agreements maturing in more than 7 days are considered
illiquid for purposes of this restriction.]
 
     (11)  Invest for the purpose of exercising control or management of another
issuer.
 
     (12)  Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers which
invest in or sponsor such programs.
 
     (13)  Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
                                      E-16
   93
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
     (16)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions.
 
     (17)  Engage in put or call option transactions.
 
     (18)  Invest in commodities or commodity futures contracts; or in real
estate, although it may invest in securities which are secured by real estate
and securities of issuers which invest or deal in real estate.
 
                                      E-17
   94
 
                            KEMPER ASIAN GROWTH FUND
                               KEMPER EUROPE FUND
                           KEMPER GLOBAL INCOME FUND
                           KEMPER INTERNATIONAL FUND
 
KAGF may not, as a fundamental policy:
 
     (1)  With respect to 75% of the Fund's total assets, purchase securities of
any issuer (other than securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities) if, as a result, more than 5% of the
Fund's total assets would be invested in securities of that issuer, except that
all or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options and financial
futures transactions and any margin payments in connection therewith are not
deemed to be pledges or other encumbrances.)
 
     (6)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
options and financial futures transactions.
 
     (7)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (8)  Concentrate 25% or more of the Fund's total assets in any one
industry, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund. Water,
communications, electric and gas utilities shall each be considered a separate
industry. This limitation shall not apply to obligations issued by the U.S.
Government or its agencies or instrumentalities.
 
     (9)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts and may
enter into foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate including real estate investment trusts.
 
                                      E-18
   95
 
     (10)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund. The Fund may buy and sell
securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.
 
     (11)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
KEUF may not, as a fundamental policy:
 
     (1)  With respect to 75% of the Fund's total assets, purchase securities of
any issuer (other than securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities) if, as a result, more than 5% of the
Fund's total assets would be invested in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options and financial
futures transactions and any margin payments in connection therewith are not
deemed to be pledges or other encumbrances.)
 
     (6)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
options and financial futures transactions.
 
     (7)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (8)  Concentrate 25% or more of the Fund's total assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry. This limitation shall not apply to obligations
issued by the U.S. Government or its agencies or instrumentalities.
 
     (9)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts and may
enter into foreign currency transactions; or in real estate, although it may
invest insecurities which are secured by real estate and securities of issuers
which invest or deal in real estate including real estate investment trusts.
 
     (10)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities. The Fund may buy and
sell securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.
 
     (11)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
                                      E-19
   96
 
KGIF may not, as a fundamental policy:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer except that, with respect to 50% of the Fund's
total assets, the Fund may invest up to 25% of its total assets in securities of
any one issuer, and except that all or substantially all of the assets of the
Fund may be invested in another registered investment company having the same
investment objective and substantially similar investment policies as the Fund.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objective and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
     (8)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may the Fund purchase put
or call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (9)  Purchase securities (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.
 
     (10)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
                                      E-20
   97
 
     (11)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (12)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
KIF may not, as a fundamental policy:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States or any foreign government or their agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total assets
would be invested in securities of that issuer. With respect to 75% of its
assets, the Fund will limit its investments in the securities of any one foreign
government issuer to 5% of the Fund's total assets.
 
     (2)  Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited.
 
     (4)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (5)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (6)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (7)  Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry. This limitation shall not apply to obligations
issued by the United States or any foreign government or their agencies or
instrumentalities.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts and may
enter into foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
 
     (9)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities. The Fund may buy and
sell securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.
 
     (10)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
                                      E-21
   98
 
                            KEMPER SECURITIES TRUST
                       KEMPER U.S. GROWTH AND INCOME FUND
 
The Fund may not, as a fundamental policy:
 
     (1)  Borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction, from time
to time
 
     (2)  Issue senior securities, except as permitted under the 1940 Act and as
interpreted and modified by regulatory authority having jurisdiction, from time
to time.
 
     (3)  Purchase physical commodities or contracts relating to physical
commodities.
 
     (4)  Engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities.
 
     (5)  Purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.
 
     (6)  Make loans to other persons except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
 
     (7)  Concentrate its investments in a particular industry, as that term is
used in the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time.
 
                                      E-22
   99
 
                     KEMPER NATIONAL TAX FREE INCOME SERIES
                    KEMPER INTERMEDIATE MUNICIPAL BOND FUND
                           KEMPER MUNICIPAL BOND FUND
                      KEMPER STATE TAX-FREE INCOME SERIES
                     KEMPER CALIFORNIA TAX-FREE INCOME FUND
                      KEMPER FLORIDA TAX-FREE INCOME FUND
   
                      KEMPER NEW YORK TAX-FREE INCOME FUND
    
   
                        KEMPER OHIO TAX-FREE INCOME FUND
    
 
KMBF and KIMBF each may not, as a fundamental policy:
 
   
     (1)  Make investments other than in accordance with its investment
objective and policies, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
    
 
   
     (2)  With respect to temporary investments, purchase securities (other than
securities of the United States Government, its agencies or instrumentalities)
if as a result of such purchase more than 25% of the Fund's total assets would
be invested in any industry.
    
 
     (3)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the Fund's total assets would be invested in
securities of that issuer, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (4)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited.
 
     (5)  Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (6)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credit as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (7)  Write, purchase or sell puts, calls or combinations thereof, except in
accordance with its investment objective and policies.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts.
 
     (9)  Invest in real estate, although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate.
 
     (10)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (11)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
                                      E-23
   100
 
KCATF may not, as a fundamental policy:
 
     (1)  Purchase securities or make investments other than in accordance with
its investment objective and policies, except that all or substantially all of
the assets of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar investment
policies as the Fund.
 
     (2)  Purchase securities (other than securities of the United States
Government, its agencies or instrumentalities, or the State of California or its
political subdivisions) if as a result of such purchase more than 25% of the
Fund's total assets would be invested in any industry, except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (3) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the total value of the Fund's assets would be
invested in securities of that issuer, except that, with respect to 50% of the
Fund's total assets, the Fund may invest up to 25% of its total assets in
securities of any one issuer, and except that all or substantially all of the
assets of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar investment
policies as the Fund.
 
     (4) Make loans, except in accordance with its investment objective and
policies.
 
     (5) Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
10% of the Fund's net assets; or pledge its securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.
 
     (6)  Make short sales of securities or purchase any securities on margin,
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions.
 
     (7)  Write, purchase or sell puts, calls or combinations thereof, except in
accordance with its investment objective and policies.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts.
 
     (9)  Invest in real estate, although it may invest in Municipal Securities
which are secured by real estate and securities of issuers which invest or deal
in real estate.
 
     (10)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (11)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
   
KFLTF, KNYTF and KOHTF each may not, as a fundamental policy:
    
 
     (1)  Make investments other than in accordance with its investment
objective and policies, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (2)  Purchase securities (other than securities of the United States
Government, its agencies or instrumentalities, or of a state or its political
subdivisions) if as a result of such purchase 25% or more of its total assets
would be invested in any industry, except that all or substantially all of the
assets of
 
                                      E-24
   101
 
the Fund may be invested in another registered investment company having the
same investment objective and substantially similar investment policies as the
Fund.
 
     (3)  Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited.
 
     (4)  Borrow money except for temporary purposes (but not for the purpose of
purchase of investments) and then only in an amount not to exceed one-third of
the value of its total assets (including the amount borrowed) in order to meet
redemption requests which otherwise might result in the untimely disposition of
securities; or pledge its securities or receivables or transfer or assign or
otherwise encumber them in an amount to exceed 10% of its net assets to secure
borrowings. Reverse repurchase agreements are permitted within the limitations
of this paragraph. The Fund will not purchase securities or make investments
while reverse repurchase agreements or borrowings are outstanding.
 
     (5)  Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credit as may be necessary for the clearance of
transactions; however, it may make margin deposits in connection with financial
futures and options transactions.
 
     (6)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets; nor may it purchase put or
call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (7)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the dispositions of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.
 
     (8)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and option on such contracts.
 
     (9)  Invest in real estate, although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate.
 
     (10)  Issue senior securities except as permitted under the Investment
Company Act of 1940.
 
   
     (11)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the total value of the Fund's assets would be
invested in securities of that issuer except that, with respect to 50% of the
Fund's total assets, the Fund may invest up to 25% of its total assets in
securities of any one issuer, and except that all or substantially all of the
assets of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar investment
policies as the Fund.
    
 
                                      E-25
   102
 
                              KEMPER EQUITY TRUST
                     KEMPER-DREMAN FINANCIAL SERVICES FUND
 
The Fund may not, as a fundamental policy:
 
     (1)  Borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction from time to
time.
 
     (2)  Issue senior securities, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction, from time
to time.
 
     (3)  Purchase physical commodities or contracts relating to physical
commodities.
 
     (4)  Engage in the business of underwriting securities issued by others,
except to the extent that a Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities.
 
     (5)  Purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities
 
     (6)  Make loans to other persons except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
 
     (7)  Concentrate its investments in a particular industry, as that term is
used in the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time, except that the Fund will concentrate
its investments in the financial services industry.
 
                                      E-26
   103
 
                    KEMPER GLOBAL/INTERNATIONAL SERIES, INC.
                      KEMPER EMERGING MARKETS GROWTH FUND
                      KEMPER EMERGING MARKETS INCOME FUND
                          KEMPER GLOBAL BLUE CHIP FUND
                  KEMPER INTERNATIONAL GROWTH AND INCOME FUND
                           KEMPER LATIN AMERICA FUND
 
As a matter of fundamental policy, each Fund will not:
 
     (1)  Borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction from time to
time.
 
     (2)  Issue senior securities, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction, from time
to time.
 
     (3)  Purchase physical commodities or contracts relating to physical
commodities.
 
     (4)  Engage in the business of underwriting securities issued by others,
except to the extent that a Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities.
 
     (5)  Purchase or sell real estate, which terms does not include securities
of companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that a Fund reserves freedom of action
to hold and to sell real estate acquired as a result of the Fund's ownership of
securities.
 
     (6)  Make loans to other persons except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with a Fund's
investment objective and policies may be deemed to be loans.
 
     (7)  Concentrate its investments in a particular industry, as that term is
used in the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time.
 
                                      E-27
   104
 
                           KEMPER TARGET EQUITY FUND
                       KEMPER RETIREMENT FUND -- SERIES I
                      KEMPER RETIREMENT FUND -- SERIES II
                      KEMPER RETIREMENT FUND -- SERIES III
                      KEMPER RETIREMENT FUND -- SERIES IV
                       KEMPER RETIREMENT FUND -- SERIES V
                      KEMPER RETIREMENT FUND -- SERIES VI
                      KEMPER RETIREMENT FUND -- SERIES VII
                           KEMPER WORLDWIDE 2004 FUND
 
KRF I Fund may not:
 
     (1)  Purchase securities of any issue (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings, permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances).
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
     (8)  Write or sell put or call options, combinations thereof or similar
options; nor may the Fund purchase put or call option if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Fund may buy or sell
options on financial futures contracts.
 
     (9)  Purchase or retain the securities of any issuer if any of the officer,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
 
     (10)  Invest for the purpose of exercising control or management of another
issuer.
 
                                      E-28
   105
 
     (11)  Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (12)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (13)  Invest in interests in oil or gas exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
KRF II Fund may not:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings, permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances).
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
     (8)  Write or sell put or call options, combinations thereof or similar
options; nor may the Fund purchase put or call option if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Fund may buy or sell
options on financial futures contracts.
 
                                      E-29
   106
 
     (9)  Purchase or retain the securities of any issuer if any of the officer,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
 
     (10)  Invest for the purpose of exercising control or management of another
issuer.
 
     (11)  Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (12)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (13)  Invest in interests in oil or gas exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
KRF III may not:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings, permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances).
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
                                      E-30
   107
 
     (8)  Write or sell put or call options, combinations thereof or similar
options; nor may the Fund purchase put or call option if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Fund may buy or sell
options on financial futures contracts.
 
     (9)  Purchase or retain the securities of any issuer if any of the officer,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
 
     (10)  Invest for the purpose of exercising control or management of another
issuer.
 
     (11)  Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (12)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnership), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (13)  Invest in interests in oil or gas exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
KRF IV may not:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities
                                      E-31
   108
 
or other assets or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities or other
assets of the same issue as, and equal in amount to, the securities or other
assets sold short and unless not more than 10% of the Fund's total assets is
held as collateral for such sales at any one time.
 
     (8)  Write or sell put or call options, combinations thereof or similar
options; nor may the Fund purchase put or call options if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the fund may buy or sell
options on financial futures contracts.
 
     (9)  Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and together
own more than 5% of the securities of such issuer.
 
     (10)  Invest for the purpose of exercising control or management of another
issuer.
 
     (11)  Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (12)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (13)  Invest in interests in oil or gas exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
KRF V Fund may not:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
 
                                      E-32
   109
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
     (8)  Write or sell put or call options, combinations thereof or similar
options; nor may the Fund purchase put or call options if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Fund may but or sell
options on financial futures contracts.
 
     (9)  Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and together
own more than 5% of the securities of such issuer.
 
     (10)  Invest for the purpose of exercising control or management of another
issuer.
 
     (11)  Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (12)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (13)  Invest in interests in oil or gas exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
KRF VI Fund may not:
 
     (1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
                                      E-33
   110
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
     (8)  Write or sell put or call options, combinations thereof or similar
options; nor may the Fund purchase put or call options if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the fund may but or sell
options on financial futures contracts.
 
     (9)  Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and together
own more than 5% of the securities of such issuer.
 
     (10)  Invest for the purpose of exercising control or management of another
issuer.
 
     (11)  Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (12)  Investment commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (13)  Invest in interests in oil or gas exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
 
     (14)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (15)  Issue senior securities as defined in the Investment Company Act of
1940.
 
KRF VII Fund may not:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Fund's assets would be invested
in securities of that issuer.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of
                                      E-34
   111
 
the Fund's total assets falls below an amount equal to three times the amount of
its indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
     (8)  Purchase securities (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (9)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (10)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
 
     (11)  Issue senior securities as defined in the Investment Company Act of
1940.
 
KWF4 Fund may not:
 
     (1)  Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States or any foreign government or their agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total assets
would be invested in securities of that issuer. With respect to 75% of its total
assets, the Fund will limit its investments in the securities of any foreign
government issuer to 5% of the Fund's total assets.
 
     (2)  Purchase more than 10% of any class of voting securities of any
issuer.
 
     (3)  Make loans to others provided that the Fund may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objectives and policies.
 
     (4)  Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Fund will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
 
                                      E-35
   112
 
     (5)  Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
 
     (6)  Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the Fund
may make margin deposits in connection with options and financial futures
transactions.
 
     (7)  Make short sales of securities or other assets or maintain a short
position for the account of the Fund unless at all times when a short position
is open it owns an equal amount of such securities or other assets or owns
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities or other assets of the same issue as, and
equal in amount to, the securities or other assets sold short and unless not
more than 10% of the Fund's total assets is held as collateral for such sales at
any one time.
 
     (8)  Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Fund's net assets, nor may the Fund purchase put
or call options if more than 5% of the Fund's net assets would be invested in
premiums on put and call options, combinations thereof or similar options;
however, the Fund may buy or sell options on financial futures contracts.
 
     (9)  Purchase securities (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if as a result of such
purchase 25% or more of the Fund's total assets would be invested in any one
industry.
 
     (10)  Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts.
 
     (11)  Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities. The Fund may buy and
sell securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.
 
     (12)  Issue senior securities as defined in the Investment Company Act of
1940.
 
                                      E-36
   113
 
                                                                      APPENDIX 1
 
                     KEMPER TRUSTS/CORPORATIONS and Series
 
                    KEMPER AGGRESSIVE GROWTH FUND ("KAGGF")
 
                       KEMPER ASIAN GROWTH FUND ("KAGF")
 
   
                         KEMPER BLUE CHIP FUND ("KBCF")
    
 
                    KEMPER DIVERSIFIED INCOME FUND ("KDIF")
 
                          KEMPER EQUITY TRUST ("KET")
                Kemper-Dreman Financial Services Fund ("KDFSF")
 
   
                          KEMPER EUROPE FUND ("KEUF")
    
 
                       KEMPER GLOBAL INCOME FUND ("KGIF")
 
                          KEMPER GLOBAL/INTERNATIONAL
                             SERIES, INC. ("KGIS")
                 Kemper Emerging Markets Growth Fund ("KEMGF")
                 Kemper Emerging Markets Income Fund ("KEMIF")
                     Kemper Global Blue Chip Fund ("KGBCF")
             Kemper International Growth and Income Fund ("KIGIF")
                       Kemper Latin America Fund ("KLAF")
 
                           KEMPER GROWTH FUND ("KGF")
 
                       KEMPER HIGH YIELD SERIES ("KHYS")
                        Kemper High Yield Fund ("KHYF")
                  Kemper High Yield Opportunity Fund ("KHYOF")
 
                          KEMPER HORIZON FUND ("KHF")
   
                     Kemper Horizon 20+ Portfolio ("KH20P")
    
   
                     Kemper Horizon 10+ Portfolio ("KH10P")
    
   
                      Kemper Horizon 5 Portfolio ("KH5P")
    
 
                           KEMPER INCOME AND CAPITAL
                          PRESERVATION FUND ("KICPF")
 
                       KEMPER INTERNATIONAL FUND ("KIF")
 
                            KEMPER NATIONAL TAX FREE
   
                            INCOME SERIES ("KNTIS")
    
               Kemper Intermediate Municipal Bond Fund ("KIMBF")
                      Kemper Municipal Bond Fund ("KMBF")
 
                            KEMPER PORTFOLIOS ("KP")
                       Kemper Cash Reserves Fund ("KCRF")
                      Kemper U.S. Mortgage Fund ("KUSMF")
 
                        KEMPER SECURITIES TRUST ("KST")
                 Kemper U.S. Growth and Income Fund ("KUSGIF")
                Kemper Small Cap Relative Value Fund ("KSCRVF")
 
                          KEMPER SMALL CAPITALIZATION
                              EQUITY FUND ("KSCF")
 
                             KEMPER STATE TAX-FREE
   
                            INCOME SERIES ("KSTIS")
    
                Kemper California Tax-Free Income Fund ("KCATF")
                 Kemper Florida Tax-Free Income Fund ("KFLTF")
   
                 Kemper New York Tax-Free Income Fund ("KNYTF")
    
   
                   Kemper Ohio Tax-Free Income Fund ("KOHTF")
    
 
                       KEMPER TARGET EQUITY FUND ("KTEF")
   
                  Kemper Retirement Fund -- Series I ("KRF I")
    
   
                 Kemper Retirement Fund -- Series II ("KRF II")
    
   
                Kemper Retirement Fund -- Series III ("KRF III")
    
   
                 Kemper Retirement Fund -- Series IV ("KRF IV")
    
   
                  Kemper Retirement Fund -- Series V ("KRF V")
    
   
                 Kemper Retirement Fund -- Series VI ("KRF VI")
    
   
                Kemper Retirement Fund -- Series VII ("KRF VII")
    
   
                      Kemper Worldwide 2004 Fund ("KWF4")
    
 
                        KEMPER TECHNOLOGY FUND ("KTEC")
 
                       KEMPER TOTAL RETURN FUND ("KTRF")
 
                             KEMPER U.S. GOVERNMENT
                            SECURITIES FUND ("KGSF")
 
                       KEMPER VALUE+GROWTH FUND ("KVGF")
 
                       KEMPER VALUE SERIES, INC. ("KVS")
   
                         Kemper Contrarian Fund ("KCF")
    
   
                Kemper-Dreman High Return Equity Fund ("KDHRF")
    
   
                     Kemper Small Cap Value Fund ("KSCVF")
    
   114
 
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   115
 
   
                                                                      APPENDIX 2
    
 
   
                            FUND SHARES OUTSTANDING
    
 
   
     Holders of record of the shares of each Fund at the close of business on
September 22, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table below sets forth the number of shares outstanding for
each Fund as of June 30, 1998.
    
 
   


                                                                 NUMBER OF SHARES
                                                                    OUTSTANDING
                            FUND                                AS OF JUNE 30, 1998
                            ----                                -------------------
                                                             
Kemper Aggressive Growth Fund                                       2,671,540.63
Kemper Asian Growth Fund                                            1,344,084.82
Kemper Blue Chip Fund                                              33,856,149.23
Kemper California Tax-Free Income Fund                            133,474,603.86
Kemper Cash Reserves Fund                                          73,317,872.15
Kemper Contrarian Fund                                             10,989,617.13
Kemper Diversified Income Fund                                    151,187,977.11
Kemper Emerging Markets Growth Fund                                  136,881.434
Kemper Emerging Markets Income Fund                                  609,188.728
Kemper Europe Fund                                                  3,273,007.17
Kemper Florida Tax-Free Income Fund                                10,029,302.04
Kemper Global Blue Chip Fund                                         655,209.051
Kemper Global Income Fund                                          10,150,394.54
Kemper Growth Fund                                                197,177,727.45
Kemper High Yield Fund                                            661,537,807.63
Kemper High Yield Opportunity Fund                                  2,429,192.17
Kemper Horizon 10+ Portfolio                                        8,634,179.22
Kemper Horizon 20+ Portfolio                                        7,953,458.72
Kemper Horizon 5 Portfolio                                          4,717,196.13
Kemper Income and Capital Preservation Fund                        76,430,642.91
Kemper Intermediate Municipal Bond Fund                             2,296,881.76
Kemper International Fund                                          51,224,178.28
Kemper International Growth & Income Fund                            236,799.972
Kemper Latin America Fund                                            174,353.718
Kemper Municipal Bond Fund                                        302,140,272.71
Kemper New York Tax-Free Income Fund                               25,532,439.84
Kemper Ohio Tax-Free Income Fund                                    4,135,843.59
Kemper Retirement Fund Series I                                     9,979,164.52
Kemper Retirement Fund Series II                                   12,903,472.30
Kemper Retirement Fund Series III                                  11,346,741.18
Kemper Retirement Fund Series IV                                   11,808,353.63
Kemper Retirement Fund Series V                                    12,530,768.83
Kemper Retirement Fund Series VI                                   6,321,422.386
Kemper Retirement Fund Series VII                                  24,583,385.14
Kemper Small Capitalization Equity Fund                           146,817,729.17
Kemper Small Cap Relative Value Fund                                   90,037.67
Kemper Small Cap Value Fund                                        56,727,064.94
Kemper Technology Fund                                            108,388,452.66
Kemper Total Return Fund                                          319,635,573.90

    
   116
 
   


                                                                 NUMBER OF SHARES
                                                                    OUTSTANDING
                            FUND                                AS OF JUNE 30, 1998
                            ----                                -------------------
                                                             
Kemper U.S. Government Securities Fund                            385,056,726.69
Kemper U.S. Growth & Income Fund                                   1,309,693.177
Kemper U.S. Mortgage Fund                                         314,907,460.36
Kemper Value + Growth Fund                                          8,673,570.08
Kemper Worldwide 2004 Fund                                          2,852,584.52
Kemper-Dreman Financial Services Fund                              19,372,714.24
Kemper-Dreman High Return Equity Fund                             133,979,596.17

    
 
                                        2
   117
 
                                                                      APPENDIX 3
 
                 BENEFICIAL OWNERS OF 5% OR MORE OF FUND SHARES
 
   
     As of June 30, 1998, 87,277 shares in the aggregate, 11.70% of the
outstanding shares of KAGF (A Shares) were held in the name of NFSC FEBO #
179-821748, FMT CO CUST IRA, FBO Burdett W. Helenius, 15990 Algoma Avenue Cedar
Springs, MI 49319, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
    
 
     As of June 30, 1998, 60,243 shares in the aggregate, 8.07% of the
outstanding shares of KAGF (A Shares) were held in the name of National City
Bank of PA, Trustee, Mckeesport Healthcare Pension Trust U/A 02/08/1984, Attn.:
Trust Mutual Funds, PO Box 94984, Cleveland, OH 44101, who may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
   
     As of June 30, 1998, 79,512 shares in the aggregate, 14.63% of the
outstanding shares of KAGF (B Shares) were held in the name of NFSC FEBO #
179-821748, FMT CO Custodian IRA, FBO Burdett W. Helenius, 15990 Algoma Avenue,
Cedar Springs, MI 49319, who may be deemed to be the beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
    
 
     As of June 30, 1998, 5,774 shares in the aggregate, 10.44% of the
outstanding shares of KAGF (C Shares) were held in the name of A.G. Edwards &
Sons Inc. Custodian, FBO Julie M. Cobb IRA R/ O, 5104 Chicago Street, Omaha, NE
68132, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 3,598 shares in the aggregate, 6.50% of the
outstanding shares of KAGF (C Shares) were held in the name of Coldstream
Capital LLC P/S, P. Rader/R R Reinfrank, Trustees, FBO Stephen Rader, 865 S.
Figueroa Street, Suite 700, Los Angeles, CA 90017, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
   
     As of June 30, 1998, 85,649 shares in the aggregate, 5.66% of the
outstanding shares of KAGGF (A Shares) were held in the name of NFSC FEBO #
A8H-626155, Ake N Nystrom, 1016 Rue Grande Vue, Pittsburgh, PA 15220, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
    
 
     As of June 30, 1998, 71,507 shares in the aggregate, 7.26% of the
outstanding shares of KAGGF (B Shares) were held in the name of NFSC FEBO #
0EA-285072, George H. Pearce, Iride Pearce, 42 Mechanic Street, Danielson, CT
06239, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 51,534 shares in the aggregate, 5.23% of the
outstanding shares of KAGGF (B Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 8,630 shares in the aggregate, 5.08% of the
outstanding shares of KAGGF (C Shares) were held in the name of NFSC FEBO #
APX-151564, Rainbow Ponds Inc., 2904 Hwy. 8 West, Cleveland, MS 38732, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
 
   
     As of June 30, 1998, 544,503 shares in the aggregate, 5.53% of the
outstanding shares KBCF (B Shares) were held in the name of NFSC FBO #
139-301639, FMT Co. Custodian, IRA Rollover, FBO Paul W. Grabow, 137 Ball Road,
Mountain Lake, NJ 07046, who may be deemed to be the beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
    
 
   
     Certain accounts for which the Investment manager Acts as investment
adviser owned 31,528 shares in the aggregate, 8.03% of the outstanding shares of
KBCF (I Shares) on June 30, 1998. The
    
   118
 
   
Investment Manager may be deemed to be a beneficial owner of certain of these
shares, but disclaims any beneficial ownership in such shares.
    
 
   
     Certain accounts for which the Investment manager Acts as investment
adviser owned 297,068 shares in the aggregate, 75.66% of the outstanding shares
of KBCF (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
a beneficial owner of certain of these shares, but disclaims any beneficial
ownership in such shares.
    
 
     As of June 30, 1998, 8,800,401 shares in the aggregate, 6.82% of the
outstanding shares of KCATF (A Shares) were held in the name of Smith Barney
Inc., 00154613168, 388 Greenwich Street, New York, NY 10013, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 575,562 shares in the aggregate, 12.76% of the
outstanding shares of KCATF (B Shares) were held in the name of Josef Dittrich &
Maria Dittrich, Trustee, FBO Dittrich Family Trust, U/A 11/03/1998, 11373
Tortuga Street, Cypress, CA 90630, who may be deemed to be the beneficial owner
of certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 338,780 shares in the aggregate, 7.51% of the
outstanding shares of KCATF (B Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 267,029 shares in the aggregate, 5.92% of the
outstanding shares of KCATF (B Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration # 97D69, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 53,562 shares in the aggregate, 6.67% of the
outstanding shares of KCATF (C Shares) were held in the name of Helena G. Hale,
Trustee, FBO Helena Hale Living Trust, U/A 11/13/1997, 803 Paseo Alicante, Santa
Barbara, CA 93103, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 61,513 shares in the aggregate, 7.66% of the
outstanding shares of KCATF (C Shares) were held in the name of Marilyn L.
Ginsburg-Kindler, Trustee, FBO Marilyn L. Ginsburg, Kindler Trust U/A
11/13/1997, 427 Beirut Avenue, Pacific Plsds, CA 90272, who may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 45,187 shares in the aggregate, 5.62% of the
outstanding shares of KCATF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration # 97D72, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 44,532 shares in the aggregate, 5.54% of the
outstanding shares of KCATF (C Shares) were held in the name of Patricia Elliott
Apstein & Theodore Apstein, Trustee, FBO Apstein Family Trust, U/A 02/21/1989,
1000 N. Norman Place, Los Angeles, CA 90049, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 4,699,434 shares in the aggregate, 5.10% of the
outstanding shares of KCRF (A Shares) were held in the name of NFSC FEBO #
OR1-004359, Home Savings of America, Trustee, Tracy Shimura, 9144 Burnet Avenue,
#33, Sepulveda, CA 91343, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 6,838,077 shares in the aggregate, 7.42% of the
outstanding shares of KCRF (A Shares) were held in the name of CIBC Oppenheimer
Corp., FBO 320-18212-16, PO Box 3484,
 
                                        2
   119
 
Church Street Station, New York, NY 10008, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
   
     As of June 30, 1998, 2,082,360 shares in the aggregate, 7.16% of the
outstanding shares of KCRF (C Shares) were held in the name of NFSC FEBO #
OSN-997943, Lyle Betsch, Virginia Bertsch, 2164 Falcon Ridge, Highlands, NC
28741, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
    
 
     As of June 30, 1998, 4,381,918 shares in the aggregate, 8.86% of the
outstanding shares of KDIF (B Shares) were held in the name of NFSC FEBO #
OGX-939595, NFSC/FMTC IRA, FBO Sherman B Kerbel, 3006 O'Hara Place, Olney, MD
20832, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 3,007,403 shares in the aggregate, 6.08% of the
outstanding shares of KDIF (B Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 475,596 shares in the aggregate, 10.91% of the
outstanding shares of KDIF (C Shares) were held in the name of NFSC FEBO #
APW-891444, Mary M Villageomez, 218 Tubing Road, Broussard, LA 70518, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 271,609 shares in the aggregate, 6.23% of the
outstanding shares of KDIF (C Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 938,478 shares in the aggregate, 21.53% of the
outstanding shares of KDIF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration (97D56), 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 136,415 shares in the aggregate, 8.08% of the
outstanding shares of KEUF (A Shares) were held in the name of NFSC FEBO #
BRD-015881, Stephen J. Shive, Flora A. Shive, 921 Wiseburg Road, White Hall, MD
21161, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 91,824 shares in the aggregate, 5.44% of the
outstanding shares of KEUF (A Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 93,800 shares in the aggregate, 5.55% of the
outstanding shares of KEUF (A Shares) were held in the name of Charles Schwab &
Co. Inc., Special Custody Account for the Exclusive Benefit of Customers, Attn
Mutual Funds, 101 Montgomery Street, San Francisco, CA 94104, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 125,322 shares in the aggregate, 9.01% of the
outstanding shares of KEUF (B Shares) were held in the name of NFSC FEBO #
BRD-015881, Stephen J. Shive, Flora A. Shive, 921 Wiseburg Road, White Hall, MD
21161, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 13,204 shares in the aggregate, 9.10% of the
outstanding shares of KEUF (C Shares) were held in the name of NFSC FEBO #
APX-726710, NFSC/FMTC IRA Rollover, FBO
 
                                        3
   120
 
Carole Sue Crenshaw, 1604 Cherokee Place, Bartlesville, OK 74003, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 9,271 shares in the aggregate, 6.39% of the
outstanding shares of KEUF (C Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corp Inc., PO Box 2052, Jersey City, NJ 07303, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 15,413 shares in the aggregate, 10.62% of the
outstanding shares of KEUF (C Shares) were held in the name of Sterling Trust
Company Custodian, FBO Sandra J. Sundeen IRA, #K00731, PO Box 2526, Waco, TX
76702, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 759,046 shares in the aggregate, 8.09% of the
outstanding shares of KFLTF (A Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn.: Fund
Administration 977L9, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 68,870 shares in the aggregate, 11.85% of the
outstanding shares of KFLTF (B Shares) were held in the name of NFSC FBO #
OK7-007390, Lola F. Benson, 2846 SE Evergreen Avenue, Stuart, FL 34997, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
 
     As of June 30, 1998, 59,958 shares in the aggregate, 10.31% of the
outstanding shares of KFLTF (B Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 101,823 shares in the aggregate, 17.52% of the
outstanding shares of KFLTF (B Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn.: Fund
Administration #97D73, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 29,233 shares in the aggregate, 5.03% of the
outstanding shares of KFLTF (B Shares) were held in the name of Albert J.
Thompson & Fern L. Thompson JT WROS, 526 Pendleton Drive, Venice, FL 34292, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 7,571 shares in the aggregate, 11.21% of the
outstanding shares of KFLTF (C Shares) were held in the name of NFSC FEBO
#BR5-453765, David I. Pinkham, Mary E. Pinkham, 10930 102nd Avenue North,
Seminole, FL 33778, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 3,874 shares in the aggregate, 5.73% of the
outstanding shares of KFLTF (C Shares) were held in the name of Wexford Clearing
Services Corp. FBO Marilyn Milbauer, Milton Milbauer, Co-Trustees, The Marilyn
Milbauer Trust, U/A DTD 11/30/93, Lake Worth, FL 33467, who may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 15,011 shares in the aggregate, 22.22% of the
outstanding shares of KFLTF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn.: Fund
Administration #97D74, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
                                        4
   121
 
   
     As of June 30, 1998, 6,122 shares in the aggregate, 9.06% of the
outstanding shares of KFLTF (C Shares) were held in the name of Susan H.
Wallace, 260 Rafael Boulevard NE, St. Petersburg, FL 33704, who may be deemed to
be the beneficial owner of certain of these shares.
    
 
     As of June 30, 1998, 27,349 shares in the aggregate, 40.49% of the
outstanding shares of KFLTF (C Shares) were held in the name of Southwest
Securities Inc. FBO, Patricia G. Kaighin, Box 509002, Dallas, TX 75250, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
 
     As of June 30, 1998, 119,492 shares in the aggregate, 7.28% of the
outstanding shares of KGF (C Shares) were held in the name of J.C. Bradford &
Co. Custodian FBO, RCIP Limited Partners I, 330 Commerce Street, Nashville, TN
37201, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment manager Acts as investment
adviser owned 1,213,812 shares in the aggregate, 67.85% of the outstanding
shares of KGF (I Shares) on June 30, 1998. The Investment Manager may be deemed
to be a beneficial owner of such shares but disclaims any beneficial ownership
in such shares.
 
     As of June 30, 1998, 104,749 shares in the aggregate, 5.85% of the
outstanding shares of KGF (I Shares) were held in the name of ZKI INC. Non-Qua
DEF C, Lasalle National Bank, Trustee, 222 S Riverside Plaza, 24th Floor,
Chicago, IL 60606, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 504,896 shares in the aggregate, 6.15% of the
outstanding shares of KGIF (A Shares) were held in the name of NFSC FBO
#AC3-002321, NFSC/FMTC, FBO Roger T. Odegaard IRA, RR I Box 69, Crookston, MN
67160, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 129,701 shares in the aggregate, 7.28% of the
outstanding shares of KGIF (B Shares) were held in the name of NFSC FEBO
#OC8-354236, Irene Simpson, Trustee, Irene B. Simpson Revoc Trust, U/A 11-20-91,
20 Hillsdale Street, Auburn, ME 04210, who may be deemed to be the beneficial
owner of certain of these shares, but disclaims any beneficial ownership
therein.
 
     As of June 30, 1998, 89,551 shares in the aggregate, 5.03% of the
outstanding shares of KGIF (B Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 237,511 shares in the aggregate, 13.34% of the
outstanding shares of KGIF (B Shares) were held in the name of Everen Clearing
Corp. Custodian, FBO Jack Ely Westin IRA, A/C 8285-1309, 513 Oak Mont Place,
Melbourne, FL 32940, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 18,349 shares in the aggregate, 11.01% of the
outstanding shares of KGIF (C Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 45,610 shares in the aggregate, 27.37% of the
outstanding shares of KGIF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration (97D79), 4800 Deer Lake Drive, East 3rd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 14,714 shares in the aggregate, 8.83% of the
outstanding shares of KGIF (C Shares) were held in the name of WLN, Attn. Mary
Schroeder, PO Box 3888, Lacey, WA 98509, who
 
                                        5
   122
 
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 778,700 shares in the aggregate, 8.00% of the
outstanding shares of KGSF (B Shares) were held in the name of NFSC FEBO
#OR1-294403, Home Savings of America, Trustee, IRA of David V. White, 815 E 6th
Street, Ontario, CA 91764, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 539,944 shares in the aggregate, 5.55% of the
outstanding shares of KGSF (B Shares) were held in the name of BHC Securities
Inc., FAO 25080444, Attn. Mutual Funds Dept., One Commerce Square, 2005 Market
Street Suite 1200, Philadelphia, PA 19103, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 80,806 shares in the aggregate, 5.39% of the
outstanding shares of KGSF (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 199,974 shares in the aggregate, 13.35% of the
outstanding shares of KGSF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration (97D94), 4800 Deer Lake Drive, East 2nd FL, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 281,359 shares in the aggregate, 48.65% of the outstanding shares
of KGSF (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 237,900 shares in the aggregate, 6.42% of the
outstanding shares of KH20P (B Shares) were held in the name of NFSC FBO
#E3N-002658, NFSC/FMTC IRA, FBO Robert Montgomery, 1220 Cottonwood Street, Grand
Forks, ND 58201, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 75,034 shares in the aggregate, 98.58% of the outstanding shares
of KH20P (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 634,617 shares in the aggregate, 14.21% of the
outstanding shares of KH10P (A Shares) were held in the name of Prudential
Trust, FBO Its Defined Contribution Plan Customers, 30 Scranton Office Park,
Scranton, PA 18507, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 349,459 shares in the aggregate, 10.63% of the
outstanding shares of KH10P (B Shares) were held in the name of NFSC FBO
#APW-732176, NFSC/FMTC IRA Rollover, FBO Richard L. Johnson, 935 Trentle Court,
Charlotte, NC 28211, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 14,669 shares in the aggregate, 50.06% of the outstanding shares
of KH10P (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 3,240 shares in the aggregate, 11.06% of the
outstanding shares of KH10P (I Shares) were held in the name of ZKDI Inc.
Non-QUA DEF C, Lasalle National Bank, Trustee, 222 S. Riverside Plaza 24th
Floor, Chicago, IL 60606, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
                                        6
   123
 
     As of June 30, 1998, 11,182 shares in the aggregate, 38.16% of the
outstanding shares of KH10P (I Shares) were held in the name of ZKI Inc. Non-QUA
DEF C, Lasalle National Bank, Trustee, 222 S. Riverside Plaza 24th Floor,
Chicago, IL 60606, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 108,983 shares in the aggregate, 5.20% of the
outstanding shares of KH5P (A Shares) were held in the name of NFSC FEBO
#AC7-015628, Mildred L Burrack, Dixie Ghormley, Box 206 Feulner Street,
Strawberry Point, IA 52076, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 152,589 shares in the aggregate, 7.41% of the
outstanding shares of KH5P (B Shares) were held in the name of NFSC FEBO
#A7L-685631, Gregg A. Albritton Custodian, Blake T. Albritton UTMA IL, 2519
Reduck Court, Decatur, IL 62521, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 26,564 shares in the aggregate, 6.08% of the
outstanding shares of KH5P (C Shares) were held in the name of Investors
Fiduciary Trust Co-Trust, IRA R/O Micaela Delgado, 720 President St, Brooklyn,
NY 11215, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 32,419 shares in the aggregate, 7.42% of the
outstanding shares of KH5P (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corp Inc., PO Box 2052, Jersey City, NJ 07303, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 29,044 shares in the aggregate, 6.65% of the
outstanding shares of KH5P (C Shares) were held in the name of Rogers Petroleum
Company, 8511 141st Street CT W, Saint Paul, MN 55124, who may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 13,949 shares in the aggregate, 75.26% of the outstanding shares
of KH5P (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 4,577 shares in the aggregate, 24.70% of the
outstanding shares of KH5P (I Shares) were held in the name of ZKI Inc. Non-QUA
DEF C, Lasalle National Bank, Trustee, 222 S. Riverside Plaza 24th Floor,
Chicago, IL 60606, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 10,164,062 shares in the aggregate, 5.62% of the
outstanding shares of KHYF (B Shares) were held in the name of NFSC FEBO
#ATL-216798, Mark F. Forward, 6140 Oram Street, Dallas, TX 75214, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 1,380,946 shares in the aggregate, 5.93% of the
outstanding shares of KHYF (C Shares) were held in the name of NFSC FEBO
#E49-005550, Susan A. Walters, 201 North Squirrel Road, Apt 309, Auburn Hills,
MI 48326, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 1,232,092 shares in the aggregate, 5.29% of the
outstanding shares of KHYF (C Shares) were held in the name of Donaldson Lufkin
Jenrette, Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 2,307,171 shares in the aggregate, 9.92% of the
outstanding shares of KHYF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration #97D59, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
 
                                        7
   124
 
32246 who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 1,584,828 shares in the aggregate, 57.30% of the outstanding
shares of KHYF (I Shares) on June 30, 1998. The Investment Manager may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 259,956 shares in the aggregate, 9.40% of the
outstanding shares of KHYF (I Shares) were held in the name of Patterson & Co.,
PNB Personal Trust Acctg., PO Box 7829, Philadelphia, PA 19101, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
   
     As of June 30, 1998, 145,469 shares in the aggregate, 5.26% of the
outstanding shares of KHYF (I Shares) were held in the name of State Street Bank
and Trust Company, NA Agent for the Salvation Army, A CA Corp. High Yield Fund
#FA2011, 101 California Street, Suite 1175, San Francisco, CA 94111, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
    
 
     As of June 30, 1998, 81,397 shares in the aggregate, 7.07% of the
outstanding shares of KHYOF (A Shares) were held in the name of NFSC FEBO
#AK3-347175, Kenneth R. Snowe, Ingrid Snowe, c/o Hearthstone Fin Pln., 36
Bartholf Avenue, Pompton Lakes, NJ 07442, who may be deemed to be the beneficial
owner of certain of these shares, but disclaims any beneficial ownership
therein.
 
     As of June 30, 1998, 224,470 shares in the aggregate, 21.02% of the
outstanding shares of KHYOF (B Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 23,717 shares in the aggregate, 10.92% of the
outstanding shares of KHYOF (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 16,613 shares in the aggregate, 7.65% of the
outstanding shares of KHYOF (C Shares) were held in the name of Prudential
Securities Inc. FBO, Mr. Franklin O Bell, IRA Rollover DTD 09/16/96, 889 Summit
Pointe, Lewisville, TX 75077, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 16,575,703 shares in the aggregate, 26.19% of the
outstanding shares of KICPF (A Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith Custodian, FBO Helga Berger IRA, Attn.: Broker Transfer,
9601 S. Meridian Blvd., 3rd Floor, Englewood, CO 80112, who may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 692,617 shares in the aggregate, 6.40% of the
outstanding shares of KICPF (B Shares) were held in the name of NFSC FBO
#E47-001465, NFSC/FMTC IRA, FBO Joann Flaherty, 15018 Parkside Avenue, Oak
Forest, IL 60452,who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 570,242 hares in the aggregate, 5.27% of the
outstanding shares of KICPF (B Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corp., PO Box 2052, Jersey City, NJ 07303, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 573,814 shares in the aggregate, 5.30% of the
outstanding shares of KICPF (B Shares) were held in the name of Merrill Lynch,
Pierce, Fenner and S Rennay L Fields, Attn: Fund Administration, 4800 Deer Lake
Drive East, 3rd Floor, Jacksonville, FL 32246-6484, who may be
 
                                        8
   125
 
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 645,943 shares in the aggregate, 5.96% of the
outstanding shares of KICPF (B Shares) were held in the name of BHC Securities,
Inc., FAO 73345883, Attn.: Mutual Funds, One Commerce Square, 2005 Market
Street, Suite 1200, Philadelphia, PA 19103, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 446,481 shares in the aggregate, 28.69% of the
outstanding shares of KICPF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn.: Fund
Administration (97D78), 4800 Deer Lake Drive, East 3rd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
   
     As of June 30, 1998, 119,789 shares in the aggregate, 7.69% of the
outstanding shares of KICPF (C Shares) were held in the name of Paul K.
Christoff, Trustee, Lindsay Concrete Prod Inc. PSP, DTD 10-1-89, Paul K.
Christoff, Attorney, PO Box 578, Canal Fulton, OH 44614, who may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
    
 
     Certain accounts for which the Investment Manager acts as Investment
Adviser owned 507,485 shares in the aggregate, 68.76% of the outstanding shares
of KICPF (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 94,955 shares in the aggregate, 5.34% of the
outstanding shares of KIF (C Shares) were held in the name of NFSC FEBO
#APO-961493, NFSC/FMTC IRA, FBO Paul L Beach, 4021 Silverlake Road,
Bartlesville, OK 74006, who may be deemed to be the beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 120,189 shares in the aggregate, 6.76% of the
outstanding shares of KIF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration (97D80), 4800 Deer Lake Drive, East 3rd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 975,478 shares in the aggregate, 69.77% of the outstanding shares
of KIF (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 85,781 shares in the aggregate, 5.01% of the
outstanding shares of KIMBF (A Shares) were held in the name of NFSC FEBO
#OKG-002402, William H. Twaddell, Trustee, William H. Twaddell, American
Embassy -- Lagos, Department of State, Washington, DC 20521, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 92,090 shares in the aggregate, 5.38% of the
outstanding shares of KIMBF (A Shares) were held in the name of ABN-AMRO
Incorporated, 392-00164-11, Attn. Mutual Fund Operations, PO Box 6108, Chicago,
IL 60680, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 106,050 shares in the aggregate, 6.20% of the
outstanding shares of KIMBF (A Shares) were held in the name of GK Management,
15700 Lathrop Avenue, Harvey, IL 60426, who may be deemed to be the beneficial
owner of certain of these shares, but disclaims any beneficial ownership
therein.
 
     As of June 30, 1998, 143,513 shares in the aggregate, 8.39% of the
outstanding shares of KIMBF (A Shares) were held in the name of Woodstock A
Partnership, c/o Wood County Trust Co., PO
 
                                        9
   126
 
Box 800, Wisconsin Rapids, WI 54495, who may be deemed to be the beneficial
owner of certain of these shares, but disclaims any beneficial ownership
therein.
 
   
     As of June 30, 1998, 120,655 shares in the aggregate, 7.05% of the
outstanding shares of KIMBF (A Shares) were held in the name of Brian L. Johnson
& Joan M. Johnson JTWROS, PO Box 400, Spooner, WI 54801.
    
 
     As of June 30, 1998, 29,406 shares in the aggregate, 5.66% of the
outstanding shares of KIMBF (B Shares) were held in the name of NFSC FBO
#APX-257117, Stan W. Daniel, 4198 Yatesville Highway., Thomaston, GA 30286, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 26,891 shares in the aggregate, 5.18% of the
outstanding shares of KIMBF (B Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 32,647 shares in the aggregate, 6.29% of the
outstanding shares of KIMBF (B Shares) were held in the name of Citicorp
Securities Services, I, 303-35713-28, 111 Wall Street, 11th Floor, New York, NY
10005, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
   
     As of June 30, 1998, 35,158 shares in the aggregate, 6.77% of the
outstanding shares of KIMBF (B Shares) were held in the name of Ronald Rach &
Marilyn Rach JTWROS, 2704 Old Woods Trail, Plainfield, IL 60544.
    
 
     As of June 30, 1998, 30,722 shares in the aggregate, 5.92% of the
outstanding shares of KIMBF (B Shares) were held in the name of Donna Lee
Carkeet & Gary Dee Mall, Trustee, Mall Family 1993 Trust, U/A DTD 9/24/1993,
25000 Eastin Road, Newman, CA 95360, who may be deemed to be the beneficial
owner of certain of these shares, but disclaims any beneficial ownership
therein.
 
     As of June 30, 1998, 88,404 shares in the aggregate, 17.04% of the
outstanding shares of KIMBF (B Shares) were held in the name of Painewebber for
the Benefit of Granada Insurance Company, 3911 SW 67th Avenue, Miami, FL 33155,
who may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 8,395 shares in the aggregate, 13.64% of the
outstanding shares of KIMBF (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey, NJ 07303, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
   
     As of June 30, 1998, 7,911 shares in the aggregate, 12.86% of the
outstanding shares of KIMBF (C Shares) were held in the name of Orsolina
Gigante, 232 Thayer Street, River Vale, NJ 07675.
    
 
   
     As of June 30, 1998, 11,629 shares in the aggregate, 18.90% of the
outstanding shares of KIMBF (C Shares) were held in the name of Michael K.
Yannotta, 504 Donner Pass Apt B, Saint Peters, MO 63376.
    
 
   
     As of June 30, 1998, 7,911 shares in the aggregate, 12.86% of the
outstanding shares of KIMBF (C Shares) were held in the name of Anthony B.
Gigante, 232 Thayer Street, River Vale, NJ 07675.
    
 
   
     As of June 30, 1998, 3,853 shares in the aggregate, 6.26% of the
outstanding shares of KIMBF (C Shares) were held in the name of Painewebber for
the Benefit of G. Richard Matteucci and Linda R. Matteucci JTWROS, 4348
Prospect, Western Springs, IL 60558.
    
 
                                       10
   127
 
   
     As of June 30, 1998, 3,158 shares in the aggregate, 5.13% of the
outstanding shares of KIMBF (C Shares) were held in the name of Charlene Michel,
23560 Western Avenue, Park Forest, IL 60466.
    
 
   
     As of June 30, 1998, 3,195 shares in the aggregate, 5.19% of the
outstanding shares of KIMBF (C Shares) were held in the name of William Denaer,
Trustee, FBO William Denaer Living Trust, U/A 07/18/1995, 11202 Mandel CT,
Westchester IL, 60154, who may be deemed to be the beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
    
 
     As of June 30, 1998, 634,279 shares in the aggregate, 9.31% of the
outstanding shares of KMBF (B Shares) were held in the name of NFSC FEBO
#AA6-043079, Rosemary W Potter, Michael Potter, 1762 Autumn Avenue, Memphis, TN
38112, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 57,221 shares in the aggregate, 7.20% of the
outstanding shares of KMBF (C Shares) were held in the name of NFSC FEBO
#BK5-454206, Joseph P. Checrallah Jr., Maria L. Checrallah, 3 Forest View Drive,
Hope, RI 02831, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 41,371 shares in the aggregate, 5.21% of the
outstanding shares of KMBF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of Its Customers, Attn.: Fund
Administration (97D83), 4800 Deer Lake Drive, East 3rd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
   
     As of June 30, 1998, 39,763 shares in the aggregate, 5.00% of the
outstanding shares of KMBF (C Shares) were held in the name of Donald Isherwood
& Lynn Isherwood JTWROS, 5324 Birch Road, Plover, WI 54467.
    
 
   
     As of June 30, 1998, 9,372 shares in the aggregate, 99.88% of the
outstanding shares of KMBF (I Shares) were held in the name of Salvation Army
Federal Tax-Free Trust Pool, One International Place, Boston, MA 02110, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
    
 
   
     As of June 30, 1998, 2,631,398 shares in the aggregate, 10.91% of the
outstanding shares of KNYTF (A Shares) were held in the name of ABN AMRO
Incorporated, 040-02860-19, Attn.: Mutual Fund Operations, PO Box 6108, Chicago,
IL 60680, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
    
 
     As of June 30, 1998, 338,057 shares in the aggregate, 31.22% of the
outstanding shares of KNYTF (B Shares) were held in the name of NFSC FEBO
#AAD-745286, Lorna Reiss, 53 Leibrock Avenue, Lindenhurst, NY 11757, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 37,350 shares in the aggregate, 12.84% of the
outstanding shares of KNYTF (C Shares) were held in the name of NFSC FEBO
#APW-938475, Augustino Biondi & Luciana Biondi JT TEN, 672 Byron Avenue,
Franklin Square, NY 11010, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 61,797 shares in the aggregate, 21.24% of the
outstanding shares of KNYTF (C Shares) were held in the name of Painewebber for
the Benefit of Mrs. Diana Riklis, 1020 Park Avenue, New York, NY 10028, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
 
   
     As of June 30, 1998, 28,475 shares in the aggregate, 9.78% of the
outstanding shares of KNYTF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn.: Fund
Administration (97D86), 4800 Deer Lake Drive, East 3rd Floor, Jacksonville,
    
 
                                       11
   128
 
FL 32246, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 439,915 shares in the aggregate, 14.58% of the
outstanding shares of KOHTF (A Shares) were held in the name of NFSC FEBO
#ASX-056944, Nancy C. Young, 2683 Leighton Road, Cleveland, OH 44120, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 198,145 shares in the aggregate, 6.56% of the
outstanding shares of KOHTF (A Shares) were held in the name of John M. Wilson &
Patricia W. Wilson,Trustee, FBO John M & Patricia Wilson Trust U/A, 07/02/1994,
PO Box 386, Aurora, OH 44202, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 179,869 shares in the aggregate, 5.96% of the
outstanding shares of KOHTF (A Shares) were held in the name of Everen Clearing
Corp., A/C 1509-4570, Patricia Mortley Bichsel, 111 East Kilborun Avenue,
Milwaukee, WI 53202, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 130,765 shares in the aggregate, 12.67% of the
outstanding shares of KOHTF (B Shares) were held in the name of NFSC FEBO
#ASX-038474, Leonard E. Drake & Ganelda E. Drake JT TEN, 2640 Oatis Avenue, #3,
Toledo, OH 43606, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 51,862 shares in the aggregate, 5.02% of the
outstanding shares of KOHTF (B Shares) were held in the name of Smith Barney
Inc., 00122421179, 388 Greenwich Street, New York, NY 10013, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 437,707 shares in the aggregate, 42.42% of the
outstanding shares of KOHTF (B Shares) were held in the name of BHC Securities
Inc., FAO 25043183, Attn. Mutual Funds Dept., One Commerce Square, 2005 Market
Street, Suite 1200, Philadelphia, PA 19103, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 5,657 shares in the aggregate, 6.41% of the
outstanding shares of KOHTF (C Shares) were held in the name of Linda S. Deryck
GDN, for Shirley Y. De Ryck, c/o Stow-Glenn, 4285 Kent Road, Room 241, Stow, OH
44224, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
   
     As of June 30, 1998, 14,532 shares in the aggregate, 16.48% of the
outstanding shares of KOHTF (C Shares) were held in the name of Peter C.
McHowell, 15289 Russell Road, Chagrin Falls, OH 44022.
    
 
     As of June 30, 1998, 12,547 shares in the aggregate, 14.23% of the
outstanding shares of KOHTF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the sole Benefit of its Customers, Attn. Fund
Administration (97D88), 4800 Deer Lake Drive, East 3rd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
   
     As of June 30, 1998, 12,803 shares in the aggregate, 14.52% of the
outstanding shares of KOHTF (C Shares) were held in the name of Denise L. Glass,
1244 4th Street, NW, New Phila, OH 44663.
    
 
   
     As of June 30, 1998, 5,642 shares in the aggregate, 6.40% of the
outstanding shares of KOHTF (C Shares) were held in the name of Jay M. Simpson &
Valerie Stocklin JTWROS, 7825 N. Dixie Suite A, Dayton, OH 45414.
    
 
                                       12
   129
 
   
     As of June 30, 1998, 6,515 shares in the aggregate, 7.39% of the
outstanding shares of KOHTF (C Shares) were held in the name of Marjorie M.
Freytag, 02233 Street, Rt. 362, Minster, OH 45865.
    
 
   
     As of June 30, 1998, 6,192 shares in the aggregate, 7.02% of the
outstanding shares of KOHTF (C Shares) were held in the name of Glass
Properties, c/o Thomas Glass, 1244 4th Street, NW, New Phila, OH 44663, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
    
 
   
     As of June 30, 1998, 601,751 shares in the aggregate, 6.03% of the
outstanding shares of KRF I (A Shares) were held in the name of Donaldson Lufkin
& Jenrette SEC, Mutual Fds Dept 5th Floor, PO Box 2052, Jersey City, NJ 07303,
who may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
    
 
     As of June 30, 1998, 516,394 shares in the aggregate, 5.17% of the
outstanding shares of KRF I (A Shares) were held in the name of Everen Clearing
Corp Custodian, FBO Clarke E Mc Dermed Sep IRA, A/C 5351-3402, 601 So Barnett
Street, Anaheim, CA 92805, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 646,904 shares in the aggregate, 5.70% of the
outstanding shares of KRF III (A Shares) were held in the name of Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303,
who may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 683,288 shares in the aggregate, 5.78% of the
outstanding shares of KRF IV (A Shares) were held in the name of NFSC FBO
#AA6-014710, NFSC/FMTC IRA, FBO Ricky Lee Mayes, 1307 E. Emory Road, Knoxville,
TN 37938, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 867,548 shares in the aggregate, 7.34% of the
outstanding shares of KRF IV (A Shares) were held in the name of Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303,
who may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 1,023,352 shares in the aggregate, 8.16% of the
outstanding shares of KRF V (A Shares) were held in the name of NFSC FEBO
#A89-463400, Dime Savings Bank Custodian, IRA of Mitchell J. Darer, 28 Lawrence
Place, Chestnut Ridge, NY 10977, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 682,152 shares in the aggregate, 5.44% of the
outstanding shares of KRF V (A Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation, PO Box 2052, Jersey City, NJ 07303, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 885,818 shares in the aggregate, 14.01% of the
outstanding shares of KRF VI were held in the name of NFSC FEBO #E5D-00523, Jane
A. Dodge Custodian Anne Judith Dodge, c/o Singapore Amer School H S, 40
Woodlands Street 41, Dakota 738547, Singapore, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 326,060 shares in the aggregate, 5.15% of the
outstanding shares of KRF VI were held in the name of Donaldson Lufkin Jenrette,
PO Box 2052, Jersey City, NJ 07303, who may be deemed to be the beneficial owner
of certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 228,263 shares in the aggregate, 10.07% of the
outstanding shares of KRF VII were held in the name of NFSC FEBO #OHE-889237,
NFSC/FMTC IRA, FBO Mary Lou Markley,1515
 
                                       13
   130
 
Attleboro Ave., Springfield, OH 45503, who may be deemed to be the beneficial
owner of certain of these shares, but disclaims any beneficial ownership
therein.
 
     As of June 30, 1998, 122,755 shares in the aggregate, 5.41% of the
outstanding shares of KRF VII were held in the name of Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303 who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 267,015 shares in the aggregate, 11.78% of the
outstanding shares of KRF VII were held in the name of BHC Securities, Inc., FAO
62471137, Attn: Mutual Funds Dept, One Commerce Square, 2005 Market Street,
Suite 1200, Philadelphia, PA 19103, who may be deemed to be the beneficial owner
of certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 335,568 shares in the aggregate, 11.08% of the
outstanding shares of KSCF (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey, NJ 07303, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 931,647 shares in the aggregate, 30.76% of the
outstanding shares of KSCF (C Shares) were held in the name of J.C. Bradford &
Co. Custodian FBO, Bobby Hopper, 330 Commerce Street, Nashville, TN 37201, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 1,742,834 shares in the aggregate, 71.05% of the outstanding
shares of KSCF (I Shares) on June 30, 1998. The Investment Manager may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 816,230 shares in the aggregate, 7.80% of the
outstanding shares of KSIGF (B Shares) were held in the name of National
Financial Svcs Corp., C/F Radha Kudchadker IRA, 200 Liberty Street, New York, NY
10281, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 183,845 shares in the aggregate, 28.02% of the
outstanding shares of KSIGF (C Shares) were held in the name of NFSC FEBO
#910-110486, Mutual Funds (Non Fidelity), Dividend Redemption Account, 4th
Floor, 200 Liberty Street, New York, NY 10281, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 41,066 shares in the aggregate, 6.25% of the
outstanding shares of KSIGF (C Shares) were held in the name of Painewebber for
the Benefit of Painewebber CDN FBO, David P. Otto, PO Box 3321, Weehawken, NJ
07087, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 196,623 shares in the aggregate, 10.43% of the
outstanding shares of KTEC (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 501,827 shares in the aggregate, 26.62% of the
outstanding shares of KTEC (C Shares) were held in the name of J.C. Bradford &
Co. Custodian FBO, Dwaine R Falls, 330 Commerce Street, Nashville, TN 37201, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 1,124,314 shares in the aggregate, 70.13% of the outstanding
shares of KTEC (I Shares) on June 30, 1998. The Investment Manager may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
                                       14
   131
 
     As of June 30, 1998, 117,731 shares in the aggregate, 5.19% of the
outstanding shares of KTRF (C Shares) were held in the name of BT Alex Brown
Incorporated, FBO 711-03219-11, PO Box 1346, Baltimore, MD 21203, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
   
     Certain accounts for which the Investment Manager acts as investment
adviser owned 751,413 shares in the aggregate, 64.55% of the outstanding shares
of KTRF (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
    
 
   
     As of June 30, 1998, 3,286,050 shares in the aggregate, 5.37% of the
outstanding shares of KUSMF (B Shares) were held in the name of Merrill Lynch
Pierce Fenner Custodian, FBO Millicent S. Kincaid IRA, 4800 Deer Lake Drive
East, Jacksonville, FL 32246,who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
    
 
     As of June 30, 1998, 93,354 shares in the aggregate, 19.01% of the
outstanding shares of KUSMF (C Shares) were held in the name of Painewebber for
the Benefit of Painewebber CDN FBO, Louis L. Parker, PO Box 3321, Weehawken, NJ
07087,who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 158,032 shares in the aggregate, 32.18% of the
outstanding shares of KUSMF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn. Fund
Administration 97D98, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, NJ
07087, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 97,669 shares in the aggregate, 19.89% of the
outstanding shares of KUSMF (C Shares) were held in the name of Morongo Band of
Mission Indians Community Service Reserve Acct., 11581 Potrero Road, Banning, CA
92220, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 212,087 shares in the aggregate, 5.60% of the
outstanding shares of KVGF (B Shares) were held in the name of NFSC FEBO
#A2F-679410, NFSC/FMTC IRA, FBO Stanley Lander, 168 Sportsman Road, Rotonda
West, RL 33947, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 16,267 shares in the aggregate, 5.58% of the
outstanding shares of KVGF (C Shares) were held in the name of NFSC FEBO
#APX-734837, NFSC/FMTC IRA Rollover, FBO Loren S. Basler, 301 SE Morningside,
Bartlesville, OK 74006, who may be deemed to be the beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 354,884 shares in the aggregate, 5.68% of the
outstanding shares of KCF (A Shares) were held in the name of National Financial
Services Inc., For Exclusive Benefit of our Customers Church Street Station, PO
Box 3730, New York, NY 10008, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 352,658 shares in the aggregate, 8.24% of the
outstanding shares of KCF (B Shares) were held in the name of NFSC FEBO
#OSN-624586, NFSC/FMTC IRA Rollover, FBO Marnette M. Johnson, 10333 Lake Jackson
Drive, Manassas, VA 20111 who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 27,020 shares in the aggregate, 5.71% of the
outstanding shares of KCF (C Shares) were held in the name of NFSC FEBO
#OKA-214116, NFSC/FMTC IRA Rollover, FBO John M. Vogel, 9620 S. Mansfield, Oak
Lawn, IL 60453, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 65,436 shares in the aggregate, 13.83% of the
outstanding shares of KCF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its
 
                                       15
   132
 
Customers, Attn Fund Administration 97EP6, 4800 Deer Lake Drive, East 2nd Floor,
Jacksonville, FL 32246, who may be deemed to be the beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 7,386,807 shares in the aggregate, 11.70% of the
outstanding shares of KDHRF (A Shares) were held in the name of NFSC FEBO
179-561819, Shirley K. Hori 1-5-40, Takanawa Minato-K, Tokyo, Japan 108, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
 
     As of June 30, 1998, 4,076,887 shares in the aggregate, 6.45% of the
outstanding shares of KDHRF (A Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 6,762,884 shares in the aggregate, 11.58% of the
outstanding shares of KDHRF (B Shares) were held in the name of NFSC FEBO
#A1F-135720, Samuel P. Shaver, MSP/ MPRI, Operation Constant Guard, APO AE 09780
- -NY, Saudi Arabia, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 4,111,042 shares in the aggregate, 7.04% of the
outstanding shares of KDHRF (B Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303, who
may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 3,516,403 shares in the aggregate, 6.02% of the
outstanding shares of KDHRF (B Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn Fund Adm
(97HB6), 4800 Deer Lake Drive E Floor 2, Jacksonville, FL 32246, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 935,464 shares in the aggregate, 8.38% of the
outstanding shares of KDHRF (C Shares) were held in the name of NFSC FEBO
#W19-213756, Gloria Montero, Gozzoli Norte 235, San Borja, Lima, Peru, who may
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
 
     As of June 30, 1998, 915,449 shares in the aggregate, 8.20% of the
outstanding shares of KDHRF (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corp Inc., PO Box 2052, Jersey City, NJ 07303 who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 2,015,317 shares in the aggregate, 18.07% of the
outstanding shares of KDHRF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn Fund
Administration, SEC #97JS4, 4800 Deer Lake Drive, East 2rd Floor, Jacksonville,
FL 32246, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 770,215 shares in the aggregate, 70.27% of the outstanding shares
of KDHRF (I Shares) on June 30, 1998. The Investment Manager may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
 
     As of June 30, 1998, 2,110,876 shares in the aggregate, 7.68% of the
outstanding shares of KSCVF (A Shares) were held in the name of NFSC FEBO
#179-924164, FMT Co Custodian Sepp IRA, FBO Donald M. Garner, 9604 Rosevale
Street, Ft Washington, MD 20744, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 3,051,982 shares in the aggregate, 11.11% of the
outstanding shares of KSCVF (A Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corp. Inc., PO Box
 
                                       16
   133
 
2052, Jersey City, NJ 07303, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 2,648,299 shares in the aggregate, 11.55% of the
outstanding shares of KSCVF (B Shares) were held in the name of NFSC FEBO
#APW-037540, NFSC/FMTC IRA SEPP, FBO Peggy R. Sleeper, HCR 68, Box 61,
Thomaston, ME 04861, who may be deemed to be the beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 1,701,713 shares in the aggregate, 7.42% of the
outstanding shares of KSCVF (B Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corp. Inc., PO Box 2052, Jersey City, NJ 07303, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 2,520,570 shares in the aggregate, 11.00% of the
outstanding shares of KSCVF (B Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customer, Attn Fund ADM
(97HB5), 4800 Deer Lake Drive, E Fl 2, Jacksonville, FL 32246, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 460,713 shares in the aggregate, 8.07% of the
outstanding shares of KSCVF (C Shares) were held in the name of NFSC FEBO
#142-188093, FMT CO Custodian IRA, FBO James W. Weston, PO Box 21101, Sarasota,
FL 34276, who may be deemed to be the beneficial owner of certain of these
shares, but disclaims any beneficial ownership therein.
 
     As of June 30, 1998, 456,976 shares in the aggregate, 8.01% of the
outstanding shares of KSCVF (C Shares) were held in the name of Donaldson Lufkin
Jenrette Securities Corp., PO Box 2052, Jersey City, NJ 07303, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
 
     As of June 30, 1998, 1,644,161 shares in the aggregate, 28.83% of the
outstanding shares of KSCVF (C Shares) were held in the name of Merrill Lynch,
Pierce, Fenner & Smith for the Sole Benefit of its Customers, Attn Fund
Administration 97EP5, 4800 Deer Lake Drive, East 2nd Floor, Jacksonville, FL
32246, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
 
     Certain accounts for which the Investment Manager acts as investment
adviser owned 485,105 shares in the aggregate, 78.23% of the outstanding shares
of KSCVF (I Shares) on June 30, 1998.
 
   
     As of June 30, 1998, 303,734 shares in the aggregate, 10.64% of the
outstanding shares of KWF4 were held in the name of NFSC FEBO #A74-159255,
NFSC/FMTC IRA Rollover, FBO Barbara I. Gill, 4647 Anthony Wayne, Fairfield, OH
45014, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
    
 
                                       17
   134
 
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   135
 
                                                                      APPENDIX 4
 
   
                    FUND SHARES OWNED BY TRUSTEES/DIRECTORS
    
   


 
                                                                                                                  CASADY
       FUND(1)          BELIN    BURNHAM   DUNAWAY   HOFFMAN   JONES    PETERSON   PIERCE   SOMMERS   VILLANI   (PRESIDENT)
       -------          ------   -------   -------   -------   ------   --------   ------   -------   -------   -----------
                                                                                  
KTEC                     3,594   13,749     4,399(2)    937         0      0         0      11,218       0           0
KTRF                     1,601    3,202     7,724(4)    892         0      0         0         663       0           0
KGF                      1,170        0     9,916(6)    759         0      0         0       8,886       0           0
KSCF                     4,065    7,904    15,486(8) 12,211    40,713      0         0      43,579       0           0
KICPF                      813        0       387       484    26,236      0         0           0       0           0
KNTIS
  KMBF                     816    4,372     2,134(10)    256   22,634      0         0       2,887       0           0
  KIMBF                      0        0         0         0         0      0         0           0       0           0
KDIF                     3,794        0       445(12)  1,073        0      0         0           0       0           0
KHYS
  KHYF                   2,308   64,653       423(14)    871   34,763      0         0           0       0           0
  KHYOF                      0        0         0         0         0      0         0           0       0           0
KGSF                    10,181        0       131       481         0      0         0           0       0           0
KIF                      3,098    3,911     3,037(16)    710   11,175      0         0       4,999       0           0
KSTIS                        0        0         0         0         0      0         0           0       0           0
  KCATF                      0        0         0         0         0      0         0       4,196       0           0
  KNYTF                      0        0         0         0         0      0         0           0       0           0
  KFLTF                      0        0         0         0         0      0         0           0       0           0
  KOHTF                      0        0         0         0         0      0         0           0       0           0
KP
  KCRF                   1,249        0         0     1,249         0      0         0       1,249       0           0
  KUSMF                      0        0       175         0         0      0         0           0       0           0
KBCF                         0        0     3,518(18)      0        0      0         0           0       0           0
KGIF                     2,148        0       119         0         0      0         0         629       0           0
KVGF                         0        0     3,820(20)      0        0      0         0           0       0           0
KAGF                         0        0     1,592(22)      0        0      0         0           0       0           0
KAGGF                        0        0       191(24)      0        0      0         0           0       0           0
 

                        TRUSTEES AND
                        OFFICERS AS
       FUND(1)            A GROUP
       -------          ------------
                     
KTEC                      130,445(3)
KTRF                       24,264(5)
KGF                        23,646(7)
KSCF                      132,286(9)
KICPF                      27,920
KNTIS
  KMBF                     33,227(11)
  KIMBF                         0
KDIF                        5,312(13)
KHYS
  KHYF                    179,093(15)
  KHYOF                         0
KGSF                       10,793
KIF                        27,572(17)
KSTIS                           0
  KCATF                     4,196
  KNYTF                         0
  KFLTF                         0
  KOHTF                         0
KP
  KCRF                      3,747
  KUSMF                       175
KBCF                        3,518(19)
KGIF                        4,381
KVGF                        3,820(21)
KAGF                        1,592(23)
KAGGF                       1,208(25)

    
   136
   


 
                                                                                                            CASADY
       FUND(1)          AKINS    GOTTSCHALK   KELSEY   PIERCE   RENWICK   TINGLEFF   VILLANI   WEITHERS   (PRESIDENT)
       -------          ------   ----------   ------   ------   -------   --------   -------   --------   -----------
                                                                               
KVS
  KCF                        0       0          0        0        131       815         0        259           0
  KDHRF                 16,260       0          0        0        116       283         0        230           0
  KSCVF                  5,464       0          0        0        112       387         0        225           0
KHF
  KH20P                      0       0          0        0          0         0         0          0           0
  KH10P                      0       0          0        0          0       512         0        216           0
  KH5P                       0       0          0        0          0         0         0          0           0
KEUF                         0       0          0        0          0       476         0        203           0
KTEF
  KRF-I                      0       0          0        0          0         0         0          0           0
  KRF-II                     0       0          0        0          0         0         0          0           0
  KRF-III                    0       0          0        0          0         0         0          0           0
  KRF-IV                     0       0          0        0          0         0         0          0           0
  KRF-V                      0       0          0        0          0       713         0          0           0
  KRF-VI                     0       0          0        0          0         0         0          0           0
  KRF-VII                    0       0          0        0          0         0         0        286           0
  KWF-4                      0       0          0        0          0       556         0        243           0
KST
  KUSGIF                     0       0          0        0          0         0         0          0           0
  KSCRVF                     0       0          0        0          0         0         0          0           0
KET
  KDFSF                      0       0          0        0          0         0         0          0           0
KGIS
  KEMGF                      0       0          0        0          0         0         0          0           0
  KEMIF                      0       0          0        0          0         0         0          0           0
  KGBCF                      0       0          0        0          0         0         0          0           0
  KIGIF                      0       0          0        0          0         0         0          0           0
  KLAF                       0       0          0        0          0         0         0          0           0
 

                        TRUSTEES/DIRECTORS
                         AND OFFICERS AS
       FUND(1)               A GROUP
       -------          ------------------
                     
KVS
  KCF                          1,215
  KDHRF                       17,377
  KSCVF                        6,802
KHF
  KH20P                            0
  KH10P                          728
  KH5P                             0
KEUF                             680
KTEF
  KRF-I                            0
  KRF-II                           0
  KRF-III                          0
  KRF-IV                           0
  KRF-V                          713
  KRF-VI                           0
  KRF-VII                        286
  KWF-4                          799
KST
  KUSGIF                           0
  KSCRVF                           0
KET
  KDFSF                            0
KGIS
  KEMGF                            0
  KEMIF                            0
  KGBCF                            0
  KIGIF                            0
  KLAF                             0

    
   137
 
- ---------------
 
   
 (1) Set forth below is the number of shares of each Fund owned beneficially by
     each Trustee/Director as of June 30, 1998. Also shown is the number of
     shares owned beneficially by the Trustees/Directors and officers as a
     group. In each case, the amounts shown are less than 1% of the outstanding
     shares of each Fund unless otherwise noted. All shares shown are Class A
     shares unless otherwise noted:
    
 
   
 (2) Mr. Dunaway's total in KTEC includes 2,642 shares held with shared
     investment and voting power.
    
 
   
 (3) As a group, the Trustees and officers of KTEC held 127,803 shares with sole
     investment and voting power and 2,642 shares with shared investment and
     voting power.
    
 
   
 (4) Mr. Dunaway's total in KTRF includes 577 shares held with shared investment
     and voting power.
    
 
   
 (5) As a group, the Trustees and officers of KTRF held 23,687 shares with sole
     investment and voting power and 577 shares with shared investment and
     voting power.
    
 
   
 (6) Mr. Dunaway's total in KGF includes 3,130 shares held with shared
     investment and voting power.
    
 
   
 (7) As a group, the Trustees and officers of KGF held 20,516 shares with sole
     investment and voting power and 3,130 shares with shared investment and
     voting power.
    
 
   
 (8) Mr. Dunaway's total in KSCF includes 4,540 shares held with shared
     investment and voting power.
    
 
   
 (9) As a group, the Trustees and officers of KSCF held 127,746 shares with sole
     investment and voting power and 4,540 shares with shared investment and
     voting power.
    
 
   
(10) Mr. Dunaway's total in KMBF includes 2,134 shares held with shared
     investment and voting power.
    
 
   
(11) As a group, the Trustees and officers of KMBF held 31,093 shares with sole
     investment and voting power and 2,134 shares with shared investment and
     voting power.
    
 
   
(12) Mr. Dunaway's total in KDIF includes 445 shares held with shared investment
     and voting power.
    
 
   
(13) As a group, the Trustees and officers of KDIF held 4,867 shares with sole
     investment and voting power and 445 shares with shared investment and
     voting power.
    
 
   
(14) Mr. Dunaway's total in KHYF includes 423 shares held with shared investment
     and voting power.
    
 
   
(15) As a group, the Trustees and officers of KHYF held 178,670 shares with sole
     investment and voting power and 423 shares with shared investment and
     voting power.
    
 
   
(16) Mr. Dunaway's total in KIF includes 3,037 shares held with shared
     investment and voting power.
    
 
   
(17) As a group, the Trustees and officers of KIF held 27,572 shares with sole
     investment and voting power and 3,037 shares with shared investment and
     voting power.
    
 
   
(18) Mr. Dunaway's total in KBCF includes 1,875 shares held with shared
     investment and voting power.
    
 
   
(19) As a group, the Trustees and officers of KBCF held 1,642 shares with sole
     investment and voting power and 1,875 shares with shared investment and
     voting power.
    
 
   
(20) Mr. Dunaway's total in KVGF includes 2,789 shares held with shared
     investment and voting power.
    
 
   
(21) As a group, the Trustees and officers of KVGF held 1,031 shares with sole
     investment and voting power and 2,789 shares with shared investment and
     voting power.
    
 
   
(22) Mr. Dunaway's total in KAGF includes 1,022 shares held with shared
     investment and voting power.
    
 
   
(23) As a group, the Trustees and officers of KAGF held 569 shares with sole
     investment and voting power and 1,022 shares with shared investment and
     voting power.
    
 
   
(24) Mr. Dunaway's total in KAGGF includes 92 shares held with shared investment
     and voting power.
    
 
   
(25) As a group, the Trustees and officers of KAGGF held 1,116 shares with sole
     investment and voting power and 92 shares with shared investment and voting
     power.
    
   138
 
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   139
 
                                                                      APPENDIX 5
 
                     FUND MANAGEMENT FEE RATES, NET ASSETS
                         AND AGGREGATE MANAGEMENT FEES
 
   


                                                                                                                        AGGREGATE
                                                                                   MANAGEMENT                          MANAGEMENT
           FUND             FISCAL YEAR     NET ASSETS                              FEE RATE+                           FEE PAID+
           ----             -----------     ----------                             ----------                          ----------
                                                                                                           
Kemper Aggressive Growth     9/30/97      $   11,609,000    Base investment management fee of 0.65 of 1% of average    $    37,000
 Fund                                                       daily net assets plus or minus an incentive fee based
                                                            upon the investment performance of the Fund's Class A
                                                            shares as compared with the performance of the Standard &
                                                            Poor's 500 Stock Index, which may result in a total fee
                                                            ranging from 0.45 of 1% to 0.85 of 1%
Kemper Asian Growth Fund     11/30/97     $    6,398,000    0.85 of 1% of the first $250 million of average daily net  $  32,000(++)
                                                            assets; 0.82 of 1% of the next $750 million; 0.80 of 1%
                                                            of the next $1.5 billion; 0.78 of 1% of the next $2.5
                                                            billion; 0.75 of 1% of the next $2.5 billion; 0.74 of 1%
                                                            of the next $2.5 billion; 0.73 of 1% of the next $2.5
                                                            billion and 0.72 of 1% thereafter
Kemper Blue Chip Fund        10/31/97     $  446,891,000    0.58 of 1% of the first $250 million of average daily net  $ 2,018,000
                                                            assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion; and 0.42 of 1% thereafter
Kemper California Tax-       8/31/97      $1,007,907,000    0.55 of 1% of the first $250 million of average daily net  $ 5,417,000
 Free Income Fund                                           assets; 0.52 of 1% of the next $750 million; 0.50 of 1%
                                                            of the next $1.5 billion; 0.48 of 1% of the next $2.5
                                                            billion; 0.45 of 1% of the next $2.5 billion; 0.43 of 1%
                                                            of the next $2.5 billion; 0.41 of 1% of the next $2.5
                                                            billion and 0.40 of 1% thereafter
Kemper Cash Reserves Fund    9/30/97      $  339,655,000    0.40 of 1% of the first $250 million of average daily net  $ 1,059,000
                                                            assets; 0.38 of 1% of the next $750 million; 0.35 of 1%
                                                            of the next $1.5 billion; 0.32 of 1% of the next $2.5
                                                            billion; 0.30 of 1% of the next $2.5 billion; 0.28 of 1%
                                                            of the next $2.5 billion; 0.26 of 1% of the next $2.5
                                                            billion and 0.25 of 1% thereafter
Kemper Contrarian Fund       11/30/97     $  178,115,000    0.75 of 1% of the first $250 million of average daily net  $   903,000
                                                            assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter
Kemper Diversified Income    10/31/97     $  861,543,000    0.58 of 1% of the first $250 million of average daily net  $ 4,664,000
 Fund                                                       assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper Emerging Markets      4/30/98      $    1,147,000    1.25% of average daily net assets                          $       0(++)
 Growth Fund***
Kemper Emerging Markets      4/30/98      $    5,616,000    1.00% of average daily net assets                          $       0(++)
 Income Fund***
Kemper Europe Fund           11/30/97     $   23,910,000    0.75 of 1% of the first $250 million of average daily net  $  69,000(++)
                                                            assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter
Kemper Florida Tax-Free      8/31/97      $  103,845,000    0.55 of 1% of the first $250 million of average daily net  $   587,000
 Income Fund                                                assets; 0.52 of 1% of the next $750 million; 0.50 of 1%
                                                            of the next $1.5 billion; 0.48 of 1% of the next $2.5
                                                            billion; 0.45 of 1% of the next $2.5 billion; 0.43 of 1%
                                                            of the next $2.5 billion; 0.41 of 1% of the next $2.5
                                                            billion and 0.40 of 1% thereafter
Kemper Global Blue Chip      4/30/98      $    3,663,000    1.00% of the first $250 million of average daily net       $   858,000
 Fund***                                                    assets; 0.95 of 1% of the next $750 million and 0.90 of
                                                            1% thereafter
Kemper Global Income Fund    12/31/97     $   99,054,000    0.75 of 1% of the first $250 million of average daily net  $    6,000(#)
                                                            assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter

    
   140
 
   


                                                                                                                        AGGREGATE
                                                                                   MANAGEMENT                          MANAGEMENT
           FUND             FISCAL YEAR     NET ASSETS                              FEE RATE+                           FEE PAID+
           ----             -----------     ----------                             ----------                          ----------
                                                                                                           
Kemper Growth Fund           9/30/97      $2,827,565,000    0.58 of 1% of the first $250 million of average daily net  $14,576,000
                                                            assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper High Yield Fund       9/30/97      $4,939,302,000    0.58 of 1% of the first $250 million of average daily net  $23,419,000
                                                            assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper High Yield            3/31/98      $   16,188,000    0.65 of 1% of the first $250 million of average daily net  $ 28,000(#)
 Opportunity Fund**                                         assets; 0.62 of 1% of the next $750 million; 0.60 of 1%
                                                            of the next $1.5 billion; 0.58 of 1% of the next $2.5
                                                            billion; 0.55 of 1% of the next $2.5 billion; 0.53 of 1%
                                                            of the next $2.5 billion; 0.51 of 1% of the next $2.5
                                                            billion and 0.49 of 1% thereafter
Kemper Horizon 10(+)         7/31/98      $  111,687,000    0.58 of 1% of the first $250 million of average daily net  $   495,000
 Portfolio                                                  assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper Horizon 20(+)         7/31/98      $  110,076,000    0.58 of 1% of the first $250 million of average daily net  $   495,000
 Portfolio                                                  assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper Horizon 5 Portfolio   7/31/98      $   55,335,000    0.58 of 1% of the first $250 million of average daily net  $   242,000
                                                            assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper Income And Capital    10/31/97     $  613,470,000    0.55 of 1% of the first $250 million of average daily net  $ 3,162,000
 Preservation Fund                                          assets; 0.52 of 1% of the next $750 million; 0.50 of 1%
                                                            of the next $1.5 billion; 0.48 of 1% of the next $2.5
                                                            billion; 0.45 of 1% of the next $2.5 billion; 0.43 of 1%
                                                            of the next $2.5 billion; 0.41 of 1% of the next $2.5
                                                            billion and 0.40 of 1% thereafter
Kemper Intermediate          9/30/97      $   21,889,000    0.55 of 1% of the first $250 million of average daily net  $   117,000
 Municipal Bond Fund                                        assets; 0.52 of 1% of the next $750 million; 0.50 of 1%
                                                            of the next $1.5 billion; 0.48 of 1% of the next $2.5
                                                            billion; 0.45 of 1% of the next $2.5 billion; 0.43 of 1%
                                                            of the next $2.5 billion; 0.41 of 1% of the next $2.5
                                                            billion and 0.40 of 1% thereafter
Kemper International Fund    10/31/97     $  588,069,000    0.75 of 1% of the first $250 million of average daily net  $ 4,131,000
                                                            assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter
Kemper International         4/30/98      $    1,556,000    1.00% of average daily net assets                          $       0(++)
 Growth and Income Fund***
Kemper Latin America         4/30/98      $    1,441,000    1.25% of the first $250 million of average daily net       $       0(++)
 Fund***                                                    assets; 1.20% of the next $750 million; 1.15% over $1
                                                            billion
Kemper Municipal Bond Fund   9/30/97      $3,216,221,000    0.45 of 1% of the first $250 million of average daily net  $13,507,000
                                                            assets; 0.43 of 1% of the next $750 million; 0.41 of 1%
                                                            of the next $1.5 billion; 0.40 of 1% of the next $2.5
                                                            billion; 0.38 of 1% of the next $2.5 billion; 0.36 of 1%
                                                            of the next $2.5 billion; 0.34 of 1% of the next $2.5
                                                            billion and 0.32 of 1% thereafter
Kemper New York Tax-Free     8/31/97      $  285,934,000    0.55 of 1% of the first $250 million of average daily net  $ 1,604,000
 Income Fund                                                assets; 0.52 of 1% of the next $750 million; 0.50 of 1%
                                                            of the next $1.5 billion; 0.48 of 1% of the next $2.5
                                                            billion; 0.45 of 1% of the next $2.5 billion; 0.43 of 1%
                                                            of the next $2.5 billion; 0.41 of 1% of the next $2.5
                                                            billion and 0.40 of 1% thereafter

    
 
                                        2
   141
 
   


                                                                                                                        AGGREGATE
                                                                                   MANAGEMENT                          MANAGEMENT
           FUND             FISCAL YEAR     NET ASSETS                              FEE RATE+                           FEE PAID+
           ----             -----------     ----------                             ----------                          ----------
                                                                                                           
Kemper Ohio Tax-Free         8/31/97      $   39,468,000    0.55 of 1% of the first $250 million of average daily net  $   212,000
 Income Fund                                                assets; 0.52 of 1% of the next $750 million; 0.50 of 1%
                                                            of the next $1.5 billion; 0.48 of 1% of the next $2.5
                                                            billion; 0.45 of 1% of the next $2.5 billion; 0.43 of 1%
                                                            of the next $2.5 billion; 0.41 of 1% of the next $2.5
                                                            billion and 0.40 of 1% thereafter
Kemper Retirement            7/31/98      $  106,339,000    0.50 of 1% of average daily net assets                     $   560,000
 Fund -- Series I
Kemper Retirement            7/31/98      $  158,437,000    0.50 of 1% of average daily net assets                     $   825,000
 Fund -- Series II
Kemper Retirement            7/31/98      $  118,084,000    0.50 of 1% of average daily net assets                     $   615,000
 Fund -- Series III
Kemper Retirement            7/31/98      $  124,417,000    0.50 of 1% of average daily net assets                     $   651,000
 Fund -- Series IV
Kemper Retirement            7/31/98      $  125,886,000    0.50 of 1% of average daily net assets                     $   657,000
 Fund -- Series V
Kemper Retirement            7/31/98      $   70,487,000    0.50 of 1% of average daily net assets                     $   358,000
 Fund -- Series VI
Kemper Retirement            7/31/98      $   25,787,000    0.50 of 1% of average daily net assets                     $    76,000
 Fund -- Series VII
Kemper Small Cap Relative    N/A                     N/A    0.75 of 1% of the first $250 million of average daily net          N/A
 Value Fund*                                                assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter
Kemper Small Cap Value       11/30/97     $1,263,144,000    0.75 of 1% of the first $250 million of average daily net  $ 5,160,000
 Fund                                                       assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter
Kemper Small                 9/30/97      $1,095,478,000    Base investment management fee of .65 of 1% of average     $ 3,193,000
 Capitalization Equity                                      daily net assets plus or minus an incentive fee based
 Fund                                                       upon the investment performance of the Fund's Class A
                                                            shares as compared with the performance of the Standard &
                                                            Poor's 500 Stock Index, which may result in a total fee
                                                            ranging from .35 of 1% to .95 of 1%
Kemper Technology Fund       10/31/97     $1,209,723,000    0.58 of 1% of the first $250 million of average daily net  $ 6,532,000
                                                            assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper Total Return Fund     10/31/97     $3,241,383,000    0.58 of 1% of the first $250 million of average daily net  $17,084,000
                                                            assets; 0.55 of 1% of the next $750 million; 0.53 of 1%
                                                            of the next $1.5 billion; 0.51 of 1% of the next $2.5
                                                            billion; 0.48 of 1% of the next $2.5 billion; 0.46 of 1%
                                                            of the next $2.5 billion; 0.44 of 1% of the next $2.5
                                                            billion and 0.42 of 1% thereafter
Kemper U.S. Government       10/31/97     $3,642,027,000    0.45 of 1% of the first $250 million of average daily net  $15,888,000
 Securities Fund                                            assets; 0.43 of 1% of the next $750 million; 0.41 of 1%
                                                            of the next $1.5 billion; 0.40 of 1% of the next $2.5
                                                            billion; 0.38 of 1% of the next $2.5 billion; 0.36 of 1%
                                                            of the next $2.5 billion; 0.34 of 1% of the next $2.5
                                                            billion and 0.32 of 1% thereafter
Kemper U.S. Growth and       3/31/98      $    3,864,000    0.60 of 1% of the first $250 million of average daily net  $       0(++)
 Income Fund**                                              assets; 0.570% of 1% of the next $750 million; 0.550% of
                                                            1% of the next $1.5 billion; 0.530% of 1% thereafter.
Kemper U.S. Mortgage Fund    9/30/97      $2,497,825,000    0.55 of 1% of the first $250 million of average daily net  $13,793,000
                                                            assets; 0.52 of 1% of the next $750 million; 0.50 of 1%
                                                            of the next $1.5 billion; 0.48 of 1% of the next $2.5
                                                            billion; 0.45 of 1% of the next $2.5 billion; 0.43 of 1%
                                                            of the next $2.5 billion; 0.41 of 1% of the next $2.5
                                                            billion and 0.40 of 1% thereafter
Kemper Value+Growth Fund     11/30/97     $   97,741,000    0.72 of 1% of the first $250 million of average daily net  $   474,000
                                                            assets; 0.69 of 1% of the next $750 million; 0.66 of 1%
                                                            of the next $1.5 billion; 0.64 of 1% of the next $2.5
                                                            billion; 0.60 of 1% of the next $2.5 billion; 0.58 of 1%
                                                            of the next $2.5 billion; 0.56 of 1% of the next $2.5
                                                            billion and 0.54 of 1% thereafter
Kemper Worldwide 2004 Fund   7/31/98      $   33,070,000    0.60 of 1% of average daily net assets                     $   202,000

    
 
                                        3
   142
 
   


                                                                                                                        AGGREGATE
                                                                                   MANAGEMENT                          MANAGEMENT
           FUND             FISCAL YEAR     NET ASSETS                              FEE RATE+                           FEE PAID+
           ----             -----------     ----------                             ----------                          ----------
                                                                                                           
Kemper-Dreman Financial      N/A                     N/A    0.75 of 1% of the first $250 million of average daily net          N/A
 Services Fund*                                             assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter
Kemper-Dreman High Return    11/30/97     $2,931,721,000    0.75 of 1% of the first $250 million of average daily net  $12,084,000
 Equity Fund                                                assets; 0.72 of 1% of the next $750 million; 0.70 of 1%
                                                            of the next $1.5 billion; 0.68 of 1% of the next $2.5
                                                            billion; 0.65 of 1% of the next $2.5 billion; 0.64 of 1%
                                                            of the next $2.5 billion; 0.63 of 1% of the next $2.5
                                                            billion and 0.62 of 1% thereafter

    
 
- ------------------------------
  + Aggregate management fees disclosed in this table may include fees paid to
    successors and affiliates of Scudder Kemper Investments, Inc.
 
   
  * Audited fee and net asset information is not available for Kemper-Dreman
    Financial Services Fund, which commenced operations on March 9, 1998, and
    Kemper Small Cap Relative Value Fund, which commenced operations on May 6,
    1998.
    
 
 ** Net asset and management fee information is provided for the semi-annual
    period ended March 31, 1998.
 
 *** Net asset and management fee information is provided for the semi-annual
     period ended April 30, 1998.
 
  # The management fee was accrued but not paid as of the semi-annual period for
    which the number is provided.
 
  + The management fee rates shown are for each Fund's most recently completed
    fiscal year, unless otherwise noted.
 
 ++ After waiver and/or expense limitations.
 
                                        4
   143
 
                                                                      APPENDIX 6
 
                               DATES RELATING TO
   
                        INVESTMENT MANAGEMENT AGREEMENTS
    
 
   


                                                                                                                   TERMINATION
                                                                                      FORMER            NEW           DATE
                                                                                    INVESTMENT      INVESTMENT       (UNLESS
                                                                       DATE OF      MANAGEMENT      MANAGEMENT     CONTINUED)
                                                                        FORMER       AGREEMENT       AGREEMENT       FOR NEW
                                                       COMMENCEMENT   INVESTMENT       LAST        LAST APPROVED   INVESTMENT
                                                            OF        MANAGEMENT    APPROVED BY    BY TRUSTEES/    MANAGEMENT
                        FUND                            OPERATIONS    AGREEMENT    SHAREHOLDERS      DIRECTORS      AGREEMENT
                        ----                           ------------   ----------   -------------   -------------   -----------
                                                                                                    
Kemper Aggressive Growth Fund                            12/31/96      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Asian Growth Fund                                 10/21/96      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Blue Chip Fund                                    11/23/87      12/31/97       12/3/97         9/22/98        9/30/99
Kemper California Tax-Free Income Fund                    2/17/83      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Cash Reserves Fund                                  2/6/84      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Contrarian Fund                                    8/24/95*     12/31/97       3/18/98         9/22/98        9/30/99
Kemper Diversified Income Fund                            6/23/77      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Emerging Markets Growth Fund                        1/9/98      12/31/97      12/23/97         9/22/98        9/30/99
Kemper Emerging Markets Income Fund                      12/31/97      12/31/97      12/23/97         9/22/98        9/30/99
Kemper Europe Fund                                         5/1/96      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Florida Tax-Free Income Fund                       4/25/91      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Global Blue Chip Fund                             12/31/97      12/31/97      12/23/97         9/22/98        9/30/99
Kemper Global Income Fund                                 10/1/89      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Growth Fund                                         4/4/66      12/31/97       12/3/97         9/18/98        9/30/99
Kemper High Yield Fund                                    1/26/78      12/31/97       12/3/97         9/18/98        9/30/99
Kemper High Yield Opportunity Fund                        10/1/97      12/31/97       9/23/97         9/18/98        9/30/99
Kemper Horizon 10+ Portfolio                             12/29/95      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Horizon 20+ Portfolio                             12/29/95      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Horizon 5 Portfolio                               12/29/95      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Income And Capital Preservation Fund               4/15/74      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Intermediate Municipal Bond Fund                   11/1/94      12/31/97       12/3/97         9/18/98        9/30/99
Kemper International Fund                                 5/21/86      12/31/97       12/3/97         9/18/98        9/30/99
Kemper International Growth and Income Fund              12/31/97      12/31/97      12/23/97         9/22/98        9/30/99
Kemper Latin America Fund                                12/31/97      12/31/97      12/23/97         9/22/98        9/30/99
Kemper Municipal Bond Fund                                4/20/76      12/31/97       12/3/97         9/18/98        9/30/99
Kemper New York Tax-Free Income Fund                     12/31/85      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Ohio                                               3/22/93      12/31/97       12/3/97         9/18/98        9/30/99
  Tax-Free
  Income Fund
Kemper Retirement Fund -- Series I                         2/5/90      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Retirement Fund -- Series II                       9/11/90      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Retirement Fund -- Series III                      4/10/92      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Retirement Fund -- Series IV                       1/15/93      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Retirement Fund -- Series V                       11/15/93      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Retirement Fund -- Series VI                        5/1/95      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Retirement Fund -- Series VII                       5/1/97      12/31/97       12/3/97         9/22/98        9/30/99
Kemper Small Cap Relative Value Fund                       5/6/98        5/6/98        5/6/98         9/22/98        9/30/99
Kemper Small Cap Value Fund                               8/24/95*     12/31/97       12/3/97         9/22/98        9/30/99
Kemper Small Capitalization Equity Fund                   2/20/69      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Technology Fund                                     9/7/48      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Total Return Fund                                   3/2/64      12/31/97       12/3/97         9/18/98        9/30/99
Kemper U.S. Government Securities Fund                    10/1/79*     12/31/97       12/3/97         9/18/98        9/30/99
Kemper U.S. Growth and Income Fund                        1/30/98       1/30/98       1/29/98         9/22/98        9/30/99
Kemper U.S. Mortgage Fund                                10/26/84      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Value+Growth Fund                                 10/16/95      12/31/97       12/3/97         9/18/98        9/30/99
Kemper Worldwide 2004 Fund                                 5/3/94      12/31/97       12/3/97         9/22/98        9/30/99
Kemper-Dreman Financial Services Fund                      3/9/98        3/2/98       2/26/98         9/22/98        9/30/99
Kemper-Dreman High Return Equity Fund                     8/24/95*     12/31/97       12/3/97         9/22/98        9/30/99

    
 
- ------------------------------
* Date when Zurich Kemper Investments, Inc. assumed investment management
  responsibilities.
   144
 
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   145
 
                                                                      APPENDIX 7
 
   
                   TRUSTEES/DIRECTORS AND OFFICERS ASSOCIATED
    
                              WITH SCUDDER KEMPER
 
   


        NAME                        POSITION WITH TRUSTS/CORPORATIONS               ASSOCIATION WITH SCUDDER KEMPER
        ----                        ---------------------------------               -------------------------------
                                                                              
Daniel Pierce           Trustee/Director and Chairman of the Board                  Managing Director
Edmond D. Villani       Trustee/Director for all Trusts/Corporations except KGIS,   Chief Executive Officer and
                        KET and KSECT                                               Managing Director
Mark S. Casady          President                                                   Managing Director
J. Patrick Beimford,    Vice President for KDIF only                                Managing Director
  Jr.
Eleanor R. Brennan      Vice President for KSTIS only                               Vice President
Robert S. Cessine       Vice President for KICPF and KDIF only                      Managing Director
Tracy M. Chester        Vice President for KTEC, KBCF and KTEF only                 Managing Director
Philip J. Collora       Vice President and Secretary                                Senior Vice President
Philip G. Condon        Vice President for KSTIS only                               Managing Director
Joyce E. Cornell        Vice President for KGIS only                                Managing Director
Lori J. Ensinger        Vice President for KSECT only                               Senior Vice President
Diego Espinosa          Vice President for KGIS only                                Senior Vice President
Thomas H. Forester      Vice President for KVS only                                 Vice President
Philip S. Fortuna       Vice President for KTEC and KSECT only                      Managing Director
Frederick L. Gaskin     Vice President for KVS only                                 Vice President
Joan R. Gregory         Vice President for KGIS only                                Vice President
Tara Kenney             Vice President for KGIS only                                Vice President
Gary A. Langbaum        Vice President for KTRF only                                Managing Director
Thomas W. Littauer      Vice President                                              Managing Director
Ann M. McCreary         Vice President                                              Managing Director
Michael A. McNamara     Vice President for KDIF, KHYS and KST only                  Managing Director
Christopher J. Mier     Vice President for KNTIS and KSTIS only                     Managing Director
M. Ashton Patton        Vice President for KNTIS only                               Senior Vice President
Robert C. Peck, Jr.     Vice President for KICPF, KNTIS, KDIF, KHYS, KGSF, KSTIS,   Managing Director
                        KP, KGIF and KST only
Kathryn L. Quirk        Vice President, Trustee/Director for KGIS, KET and KSECT    Managing Director
Frank J. Rachwalski,    Vice President for KDIF, KGSF and KP only                   Managing Director
  Jr.
Sheridan Reilly         Vice President for KGIS only                                Senior Vice President
Harry E. Resis, Jr.     Vice President for KDIF, KHYS and KST only                  Managing Director
Steven H. Reynolds      Vice President for KTEC, KTRF, KGF, KSCF, KIF, KBCF,        Managing Director
                        KVGF, KAGF, KAGGF, KTEF, KHF and KEUF only
M. Isabel Saltzman      Vice President for KGIS only                                Managing Director
Thomas F. Sassi         Vice President for KVS only                                 Managing Director
Kurt R. Stalzer         Vice President for KSCF and KAGGF only                      Managing Director
Steven T. Stokes        Vice President for KVS only                                 Vice President
Richard L. Vandenberg   Vice President for KDIF, KGSF, KP and KST only              Managing Director
Linda J. Wondrack       Vice President                                              Senior Vice President
John R. Hebble          Treasurer                                                   Senior Vice President
Brenda Lyons            Assistant Treasurer                                         Senior Vice President
Maureen E. Kane         Assistant Secretary                                         Vice President
Caroline Pearson        Assistant Secretary                                         Senior Vice President
Elizabeth C. Werth      Assistant Secretary                                         Vice President

    
   146
 
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   147
 
   
                                                                      APPENDIX 8
    
 
                        FEES PAID TO KSC, SFAC AND KDI+
 
   


                                                               AGGREGATE FEE
                                                                PAID TO KSC      AGGREGATE FEE
                                                               (REMITTED BY       PAID TO KDI      AGGREGATE FEE    AGGREGATE FEE
                                                                IFTC, WHERE     (ADMINISTRATIVE     PAID TO KDI      PAID TO KDI
                     FUND                       FISCAL YEAR     APPLICABLE)          FEES)         (12B-1 FEES)     (COMMISSIONS)
                     ----                       -----------    -------------    ---------------    -------------    -------------
                                                                                                     
Kemper Aggressive Growth Fund                     9/30/97       $   13,000        $   13,000        $   19,000       $   16,000
Kemper Asian Growth Fund                         11/30/97       $   30,000        $    7,000        $   20,000       $    7,000
Kemper Blue Chip Fund                            10/31/97       $  959,000        $  834,000        $  708,000       $  131,000
Kemper California Tax-Free Income Fund            8/31/97       $  359,000        $1,718,000        $  176,000       $   46,000
Kemper Cash Reserves Fund                         9/30/97       $1,300,000        $  648,000        $1,617,000       $  824,000
Kemper Contrarian Fund                           11/30/97       $  386,000        $  267,000        $  382,000       $   64,000
Kemper Diversified Income Fund                   10/31/97       $1,681,000        $1,864,000        $2,231,000       $  424,000
Kemper Emerging Markets Growth Fund*              4/30/98+      $      650        $        0        $      203       $       20
Kemper Emerging Markets Income Fund*              4/30/98+      $    4,509        $        0        $      224       $        0
Kemper Europe Fund                               11/30/97       $   32,000        $   20,000        $   45,000       $   15,000
Kemper Florida Tax-Free Income Fund               8/31/97       $   44,000        $  189,000        $   30,000       $    5,000
Kemper Global Blue Chip Fund*                     4/30/98       $    2,081        $        0        $    1,246       $       26
Kemper Global Income Fund                        12/31/97       $  217,000        $  238,000        $  279,000       $   63,000
Kemper Growth Fund                                9/30/97       $7,398,000        $6,129,000        $6,536,000       $1,184,000
Kemper High Yield Fund                            9/30/97       $4,802,000        $9,596,000        $9,582,000       $1,351,000
Kemper High Yield Opportunity Fund                3/31/98       $    5,000        $    8,000        $   14,000       $        0
Kemper Horizon 10+ Portfolio                      7/31/98       $  441,000        $  206,000        $  377,000       $   30,000
Kemper Horizon 20+ Portfolio                      7/31/98       $  756,000        $  204,000        $  423,000       $   26,000
Kemper Horizon 5 Portfolio                        7/31/98       $  167,000        $  101,000        $  202,000       $   13,000
Kemper Income And Capital Preservation Fund      10/31/97       $  937,000        $1,209,000        $  653,000       $  213,000
Kemper Intermediate Municipal Bond Fund           9/30/97       $   10,000        $   49,000        $   38,000       $   22,000
Kemper International Fund                        10/31/97       $1,913,000        $1,280,000        $1,066,000       $  230,000
Kemper International Growth and Income Fund*      4/30/98+      $      838        $        0        $      395       $        0
Kemper Latin America Fund*                        4/30/98+      $    1,050        $        0        $      170       $        0
Kemper Municipal Bond Fund                        9/30/97       $1,585,000        $5,379,000        $  428,000       $   87,000
Kemper New York Tax-Free Income Fund              8/31/97       $  144,000        $  519,000        $   83,000       $    9,000
Kemper Ohio Tax-Free Income Fund                  8/31/97       $   21,000        $   82,000        $   66,000       $   29,000
Kemper Retirement Fund -- Series I                7/31/98       $   65,000        $  271,000        $        0       $        0
Kemper Retirement Fund -- Series II               7/31/98       $  106,000        $  408,000        $        0       $        0
Kemper Retirement Fund -- Series III              7/31/98       $   85,000        $  303,000        $        0       $        0
Kemper Retirement Fund -- Series IV               7/31/98       $  100,000        $  321,000        $        0       $        0
Kemper Retirement Fund -- Series V                7/31/98       $  101,000        $  326,000        $        0       $        0
Kemper Retirement Fund -- Series VI               7/31/98       $   62,000        $  174,000        $        0       $        0
Kemper Retirement Fund -- Series VII              7/31/98       $   18,000        $   38,000        $        0       $   96,000
Kemper Small Cap Value Fund                      11/30/97       $2,132,000        $1,643,000        $2,108,000       $  243,000
Kemper Small Capitalization Equity Fund           9/30/97       $2,814,000        $2,029,000        $1,992,000       $  419,000
Kemper Technology Fund                           10/31/97       $1,091,000        $1,927,000        $  749,000       $  182,000
Kemper Total Return Fund                         10/31/97       $7,212,000        $7,532,000         8,814,000       $1,384,000
Kemper U.S. Government Securities Fund           10/31/97       $3,598,000        $7,013,000        $  590,000       $  235,000
Kemper U.S. Growth and Income Fund*               3/31/98++     $    1,000        $        0        $    1,000       $        0
Kemper U.S. Mortgage Fund                         9/30/97       $3,192,000        $6,498,000        $6,701,000       $1,363,000
Kemper Value+Growth Fund                         11/30/97       $  236,000        $  148,000        $  232,000       $        0
Kemper Worldwide 2004 Fund                        7/31/98       $   32,000        $   83,000        $        0       $        0
Kemper-Dreman High Return Equity Fund            11/30/97       $4,150,000        $3,849,000        $6,378,000       $  848,000

    
 
- ------------------------------
   + The above information is not available for Kemper-Dreman Financial Services
     Fund, which did not commence operations until March 9, 1998; and Kemper
     Small Cap Relative Value Fund, which did not commence operations until May
     6, 1998.
   148
 
   
   * Each of Kemper Emerging Markets Growth Fund, Kemper Emerging Markets Income
     Fund, Kemper Global Blue Chip Fund, Kemper International Growth and Income
     Fund, Kemper Latin America Fund and Kemper U.S. Growth and Income Fund paid
     fees to SFAC during the relevant period of $16,666, $16,666, $16,666,
     $16,666, $16,666 and $6,000, respectively. The other Funds currently do not
     pay fees to SFAC.
    
 
   
   + Fee information is provided for the semi-annual period ended April 30,
     1998.
    
 
 ++ Fee information is provided for the semi-annual period ended March 31, 1998.
 
                                        2
   149
 
Thank you
Thank you
                                  for mailing your proxy card promptly!
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                               We appreciate your
                             continuing support and
                            look forward to serving
                         your future investment needs.
   150
 
   
KEMPER FUNDS
    
- --------------------------------------------------------------------------------
 
   
KEMPER FUNDS
    
 
   
c Kemper Aggressive Growth Fund
    
   
c Kemper Asian Growth Fund
    
   
c Kemper Blue Chip Fund
    
   
c Kemper Diversified Income Fund
    
   
c Kemper Equity Trust
    
   
c Kemper Europe Fund
    
   
c Kemper Global Income Fund
    
   
c Kemper Global/International Series, Inc.
    
   
c Kemper Growth Fund
    
   
c Kemper High Yield Series
    
   
c Kemper Horizon Fund
    
   
c Kemper Income And Capital Preservation Fund
    
   
c Kemper International Fund
    
   
c Kemper National Tax Free Income Series
    
   
c Kemper Portfolios
    
   
c Kemper Securities Trust
    
   
c Kemper Small Capitalization Equity Fund
    
   
c Kemper State Tax-Free Income Series
    
   
c Kemper Target Equity Fund
    
   
c Kemper Technology Fund
    
   
c Kemper Total Return Fund
    
   
c Kemper U.S. Government Securities Fund
    
   
c Kemper Value+Growth Fund
    
   
c Kemper Value Series, Inc.
    
 
   
                                                                            KPMC
    
 
   
                                                (LOGO)Printed on recycled paper.
    
   151
 
   
                             Please Vote Promptly!           [Kemper Funds logo]
    
 
   
   Your vote is needed. Please vote on the reverse side of this form and sign in
the space provided below. Return your completed proxy in the enclosed envelope
today.
    
 
   
   You may receive additional proxies for your other accounts. These are not
duplicates; you should sign and return each proxy card in order for your votes
to be counted. Please return them as soon as possible to help save the cost of
additional mailings.
    
 
   
                                 [NAME OF FUND]
    
 
          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF YOUR FUND
   
              Special Meeting of Shareholders -- December 17, 1998
    
 
   
   The undersigned hereby appoints Bruce H. Goldfarb, Kathryn L. Quirk, Thomas
F. McDonough and Daniel Pierce and each of them, the proxies of the undersigned,
with the power of substitution to each of them, to vote all shares of the Fund
which the undersigned is entitled to vote at the Special Meeting of Shareholders
of the Fund to be held at the offices of Scudder Kemper Investments, Inc., Two
International Place, Boston, Massachusetts 02110, on Thursday, December 17, 1998
at 11:00 a.m., Eastern time, and at any adjournments thereof.
    
 
   
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE PROXY CARD BELOW. SIGN, DATE AND
RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
    
 
   UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
 
   
   The Board members of your Fund, including those who are not affiliated with
the Fund, Scudder Kemper Investments, Inc. or Zurich Insurance Company,
recommend that you vote FOR each item.
    
 
   
1. To approve the new Investment Management Agreement between the Fund and
   Scudder Kemper Investments, Inc.
    
 
                       [ ] FOR   [ ] AGAINST   [ ] ABSTAIN
 
   
2. (FOR SHAREHOLDERS OF KEUF, KGIF, KIF, KWF4, KDFSF AND KDHRF ONLY) To approve
   the new Sub-Advisory Agreement for the Fund with either Scudder Investments
   (U.K.) Limited or Dreman Value Management, L.L.C., as applicable.
    
 
                       [ ] FOR   [ ] AGAINST   [ ] ABSTAIN
 
   
3. To modify or eliminate certain policies and to eliminate the shareholder
   approval requirement as to certain other matters.
    
 
   
   [ ] FOR ALL APPLICABLE PROPOSALS EXCEPT AS NOTED BELOW   [ ] AGAINST ALL   [
                                   ] ABSTAIN ALL
    
   152
 
   
                                                                            
 3.0 Investment objectives        3.9  Lending                                    3.17 Investment in mineral exploration
 3.1 Investment policies          3.10 Margin purchases and short sales           3.18 Investment in issuers with short
 3.2 Diversification              3.11 Purchase of securities of related issuers       histories
 3.3 Borrowing                    3.12 Pledging of assets                         3.19 Investment in Non-US dollar
 3.4 Senior securities            3.13 Restricted and illiquid securities              denominated securities
 3.5 Concentration                3.14 Purchases of securities                    3.20 Investment in other investment
 3.6 Underwriting of securities   3.15 Purchases of options and warrants               companies
 3.7 Investment in real estate    3.16 Investment for the purpose of exercising   3.21 Investment other than in accordance
 3.8 Purchase of commodities           control or management                           with objectives and policies


    
   153
 
   
To vote against a particular proposed change applicable to your Fund, write the
proposal number on the line below.
    
 
- --------------------------------------------------------------------------------
 
   The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
 
                                             Please sign exactly as your name or
                                             names appear. When signing as
                                             attorney, executor, administrator,
                                             trustee or guardian, please give
                                             your full title as such.
 
                                             -----------------------------------
   
                                                        Signature(s)
    
   
    
 
                                             Dated  _______ , 1998